Hidden skeletons - Farrer & Co

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While in large part your fellow partners will be individuals of integrity, every managing partner knows that, from time to time, you are likely to come across an allegation of professional misconduct (or worse) against a partner or employee. It’s usually better to find out the facts sooner rather than later so that you can take early action and ideally nip the issue in the bud before it escalates into a more serious regulatory breach. Law firms are places where, surprisingly, there is not much discussion about whistleblowing. Indeed, whistleblowing policies are not necessarily standard in the same way as employee grievance procedures or disciplinary rules. “There has been a tendency for bad news to be buried in law firms” Defining whistleblowing Whistleblowing is the term used to describe a situation where an employee or other worker raises a concern about illegal practices or other wrongdoing. Depending on the jurisdiction in which you operate, it is likely to have a specific legal definition. In the UK, the Public Interest Disclosure Act 1998 provides a framework for the protection of the whistleblower who makes a “qualifying disclosure”, conveying information which, in the reasonable belief of the worker, tends to show that a specified type of malpractice has taken place, is taking place or is likely to take place. These include criminal offences, breach of any legal obligation, miscarriages of justice, danger to health and safety, damage to the environment and the deliberate concealing of information about any of these matters. In the context of a law firm, you are likely to be dealing with the alleged commission of a criminal offence (most obviously fraud) or breach of a legal obligation. The latter category is very wide, and will cover, for example, breach of any contractual obligations owed by your firm to its clients, or even a breach of an employee’s own contract of employment. www.mpmagazine.com 15
COVER STORY WHISTLEBLOWING DEVELOPING A WHISTLEBLOWING CULTURE Do Consider adopting a formal whistleblowing policy, but don’t forget the importance of training on that policy. Consider as part of good risk management the importance of supervision and team working in fostering an open culture. Think carefully about the personality of any whistleblowing officers, to ensure that they are people who are seen as approachable by your partners and staff. Don’t Take on all of the responsibility for the management of whistleblowing complaints yourself – ensure you have adequate support amongst your management team and consider appointing dedicated whistleblowing officers. Allow a culture to develop of burying concerns and letting them fester. Actively encourage the early reporting of concerns. Somewhat bizarrely, in the UK there is not currently a legal requirement that the disclosure is in the public interest, meaning that an individual employee can complain about the way he has been treated by his employer and can rely on this complaint as grounds for protection under whistleblowing legislation. The UK government’s proposed reforms in this area to remove this anomaly are welcome. The UK whistleblowing regime does not cover a regulatory breach per se if such a breach does not in itself amount to breach of a legal obligation. But it will of course often be the case that a breach of regulatory obligation will amount to a separate breach of contract (such as a firm’s contract to perform services for a client in accordance with its regulatory obligations). It is prudent in any event to treat any disclosure of a regulatory breach as if it were covered by the whistleblowing regime. Why a whistleblowing culture Early warning signals The most important reason to develop a whistleblowing culture is to encourage transparency, so that concerns are reported to management as early as possible and therefore can be dealt with before significant damage has been done. This is not something which has necessarily been encouraged in law firms in the past. In fact, there has, from time to time, been a tendency for bad news to be buried in law firms. However, as firms grow in size (particularly through mergers or team bolt-ons), it can become increasingly difficult for management to keep a close watch on any potential concerns without adequate reporting structures in place. If staff feel that they will be seen as disloyal to their colleagues or their firm by reporting legitimate concerns, then that is a very dangerous environment to manage. It is well-nigh impossible for a managing partner to have oversight of everything that goes on in any firm, so you need to be able to rely on your staff to report concerns upwards – not necessarily directly to you in every case. You will need a risk management structure appropriate to your firm’s size and to share the responsibility of dealing appropriately with any allegations of wrongdoing. Partnership issues The culture at many law firms sometimes makes it difficult to manage your partners to ensure that a bright associate is not ostracised after making a disclosure about less than ideal behaviour on the part of one of your partners. The nature of law firms is that work is in the gift of the partners and is allocated to solicitors who partners feel they can trust – not to those who are seen as disloyal or troublemakers. It is very easy for trust to be broken when a solicitor has, quite rightly, brought a matter to your attention (see box: Case study). Prospect of litigation In the UK, if a whistleblower who makes a qualifying disclosure in good faith is subjected to detriment or dismissal by his employer (by, for example, being ‘sent to Coventry’ as in the case study), he can bring a claim in an employment tribunal for compensatory damages, which are theoretically uncapped. For some, a whistleblowing claim is the winning ticket to damages that are not subject to the usual £72,300 cap on compensatory awards for unfair dismissal claims or a qualifying period of service. Some claimants also feel that the pursuit of a whistleblowing claim does not carry the stigma of bringing a claim for discrimination (for which damages are also uncapped). They may therefore be more prepared to try their luck at a tribunal, usually with the aim of doing a deal somewhere along the line. “A whistleblowing claim is the winning ticket to damages” 16 MANAGING PARTNER, APRIL 2012
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Hidden skeletons - Farrer & Co

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