An onslaught of internal investigations into stimulus fraud, furlough fraud and health and safety breaches is on the horizon, warns Polly Sprenger – can employers avoid reputational damage by responding before employees blow the whistle?
As Theodore Roosevelt, the 26th president of the United States, once said: “In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing”. Many business leaders and decision-makers in the real estate sector are living this reality, deciding between doing the right thing, the wrong thing and nothing.
The effects of the current pandemic have been felt in definitive phases. The first was the need for swift redeployment of huge numbers of staff from on-site to remote working, while also balancing a wholesale realignment of commercial practices. The next was the adjustment to the financial impacts these changes created, with many accessing government-backed stimulus funding or subsidised furlough schemes. Finally, the real estate sector, alongside other industries, is readying itself for a return to work, introducing employees to new processes designed to protect against another outbreak of the coronavirus.
But all of these changes have brought along with them a large number (growing daily) of whistleblowing alerts from employees reporting alleged misconduct – by their employer, their colleagues or other external parties. The uncertainty of the situation brings one certainty – internal investigations are on their way, and companies involved in real estate would be well advised to prepare.
Claims on the rise
Employees are becoming increasingly fearless when it comes to publicly blowing the whistle on businesses that are perceived not to be “playing by the rules”, meaning that internal investigations that were expected to follow the current pandemic are arriving far more quickly than anticipated. Hotlines are blowing up with complaints – something which Addleshaw Goddard’s global investigations team is experiencing first hand.
Lately, the media has been awash with stories about companies that are forcing their employees to work while on furlough, or are claiming furlough funds for non-existent staff or oblivious staff who continue to work. Coupled with this, HMRC is currently dealing with more than 795 written or online whistleblowing complaints from employees concerned that their companies are fraudulently abusing the government’s Coronavirus Job Retention Scheme (CJRS).
Further allegations are also being levied at companies that are failing to provide safe working environments to employees returning to the workplace, or are forcing care home and medical workers to continue to work without adequate personal protective equipment. The UK’s Health and Safety Executive is, like HMRC, reporting a record number of calls from concerned employees. This is expected to rise even further as the government looks to get the economy back on track by encouraging more people to return to work. These calls, if considered serious enough to pose a significant risk to workers or the public, could lead to a formal investigation, closure of premises and criminal conviction.
A growing number of whistleblowers are also claiming abuse of the government’s three main schemes to provide emergency lending to companies. The availability of large sums of money, alongside pressure on financial institutions to push loan applications though quickly, is leading to fraudulent applications slipping through the net.
In the US, hundreds of billions of dollars have also been approved by Congress through the Paycheck Protection Program, which is giving loans of up to $10m (£7.9m), as well as the Economic Injury Disaster Loan, which provides limited funding of up to $10,000, and these schemes are matched in most other jurisdictions affected by coronavirus. The US Securities and Exchange Commission received 4,000 complaints from mid-March to mid-May, a 35% increase on the same period in 2019. According to a Reuters report on 27 May 2020: “Two factors appear to be driving the current surge in tips, according to lawyers: the sheer scale of the crisis has sparked a wave of misconduct across all areas of the SEC’s remit, and mass unemployment has unleashed whistleblowers who may otherwise have feared retaliation by their employers.”
So how can companies prepare to make the right decision and take the right steps if a whistleblower comes forward with allegations of misconduct?
Best practice
Complaints should be dealt with seriously from the outset. This means that internal risk, compliance, legal and human resources teams should be preparing themselves and their whistleblowing responders for these situations, with a specific focus on the matters that are likely to arise in their own organisations.
They should also make sure that, given the wide definition of “protected disclosure” under employment law, they pay attention not just to obvious whistleblowing made through a formal hotline, but also to whether less obvious expressions of concern could be interpreted at a later date as whistleblowing. There are no limits on the maximum compensation that can be awarded by the Employment Tribunal for claims of detriment to someone caused by making a protected disclosure, so it’s important that any claims are identified, and addressed, early.
The most important thing that companies can do to manage the legal, regulatory and reputational risk of the current crisis is to properly listen to employees’ concerns. Providing a safe procedure for raising and addressing concerns, followed by an independent and fair investigation process, will offer the best protection.
By preparing in advance for whistleblowers, businesses can prevent a complaint from becoming a crisis.
Polly Sprenger is a partner in Addleshaw Goddard’s global investigations team specialising in fraud and internal investigations
