Whistleblowing in the workplace: opportunity and risk
A survey and report from Howard Kennedy
Whistleblowing report contents Introduction: why whistleblowing matters
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Executive summary and recommendations
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Whistleblowing survey results
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The HR director’s perspective
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A guide to whistleblowing and the law
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How Howard Kennedy can help you
Whistleblowing in the workplace: opportunity and risk A survey and report from Howard Kennedy
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Introduction: why whistleblowing matters Whistleblowing and protection for whistleblowers remains high on the political and public agenda. High profile corporate scandals, such as security company G4S’ treatment of detainees at an immigration removal centre, have exposed often shocking and appalling practices that affect many segments of society. Financial services and care homes are often the focus of whistleblowing media reports, but whistleblowing is not exclusive to these sectors and it remains a key risk management issue for many, if not all, businesses.
Legal protection for whistleblowers Whistleblowers who face retaliation by their colleagues or their employer, or who are dismissed for blowing the whistle, have additional employment law protection. The Employment Rights Act 1996 protects individuals (whistleblowers) who make certain disclosures of information in the public interest and allows them to bring formal claims if they suffer victimisation after blowing the whistle. Whistleblowers can also claim uncapped compensation for unfair dismissal in the employment tribunal, and there is often significant potential reputational risk for both the business and the whistleblower.
The latest developments to whistleblowing legislation In July 2017 the Court of Appeal delivered a key decision in a whistleblowing case (Chesterton Global Ltd and another v Nurmohamed) on the meaning of the ‘public interest’ test required to be satisfied for whistleblower protection and set out detailed guidance for the first time. Click here for our report on this key legal update.
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Minimising risk for business Increasingly whistleblowing is being recognised as a major strategic risk for businesses, despite the fact that whistleblowers who are prepared to expose wrongdoing offer an effective way of addressing serious malpractice and misconduct which might otherwise go unchecked. Minimising the risk of malpractice at work and associated employment tribunal claims requires businesses to have appropriate whistleblowing policies in place, to train managers on their fair operation, and to let all staff know that retaliation against whistleblowers will not be tolerated. Having clear, accessible channels for workers to raise their concerns can help to develop an open culture where individuals feel able to report concerns safely. It also enables businesses to investigate and address any serious malpractice taking place within their organisations before they become public issues and the business or organisation suffers real reputational damage.
A positive look at whistleblowing for business Without those prepared to report their concerns about malpractice at work, many serious dangers and risks within organisations and businesses would otherwise remain unchecked and uninvestigated, often until it is too late to avoid a serious disaster. Whistleblowing, whilst undoubtedly presenting a risk management issue for employers, also offers an opportunity to spot activity that might be detrimental to its activity, to manage reputational risk and improve business practices.
Howard Kennedy whistleblowing survey To better understand the extent to which businesses encourage whistleblowing within their organisations, awareness of current whistleblowing laws including whistleblower protection and how whistleblowing reports are managed, we conducted a survey* with a group of HR directors from a spread of businesses across the UK. In this report we share our findings and include a summary of whistleblowing law and key issues in this area.
Whistleblowing in the workplace: opportunity and risk A survey and report from Howard Kennedy *conducted in 2016 with 48 respondents
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Executive summary and recommendations Whistleblowing represents both a significant risk and opportunity for companies and public sector organisations. Whistleblowing can alert organisations to potential wrongdoing, allowing them to take steps to rectify and improve how they operate and to protect their reputation. Yet, at the same time, there is a very real financial risk for those organisations which ignore or victimise whistleblowers, and the reputational damage that may follow. Our survey to find out more about how businesses address whistleblowing falls into three broad areas – managing risk, managing whistleblowing reports, and the legislation. Our research shows a positive recognition of the importance of whistleblowing:
94% 96%
of businesses surveyed encourage staff to speak out about their concerns of these businesses had a whistleblowing policy - this goes to the heart of managing risk
Experience shows, however, that there is more for businesses to do beyond simply having a formal policy.
Encourage on open culture in the workplace Promoting an open culture that encourages workers to report concerns, keeping them updated as far as possible after reports have been made, investigating reports and taking appropriate action if malpractice is confirmed can help to minimise the risk of potential claims from whistleblowers. Situations can escalate quickly into formal disputes when whistleblowers feel that they are ostracized, victimised or not kept informed once they have reported a serious concern.
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Time and cost managing whistleblowing It will be no surprise that this is costly and time-consuming. In serious and complex cases, it can take upwards of 50 hours for a business to manage, investigate and respond to a whistleblowing report at a cost of £15,000 or more. Where situations escalate to a formal employment tribunal claim by the whistleblower, time and costs can easily and quickly increase. In addition, since compensation for claims of unfair dismissal on whistleblowing grounds is uncapped, unlike for ordinary unfair dismissal claims, the potential cost and reputational risk for businesses of such claims can be significant.
Howard Kennedy recommends The risk of employment tribunal claims from whistleblowers can be minimised where businesses take a proactive and positive approach to managing whistleblowing in their organisations. Howard Kennedy recommends businesses encourage whistleblowers to report concerns by taking the following steps:
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Whistleblowing policies: Regularly review and update existing policies to ensure these reflect current UK whistleblowing legislation and best practice.
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Consider appointing a whistleblowing champion: Large organisations should consider appointing an independent whistleblowing officer/champion to whom workers can raise concerns. Staff may be encouraged to come forward if concerns are raised with managers unconnected with the reported wrongdoing. Keeping the management of a whistleblower’s concern separate from the whistleblower’s line management will also minimise the risk of a potential concern or claims by the whistleblower that they have been subjected to victimisation because they have reported a concern.
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Training: Train managers on how to recognise and respond to concerns when these are raised. Training should include practical guidance on dealing with and managing staff who raise concerns and distinguishing between a whistleblowing concern in the public interest and a personal grievance that relates to the individual’s personal employment position.
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Confidentiality: Ensure appropriate confidential arrangements and channels are available for workers to report concerns confidentially and safely.
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Feedback: Subject to confidentiality obligations in respect of any subsequent investigation and third parties, provide whistleblowers with regular feedback as far as possible.
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Whistleblowing survey results Howard Kennedy surveyed a group of HR directors from a variety of businesses across the UK to better understand: • how businesses manage whistleblowing • how they prepare for and respond to whistleblowers who raise concerns • the time and cost to businesses in dealing with whistleblowing • whether, in their opinion, the current legislation goes far enough. Our research findings are presented under three broad categories – managing risk, managing whistleblowing reports and the legislation.
Managing risk Whistleblowing represents a significant financial and reputational risk to businesses, and to individual whistleblowers. The steps taken by businesses to encourage workers to raise concerns and to ensure whistleblowers are fairly treated can play a significant part in the management of that risk. And, whilst the management of that risk may rest with the HR teams, most of the businesses surveyed report whistleblowing is recognised at board level as a key strategic risk.
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Given the nature of the potential risks to business, it is not surprising to see 96% of businesses having formal whistleblowing policies and procedures in place. Those policies will represent the critical framework for managing those risks. Risk management strategies also extend to actively encouraging staff to speak out over their concerns about danger, risk, malpractice or wrongdoing that affects others, with 94% of respondents saying that they actively encourage staff to speak out. Over three quarters (79%) of businesses surveyed said that their staff are aware of their whistleblowing policies and that they will not suffer adverse repercussions if they raise a concern. Ensuring steps are taken to eliminate retaliation against whistleblowers is a key step to minimise potential claims risk for businesses, in particular since the business can be held liable for the retaliatory acts of its staff towards whistleblowers.
96% 94% 79%
of companies have formal whistleblowing policies and procedures in place of companies actively encourage staff to speak out of companies believe staff know they will not face retaliation
Communication with whistleblowers However, there is more that companies can do to reassure whistleblowers. The level and manner of communication with whistleblowers once concerns have been raised can often dictate how whistleblowers perceive the business’ attitude to the concerns raised and towards the whistleblower themselves. Situations can quickly escalate into formal disputes when whistleblowers feel ostracised or not updated once they have reported a concern. Just 28% of survey respondents provide full and unlimited feedback to whistleblowers, whilst 51% say they provide regular feedback subject to confidentiality obligations.
28% 51%
of companies provide full and unlimited feedback to whistleblowers of companies provide regular feedback subject to confidentiality obligations
There is no requirement under current whistleblowing legislation for businesses to provide feedback to whistleblowers, however good HR practice and common sense should provide for a feedback programme, whether formally or informally. Confidentiality obligations and data protection compliance will often mean that feedback can only be limited, but businesses that take steps to keep those who have reported concerns updated as far as possible can often reduce the risk of situations escalating towards a formal dispute.
Should businesses publicly report on whistleblowing related issues? A persuasive two thirds (67%) of respondents believe that businesses should be obliged to publicly report on the number of whistleblowing reports they receive, whilst a third (33%) do not believe they should be required to publicly report this information. Interestingly, just over half (51%) of respondents confirmed they do voluntarily report publicly on whistleblowing related issues.
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Whistleblowing rules that came into force in 2016 require relevant financial services firms to appoint a whistleblowing champion to oversee the preparation of an annual whistleblowing report to their board, which must then consider whether any action should be taken. There is currently no requirement for other organisations to publicly report on whistleblowing concerns that are raised internally or externally (for example, to a regulator). However, requiring certain businesses, for example, publicly listed companies and/or those in potentially high whistleblowing risk sectors, to publicly report on these issues would undoubtedly lead to those organisations taking a more critical look at their whistleblowing policies and internal management of reported concerns. It would likely also address the controversial attempts by some employers to use ‘gagging clauses’ in formal settlements with whistleblowers, widely reported, for example, in the healthcare sector.
Key components of a whistleblowing policy Whistleblowing policies will vary from business to business and sector to sector. They will typically include: • identifying the types of concerns that workers are encouraged to report • how and to whom concerns should be raised • whether and, if so, how reports can be made anonymously • what whistleblowers can expect will happen once they have raised a concern • the protection available to whistleblowers and to whom they should raise any concerns in respect of alleged victimisation.
Managing whistleblowing reports Number of whistleblowing reports received over the last three years
Where whistleblowing reports where received, they resulted in:
27% 73% 46% 5%
employee dismissal (of whistleblower or others) effective resolution to the satisfaction of the business effective resolution to the satisfaction of the whistleblower employment tribunal claim against the business
It is often challenging for a business to satisfy the demands of both the business and the whistleblower following a report of a whistleblowing issue, yet our survey suggests that in most cases this is possible.
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Time and cost of managing whistleblowing claims Time taken to manage, investigate and respond to a whistleblowing issue, including to address any associated wrongdoing identified Costs associated with managing reported whistleblowing issues
Once a worker has reported a whistleblowing concern internally, businesses will need to take steps to investigate the matter appropriately. The amount of time required to investigate allegations of malpractice will depend on the facts in each particular case and whether further evidence of the alleged wrongdoing is revealed. Of those businesses which had received reports of whistleblowing issues in the last three years, only 5% reported that those led to an employment tribunal claim. However, when this happens, time and costs to manage the claims increase significantly, as the below also illustrates.
Time taken to manage employment tribunal whistleblowing claims
Costs associated with managing employment tribunal whistleblowing claims
The extent to which businesses can minimise the risk of whistleblowers pursuing employment tribunal claims against the business, and consequently the associated time and cost defending such claims, will often depend on an organisation’s response once a concern is raised and how the whistleblower is subsequently treated after raising the concern. A culture of tolerance and fairness, and managers who are properly trained to recognise and respond to whistleblowing concerns, with appropriate HR support, can reduce the risk of situations escalating. Our survey also reveals some employers’ concerns that some whistleblowing reports are made simply to increase the individual’s leverage by increasing the potential compensation values for an individual making a claim against the business. 10% of respondents believe this to happen in all cases where whistleblowing concerns are raised, and 14% of respondents consider this applies in the majority of cases. 10% believe this only occurs in the minority of cases. More positively, 38% believe that this does not happen at all whilst 28% of respondents reported they did not know if this happens. This presents a unique challenge for businesses, having to treat all reports of alleged wrongdoing at work with the seriousness they demand, notwithstanding possible concerns about a whistleblower’s motives. Whistleblowing legislation was amended in 2013 to remove the requirement that a whistleblowing concern must be raised in good faith in order for the whistleblower to have the enhanced employment rights protection afforded to whistleblowers. However, a whistleblower’s motive(s) will still be relevant when considering the level of compensation they may achieve in the tribunal if they are successful with their claim.
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The legislative environment Whistleblowing legislation has been in place since 1998, having been amended significantly in 2013. The final part of our survey explored businesses’ views on current whistleblowing law. Just 19% of businesses believe whistleblowing legislation to be highly effective. In line with our expectations, almost all (96%) respondents were aware that the law gives whistleblowers enhanced legal protection if they are dismissed or subject to detrimental treatment after raising a whistleblowing concern, although we would have expected the responses here to have been 100%. The legislation does leave room for improvement. Our final question asked businesses to suggest ways to improve the whistleblowing regime for both employers and employees. A selection of those suggestions are below:
“Whistleblowers need to be kept anonymous so they can retain their job without reprisals.” “Reduce the financial incentive that drives spurious claims.” “More protection for all affected parties.” “Greater protection for whistleblowers in smaller organisations who may be victimised post disclosure.” “Greater clarity and a degree of materiality.”
“Whilst some whistleblowing reports are based on genuine concerns, others are motivated by staff who do not like being told by their managers what to do. As everyone wants to hear about wrong doing in care, aggrieved employees or ex-employees see whistleblowing to [the] CQC as a way to gain ‘revenge’. These reports involve a huge amount of investigation work and are generally unfounded.” “In my experience, a whistleblowing claim comes during a dispute to enhance any settlement to an employee, which is very frustrating to the employer.”
Whistleblowing policies can address the consequences for those who raise unfounded concerns in bad faith by stating that if, following investigation, it is found that spurious allegations have been raised this may lead to disciplinary action. This will, however, always require very careful consideration and management to balance the risk of a subsequent victimisation claim by the individual if disciplinary action is pursued.
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The HR director’s perspective Interview one: HR Director – life sciences company My own experience of managing whistleblowing claims in this company is limited. That is very much down to the way our business is run and its size. Whistleblowing is, however, an issue for life sciences companies, as it is for many businesses. Our business is built around a very clear and simple set of values – helping others, being open, always learning and striving for better. These values are instilled into every aspect of what we do, meaning practically that doors and discussions are always open. These values and our approach extends to all of our staff around the world irrespective of the local legal requirements. They are, of course, supported by strong policies. Good governance and a strong culture of staff engagement is, I believe, one of the best ways a company can protect itself from spurious whistleblowing claims. This is, of course, not always possible in much larger businesses. Whilst many whistleblowing claims are completely justified, many are, I believe, a result of a breakdown in communication. Whistleblowing becomes a tactic in an escalating dispute, and it can really tie a company in knots. Spurious claims are enormously frustrating, and unfortunately, all too often mud sticks. The wider public rarely has any sympathy for big pharma companies. There is very little a company can do in these situations but respond in good faith as if it were a genuine claim. The need for a transparent and visible process for dealing with such claims is paramount, as is good and open communication, particularly with staff and key stakeholders. That said, the need for protections for whistleblowers is also important. Genuine claims are rarely brought lightly, with the individual bringing a claim putting their career, and chances of future employment, at risk. It is all but impossible to keep a whistleblower completely anonymous; colleagues will recognise very quickly who is involved, and it is difficult to keep names out of the press, even more so if a claim ends up at an employment tribunal. I would recommend that any individual considering bring a claim take professional advice before they do so – and if they cannot afford a lawyer, organisations like the Citizens Advice Bureau can be helpful. I am sure the current laws could also be strengthened.
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Interview two: HR Director – energy and commodities trading company In this role I have worked extensively in the UK and around the world with a large energy company, and more recently in London with a commodities trading business. Whilst working with the energy company, a dedicated hotline was introduced for staff to encourage them to ‘blow the whistle’ on activity that is not what should be expected of the business or that might damage its reputation. Rather than going to the HR department, calls were directed to a dedicated compliance team. In my current role – a much smaller trading firm with some 200 employees – the hotline approach simply would not work. A clearly communicated whistleblowing policy is in place that allows staff with a whistleblowing claim to report it either to their line manager, the HR team, directly to the CEO, or through legal counsel. The downside to that is anonymity is lost. That said, not one whistleblowing allegation has been raised in three years. In principle, the hotline was a good idea, offering anonymity to would-be whistleblowers and the opportunity to better protect the reputation of the company. However, in practice most of the reports were frivolous and with no basis. All claims need to be investigated and that takes time. And that perhaps illustrates one of the problems with the current legislation: it can be very difficult to distinguish between genuine and vexatious claims. In my experience, many whistleblowing claims follow employment proceedings already underway. It is not uncommon to see a discrimination or whistleblowing claim added to unfair dismissal proceedings, with the disgruntled employee hoping for a better settlement. This is highly inconvenient for companies and whilst the most outrageous claims can be easily dismissed, the only course of action is to use legal counsel to refute them – and that can be expensive and timeconsuming. A fair and democratic society needs to give people the opportunity to blow the whistle, but there does need to be some protection for businesses. Perhaps one solution might be a higher benchmark to reach before a whistleblowing claim can be added to an existing unfair dismissal action.
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A guide to whistleblowing and the law What is whistleblowing? Whistleblowing is when a worker reports suspected wrongdoing at work. Officially this is called ‘making a disclosure in the public interest’, but is more commonly called ‘blowing the whistle’. Individuals who disclose wrongdoing at work are known as ‘whistleblowers’. UK whistleblowing law protects employees and other workers.
Who is a worker? Workers are employees and other individuals who work, or formerly worked, under an express or implied contract to personally provide services, provided they are not genuinely in business on their own account. Both current and former workers are covered. For example, an individual who is subjected to a detriment by their former employer after termination of their contract can still bring a claim. Under UK whistleblowing legislation, workers also include: • homeworkers • non-employees undergoing training or work experience as part of a training course, other than at an educational establishment • self-employed doctors, dentists, ophthalmologists, pharmacists in the National Health Service, student nurses and student midwives • agency workers • police officers.
What type of suspected wrongdoing is covered? The information reported by a worker must be information that the worker reasonably believes is in the public interest and reports one or more of the following categories that is either happening, has taken place, or is likely to happen in the future: • a criminal offence • breach of a legal obligation • a miscarriage of justice • that someone’s health and safety is in danger • damage to the environment • the deliberate concealing of any of the above. These are known as ‘qualifying’ disclosures and can be made verbally or in writing.
What other conditions need to be satisfied? Qualifying disclosures must meet certain conditions in order to be a ‘protected’ disclosure under UK whistleblowing legislation. The specific conditions to be satisfied will depend on the type of person or organisation the whistleblowing concern is reported to. The law encourages internal disclosures to employers but permits external disclosures to certain
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prescribed organisations (such as a statutory regulator) however there are more stringent conditions for the whistleblower to satisfy if making a report to an external prescribed body. For example the whistleblower must believe the information and allegation they are reporting are substantially true. There are further more stringent requirements and conditions to satisfy if reporting whistleblowing concerns to a media organisation.
What protection do workers have? Whistleblowers have two types of legal protection: • protection against dismissal: if the reason, or principal reason, that an employee is dismissed is that they have made a protected disclosure, their dismissal will be automatically unfair • protection against suffering detriments: it is unlawful for an employer to subject a worker to a detriment on the ground that they have made a protected disclosure.
Automatic unfair dismissal The usual remedies for unfair dismissal apply for claims of automatic unfair dismissal on whistleblowing grounds. These are re-instatement, re-engagement and compensation. However, unlike ordinary unfair dismissal claims, there is no cap on compensation or minimum length of service requirement. In dismissal cases, compensation is based on the post-dismissal losses suffered by the whistleblower. This will usually be based on future loss of earnings. If the tribunal finds evidence that the whistleblower has been stigmatised or ‘black-listed’ in some way, this can result in a more significant award if the individual is realistically not likely to find alternative employment in their industry again or for a long time.
Detriment The term ‘detriment’ is not defined. Case law has established that detriments can include, but are not limited to, threats, disciplinary action, loss of work or pay, or damage to career prospects. Where a worker succeeds in showing unlawful detriment, the employment tribunal must make a declaration to this effect and may award compensation, which is uncapped. Compensation for detriment claims is assessed based on the loss the whistleblower has suffered as a result of the detrimental treatment. Tribunals may also award compensation for injury to feelings arising from a detriment, but not from a dismissal. Case law has established guidelines for assessing injury to feelings awards which, can range from £800 - £42,000 depending on the severity of the case. Click here for our report on a key employment appeal tribunal decision (International Petroleum Ltd and others v Opisov and others) in July 2017 regarding an employee’s detriment claim against his employer and two non-executive directors.
Interim relief For whistleblowing complaints (arising from a dismissal) with a good prospect of success, an employee can make an application for a tribunal to grant the employee ‘interim relief’ by making an order for the continuation of their employment pending final determination of their case. If the order is granted, the employee continues to receive their salary until their case is finally determined.
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How Howard Kennedy can help you Howard Kennedy’s experienced and commercial employment lawyers advise senior management, board level personnel and family offices on workforce issues including advising on whistleblowing claims. With experience acting for organisations facing whistleblowing claims and senior individuals who have raised whistleblowing concerns, the team will quickly assess the merits of each case and make pragmatic recommendations on the best course of action. This includes helping to manage the potential personal and professional reputational damage which often plays a key strategic role in these types of cases. The team works with employers across a range of sectors, with a particular focus on financial services, media and technology businesses. The team also has a strong track record in working with hotels, restaurants, retail, real estate and professional services business, including those with international reach.
Our services include: • • • • • • • • • • • • • • •
dismissal and employment termination advice employment tribunal statutory rights advice and representation including whistleblowing claims board level personnel rights advice disciplinary and grievance guidance employment contract, service agreement and policy preparation worker status and atypical workers’ rights advice capability and employee ill-health absence management pay, bonus, incentives and remuneration rights advice the workforce impact of service provider change and of business transfer advice securing employee business confidentiality obligations and customer information protection workforce rights management in redundancy and reorganisation programmes cross-jurisdictional workforce projects implementation discrimination and harassment rights and breach reputation management directors’ duties and LLP partners’ rights and obligations advice High Court employment terms and fiduciary rights enforcement including injunctions.
For more information or advice, please contact:
Jane Amphlett Head of Employment T: +44 (0) 20 3755 5360 E: jane.amphlett@howardkennedy.com
Lydia Christie Senior Associate T: +44 (0) 20 3755 5402 E: lydia.christie@howardkennedy.com
Visit our website to meet the rest of the employment team and find out more about how we can help you and your business.
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