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The Department of Home Affairs has issued its draft guidance “Modern Slavery Act 2018: Draft Guidance for Reporting Entities” (Draft Guidance) for the new Modern Slavery Act 2018 (Cth) (the Act).
Australia’s existing whistleblower protection laws have been heavily criticised due to gaps in the legal framework, their limited scope and their complexity. The draft Treasury Laws Amendment (Whistleblowers) Bill 2017 (the Bill) aims to address at least the first two criticisms. The Bill creates a consolidated whistleblower protection regime in the Corporations Act 2001 (Cth) (Corporations Act) to cover misconduct in the corporate, financial and credit sectors as well as a broadly equivalent taxation whistleblower protection regime in the Taxation Administration Act 1953 (Cth) to protect those who expose tax misconduct.
The Federal Government plans to introduce the Bill into Parliament this month and if passed, it is expected to come into effect for the private sector by 1 July 2018. Unfortunately, some of the more controversial but potentially game changing proposals for the whistleblower protection regime including:
have not been addressed in the Bill but deferred until 2018 for further consideration by the Government’s Expert Advisory Panel. The piecemeal approach is disappointing.
Key amendments to the Corporations Act include:
These reforms are a significant milestone for whistleblowers. There is no doubt this is a step forward, but the potential reforms still left on the table leave the business community waiting to see if there is more coming, and the regulators wondering if the reforms so far proposed are enough to establish the culture of compliance underlying so much of recent corporate law legislation.
Compensation for victimisation of whistleblowers is another area that may prove a burden for companies as the Bill reverses the onus of proof and claimants need only prove that they suffered damage as a result of the defendant’s conduct, whereas the defendant accused of victimisation must prove that a disclosure by the whistleblower was not in any part a reason for their conduct.
The Bill, if adopted in its current form, will require Companies to create and make available internal whistleblower policies or risk facing penalties. Furthermore, disclosure of a whistleblower’s identity will become a civil penalty offence carrying a maximum penalty of $200,000 for an individual and $1 million for a corporation.
Transparent internal whistleblower policies are essential to good corporate culture and governance. They must include information about the protections available to whistleblowers, how the Company will ensure fair treatment of Company employees who are mentioned in disclosures that qualify for protection and any other matters prescribed by the Bill. Companies who already have whistleblower policies in place should review their policies to ensure they meet the new criteria. For Companies who do not currently have a whistleblower policy in place, this should be a priority for 2018, as failure to comply will be a strict liability offence carrying a penalty of $63,000 and comes with significant potential reputational damage.
It is essential for companies to have processes in place that facilitate anonymous reporting, protect whistleblowers and respond adequately to disclosures. Eligible whistleblowers ought to be informed of the scope and application of the Company’s whistleblower policy. It would be prudent for Companies to train senior management in this regard as technical breaches of the legislation can occur absent knowledge of the strict confidentiality requirements for the protection of a whistleblower’s identity.
While the reforms described above are significant, the most contentious proposal - a US style bounty reward may still become a reality, given the proposals left on the table. The US whistleblower program significantly incentivises reporting and the Securities and Exchange Commission (SEC) is authorised to provide financial rewards, ranging between 10% and 30% of the penalty imposed against a company, to whistleblowers who disclose relevant information to the SEC. Earlier this year for instance, a whistleblower received a monetary reward exceeding $20 million through this program. Interestingly, the tips received by the SEC have also been provided from countries outside the US with the highest number coming from the United Kingdom, Canada and Australia. It’s unclear how long consideration of these proposals will be deferred.