Mr M Geduld became a director and employee of Cavendish Munro Professional Risks Management Limited (Cavendish) in March 2007. There were three directors, each with a shareholding of 26.6%. There were tensions between Geduld and the other directors, which came to a head in late 2007, at which time he signed a shareholders agreement. In January 2008 there were discussions about a buyout of his shareholding with a view to removing him as a director. Geduld was given the option of resigning as director but remaining as an employee, or resigning as a director and having a basic contract of employment, or agreeing an exit. Shortly afterwards, he was removed as a director.
Negotiations continued without agreement and Geduld consulted a solicitor. The solicitor wrote to the two remaining directors on his behalf on 4 February 2008. The letter stated that the solicitor had given legal advice concerning the validity of the shareholder agreement and unfair prejudice to Geduld as a shareholder. On 5 February 2008, Geduld was dismissed with immediate effect. Geduld, who had less than 12 months’ service, brought a claim that he had been dismissed because he made a protected disclosure, relying on the letter from his solicitor.
The tribunal held that although the letter from Geduld’s solicitor was ‘without prejudice’, it was admissible in evidence. The tribunal found that Geduld was dismissed because of the solicitor’s letter. The tribunal held that the solicitor’s letter did constitute a qualifying disclosure as it referred to legal obligations with which it was asserted that the other directors had not complied. The tribunal went on to find that Geduld had been unfairly dismissed. At a Remedies Hearing, he was awarded compensation of £36,300.
Cavendish then appealed to the Employment Appeal Tribunal (EAT). The EAT held that the solicitor’s letter did not amount to a qualifying disclosure. The Employment Rights Act 1996 recognises a distinction between an allegation and information. To fall within the definition of a protected disclosure there must be disclosure of information. The letter did not disclose information; it was a statement of position communicated in the course of negotiations. Further, the letter did not amount to a disclosure as it did not disclose any facts. Accordingly, Geduld did not have the requisite service to bring a claim for unfair dismissal. The EAT also set aside the compensation award.
This case does not mean that a solicitor’s letter before action is incapable of containing a protected disclosure, but it does significantly limit the circumstances in which it will do so. To make a protected disclosure, the worker must actually convey facts, even if those facts are already known to the recipient. This case is likely to act as a limitation on the significant widening of whistleblowing law brought about by the decision in Parkins v Sodexho, in which the EAT held that the definition of a qualifying disclosure (which includes “breach of any legal obligation”) was broad enough to cover breach of the whistleblower’s own contract of employment. This had led to employees who considered themselves at risk of dismissal, particularly those with less than a year’s service, making allegations of breach of their employment rights with a view to relying on a protected disclosure. The decision in Geduld, however, throws into doubt the common assumption that a complaint about such a breach will amount to a “disclosure of information”.
Allan Chalmers, employment partner, DLA Piper