Australian companies are on the eve of a new age of corporate activism. New protections for whistleblowers who go public about serious corporate misconduct are among the key provisions proposed by the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017.
Here are the five things you need to know about the proposed reforms, which the Senate Economics Committee has recommended should be passed but with amendment. However, spirited dissenting reports from Labor, Greens and NXT Senators mean that the detail of these proposed laws is still up for negotiation. Now’s the time for companies to get in on the conversation and prepare for these reforms.
The proposed laws differ from the exposure draft released by the Government last year. If passed in their current form, they will include for companies some gems and challenges buried in their details.
1. Proposed whistleblower protections: tougher, broader, stronger
The reforms propose to consolidate the various whistleblower protections in corporate, financial services and insurance laws into one stronger scheme under the Corporations Act, in addition to introducing a specific scheme for whistleblowing about tax affairs and suspected tax avoidance.
The reforms propose to:
- expand the class of potential whistleblowers (including former employees, goods and services contractors, officers and relatives and dependants of these persons)
- sweep direct managers and supervisors into the class of persons to whom a protected disclosure can be made
- allow disclosures to be protected even if made anonymously
- strengthen protections and penalties, including by introducing civil penalties of up to $1 million for companies contravening confidentiality or anti-victimisation protections, and allowing whistleblowers to bring claims for compensation, in most cases, without the threat of adverse costs orders and with the benefit of a reversed burden of proof.
Whistleblowers will still not be protected from underlying wrongdoing which is disclosed however.
2. Keeping whistleblower identity confidential is key
The reforms propose clearer confidentiality protections making it much less risky for companies to investigate, take action and get legal advice – provided whistleblower identities are protected.
The proposed reforms give paramount protection to the confidentiality of whistleblower identity and information which is likely to reveal that identity. Subject to this, confidentiality protection over the information disclosed will otherwise be lifted.
Whistleblower identities (and information likely to reveal them) will also benefit from a new quasi-privilege, enabling the production of documents or other disclosures to a court or tribunal to be resisted where they would reveal whistleblower identities.
3. Going nuclear: disclosures to media and MPs
The reforms propose protections for “emergency disclosures” if:
- a reasonable period has passed since making a protected disclosure to a prescribed regulator, such as ASIC or APRA, and
- the whistleblower reasonably believes that “there is an imminent risk of serious harm or danger to public health or safety, or to the financial system, if the information is not acted on immediately”.
In those circumstances, the whistleblower will be able to disclose the information to a member of parliament or a journalist provided they give the regulator sufficient written notice.
The reforms propose that “emergency disclosures” are protected, giving the whistleblower immunity against liability for making the disclosure and relief from victimisation.
If passed as proposed, the key for companies will be to act quickly on disclosures and keep the whistleblower engaged, to the extent possible, in the resolution of their complaint. Robust internal processes may help prevent the whistleblower escalating complaints externally.
4. The likely battleground in the Senate
Labor, Greens and Xenophon Senators have already foreshadowed their displeasure with details in the proposed bill, meaning the Government will have to negotiate to get its reforms through the Senate.
Likely battlegrounds include whether:
- a bounty system should be introduced to reward whistleblowers
- disclosures about ‘misconduct’ and an ‘improper state of affairs’ cast too wide a net (consider, for example, personal employment matters and environmental law breaches)
- the AFP should be able to receive a protected disclosure (as it currently can in some cases)
- only senior managers (rather than all supervisors) should be able to receive protected disclosures
- the scope and threshold for emergency disclosures are appropriate
- companies should have a positive duty to support and protect whistleblowers
- the reverse burden of proof should be re-drafted to avoid difficulties for both whistleblowers and companies in bringing or defending claims
- there should be an avenue (other than a court) open to whistleblowers to seek relief.
5. You may need a (revised) policy in place by 1 January 2019
For the first time, a criminal offence is proposed for public and large proprietary companies who do not have a whistleblower policy available to officers and employees. This proposal appears to have no detractors.
The reforms propose that a policy must include information about:
- whistleblower protections, including to whom and how protected disclosures can be made
- how the company will support whistleblowers and protect them from detriment
- how the company will investigate complaints and also ensure the fair treatment of employees who are mentioned or related to the complaint
- how the company will make the policy available to officers and employees.
A good policy can be an important tool to set expectations on how disclosures will be handled and with whom they may be shared. The reforms propose to convert today’s best practice into mandatory obligations.
If passed in their current form, the new laws will come into effect on 1 July 2018. Companies will have until 1 January 2019 to review their policies and prepare their people for an age of strengthened corporate activism.
For further advice or assistance, including in implementing or refreshing your whistleblower policy, contact our litigation partner Crispian Lynch, corporate advisory partner Sarah Turner or litigation lawyer Ghassan Kassisieh.