22 December 2023



To what extent does regulatory action impact reduce compensation in a whistleblowing claim?

To what extent does regulatory action impact reduce compensation in a whistleblowing claim? Case Note on McNicholas v (1) Care and Learning Alliance and (2) Cala Staff Bank [2023] EAT 127


In McNicholas v (1) Care and Learning Alliance and (2) Cala Staff Bank [2023] EAT 127, the Employment Appeal Tribunal (“EAT”) concluded that the Employment Tribunal (“ET”) had erred in law when it held that regulatory action from the General Teaching Council for Scotland (“GTCS”) broke the chain of causation between the whistleblowing detriments and the Claimant’s losses and therefore reduced the Claimant’s compensation accordingly.



The Claimant worked at Cala Staff Bank under an agreement for casual work. She was employed to provide relief staffing and support in early years childcare and one-to-one support for children with Autism Spectrum Disorder. The Claimant also worked at Care and Learning Alliance (the parent company of Cala Staff Bank) as a Family Support Practitioner. 

In June 2018, the Claimant presented a claim to the ET, alleging detriments by both Respondents as a result of making protected disclosures. One of the pleaded detriments was that both Respondents had made a complaint to the GTCS about the Claimant’s fitness to teach (“the GTCS detriment”).

The ET found that the Claimant had made protected disclosures and had been subjected to detriments as a result. In relation to the GTCS detriment, the ET found that, the complaint was made in bad faith and was retaliation against the Claimant for having made the protected disclosures. However, it also concluded at the remedies hearing that the GTCS’ decision to further investigate the Claimant following a referral by the Respondents was a break in the chain of causation between the Respondents’ detrimental action and the Claimant’s losses. The ET concluded this on the basis that it was in GTCS’ “competence to lawfully act in that way presumably after an assessment of the prima facie case against the [C]laimant”.

Due to the ET’s conclusions, it declined to make any award to the Claimant in respect of pension loss or for her legal expenses in defending the GTCS proceedings or for pursuing her ET claims against the Respondents.

The Claimant appealed to the EAT.


The Law

Whether a supervening act breaks the chain of causation is ultimately a question of fairness for the Tribunal. It would be unfair to hold a wrongdoer liable for loss caused not by the wrongful act itself, but by some independent, supervening cause for which the wrongdoer is not responsible; Corr v IBC Vehicles Ltd [2008] 1 AC 884

The intervening act must, however, be the sole effective cause of the loss, damage or injury suffered, such that the prior wrongdoing no longer remains the effective or contributory cause in law; Clay v TUI Ltd [2018] EWCA Civ 1177.


The EAT decision

Lord Fairley held that it was not open to the ET to conclude that the GTCS’ decision to investigate the Claimant broke the chain of causation, as it was a “natural and reasonable consequence of the respondents’ wrongful act. The wrongful act remained the effective cause of the appellant’s loss.” It further noted that the ET’s finding was irreconcilable with earlier findings made at the liability judgment, including that the Respondents’ decision to report the Claimant to the GTCS was made in bad faith and was based on allegations which had no real or genuine substance.

The EAT therefore allowed the Claimant’s appeal and remitted the case to the same ET to re-assess compensation and the application for expenses.


What to take away

The McNicholas decision helpfully clarifies the law on whistleblowing remedies and serves an important reminder that the mere fact that a Claimant is reported to a regulator (and subsequently subject to regulatory investigation) does not break the chain of causation and will not therefore limit the Claimant’s entitlement to a remedy.

It is worth noting, however, that the EAT’s decision ultimately turns to the facts of the McNicholas case itself. What ultimately resulted in the ET making an error of law was the conclusion that the regulatory investigation was a break in the chain of causation, despite also concluding that the regulatory referral was made in bad faith and had no real or genuine substance. As such, the Respondents’ detrimental acts remained the effective or contributory cause in the Claimant’s losses.

Whilst the McNicholas decision concerned the GTCS, this decision will no doubt be important where a whistleblower has been subject to FCA, SRA or ICAEW regulatory investigations as a result of the Respondents’ detrimental acts.

Written by:

Photo of Lucas Nacif Trainee Lawyer

Lucas Nacif

Associate Lawyer