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The recent Court of Appeal case Kong (appellant) v Gulf International Bank (UK) Ltd established the troubling precedent that a whistleblower may be dismissed for their conduct without statutory relief in circumstances where allegations are unfounded and arise resultant of the disclosure.
The United Kingdom Court of Appeal (Civil Division) has recently upheld an Appeal Employment Tribunal decision that a whistleblower who was dismissed for accusations of criticizing a colleague's integrity and knowledge when making a protected disclosure was not automatically unfairly dismissed, despite her conduct being deemed as reasonable and the accusations unfounded. The whistleblowing charity Protect, which provides advice to whistleblowers and campaigns for better legal protection, intervened in the appeal.
Following a protected disclosure to the Head of Legal of Gulf International Bank, the whistleblower, Ms. Ling Kong, who was employed by Gulf International Bank (UK) Ltd (hereinafter "the Bank") serving as Head of Financial Audit, was summarily dismissed by the Bank in December 2018 purportedly for reasons relating to conduct.
This ruling raises significant concerns regarding the applicability of whistleblower protections within the United Kingdom, especially considering the nature of Ms. Kong’s role as the head of an auditing department, whose inherent function is to ensure legal compliance and challenge senior organizational members where concerns arise and fail to be resolved. This is worrisome because, through intimate knowledge of internal systems, whistleblowers remain the most effective stakeholders in reducing the occurrence of criminal behavior in organizations (Grasso, 2020).
Case Background
Ms. Kong was appointed by the bank in 2010 as a Senior Business Auditor, before being promoted to the Head of Financial Audit in March 2016. As highlighted in the judicial decision,
“... In a section headed “[Ms. Kong’s] performance and conduct generally” the tribunal referred to the claimant’s performance appraisals, which were “outstanding” or “exceeded expectations” every year...
However, a number of colleagues described her approach as
“challenging, pernickety or inflexible; and lacking “softer, interpersonal” skills.“
In October 2018, Ms. Kong made a verbal protected disclosure to Ms. Jenny Harding, Head of Legal, to the effect that an industry-standard financial compliance template, designed for bank-to-bank lending, was being used for non-bank to-bank lending and was therefore not suitable and fell outside of legal compliance requirements. This disclosure followed concerns regarding the practice being raised previously through the appropriate channels and a lack of response from senior members of the bank as would be expected.
The appeal tribunal outlines that Ms. Harding disagreed with this view, became agitated in the disclosure meeting and walked out of Ms. Kong’s office slamming the door behind her.
Ms. Harding claimed that in raising the issue, Ms. Kong had questioned her integrity, her ability to do her job, and her position as the head of legal. The tribunal found this to be without merit, and instead found that Ms. Kong had only questioned her legal awareness on this particular issue and not her professional integrity.
Resultant of the breakdown of the professional relationship between the parties, mediation was suggested. However, Ms. Harding refused to engage and stated that the damage was irreparable, and would instead attempt to minimize interactions with Ms. Kong.
Due to Ms. Harding’s stated inability to work with Ms. Kong, the Head of Human Resources, CEO, and Group Chief Auditor decided to dismiss Ms. Kong in November 2018, stating she had "little emotional intelligence when dealing with colleagues" and was "dogmatic in her approach." Further, they described her approach to undertaking audits as being "very forensic" and that often it was felt she does not take a "proportionate approach in her assessment of the risk." During the dismissal, the reason provided was:
“behaviours, manner, and approach had resulted in people not wanting to work with her”.
Ms. Kong appealed against her dismissal without success, before subsequently bringing an action for unfair dismissal for having made a protected disclosure.
First and Second Tiers Tribunals
The first tier court (Employment Tribunal) recognized that the concerns raised reached the threshold of a protected disclosure, and therefore entitled Ms. Kong to whistleblower protections. The tribunal also concluded that Ms. Harding’s actions and treatment of Ms. Kong were materially motivated and influenced by the protected disclosure, including the subsequent complaints to others regarding the perceived questions of her integrity and ability to perform her job. They further found that Ms. Kong did not act in an unreasonable or unacceptable manner when raising what were deemed to be valid concerns, and did not question Ms. Harding’s integrity or ability to do her job.
The tribunal determined that
“... the nature and extent of Ms Harding’s complaints to others about the claimant was a material part of the reason why the claimant was ultimately dismissed…”
whereby recognizing there had been no prior inclination to terminate Ms. Kong’s contract, and that Ms. Harding’s concerns were foremost in the minds of decision-makers. In coming to this conclusion, the tribunal established a causal link between the act of whistleblowing, the making of unfounded complaints, and the grounds for dismissal.
Notwithstanding, the tribunal applied the "separability principle," whereby splitting the disclosure itself and the employers' perceptions of Ms. Kong’s alleged conduct towards Ms. Harding into two distinct and separate matters, each justiciable as independent and unrelated events. In doing so, the tribunal prescribed the motive of the decision makers to what they understood as "unacceptable conduct" as opposed to the making of a protected disclosure, therefore removing the dismissal from the scope of whistleblower protections.
Contributing to these findings was Ms. Harding’s feeling of upset when Ms. Kong (correctly) disagreed with her position, and that the dismissing managers did not investigate what led to the incident, and were therefore insulated from the protected disclosure. Finding that the dismissal was “wholly unfair substantially as well as procedurally”, the Bank had not breached whistleblower protections since the motive to dismiss Ms. Kong was not the disclosure, but Ms. Harding’s feelings of hurt when the disclosure had been made.
Upon appeal, the Employment Appeal Tribunal agreed with the decision and reasoning of the original tribunal, explaining the decision to dismiss was based on the manager's thought that the claimant’s
“... unacceptable style of interaction had now manifested itself in an incident that was so serious in its impact on a senior colleague, with no prospect of her changing her ways, that she had to go ...”
and was not linked to the protected disclosure, and therefore, there existed sufficient separability of the issues.
Court of Appeal (Civil Division)
Appealing the judgment to the Court of Appeal, Ms. Kong’s representatives outlined the significant risk this precedent holds in degrading whistleblower protections, expressing at para 41, “If it could be, any person who was the subject of, or directly affected by, protected disclosures could rely on being upset in response to justify retaliating against the whistle-blower. That would very substantially undermine the protection offered by the protected interest disclosure provisions of the ERA”.
The court however upheld the judgment of both the first tier and appeals tribunals, finding that the principle of separability provided the sufficient distance between the disclosure and the actions taken by the managers as to establish no causal link between the two. [Royal Court of Justice, London - Photo by Mahosadha Ong on Unsplash].
Commentary
While the operation of separability is of practical necessity, it is the extent to which it has been applied in this instance that proves problematic. It is beyond reproach that the conduct of the party making a disclosure is of importance, and in circumstances, may be treated as a separate and distinct matter from the disclosure itself giving rise to punitive responses. For example, if a person in making a disclosure embarks on a racist tirade it is reasonable that addressing the conduct of the racism may be dealt with distinct from the making of the disclosure.
The question, therefore, becomes where separability is appropriate, and it is at this point that it appears that the judges have erred in their judgment.
The test for separability applied is if the conduct was necessary for the making of the disclosure. Simply, could the disclosure be stand-alone without the behavior in question? In the affirmative, then separability may be applied. However, such a test is overly simplistic and fails to account for the complex nature of human behaviors in high-stress situations. The question should not be "did the conduct fall below the absolutely essential?" but rather, "was it grossly and manifestly inappropriate?" The existence of an offended or aggrieved party in the context of whistleblowing should not prima facie be indicative of poor conduct. In reaching these conclusions, the court should first be convinced of the legitimacy of the claim of poor conduct being relied on, or that the party engaging in detrimental conduct had taken reasonable steps to satisfy themselves as to the existence and extent of the behavior.
And it is here the application of separability gets into trouble. The court recognized Ms. Harding’s complaints were motivated by the protected disclosure, and that Ms. Kong was dismissed directly as a result of those complaints, therefore establishing a direct causal link between the disclosure and the resultant dismissal.
Absent the initial well-founded disclosure, Ms. Harding would not have rejected the concern. Without rejecting the concern, it would not have been necessary to question Ms. Harding’s specific legal understanding of the matter. Without this question, Ms. Harding would not have made unfounded claims that her integrity or ability had been brought into question, and without these complaints, there would not be sufficient grounds on which to dismiss Ms. Kong.
The matters, therefore, appear to become causally and intrinsically linked, whereby it is impossible to separate the disclosure from the dismissal, especially considering the overwhelming likelihood a whistleblower complaint will result in a party who feels aggrieved.
Suffice here to say that, unfortunately, each whistleblower disclosure may inherently be considered by the affected organization as a form of behaviors, “manner, and approach" that may result "in people not wanting to work with" the whistleblower. Unethical retaliatory practices are rife and this decision seems to ignore such a phenomenon.
As a result, the effect of the decision is to dilute existing whistleblower protections, whereby causing uncertainty in the mind of potential whistleblowers when deciding to disclose or remain silent. Should they be accused of unacceptable conduct, regardless of any basis in fact, they risk not being afforded the protections in law granted to whistleblowers, and must therefore rely instead on the weaker claims of unfair dismissal.
Such a shift is inherently problematic for a number of reasons.
As has been well documented (for example see p.83 of Protecting Whistleblowers In The UK: A New Blueprint), the phenomena of ‘reason shopping’ masks motivations for whistleblower retaliation, blaming punitive actions on fabricated or distorted unrelated events. It is the means through which an employer is able to take detrimental action against a disclosing party, often months later, while attempting to distance their retaliation from the disclosure.
Critically, this case expands the scope of reason shopping from convincing a tribunal the punitive measures are entirely unrelated to the protected disclosure, for example, poor performance evaluations, to now include complaints of hurt feelings made by the subject of the disclosure without the requirement to demonstrate the behaviors were grossly unacceptable or to establish merit to claims of unacceptable conduct.
Potentially, employers may dismiss whistleblower protections by simply expressing they believed that the disclosing parties' conduct was unacceptable, that the conduct was not necessary for the disclosure, and their motive was a belief this is true, regardless of evidence.
Once the disclosure and the alleged conduct have been separated into distinct justiciable issues, it is no longer incumbent upon the employer to demonstrate their actions were entirely unrelated to the disclosure, but rather, that they comply with fair and reasonable grounds for dismissal which is in itself a lower barrier.
Of concern, the case makes clear a lack of evidence or effective due process is not a barrier to separability. It may be reasonably expected that a complaint so serious as to warrant instant dismissal be thoroughly investigated. In fact, it could be argued the existence of a whistleblower complaint places a higher burden on the organization to eliminate any question of retaliation, especially when raised by a person affected by the disclosure. However, the court found not only does no such duty exist, but the absence of an investigation gives rise to stronger grounds of separability as the disclosure may not be seen at the forefront of the deciding parties’ minds.
Perversely, the judgment in the Kong case actively disincentivizes investigations to establish legitimacy to claims of poor conduct. A deciding factor relied upon by the court was that the managers who decided to dismiss Ms. Kong provided no apparent focus on the protected disclosure, whereby allowing the court to conclude the decisions were made exclusively on the apparent conduct of the claimant. Had the opposite been true and those involved carefully examined the facts prior to dismissing Ms. Kong, the argument may have been more strongly put forward that the disclosure played a central role in the decision-making process.
Forearmed with this knowledge and interpretation, it follows that an organization that would wish to retaliate against a whistleblower while not falling foul of protection provisions would be mindful to act first and investigate later, thereby establishing the argument in a similar fashion that the lack of scrutiny or subsequent investigations of the disclosure means the decisions were not influenced by the disclosure itself.
It may be argued that although Ms. Kong was unsuccessful with her specific claim of whistleblower retaliation, she was successful overall with the court finding she had been unfairly dismissed, however, such a judgment is significant.
Financial compensation for whistleblower retaliation and dismissal is uncapped, with judges able to consider the financial dimension of injury to feelings, aggravated damages, loss of future wages, and others. For other unfair dismissal cases, however, there is a limit of one year’s wages up to a maximum of £93,878. Considering the role of senior managers in large banks or multinational corporations where wages may easily exceed this sum, or limit damages otherwise to one year’s wages, there exists a powerful financial argument to attempt to persuade a judge that a person was wrongfully dismissed for reasons other than a protected disclosure.
Within the United Kingdom those employed for fewer than two years may be subject to summary dismissal without an employer being required to provide reasons, and with no recourse of unfair dismissal by the employee except in instances provided for in legislation, such as dismissal resultant of a protected characteristic or a protected disclosure.
Therefore, should a person be with a company for less than two years and make a protected disclosure and be dismissed, and the organization succeeds in arguing the dismissal was resultant of reported conduct in making the disclosure, they are left entirely without recourse. This appears to remain true even if the company fails to investigate the complaints and they are later found to be without merit so long as they may be argued as the primary reason for the dismissal.
A Decision Detrimental to Auditors and Compliance Officers' Role
The Kong case appears particularly problematic also as it dilutes the function of an internal audit system as well as the role of compliance officers, and subjugates the role of an auditor from one of ensuring compliance through investigation, to that of being a team player and being prepared to compromise, or risk being deemed hostile.
Within certain sectors, following a history of wrongdoing, illegality, and public harm, it has become a legal requirement to have an effective internal auditing process. The Basel Committee on Banking Supervision recognizes the essential role internal audits have in implementing compliance structures and meeting the requirements of good corporate governance.
In performing these functions, auditors must be empowered to ask difficult questions or to identify and vocalize inconvenient truths and to expect responses to concerns, with corrective action if required. Of course, this should be done in a professional and appropriate manner, however, a key function of the role of both auditors and compliance officers is one that will inevitably bring them into contention with colleagues when they are not sufficiently satisfied that compliance and risk are being dealt with suitably. For an auditor or a compliance officer to be meaningful, they must be able to probe matters and be empowered with a degree of tenacity when questions go unanswered. The alternative is the emergence of preventable risk to stakeholders, shareholders, and the general public.
Problematically, the Kong case risks acting as a warning to auditors and compliance officers who may be observing. Should they identify a lack of legal compliance, raise it, and the subject of the issue disagrees, they now face an unenviable choice. Either acquiesce to the other party, allowing the conduct to continue and representing an organizational risk or pursue the issue with the knowledge there is an enhanced risk of retaliation without protection should their conduct be brought into disrepute.
Financial institutions are not staffed exclusively by competent saints. There exist nefarious and bad faith actors, and those promoted beyond competency. It is the core function of an auditor to detect and prevent such risks. The judgment in question however brings this role into disrepute, implicitly acknowledging that auditors may be required to act with high levels of caution in their approach, as even if they are correct in identifying inadequacies or risks of illegality, should they be communicated in a way that the other party takes offense at, even without basis, then they may be subject to retaliation.
Conclusion
The decision in the Kong case is troubling for a number of distinct reasons, including broadening the scope of reason shopping, encouraging acquiescence to the other party's lack of responses to allegations resultant from disclosures, reducing the financial liability of parties for retaliatory actions, and the possibility of excluding legal protections or recourse in its entirety. While any single one of these effects would be inherently problematic from the perspective of whistleblower protections, combined they have the potential to provide a substantial chilling effect on a professional’s propensity to make a protected disclosure.
In particular, the case raises troubling questions about the protections afforded to those fulfilling their role as an auditor or compliance officer through encouraging compromise, being less determined to receive sufficient answers, or not otherwise asking probing or problematic questions, in order to avoid being seen as combative or antagonistic. This is particularly worrisome when it is taken into consideration that it is inherent in the nature of their task to become combative or antagonistic when they honestly believe that the management acts negligently or ignores the issues they have raised. A good auditor or compliance officer is expected to be "challenging and inflexible" when, although potential risks of economic crime have been identified, the management demonstrates to be unwilling to act. This is particularly true for auditors and compliance officers of the seniority of Ms. Kong, who was serving as Head of Financial Audit.
Saliently, this judgment risks fostering an environment where those seeking to detriment whistleblowers are able to do so with impunity or dramatically decreased liability and threatens the whistleblower with prolonged stressful and expensive legal battles with increasingly uncertain remedies. The effect on the proclivity of an individual to stick their head above the parapet and assume such levels of risk will be nothing short of chilling, therefore significantly increasing the risk to the public of organizational delinquency.
Please find below the judicial decision Kong (appellant) v Gulf International Bank (UK) Ltd [2022] EWCA Civ 941.
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References
Basel Committee on Banking Supervision (2010). Principles for enhancing corporate governance. Basel: Bank for International Settlements. https://www.bis.org/publ/bcbs176.pdf
Grasso C. (2020). Concerns Regarding or Improvement to the UK Anti-Money Laundering Regime (written evidence submitted to the House of Commons Treasury Committee). UK Parliament. https://committees.parliament.uk/writtenevidence/17591/pdf
Thomson Reuters Foundation and Blueprint for Free Speech (2016). Protecting Whistleblowers in the UK: A New Blueprint. London: Thomson Reuters Foundation. https://www.trust.org/contentAsset/raw-data/7161e13d-2755-4e76-9ee7-fff02f6584db/file
Suggested Citations
Bluebook: Stephen Holden, Troubling UK judicial decision undermines whistleblower protection, CORPORATE CRIME OBSERVATORY, (August 24, 2022), www.corporatecrime.co.uk/post/kong-v-gulf-bank Harvard: Holden, S. (2022) ‘Troubling UK judicial decision undermines whistleblower protection’. Corporate Crime Observatory. Available at: www.corporatecrime.co.uk/post/kong-v-gulf-bank OSCOLA: Stephen Holden, ‘Troubling UK judicial decision undermines whistleblower protection’, (Corporate Crime Observatory, 24 August 2022), www.corporatecrime.co.uk/post/kong-v-gulf-bank