Legal experts are warning HR professionals of the consequences of workers whistleblowing on their former and current employers for coronavirus job retention scheme fraud.
Whistleblowing cases relating to furlough fraud are increasing, with law firm Pinsent Masons reporting that 13,775 furlough fraud whistleblowing reports have now been made to HMRC.
The government department has simultaneously been stepping up enforcement activity on furlough fraud, adding resources to investigations teams and making available online information about whether an employer made a furlough claim.
It comes after the Public Accounts Committee’s (PAC) revelation in February that an estimated 8.7 per cent of money distributed by the government’s furlough scheme during the Covid-19 pandemic – £5.3bn of circa £70bn – was lost to fraud and error resulted in criticism.
At the time, Dame Meg Hillier, Labour MP and chair of the PAC, said the government’s “lack of preparedness and planning” had led to an “unacceptable level of mistakes, waste, loss and openings for fraudsters”.
For those concerned about the upstep in furlough fraud scrutiny, Lynne Ingram, managing associate at law firm Freeths, recommended that employers proactively review previous furlough claims, preemptively disclosing concerns to HMRC along with evidence to show any potential mistakes were not deliberate.
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Ingram added: “It is appreciated employers may be nervous regarding making HMRC aware of any concerns; however, claims that are disclosed now will be easier to defend in the future years when they may then become under review by HMRC.”
Andrew Sackey, partner at Pinsent Masons, agreed that this proactive approach was best, especially as HMRC was “looking to take strong and public action” against those who took money they were not entitled to. He said: “[Deliberate fraud] is the kind of fraud that HMRC will, in the most egregious cases, feel should result in criminal prosecution. There is significant public interest in the justice system dealing with those who broke the rules to take advantage of the furlough system at a time of national crisis.”
In fact, as Paul Britton, founder of Britton & Time Solicitors, highlighted, a furlough scheme suspect has already been arrested in a case estimated to be worth circa £495,000.
Yet, according to Britton, deliberate or accidental fraud is not the only aspect of this evolving story that HR needs to be wary of, as the role of whistleblowing adds complexity, too.
For employers that feel aggrieved that employees may have told HMRC about their furlough claims, he warned that the Public Interest Disclosure Act and the Employment Relations Act offers them protection. Britton said: “It protects workers who report misconduct by their employers or third parties from being victimised or dismissed.
“[But to circumvent it getting to this stage] in all circumstances, employers should seek independent legal advice early to avoid costly mistakes and claims, which inevitably take up management time and business resources.“
However, many employers simply didn't listen to their staff telling them to take this proactive approach. Research from whistleblowing charity Protect found that almost six in 10 whistleblowers received no response from their employer when raising furlough leave concerns at the time of the scheme.
Liz Gardiner, chief executive of Protect, added that at the start of the pandemic many employees knew furlough was being claimed for them, even if they were working, but they risked dismissal if they refused to work. She added that many workers the charity receives calls for advice from wanted to raise concerns but had no recourse to internal whistleblowing services or channels to raise the issue with their employer. “Therefore, one of the lessons of furlough fraud is that employers should have effective whistleblowing arrangements in place. When workers raise ethical or fraudulent concerns, employers should listen, investigate and, where appropriate, act,” she said.
“Had more furlough whistleblowers been listened to by employers, the scale of this loss to the taxpayer may have been minimised.”