December 12, 2013

24 Steps Forward and 1 Giant Step Back on the Path to UK Whistleblower Reform

shutterstock_312126623By Gordon Schnell

Major kudos to Public Concern at Work (PCW), the highly regarded UK whistleblower charity, for its recent report on how best to advance whistleblowing in the Commonwealth.  It contains 25 recommendations to encourage more people to say something when they see something wrong in their workplace, and protect them from retaliation for doing so.  If adopted, the recommendations could go a long way in making whistleblowing a more established and effective mechanism for supplementing the UK government’s efforts to combat fraud and misconduct.

There is one major problem however.  The report rejects the concept of whistleblower rewards.  In doing so, PCW’s good work here will be severely constrained.  The U.S. whistleblower experience makes this abundantly clear.  An effective whistleblower system must contain financial incentives.  They are necessary to encourage whistleblowers to suffer through what can be an extremely tiresome and harrowing ordeal.  And they justly compensate them for the significant financial, personal, and even physical hardships they suffer for standing up and speaking out.

The PCW report, titled Report on the Effectiveness of Existing Arrangements for Workplace Whistleblowing in the UK, is the end product of an extensive study conducted by an independent expert commission PCW set up to examine the current state of whistleblowing in the UK.  The commission is comprised of a who’s who list of UK luminaries from the public and private sector so their opinions likely will carry a lot of weight.  This is particularly so given the report’s timing, following on the heels of the UK government’s own Call for Evidence on improving its existing whistleblower regime.

So here is where the PCW report gets it right.  It powerfully reinforces the vital role of whistleblowing not only for the government and public but for the very companies where the wrongdoing is occurring.  It explains why the current system is not working because so many individuals who witness fraud or misconduct—reportedly more than half—are afraid to come forward for fear of reprisal or futility.  And most importantly, it provides a series of groundbreaking recommendations to overcome this “culture of silence” and better motivate and protect would-be whistleblowers.  These include:

  • Strongly encouraging or even requiring companies to have programs in place that encourage and protect whistleblowers (Recs. 1-3).
  • Establishing a clear procedure regulators must follow for dealing with whistleblowers and reporting the results to Parliament (Recs. 4-5).
  • Creating a Code of Practice under the Employment Rights Act which would provide guidance to both employers and employees for promoting an effective whistleblower program in the workplace (Rec. 6).
  • Further amending the Public Interest Disclosure Act of 1998 (PIDA)—the UK’s principal whistleblowing statute—to broaden the scope of whistleblowers protected, the wrongdoing covered, and the relief available (Recs. 8-20).
  • Expanding the whistleblowing expertise and authority of the judges hearing PIDA claims (Recs. 21-24).
  • Researching the need for a government agency devoted to supporting and promoting whistleblowing (Rec. 25).

These recommendations, even if adopted in part, could vastly improve the relatively nascent, and by some degree struggling, UK whistleblower program.  But here is where the PCW report gets it wrong.  And it is a big one.  The report “does not recommend the introduction of financial rewards or incentives for whistleblowing.”  Rec. 7.  It identifies in summary fashion six reasons why: it would be inconsistent with UK culture; would undermine the moral stance of the whistleblower; could lead to false reporting; could undermine witness credibility; could result in negative portrayal of the whistleblower; and would be inconsistent with the current UK compensatory regime.

For a report so well reasoned in its proposed whistleblower reforms, it is surprising where it comes out on this crucial point and how thin it is in establishing why, particularly in relying on such squooshy notions as culture, morality, and image.  It is especially troubling how the report ignores the overwhelming success of the U.S. whistleblower system where financial rewards play an indispensible part.  The False Claims Act, for example, the linchpin of the U.S. whistleblower system, awards whistleblowers up to 30 percent of the government’s recovery.  It was enacted in 1863 by President Lincoln to combat fraud by unscrupulous government contractors during the Civil War.  But it was only after the 1986 amendments to the statute—which significantly increased whistleblower protections and financial incentives—that the statute began to show real results.

The recently-enacted Dodd-Frank Act provides whistleblowers to the Securities and Exchange Commission (SEC) with equally hefty financial incentives.  In passing this legislation, Congress clearly saw the wisdom of whistleblower rewards, recognizing the SEC’s previously existing whistleblower program—which lacked any financial incentives—did not work.  Now, the whistleblowers are flooding in to the SEC (thousands a year) and have contributed heavily to the reawakening of what had been considered by many to be a largely moribund agency.  The PCW report is silent on this real-world empirical support for financial incentives.  It likewise avoids any real discussion of the strong policy reasons for compensating whistleblowers for the real risks and harms they face, even when strong protections exist.  See Message to the UK — Whistleblower Incentives Work.

The bottom line is that regardless of where the UK may go in developing additional protections for whistleblowers—and hopefully it will go far prompted by the PCW’s good work here—the risk of retaliation or some form of estrangement, alienation or even blacklisting will remain very real.  That is why PCW’s rejection of financial incentives is so disappointing and why, without them, their 24 excellent recommendations will be limited in what they ultimately accomplish.  If we are really serious about bringing whistleblower reform to the next level in the UK, financial incentives need to be part of the plan.  The mere promise of protection and a more enlightened community embrace just won’t be enough.

*     *     *

If you would like more information or would like to speak to a member of Constantine Cannon’s whistleblower lawyer team, please click here.

Leave a Reply

Your email address will not be published.

One Response to “24 Steps Forward and 1 Giant Step Back on the Path to UK Whistleblower Reform

  1. I somewhat disagree. UK culture is quite different from US culture on this point IMHO and whistleblowers are seen through an even more negative lens than here. But then again they are people and if you throw enough money at people, most will take the bait.