Whistle Blowing by Solicitors
The recent report in the Law Society’s Gazette concerning the involvement of the Solicitors Regulation Authority (SRA) in what is understood to be the first legal action by a law firm against an in-house ‘whistleblower’ (Gazette 27 October 2014 – Firm acts against ‘spy in the cab’) has once again thrown into the spotlight the whole issue of disclosure and whistle blowing to the SRA.
In this case, the SRA stated that it has become involved in order to “assist the court by providing objective information about the regulatory regime for solicitors and about the public interest importance of the free flow of information to the SRA to enable the SRA to regulate effectively.” However, the case does yet again raise the question of what is the position regarding whistleblowing in law firms and what are the duties to which solicitors and their staff are subject?
This is not the first time that whistle-blowing in law-firms has come up this past year. In May 2014, it was reported that international firm Clyde & Co had settled a long-running dispute with former partner Krista Bates van Winkelhof following a Supreme Court ruling that even though a partner, Bates van Winkelhof was to be regarded as a ‘worker’ for the purpose of employment legislation and was therefore entitled to protection under whistle blowing laws.
This article looks at some of the issues involved and at what firms should consider when implementing a policy to allow staff to comply with the notification and reporting requirements in Chapter 10 of the Code of Conduct.
Whistle blowing within solicitors firms is covered not just by the general law relating to whistle blowing (of which more shortly) but is also the subject of a number of regulatory duties. Indeed, the Solicitors Regulation Authority (SRA) places a great deal of emphasis on the management of risk within the profession and one of the key elements of that is the duty upon everyone within a solicitors’ practice, not just solicitors themselves, to report to the SRA circumstances or information which could lead to such a risk arising.
Whistle blowing, therefore, within the solicitor’s profession is thus raised from a socially desirable and worthy activity to one of duty and professional compliance.
Whistle blowing was defined in 1994 by the Nolan Committee on Standards in Public Life as the act of “raising concerns about misconduct within an organisation or within an independent structure associated with it.” In other words, whistle blowing is reporting misconduct to those that have the power to take corrective action. Generally it applies to the violation of law, rule, regulation and/or a direct threat to public interest possibly arising from fraud, health and safety violations, regulatory breaches and corruption.
Protection for whistle blowers
The current protection enjoyed by whistle blowers dates from the Public Interest Disclosure Act 1998 (as amended by the Enterprise and Regulatory Reform Act 2013) which provides protection (and rights not to be victimised) to those individuals who make certain disclosures of information in the public interest. The legislation covers employees, contractors, trainees and agency staff and, following the decision of the Supreme Court in Clyde & Co LLP v Van Winkelhof  UKSC 32 (21 May 2014) to members of an LLP.
The protection given by the Act is to make it unlawful for an employer to dismiss or to subject to a detriment any worker on the grounds that they have made a protected disclosure. A protected disclosure involves passing on information which shows that:
- a criminal offence has been committed;
- a person has failed, or is likely to fail, to comply with a legal obligation;
- a miscarriage of justice has, is or is likely to occur;
- the health or safety of an individual has been, or is likely to be, endangered;
- the environment has been, is being or is likely to be, damaged;
- any information tending to show any of the above has been, is being or is likely to be deliberately concealed.
Under the Public Interest Disclosure Act 1998 the test for whistle blowing was that the disclosure was protected if it was made in good faith. However, following the changes introduced by the Enterprise and Regulatory Reform Act 2013 this has been changed so that a disclosure will be protected if the whistleblower reasonably believes it is being made ‘in the public interest’.
The Regulatory Duties
The main regulatory duties to disclose information to the SRA are to be found in Chapter 10 of the SRA Code of Conduct 2011. The preamble to the chapter makes it clear that information which the SRA requests helps it to “understand any risks to clients, and the public interest more generally”.
Thus, the Outcomes in Chapter 10 provide:
- at Outcome O(10.1) that you “ensure that you comply with all the reporting and notification requirements in the Handbook that apply to you”;
- at Outcome O(10.3) that you “notify the SRA promptly of any material changes to relevant information about you including serious financial difficulty, action taken against you by another regulator and serious failure to comply with or achieve the Principles, rules, outcomes and other requirements of the Handbook”;
- at Outcome O(10.4) that you “report to the SRA promptly, serious misconduct by any person or firm authorised by the SRA, or any employee, manager or owner of any such firm (taking into account, where necessary, your duty of confidentiality to your client)”; and
- at Outcome O(10.7) that you “do not attempt to prevent anyone from providing information to the SRA or the Legal Ombudsman”,
whilst the Indicative Behaviours focus mainly on the need to advise the SRA of problems arising within the firm, including financial stability and viability, indicators of serious financial difficulty, issues concerning competence and fitness and propriety of employees, managers and owners, and the management and structure of the firm.
Finally, Indicative Behaviour IB (10.10) suggests that a behaviour of a compliant firm is to have a whistle-blowing policy – although no further guidance is provided as to what that requires.
In addition to the Chapter 10 duties, there are duties which are placed upon the compliance officer for legal practice (COLP) and the compliance officer for finance and administration (COFA) of a licensed body. These are contained in rule 8.5 of the SRA Authorisation Rules for Legal Services Bodies and Licensable Bodies 2011. 8.5(c) and 8.5 (e) provide that the COLP and the COFA must record (and make available to the SRA where necessary) all failures of compliance and report to the SRA as soon as reasonably practicable all material breaches (or in the case of a licensed body – i.e. an ABS – all breaches whether material or not).
Encouraging whistle blowing
Just as the Public Interest Disclosure Act 1998 attempts to provide protections for whistle blowers in general, so outcome O (10.7) is designed to encourage whistle blowing and those who wish to report to the SRA by making it a regulatory requirement not to attempt to prevent anyone from providing information to the SRA or the Legal Ombudsman. Is this enough? Probably not.
Despite the provisions of 10.7 many will realise that the very act of whistle blowing in certain circumstances could lead to:
- firm closure;
- sanctions being taken against the employer affecting the whistle blowers own prospects;
- sanctions being taken against the whistle blower if they are involved in the actions being disclosed;
- reputational problems for the whistle blower;
- damage to the whistle blowers career prospects;
to name but a few. Additionally, whistle blowers tend to be faced with doubts about blowing the whistle because:
- they believe no-one will be interested;
- they do not know who to tell;
- they are embarrassed by the revelation;
- they think they will not be believed; or
- they have cultural objections to being a “Judas” or a “snitch”.
Similar problems to these have arisen following the introduction of the Public Interest Disclosure Act 1998. Although the Act provides protections, surveys, such as that carried out by the Institution of Occupational Safety and Health, have shown that often less than a third of workers would be prepared to report wrong doing by their employers.
Until the Bates van Winkelhof case was decided, partners and members of an LLP in particular found themselves between a rock and hard place when it came to disclosures. As a partner or member of an LLP, you are subject to responsibilities for the management of the firm within the ambit of the rules. However, there was no protection under the whistle blowing legislation because, until the decision in May, it was not accepted that a partner in an LLP was a worker for the purposes of the legislation.
Further, the preamble to Chapter 7 of the SRA Code of Conduct 2011 provides that “overarching responsibility for the management of the business in the broadest sense rests with the manager(s)” where managers are defined as “a member of an LLP; a director of a company; a partner in a partnership; or in relation to any other body, a member of its governing body.” Similarly, Rule 8 of the SRA Authorisation Rules 2011 and sections 90 and 176 of the Legal Services Act place responsibilities on regulated and non-regulated individuals and bodies.
Thus, any disclosure by a partner or member could be seen as a self-report and one which could potentially leave the reporting partner or member in a position of liability for the actions being reported.
So what can firms to do to encourage whistle blowing?
Need for a policy
To encourage managers and staff to report, firms need to implement a whistle blowing policy – as required in Indicative Behaviour IB(10.10). Such policies are becoming far more common in the workplace generally as businesses realise that the damage which can be done by instances of fraud, wrongdoing and breaches of legislation going unnoticed. Moreover, having and implementing the provisions of a practical policy is an excellent way for a firm to show that it is addressing risks within the practice and as a result satisfying its obligations under outcomes focussed regulation.
Ideally, policies should address not only issues relating to reporting to the SRA but should address in addition the more general issues covered by the 1998 and 2013 Acts.
As an absolute minimum the policy should contain:
- a commitment by the firm to treat whistle blowing in an appropriate manner;
- an encouragement to managers and staff to make reports;
- an outline of the kinds of activities to which managers and staff should be alert;
- the process by which concerns are to be raised;
- the steps the firm will take to address those concerns;
- an assurance of confidentiality;
- guidance on ensuring that the process is not used for malicious or similar purposes.
In addition, firms should:
- provide staff with guidance on what to do if they encounter reportable issues, provide reassurances that they will not be penalised for making a disclosure and ensure that they have the appropriate support after a disclosure is made;
- ensure that line managers are supportive, understand what to do when a disclosure is made to them by members of staff, and realise the importance of the reporting process; and
- ensure that those who do report are protected from reprisals and are confident themselves that this protection exists.
A policy on its own, however, is not sufficient.
Firms should ensure that they provide staff with training not only in how and when to report issues but as to what the issues are for which they should be looking out. That means paying attention to warnings and guidance issued by the SRA and ensuring that staff are made aware.
The firm should also itself be monitoring to make sure that issues of the kind which could form the basis of a complaint are not arising.
How will the SRA deal with a report?
The SRA have set out in a statement entitled “Whistle blowing to the SRA“ what their approach is to receiving information from the public, from lawyers and from other people working in the legal sector, which relates to serious misconduct or risk to the public. In particular they are keen to emphasise that they understand that those who are concerned about the conduct of someone with whom they work or another person can be placed in a difficult position.
To encourage whistle blowing they state that “many serious risks to the public do not come to light unless someone decides to report them, or they may come to light only when a great deal of damage or loss has already been caused.”
The SRA are at pains to reassure whistle blowers that they will deal with reports sensitively and that where information is provided on a confidential basis they will take appropriate steps to protect the whistle blowers identity. In some cases it may be necessary for the SRA to ask the whistle blower if they are willing to be identified at a later stage – especially where it would be difficult taking enforcement or disciplinary action without formally and openly relying upon the evidence provided by the whistle blower.
However, it should be borne in mind that those whom the SRA regulates are under a duty to report and not doing so could itself be a regulatory breach.
Having received a report, the steps that the SRA take will ultimately depend upon the nature of the report. The approach which the SRA take is designed to be:
- targeted, and
In most cases the SRA will proceed by acknowledging all initial reports of information by acknowledging the receipt of the information and explaining that the informant will not normally be provided with information as to the outcome of the report. Sometimes they may need to contact again the person making the report if they require more information or if they think the person needs to be a witness.
The SRA will apply the same risk criteria to the report as it does to information from all other sources so as to direct its resources to the areas of greatest risk to the public interest. High-risk issues are given priority. Depending on the information provided the SRA may take different types of action, including
- keeping the information for future use in deciding whether a particular law firm poses a risk to the public—we call this outcome “No engagement at present”
- using the information to supervise a law firm more closely, and
- using the information as part of a formal investigation of a particular law firm.
Thus they may decide to take no steps or they may engage in supervision of the firm, they may carry out an investigation or they may, in the more extreme cases take more drastic action such as intervention.
The Lawyers Defence Group can assist you whether you are:
- someone who intends to whistle blow
- someone is experiencing unpleasant consequences of having blown the whistle, or
- a firm that is the subject of activity from the SRA as a result of whistle blowing.
Contact the Lawyers Defence Group:
- by phone on 0333 888 4070;
- by email to firstname.lastname@example.org;
- by requesting a callback using the form in the right hand menu and someone will call you back; or
- by writing to Lawyers Defence Group at one of the addresses on our contacts page.