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UK: EAT whistleblowing decision highlights importance of complying with Acas Code

A recent EAT ruling serves as a reminder to employers that a failure to follow the statutory Acas Code of Practice on disciplinary and grievance procedures can lead to a substantial uplift on an already large award for a whistleblowing dismissal, and that contractual clauses purporting to cap compensation on termination have no effect even where agreed by a senior executive with equal bargaining power.

The tribunal can award compensation for losses due to whistleblowing dismissal of such amount as is just and equitable in all the circumstances and there is no statutory cap.  In SPI Spirits (UK) Ltd v Zabelin, the employee’s losses exceeded £1.6 million, far greater than the £270,000 which the employment contract provided would be the only amount payable on termination, in return for post-termination covenants and expressly inclusive of any other amounts claimed on termination.  The contract had been negotiated with the claimant, who was a legally trained and advised senior employee. The employer accepted that the contractual provision was not enforceable as a legal cap on the tribunal award, but nevertheless sought to argue that the existence and context of the contractual provision should be taken into account as a relevant circumstance which might reduce what it was just and equitable to award.  The EAT rejected this argument, as to do so would effectively allow an employee to contract out of their statutory rights, contrary to the Employment Rights Act.

The EAT’s ruling also clarified a number of points concerning the Acas Code on discipline and grievance, breach of which can lead to an award being adjusted by up to 25% (upwards, where the breach is the employer’s, downwards if the employee’s):

  • where an employer dismisses or takes other disciplinary action against an employee for what it regards as potentially culpable behaviour, the disciplinary provisions of the Code apply and therefore an uplift for the employer’s breach can be made, regardless of whether the tribunal concludes that the employee’s behaviour in fact amounted to protected whistleblowing (and therefore not culpable).
  • where the employee makes an initial grievance in writing as required for the Code to be engaged, the Code will apply to the way in which the employer handles this and any additional closely related concerns that are raised subsequently in grievance meetings – there is no need for the employee to put these additional concerns in writing for the Code to be engaged in respect of them.  This was important in this case for a 20% uplift to properly apply to the whistleblowing compensation: the employee’s grievance about a cut to his pay only fulfilled the requirements of a protected disclosure once he had identified the impact of pay cuts on over 2000 other employees and thereby acquired a reasonable belief that his disclosure was in the ‘public interest’.  The belief had only formed as a result of a conversation with a colleague after the initial written grievance had been submitted but before the grievance meetings.  The EAT stated that it is only if there has been a material change of kind in terms of the nature or scope of the complaint, for example in relation to the underlying subject matter or redress sought, that a new written grievance would be needed before the Code applied.  The EAT considered that the first instance tribunal was entitled to judge whether there has been such a change on the facts and it should be given a generous margin of appreciation.
  • where an individual acts as the agent of the employer and is responsible for the failure to comply with the Code, the uplift can also be applied to an award for whistleblowing detriment against the individual.
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