ARE WHISTLEBLOWERS TRULY PROTECTED, MOTIVATED AND REWARDED BY EXISTING LEGAL SYSTEMS?

1. Introduction

The COVID-19 pandemic exposed governments to waves of fraud. As the unscrupulous profiteers in Britain and America remorselessly exploit the crisis for illegal gains thereby worsening taxpayers’ woes fraud, everyone in both public and private sectors are morally obligated to blow the whistle under the False Claims Act and similar programs. This action from three plaintiff categories vice-visa: consumers, employees and stakeholders, will help governments uncover scams as well as recover misappropriated funds.

However, protecting global economies from another healthcare and financial crises require more than efforts from whistleblowers. The major challenges to effective whistleblowing are legal, financial and institutional in nature. This highlights the need for reliable frameworks that motivate, protect and reward whistleblowers while, at the same time, prosecuting offenders. The Public Interest Disclosure Act 1998 (PIDA) in the UK, and Dodd-Frank in the U.S., are some of the legal frameworks established for these purposes. But the different political systems present myriad of discrepancies in judicial processes and overall performance of legal institutions. For example, America’s Dodd-Frank Act offers between 10-30% rewards to whistleblowers under certain conditions whereas Britain rejects the idea of monetary rewards. This study examines how legal structures increase or undermine whistleblowing activities in both the U.S. and the UK, using COVID-19 events as the yardstick.

2. Research Objectives and Questions

COVID-19 fraud and retaliation claims present a 2020 trend in employment litigations around the world. In the United Kingdom and the US, private and public-sector companies are also facing COVID-19 lawsuits from employees, consumers and shareholders as a result of lay-off plans executed without adequate compensations, including unethical practices from healthcare administrators and corruption in governance. Additionally, some employees are being subjected to remote jobs while those in essential services work under extraordinary conditions—with high uninsured risks. These circumstances call for individual and/or class actions. But the success of COVID-19 lawsuits hinges on the effectiveness of legal systems, awareness of whistleblower rights, attractiveness of compensations, and level of protection offered to anyone reporting any suspected wrongdoing of corporate significance—in good faith.

On this premise, the objectives of this Thesis are:

To analyse the purpose and functioning of whistleblowing policies in the UK and the US.
To examine the effectiveness of legal structures for empowering, protecting and compensating whistleblowers.
To identify COVID-19 whistleblower risks and future implications around the world.
To understudy actions taken by the UK and the US government to protect COVID-19 whistleblowers and prosecute offenders.

To achieve the aforementioned objectives, the Thesis aims to answer these research questions:

(a) How effective are the legal systems and whistleblower legislations in the UK and the US?

(b) Will the handling of COVID-19 whistleblower cases motivate or discourage reporting of wrongdoings in the future?

The first research question “How effective are the legal systems and whistleblower legislations in the UK and the US?” aims at establishing the extent of legal protection given to COVID-19 whistleblowers in the both countries. This will be achieved through an indebt analysis of relevant whistleblowing legislations in the political systems (such as the PIDA, EU Directives, Dodd, Sarbanes-Oxley, and False Claims Act) for the purpose of weighing their effectiveness, achievements or setbacks. A comparative study of Whistleblower Protection Acts in the two legal systems will therefore underscore why the American model of whistleblower protection is considered a pacesetter across the international community. For example, SEC – in line with Dodd guidelines – encourages people to expose wrongdoings such as financial fraud, corruption, sabotage, waste of resources, and other actions that pose specific and substantial danger to the public health or safety. SEC also provides conditional monetary compensation to whistleblowers in the financial sector. But, on the other hand, the UK rejects this idea of financial rewards although it emphasizes on the ethical responsibility of “doing the right thing.” Moreover, the EU is silent on whether Eurozone countries should introduce monetary rewards, and the regional institution made no specific reference on whistleblower compensation issues in its most recent document – the EU Whistleblower Directives (2019).

Secondly, the research question “Will the handling of COVID-19 whistleblower cases motivate or discourage reporting of wrongdoings in the future?” investigates whether legal structures in the UK and US have effective mechanisms to empower, motivate and protect COVID-19 whistleblowers. Accordingly, the research question aims to thoroughly glean circumstances in which whistleblowers in the different political systems are denied legal protection. This objective will, in turn, enhance understanding of the “protected disclosure” concept, particularly in the context of COVID-19 pandemic which provides a testing ground for employees’ knowledge of the appropriate internal/external channels of whistleblowing. For example, an analysis of COVID-19 retaliation lawsuits such as Kristopher King v. Trader Joe’s East, Inc. (a lawsuit filed in Kentucky) and Alaska State employees v. State of Alaska, USA will help to identify areas of US whistleblowing legislations that can improve corporate governance, control retaliatory actions against whistleblowers, and restore trust in governmental structures around the world.

In the UK scenario, whistleblowing channels are available and quite responsive. For example, in May 2020 — few months after COVI-19 lockdown — hundreds of frontline staff in different sectors of the economy reported fraud, corruption and other unethical practices. But, despite the huge outcry, lawsuits against offenders were minimal due to employees’ poor knowledge of the Act, disclosure rights or appropriate channels for reporting wrongdoings. Additionally, there’s perceived weakness in the UK legal system and administrative process. These factors, including non-availability of monetary rewards, will be examined to understand what areas of law and governance should be reviewed for efficiency. This thesis will therefore analyse how re-orientation of the UK workforce, introduction of financial rewards, and implementation of changes in the legal process can empower employees to blow the whistle on perceived or actual wrongdoings.

The third research question “How does the UK’s COVID-19 whistleblowing protection compare with the one in the US?” aims at identifying remedial strategies adapted by the British and American governments to ensure good corporate governance at all time, especially during pandemics. The purpose is to understand the current level of disaster risk preparedness/management in the UK and USA. This will certainly expose each nation’s vulnerability to fraud, corruption and unethical practices as well as the underlying risks to potential whistleblowers—which is the fourth objective of this research. Further, the researcher will critically examine if potential COVID-19 whistleblowers in the UK and US are adequately empowered to act—either in good faith or for the expected compensation—as reliable watchdogs in their work places. Long-term viability of the available motivations and protective mechanisms in both countries will also be analysed. But, more importantly, determining the level of each government’s commitment towards identifying and prosecuting people and/or institutions involved in COVID-19 malpractices will be pivotal to this research.

The purpose is to ascertain the relevance of whistleblower legislations such as the PIDA, EU Directives, Dodd, Sarbanes-Oxley, and False Claims Act, particularly their effectiveness in protecting employees from retaliatory actions. The UK framework of protection in sections 43A to 43L and 103A of the Employment Rights Act (1996) discourages employers from subjecting whistleblowers to any detriment (such as harassment, demotion or dismissal) if their activities are within the scope of ‘protected disclosures’. Similarly, the lawsuit against Trader Joe’s in Kentucky, USA, provides an insight into a whistleblower retaliation claim arising from COVID-19 and what actions are considered reasonable for affected employers. The lawsuit also highlights the vulnerability of employers in both public and private sectors. Other highlights of the case law include: (a) how multinational corporations and government contractors can manage risks associated with whistleblower claims and (b) employee protections against retaliation as stipulated by the Sarbanes-Oxley Act and the False Claims Act. In the UK legal system, challenges of the EU Whistleblower Directive (2019) and COVID-19 whistleblower employment litigations as seen in case laws handled by the Employment Appeal Tribunals (EAT) will provide more grounds for inferences in this research.

3. Literature Review

The COVID-19 pandemic practically brought all existing whistleblower protection laws to the test. As the international community keeps daily count of confirmed cases, deaths and recoveries from the novel coronavirus, over forty-five (45) whistleblower protection groups comprising the Whistleblowing International Network (WIN) are protesting retaliatory actions meted on concerned employees who arguably in defense of public health and security courageously expose wrongdoings. Governments and public agencies have been challenged to provide adequate protection for whistleblowers in line with the obligatory roles of good corporate governance. In the healthcare sector, for example, many COVID-19 whistleblowers have shared grievances on public procurement problems, inadequate health system capacity, violations of labour, health and safety laws, manipulation of global markets, imbalanced global supply chain, and unfair business practices. There are also cases of encroachment on people’s privacy rights.

A large number of scientists, nurses, doctors and other frontline workers in the UK, US, China and Italy, among others, have had their appointments terminated for exposing fraud or speaking up against administrative incompetence. Among the numerous victims of COVID-19 retaliation are:

Dr. Ai Fen from Wuhan Central Hospital, China, who suffered retaliation from superiors after making unapproved public statements on COVID-19. She later disappeared. Similarly, many doctors and nurses were allegedly summoned by the Chinese police for whistleblowing about coronavirus.

Other public and private sector employees involved in COVID-19 lawsuits are: (a) Ming Lin (an emergency room physician in Seattle, WA) who was unjustly dismissed for granting an interview to a newspaper about inadequate testing and lack of protective equipment. Similarly, (b) Lauri Mazurkiewicz (a qualified nurse in Chicago, IL) was fired by North-western Memorial Hospital, for violating disclosure agreement by complaining to friends about the quality of available protective masks.

In London, the National Health Service (NHS) allegedly warned health workers against granting interviews or reporting their health and safety concerns to the media. These examples highlight the pivotal role of whistleblowers in enforcing accountability and transparency and strengthening public trust. Good corporate governance therefore, lends credence to the effectiveness of whistleblowing activities and the level of protection offered in legal systems.

Unfortunately, a deluge of COVID-19 Retaliation Claims has not changed employers’ attitude towards legal, fair and ethical practices. Whistleblower retaliation is therefore considered another global crisis of a different kind.

Scheetz and Wall (2019) used a global approach to understudy whistleblower rights and found that most countries lack effective legislations and institutional framework for whistleblower protection, thus, making it impossible to prevent abuse of power, mismanagement of funds, corruption and money laundering. The scholar suggested a multi-stakeholder approach that allows partnership among the media, civil society, international organisations, governments and labour protection/anti-corruption agencies..

Moore et al (2017) agreed that retaliatory actions against whistleblowers present danger to public health and safety, also noting that whistleblower protection is the bedrock of transparency reforms in corporate governance. But most countries are yet to enact and strictly enforce legislations for this purpose.

Mintz (2015) acknowledged that retaliatory actions against whistleblowers are fairly standardized across organisations and industries. For example, retaliatory actions are classified under nullification, isolation, defamation and expulsion. Employee is finally forced out of the organisation either by firing or forced resignation. The scholar cited cases where whistleblowers were expelled from an entire industry through blacklisting. Few examples of global whistleblower issues are Snowden, Panama Papers, Cambridge Analytica, Dieselgate and LuxLeaks.

4. Methodology

The methodology of the research will be qualitative. The researcher used relevant literatures on COVID-19 as well as whistleblower laws and case studies as main sources of non-numeric data to enable understanding of what employers think about Whistleblower Protection and why they (employees) choose to expose wrongdoing or not. Additionally, the researcher will collate valuable secondary information in the area of study from a review of relevant books, journals, general legislations on corruption, and the World Health Organization’s principles for the protection of human rights, among others. These will provide detailed insight needed for a holistic study.

If available, field notes will be used while transcribing audio recorded data from whistleblower-related judgements from Employment Appeal Tribunals (EAT), such as Cavendish Munro Professional Risks Management v Geduld, Hibbins v Hesters Way Neighbourhood Project, and Babula v Waltham Forest College. Although video recordings are more reliable than field notes, the researcher will ensure both sources of data are secured in a similar manner, as data protection is paramount.

The UK and the US were chosen for this study because they have strong economic and socio-political structures that promote good corporate governance, freedom, and human rights protection. Moreover, both countries have very developed, organised, efficient and dynamic governments. However, the UK operates a parliamentary system of government whereas its counterpart adapts the presidential model. A comparative study of both jurisdictions will therefore highlight the advantages and disadvantages of these two legal orders, with a focus on how governmental systems/processes encourage or hamper whistleblowing activities.

Basically, the qualitative analysis of the available data will be comparative and descriptive in nature. This will enhance the understanding of the whistleblowing protection laws in the UK and the U.S., with highlight on the effectiveness of existing legal structures in both countries. The qualitative research method has been chosen because it creates room for in-depth and further probing of findings from respondents and materials vetted during the research.

5. The EU Whistleblower Directives (2019)

Enacted by the European Union Parliament on 16 December, 2019, the EU Whistleblower Directive is yet to achieve its purpose due to discrepancies in its adoption and implementation. More than half of the 27-member political institution are already transposing the EU Whistleblower Protection Directive into national law. But there are widespread concerns that all Eurozone countries will meet the December 2021 deadline. This highlights the need for lawmakers, including management board of every multinational corporation and private/public companies that will be mandated to follow the new rules, to hasten preparation against litigations such as COVID-19 retaliation lawsuits.

The EU Directive (also known as the Act) will affect thousands of organizations as well as Small and Medium-scale Enterprises (SMEs) within Europe, especially those with over 50 employees. However, only organizations/businesses with up to 250 workers are obligated to comply first. Companies with 50-249 employees have about 2 years to implement the legislation. Basically, the Directive is mainly focused on protecting a wide range of whistleblowers, especially those reporting violation of EU laws. This legal provision, in turn, is expected to increase accountability, equity and commitment to good corporate governance among organizations. But achieving these objectives depends on proper adoption of safe reporting channels—such as whistleblower websites and hotlines. The Act clearly stipulates that EU Member States should design, establish and operate reporting channels that guarantee protection of private information. Apart from the emphasis on confidentiality of the identity of whistleblowers, the Directive also offers protection to any third party mentioned in the report.

Further, according to Article 9, Directive (EU) 2019/1917 of the European Parliament and Council, every affected organization is also required to:

Enlighten employees of reporting options available to them.
Implement strategies to protect whistleblowers from any form of retaliation—such as dismissal or demotion.
Engage services of a competent and unbiased person to receive and investigate reports.
Ensure that every report is investigated with 3 months.

According to the 2018 EU General Data Protection Regulation (GDPR), slow national adoption of the Directive limits awareness due to the fact that each member state is free to transposed individually until December 2021. This creates room for differences in each local version of the Act. But, despite the setback, the Directive’s main aim is to provide minimum level of protection for whistleblowers in Eurozone countries.

Sweden on 29 June, 2020 recorded notable progress in its effort to protect whistleblowers. The Exploratory Committee delivered an 802-page report containing detailed plan for transposing the new Whistleblower Protection law, and remarkably, reduced the scheduled date by one month. New date is1 December, 2021.
Similar proposals presented in Denmark and Finland set Spring of 2021 as their implementation period. Their impressive efforts were slowed by the coronavirus pandemic as was the case in Portugal.
In June 2020, the Republic of Ireland commenced public consultation towards adapting the EU Directive.
Latvia called for public opinion to enable preparation of a proposal that will facilitate amendment of its Whistleblowing Protection Act within the same month.
Accordingly, the Ministry of Justice, Slovenia reiterated its desire to prioritise transposition of the EU Directive.

Other Eurozone countries such as Bulgaria, Estonia and Greece have taken proper steps toward adapting the new law before the end of 2020. But setbacks to the implementation of EU Directive isn’t only poor commitment to the establishment of the required confidential reporting channels. Most Eurozone countries are yet to find a solution notwithstanding evidence of COVID-19 fraud and whistleblower retaliation. On this backdrop, an independent research from George Washington University argues there’s link between increased use of reporting channels and improved business performance. It is also a truism that the world’s most successful organisations agree that whistleblowers are an indispensable tool for building trust with employees and managing costly-and-avoidable business risks. This is more so because employees are crucial in early detection of actionable misconduct within an organization.

How robust in the Directive in comparison with PIDA, Dodd, Sarbanes-Oxley, and False Claims Act?

Unlike Dodd-Frank and other whistleblower-protection mechanisms in the United States, the EU Directive is undergoing serious reforms—with lots of challenges arising from discrepancies in political systems and governmental processes among Eurozone countries. But it is a giant stride towards improving freedom of speech as well as accountability and probity in public and private companies. Therefore, comparison between the Act and similar US legislations is quite robust and a promising academic exercise. This is also golden because the UK operates a parliamentary system of government whereas the US runs a presidential model.

The EU Whistleblowing Directive is a vital legislative cog in attempting to prevent breaches of EU law—such as corruption and fraud. It also aims at providing comprehensive protection for any individual or group of people blowing the whistle on wrongdoers across Europe. EU member states are obligated to transpose the Act using their own version as national law by 17 December 2021. But, remarkably, the national laws must include—as a minimum—all whistleblower protections stipulated in the EU Directive although each country is allowed to include more protections as may be desired. More importantly, EU countries can decide on how anonymous reporting should be handled, or if there are circumstances when whistleblowers should receive financial rewards. These commendable improvements are a step in the right direction, especially in this era of COVID-19 when retaliatory actions against whistleblowers have stressed the urgent need for governments to strengthen whistleblower-related laws.

6. Timeline of the Study

Year One:

November 2020 – February 2021 – research and write first chapter

March – June 2021 – research and write second chapter

July – October 2021 – research and field work (if no COVID-19 restriction)

Year Two:

November 2021 – January 2022 – data analysis

February – May 2022 – research and write third chapter

June – September 2022 – research and write fourth chapter

Year Three:

October 2022 – January 2023 – research and write fifth chapter

February 2023 – April 2023 – write introduction and conclusion.

May – September 2023 – work on the draft Thesis and prepare for submission.

References

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