1 Feb 2013
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Blacklisting - legal fall-out reaches every employer

Vanessa Latham outlines what the blacklisting scandal means for construction firms

The disclosure of a database of some 3,000 names, used to vet workers in the construction sector for more than 15 years, has prompted calls for a public inquiry to uncover the full extent of the practice.

The Information Commissioner’s Office has opened up access to the database anyone who thinks they might be on the list, so it will take minimal effort for a construction worker to find out whether they have been blacklisted. Any businesses involved now faces likely civil litigation, and possibly even criminal prosecution. Individuals could take legal action if they believe they have been refused employment, or for being placed on the blacklist in the first place.

The shadow business secretary, Chuka Umunna, told parliament that secret files held on thousands of construction workers had resulted in them being denied work because they had raised legitimate health and safety concerns or belonged to a trade union.

Under the Employment Relations Act 1999 (Blacklists) Regulations 2010, whistleblowers cannot be refused employment on the ground that they have taken part in trade union activity. Employment tribunal damages for refusing employment can be set at up to £65,300.

In addition, firms that place employees on blacklists, on the grounds that they have made a protected disclosure (see below) are subjecting those employees to an “unlawful detriment”. The concept of a detriment covers threats, disciplinary action, loss of work or pay, and damage to career prospects. Damages for employment claims linked to making protected disclosures (ie whistleblowing) are uncapped, and there is no minimum qualifying period.

Further, due to the fact that employees are unlikely to be aware of the fact that they have been blacklisted, it is likely that the employment tribunal would extend the period within which claims can be brought to well beyond the usual three-month period.

A protected disclosure must, in the reasonable belief of the worker, tend to show that one of following has occurred, is occurring, or is likely to occur:

A criminal offence
Breach of any legal obligation
Miscarriage of justice
Danger to the health and safety of any individual
Damage to the environment
The deliberate concealing of information about any of the above

The disclosures for which names were referred to the blacklisting company, The Consulting Association, would appear to mainly fall under “danger to the health and safety of any individual”, and would therefore be protected.

Disclosures to employers that are made in good faith are protected, even if they turn out to be unfounded. Disclosures to outsiders are protected if they are made to:

Responsible third parties (such as a client or supplier who is responsible for the wrongdoing), or
Prescribed persons (such as HMRC, the Health and Safety Executive, or the Office of Fair trading)
Government ministers
Legal advisers

Companies not linked to Consulting Association or blacklisting practices also need be aware of employment law as it relates to whistleblowing and protected disclosures. Under the Bribery Act 2010, it is a corporate offence for an organisation to fail to prevent bribery by a person “associated “ with it. The offence carries a strict liability standard, and holds firms responsible for bribery by their employees or associates, unless organisations can demonstrate that they had “adequate procedures” in place to prevent bribery. Such procedures will include having effective whistleblowing procedures that encourage the reporting of bribery.

Having a whistleblowing policy in place, with detailed steps for investigation and allowing staff to report concerns, can ensure that businesses can deal with problems early and can help protect them from strict criminal liability.

Giving training on whistleblowing scenarios can also help, as staff who subject whistleblowers to detriment can bring liability on the entire company, regardless of whether the company had knowledge of employees actions. Businesses should be aware that, under s43J(1) of the Employment Rights Act 1996, confidentiality clauses are unenforceable as a means of preventing external disclosures.

In the event that a business has broken the law in its treatment of whistleblowers, it will have to manage the dual threat of litigation and a public relations disaster. The cost of litigation, measured in time and money, is potentially extensive.

In the case of the construction industry blacklisting, it seems that many thousands of employees could have been affected, going back years. The real damage here is that those employees will be able to bring claims for loss of earnings going back years. Some construction workers have been unemployed for decades, arguably due to being blacklisted. Uncapped claims in such cases are likely to be valued at hundreds of thousands of pounds.

Vanessa Latham is an employment partner at law firm Berrymans Lace Mawer LLP (vanessa.latham@blm-law.com and 020 7865 8454)