Are You Complying with the New Whistleblower Laws?
The revamped federal whistleblower laws commenced on 1 July 2019 and they have some teeth.
A whistleblower is an insider or a person related to an organisation who reports misconduct or other inappropriate activity that has occurred within the organisation. Certain legal protections are provided to whistleblowers and the recent changes have significantly expanded and strengthened the regime.
Companies and other organisations need to take active steps to comply with the new laws as there are heavy fines and other consequences for not complying.
Do the new laws apply to you?
The new laws amend the Corporations Act and apply to companies, constitutional corporations (such as trading or financial corporations) as well as banking, insurance and superannuation entities.
The new laws also amend tax legislation and relate to breaches of tax laws and tax misconduct, but these are not discussed in this update.
When did the new laws commence?
Most of the changes commenced on 1 July 2019. The new laws apply to ‘protected disclosures’ made after this date but can relate to conduct that occurred before 1 July 2019.
Mandatory whistleblower policies for certain organisations are required to be in place by 1 January 2020.
When do whistleblower protections apply?
A disclosure of information will qualify for protection if the following requirements are met:
1. The disclosure is made by an ‘eligible whistleblower’ in relation to a ‘regulated entity’
Eligible whistleblowers include current and former officers, employees, individuals supplying services or goods (and their employees) individual associates, as well as relatives and dependants of the above. Whistleblowers can give disclosures anonymously.
Regulated entities include companies, constitutional corporations and banking, insurance and superannuation entitles.
2. The disclosure is made to an ‘eligible recipient’ or a prescribed entity
Internally to your business this includes officers, senior managers, auditors, actuaries and persons authorised by the entity to receive protected disclosures (such as HR personnel).
Externally this includes ASIC and other federal authorities as well as legal practitioners, journalists and parliamentarians in certain circumstances.
3. The disclosure is about a ‘disclosable matter’ and is not a ‘personal work-related grievance’
The whistleblower must have reasonable grounds to suspect that the information concerns “misconduct, or an improper state of affairs or circumstances” or indicates conduct was engaged in that contravenes certain legislation (such as the Corporations Act) or represents a danger to the public or financial system.
Personal work-related grievances
‘Personal work-related grievances’ are only ‘protected disclosures’ in certain circumstances. To be protected the information will need to relate to the whistleblower’s employment and have implications for them personally, not have significant implications for the entity and not concern a contravention of the victimisation protections or certain legislation (such as the Corporations Act) or represent a danger to the public or financial system.
Examples of ‘personal work-related grievances’ may include interpersonal conflicts, decisions relating to the engagement, transfer, promotion, suspension, discipline, termination or employment terms and conditions of the whistleblower.
A personal work-related grievance disclosed to a lawyer to obtain advice or representation about whistleblower laws may qualify for protection.
If it is unclear whether a disclosure of information is a ‘personal work-related grievance’ or if it qualifies for protection, it is best to seek legal advice.
The whistleblower protections have been strengthened and include:What are the whistleblower protections?
- Confidentiality – the whistleblower’s identity and information likely to lead to their identification must be kept confidential (exceptions include disclosure with the whistleblower’s consent, disclosure to regulatory bodies and disclosure to lawyers for the purpose of obtaining advice or representation about whistleblower laws).
- Immunity – from civil, criminal or administrative liability (such as disciplinary action) for making a protected disclosure. This does not prevent liability for conduct of the whistleblower that is revealed by the disclosure.
- No victimisation – a person cannot engage in conduct that causes or threatens detriment (such as dismissal, demotion, discrimination, harassment, psychological harm or reputational damage) to any person (not just the whistleblower) because the victimiser suspects a disclosure has been made or a potential future disclosure could be made.
- No enforcement or exercise of rights – no contractual or other rights or remedies may be enforced or exercised against the whistleblower on the basis of the disclosure.
Taking adverse action against an employee whistleblower because they made a disclosure could also be in breach of the general protections provisions under the Fair Work Act.
What are the consequences for breaching the laws?
The consequences of breaching the new whistleblower laws are significant and could result in:
- civil penalties in the millions of dollars depending on the breach;
- criminal penalties, including fines and imprisonment;
- court actions by whistleblowers who have suffered detriment claiming compensation, injunctions, apologies, reinstatement and exemplary damages; and
- orders for compensation against employers for detrimental conduct carried out by their employees.
Court actions by whistleblowers may now be more appealing as the new laws include a reverse onus of proof in favour of the whistleblower and a restriction that costs can only be ordered against a whistleblower if their claim is vexatious.
Do you need a whistleblower policy?
We strongly recommend you have a whistleblower policy in place to protect your business and ensure compliance with the new laws.
The new laws introduce a mandatory requirement for all public companies and large proprietary companies to have a compliant whistleblower policy. Public companies must have a policy in place by 1 January 2020.
The deadline for large proprietary companies is likely also to be 1 January 2020 but depends on the timing of the company’s financial year. The thresholds that define when a company is a large proprietary company increased on 1 July 2019 and may also depend on the company’s financial year. If you are uncertain about whether and when you need a mandatory policy in place, you should seek legal advice.
Mandatory whistleblower policies must contain certain information to be compliant. Failure to have a compliant policy in place by the deadline could result in a penalty of up to $126,000.
Even if a policy is not mandatory for your business, you are still required to comply with the new laws and a policy will help you do this. Further, whether an employer has a policy and followed it will be considered by a court in determining an employer’s liability for the actions of its employees who breach the laws.
What should you do?
Businesses need to take care when dealing with whistleblowers and disclosed information as the new laws have increased protections and consequences. Businesses should:
- Be aware of and understand the new laws and take steps to ensure compliance.
- Have a good whistleblower policy that sets out how you deal with disclosures and protected whistleblowers.
- Train your workforce on the whistleblower regime and your policy to ensure compliance. This may be considered a reasonable precaution an employer has taken to avoid breaches by employees.
- Train the employees who will receive whistleblower disclosures (such as officers, senior managers and HR personnel) on how to identify a whistleblower disclosure and what to do to ensure compliance with the laws.
- Have good investigation processes and procedures and ensure investigators understand and comply with the whistleblower regime.
Contact us for assistance
The new laws are certainly more robust and raise some issues for businesses. If you would like more detailed and tailored information about the new laws and how they will apply to your business, if you need assistance with a whistleblower policy or have any other queries, please contact us.
Disclaimer: The information contained this article is general and intended as a guide only. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this update, Aitken Legal does not accept liability for any errors it may contain. Liability limited by a scheme approved under professional standards legislation.