In-house lawyers under threat from whistleblowing duty

The Corporate Governance Committee of the Commerce & Industry Group, the Law Society's recognised body for in-house lawyers, has warned that lawyers could find themselves exposed because of gaps in legislation protecting people who expose corporate wrongdoing.

"Compliance officers and money-laundering reporting officers are particularly exposed because they may have to make disclosures outside of their organisations, and this was not contemplated when the whisleblowing legislation was drafted," said a statement from the Group.

It said that the law should be changed. "The Committee suggests that the legislation should be amended to protect individuals who are complying in good faith with their obligations to make external reports."

The Public Interest Disclosure Act (PIDA) provides some protection for employees when it comes to reporting malpractice by a company. The Commerce & Industry Group (C&I Group) has produced guidance on the application of that law to in-house lawyers.

"PIDA encourages employees, contractors and other staff and workers in an organisation to raise their concerns about a malpractice by protecting them from dismissal, victimisation or other detriment, provided they have acted in good faith," said the guidance.

"If they suffer a detriment for making a 'protected disclosure', there is no qualifying period of service and there is no limit to the amount of compensation they may be awarded," it said.

The disclosures must show that the person believes that the company's behaviour is or is likely to cause a criminal offence to be committed, a failure to comply with a legal obligation, a miscarriage of justice, a threat to the health or safety of a worker, damage to the environment or deliberate concealment of any of these.

The C&I Group said that the legislation leaves some lawyers exposed, though, because some of the information they will want to disclose will be bound by legal privilege between lawyer and client.

The law also fails to protect lawyers who disclose information to external authorities, even when other laws insist that such information be disclosed.

"The law sometimes requires particular individuals to report malpractices directly to external bodies, such as the Financial Services Authority or Serious and Organised Crime Agency," said the C&I Group's guidance. "It would therefore be logical for PIDA to provide these individuals with the protection they would have had if they had been making an internal, rather than an external report."

"Unfortunately, it does not. Instead it imposes an important additional burden on the whistleblower, if he or she has to blow the whistle to an external regulator or government body such as the FSA, by requiring him or her to show that they had a reasonable belief that the information disclosed and that any allegations contained in it are substantially true. Consequently,  compliance officers may be required to report matters to the FSA before they have sufficient information to be sure that they are within the safe harbour provided by the PIDA," it said.

Nonetheless, the Group said that lawyers should always report malpractice, even if the Act does not give them the protection that they might want.

"Our view is that you should not allow the question of PIDA protection to affect or delay your decision whether or not to blow the whistle. If you believe that your organisation has committed, or is about to commit, a malpractice that is sufficiently serious to justify reporting it directly to the Board, and still more so to justify reporting it externally, then you must do this regardless of any concerns you may have about preserving your own job or obtaining compensation if you are victimised. You may be heavily criticised if you decide not to blow the whistle because of concerns for your own position," it said.