Blowing the whistle

The outcome of a recent employment tribunal could pave the way for claims of unfair dismissal under the whistleblowing legislation - without the one year service required. Malcolm Pike looks at practical ways employers can protect themselves

There can be few employers who have not had to deal with breach of contract claims from disgruntled former employees. Now imagine that in addition to the obvious claim under contract law, those employees also have a whole new cause of action for automatic unfair dismissal, with no service or age requirement and no cap on compensation. What is more, the employee can also claim interim relief until the date of the hearing (likely to be several months in some areas of the country) which, if successful, would mean the employer must continue to pay the dismissed employee their full wages during that period.

With its controversial judgement in Parkins v Sodexho Ltd [2002] IRLR 109, the Employment Appeal Tribunal has made this unwelcome scenario a potential reality. The case established that a worker can claim the protection of the Public Interest Disclosure Act 1998 - or the 'Whistleblowing Act' as it has become known - where the 'protected disclosure' in question is a breach of the employment contract.

When it came into force on 2 July 1999, the PIDA inserted new provisions into the Employment Rights Act 1996 to protect workers from dismissal or other detriment at the hands of their employers for disclosing information about certain kinds of malpractice. The Act provides protection for employees by rendering automatically unfair the dismissal of an employee for having made a 'protected disclosure'. The statutory definition of 'protected disclosure' includes any disclosure of information which, in the reasonable belief of the employee or worker making the disclosure, 'tends to showÉ that a person has failed to comply with any legal obligation to which he is subject'. The EAT's broad and employee-friendly interpretation established that this failure can include a breach of the employment contract.

Parkins v Sodexho - the facts

Mr Parkins was employed by Sodexho Ltd from 17 January 2000 until 28 April 2000, when he was summarily dismissed. The reason for his dismissal, he claimed, was that he had complained to Sodexho that there was no supervision on one of the sites where he worked. He said that, instead, he had to telephone his day supervisor to inform him when he left at the end of his shift and of any problems that he had encountered during the shift. He brought a claim before an employment tribunal arguing that Sodexho was legally obliged, under his contract of employment, to arrange for him to report directly to on-site supervisors and that the company's failure to do so not only amounted to a breach of contract but also to a breach of 'any legal obligation' under the PIDA. Since he did not have the necessary one year's service to claim unfair dismissal in the usual way his argument that he was covered by the PIDA was crucial.

The tribunal's decision - claim not in spirit of the legislation

In the employment tribunal Mr Parkins' argument was rejected. As the tribunal saw it, "[w]hile everybody is obliged to comply with contracts of employment, we do not consider that an allegation of breach of an employment contract in relation to the performance of duties comes within the letter or spirit of the statutory provision". This is not a surprising view for the tribunal to take. As one of the promoters of the legislation, Lord Borrie, said during the committee stage of the Bill's passage through Parliament: "[t]his Bill is meant to encourage any worker in any workplace who discovers a malpractice of some kind, whether it is financial, a breach of safety regulations or the commission of a criminal offence by the employer - several examples were given to me and several other noble Lords during second reading - to disclose those matters in the public interest. It is not concerned with a worker who wishes to disclose some malpractice for his own ends, possibly to try to gain a private advantage. As the title of the Bill clearly indicates, it is concerned with the public interest'. So, an employee who merely alleges breach of contract to contrive a claim for unfair dismissal should fall outside the Act and should fail. That, surely, is what Parliament intended and how most employers and workers would see it.

The EAT decision - breaches of contract are caught

Not so at the EAT. It allowed Parkins' appeal and decided there is no reason to distinguish a legal obligation which arises under an individual's contract of employment from any other form of legal obligation.

The EAT's only comfort for employers, effectively acknowledging the possibility of contrived claims from employees not qualified to claim unfair dismissal, was to make it clear that no claim would succeed unless the principal reason for the dismissal was a protected disclosure made by the employee in good faith.

The EAT added: "We anticipate that the difficulty for an employee to show that that was likely to be the reason for his dismissal would be as difficult a hurdle to surmount in this area as it has shown to be in the past in other areas."

The issue of whether Mr Parkins was dismissed because he complained (as he argued) or because he refused to take orders (as Sodexho argued) was not resolved; the EAT remitted the issue to a freshly-constituted tribunal. It will be interesting to see how robust a line that tribunal is able to take.

Possible claims from private disputes

The EAT's decision to give a literal and therefore very wide interpretation to 'legal obligation' and extend it to breaches of the employment contract is, on the face of it, logical. After all, the employment contract is full of legal obligations. In Parkins, arguably, the nature of the breach of contract fell within the spirit of the whistleblowing legislation - a health and safety obligation which had implications for the rest of the workforce.

The problem with the decision arises from the fact the EAT, by its own admission, could not define the spirit of the legislation. Perhaps that was the underlying reason it did not attempt to say which types of legal obligations owed to employees under their employment contracts fall within the scope of the PIDA. The EAT's failure to do that means we have no guidance on that issue yet.

Meanwhile, employers risk whistleblowing claims arising out of a purely 'private' dispute which has nothing to do with the wider public interest - for example, an employee's entitlement to wages or holiday. Clearly, this is not the type of malpractice the whistleblowing legislation was intended to cover - in most cases the dispute will be of relevance only to the individual making the complaint.

Policies and grievance procedures

While the Parkins case concerned one particular type of protected disclosure - breach of a legal obligation - the range of qualifying disclosures is far wider. They include the commission of criminal offences, miscarriages of justice, the protection of health and safety and the protection of the environment. Complaints falling into any of these additional categories should be dealt with under the employer's whistleblowing policy, which should set out clearly to whom the complaint should be directed and how it will be addressed [see box]. The purpose of a whistleblowing policy is, primarily, to deter and detect malpractice in the workplace and it should normally be kept separate from the normal grievance procedure, which is used to handle individual or group grievances.

Despite the Parkins case, the grievance procedure will continue to be the more appropriate policy for handling the vast majority of complaints relating to allegations of breach of contract. The contract of employment or the statement of terms and conditions should identify the employer's grievance procedure and specify the person to whom a complaint should be made in the first instance. Importantly, it should not be contractually binding, otherwise any failure by the employer to follow it will amount to a breach of contract itself.

Whistleblowing: practical steps to take

The independent charity Public Concern at Work offers the following useful guidance for employers.

- Employers should make it clear that it is safe and acceptable for workers to raise a concern they may have about misconduct or malpractice in the organisation.

- Where a worker raises a concern about a specified malpractice, every effort should be made to ensure the employer responds (and can show it has responded), rather than 'shooting the messenger'.

- It is in employers' own interests to introduce effective whistleblowing procedures. This will not only help separate the message from the messenger but will also reduce the likelihood that a public disclosure will be protected under the Act.

- Where a protected disclosure has been made, employers should take all reasonable steps to try and ensure that no colleague, manager or other person under its control victimises the whistleblower.

- Confidentiality clauses in severance agreements and employment contracts should be reviewed (since any such clause is void if it precludes a protected disclosure).

- Employers should review the terms and conditions in their arrangements with contractors to ensure that those who work for key contractors also have access to the employer's whistleblowing policy if the concern affects it.