The Co-op Group has won its legal battle against a former director who claimed she was sacked because she exposed malpractice among its executive.
Procurement chief Kath Harmeston was not unfairly dismissed, ruled Manchester Employment Tribunal.
But the Group did fail to pay her expenses within a reasonable period due to the information she disclosed, the court ruled. Thus she achieves whistleblower status in this one, relatively minor instance.
The tribunal dismissed 15 other claims that Ms Harmeston’s disclosures led to mistreatment. She claimed the executive were looking for reasons to fire her and that her colleagues had assigned her a codename, ‘Wimbledon’, in an attempt to avoid their obligations under the Data Protection Act.
CEO Richard Pennycook had “sidelined and avoided” her, she said, and chief operating officer Pippa Wicks, her line manager, had given her permission to recruit contractors Silver Lining Partners (SLP), only to later deny this – an episode which informed the Group’s decision to dismiss Ms Harmeston.
The panel, led by Judge Kendrick Horne ruled that while some, if not all, of these detriments occurred, they were not influenced by Ms Harmeston’s self-proclaimed whistleblowing. Rather the Group “wanted to encourage, not punish, the claimant’s disclosures”, not least her drive to reduce excessive spending on consultants.
The Group headhunted Ms Harmeston from the Royal Mail in April 2014 to reduce spending on goods not for resale. She lasted 10 weeks in the post. She said her reputation was dragged through the mud after she made public interest disclosures about “endemic” procurement non-compliance.
The Group argued her claims were an attempt to mask her own serious misconduct and she was sacked because it had lost trust in her.
As the verdict points out, during the Co-op’s “rescue phase” in 2013, it was common practice for the executive to bring in contractors and consultants at short notice and high cost. But the verdict also acknowledges the Group needed to reduce its cost base, including £952m of goods not for resale among hundreds of suppliers in 2013.
Ms Harmeston told her new employer it could save £161m in goods not for resale by involving the procurement team and increasing competition. Her replacement Kevin Doran later estimated savings of £45m were more realistic.
Goods not for resale spend was 70% non-compliant with Group policy and this was “led from the top”, she told the court. The business was “haemorrhaging money” on consultants, paying up to £8m extra in 2013 due to non- compliance with its own policies.
She exposed Pippa Wicks’ potential conflict of interest as chief operating officer and one of its most highly paid consultants, and shed light on a close relationship between and Richard Pennycook and AlixPartners, the Group’s highest paid consultancy, of which Ms Wicks was managing director.
The Group has since appointed Ms Wicks as permanent COO. She will continue as non-executive chair at Alix Partners.
She accused Mr Pennycook of recruiting consultants on inflated terms and Ms Wicks of operating a “land and expand” strategy for AlixPartners, which charged the Group £8m in 2013. Ms Harmeston negotiated a 20% pay cut with the Group’s next highest paid consultancy, Boston Consulting.
But the panel found the Group’s executive acted in the company’s best interests by bringing in highly paid consultants at short notice. They rightly prioritised restructuring over Mr Harmeston’s drive for procurement excellence, it said.
The Co-operative was a burning building
Mr Pennycook said in his evidence he had not followed procurement policy during the financial crisis, but stressed he had authority from the board. He admitted directly hiring AlixPartners consultants including Ms Wicks, Glen Fietta, who renegotiated the Group’s finances for £615 an hour, and Kevin Doran.
“The Co-operative was a burning building and when your building is on fire you pick up the phone to the fire brigade,” he told the tribunal. “AlixPartners was the fire brigade.”
The judgement includes an 11-point “missing information list”, detailing the things Ms Harmeston did not write or say to her colleagues, but which would have protected her disclosures if she had, making her a whistleblower.
Ms Harmeston is naturally disappointed with the ruling that her dismissal was not unfair. However, Ms Harmeston is pleased… that she is now entitled to receive damages.
It includes the lack of any assertion that the executive knowingly tolerated bad procurement practice or failing in their fiduciary duty. There was no statement from Ms Harmeston that anyone had committed or was likely to commit a crime, or breach Group policy.
Carl Moran, employment lawyer at JMW Solicitors, said: “The employment tribunal agreed that Ms Harmeston was the subject of detrimental treatment by the Co-op after making protected disclosures.
“Ms Harmeston is naturally disappointed with the ruling that her dismissal was not unfair. However, Ms Harmeston is pleased… that she is now entitled to receive damages.”
But the Group’s statement on the verdict said the court had ruled it had not unfairly dismissed Ms Harmeston, or subjected her to any other detriment on the grounds that she made protected disclosures.
“We are glad that the tribunal has supported our view,” it said.
The tribunal will hold a further hearing to determine what remedies Ms Harmeston is entitled to. It has yet to decide whether her single protected disclosure was made in bad faith and, if so, whether compensation should be reduced.
It will also consider whether she sustained personal injury over the withheld expenses. She waited almost eight months for £15,000 and incurred legal costs of £9,000 pursuing this.
After two weeks of hearings, 4,386 pages of evidence and two months of deliberation, both sides are counting the cost of the case, not least in terms of reputational damage.
The panel was critical about the way many witnesses conducted themselves.
It said Andrew Pope, who conducted the investigation into Ms Harmeston’s relationship with SLP for the Group, included inaccuracies in his witness statement “designed to make us think badly of the claimant”.
“The way he carried out his investigation seemed to us to be inconsistent with his assertion that he had not received any executive steer at all as to what the outcome should be,” the judgement said.
“Simon Mills, HR partner at the Group, was “visibly uncomfortable” in court. The panel did not believe that the Group’s executive had not hinted to him that the outcome of the investigation was predetermined.
It said former Group chief strategy officer Paula Kerrigan’s negative impression of Ms Harmeston “may have been exaggerated” and Pippa Wicks appeared to exaggerate perceived problems with Ms Harmeston’s attitude.
Members of the group which planned the investigation into Ms Harmeston’s relationship with SLP gave contradictory evidence, and there were no notes of its meetings.
The panel also found aspects of Ms Harmeston’s evidence “hard to accept”, including the extent of her contact with Gerard Soames of SLP.
The Group’s disciplinary hearing, led by Ms Kerrigan, found she had contravened procurement policy in hiring the firm. She had worked with it at the Royal Mail and, according to an anonymous letter sent to the Co-op, knew it had been investigated for malpractice.
Ms Kerrigan found Ms Harmeston guilty of misconduct, but not gross misconduct. She could not be sure Ms Harmeston had deliberately failed to get approval for SLP’s recruitment from Ms Wicks, she said. The tribunal concurred it was probably a “misunderstanding”.
Group human resources chief Sam Walker recommended Ms Harmeston’s suspension over the letter, but the Group kept the letter and other communications about Ms Harmeston with anonymous sources at the Royal Mail secret from her.
The panel also drew attention to misleading assertions by the Group’s legal representatives. An adulterated email submitted by its lawyers concealed not only the identity of the Royal Mail source, but also knowledge of his identity and that he was prepared to make contact. A Group employee had redacted the email.
The panel said Ms Harmeston appeared to have had SLP in mind from the start, and she had certainly hired them outside proper process. It found that while the disciplinary was unduly harsh at times, she must have known recruiting SLP was not compliant with procurement policy.
It added Ms Kerrigan was not influenced by Ms Harmeston’s so-called whistleblowing. Neither were Mr Pennycook, Ms Wicks and Ms Walker when they dismissed her. Ms Walker said in her evidence that dismissal was due to behavioural and performance issues, conduct that was “seriously wanting” and a broken relationship with senior management.
There had been issues with Ms Harmeston from the outset, Ms Walker said, including complaints about her relocation
to Manchester, the location of her desk, inappropriate use of executive meeting rooms and reluctance to share her personal assistant.
The verdict says: “The reasoning of Ms Walker and Ms Wicks was not entirely free from improper considerations of the fact that the claimant [Ms Harmeston] had made protected disclosures. But we cannot say that these considerations amounted to anything like the sole or principle reason for dismissal.
“If we had to pick out one factor more influential than any other it would be Ms Wicks’ inability to trust the claimant because of the claimant’s failure to disclose SLP’s history at the Royal Mail.
“Mr Burns [representing the Group] told us the respondent [the Group] had tied itself in knots…to conceal this reason from the tribunal. We agree. This judgement is our best attempt at untangling the web spun by the respondent.”
- This article was amended on 10 May. A previous version included a summary of the actions of Simon Mills that was not substantiated in the tribunal’s verdict.