Insights

13/12/17

Whistle while you work - Whistleblowing...culture, confidentiality and damages

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:

  1. a US style bounty reward for whistleblowers; 
  2. the establishment of a Whistleblower Protection Authority to govern the public and private sector; and
  3. carving out whistleblowing from the reach of confidentiality provisions in settlements,

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.

Summary of key proposed reforms

Key amendments to the Corporations Act include:

  • broadening the scope of persons entitled to whistleblower protection to include former and present employees, individual associates, suppliers of services or goods to the company and their employees as well as spouses, children or dependents of any of these people;
  • providing a more comprehensive compensation regime for whistleblowers and strengthening the anti-victimisation offence by expanding protections and redress available for whistleblowers who suffer retaliation;
  • removal of the requirement for disclosures ‘in good faith’ by whistleblowers and replacing this with protection for disclosures where the whistleblower has ‘reasonable grounds to suspect’ a breach of law;
  • expanding the categories of protected disclosures under the Corporations Act to include disclosures concerning an improper state of affairs or circumstances;
  • permitting anonymous disclosures and imposing strict obligations to maintain the confidentiality of a whistleblower’s identity where it is provided;
  • widening the range of permitted whistleblower disclosees to include regulatory bodies such as ASIC, APRA and the AFP.  Whistleblower disclosees can include journalists or politicians, if certain preconditions are satisfied.  The Bill also expressly allows for disclosures to lawyers for the purposes of obtaining legal advice; and
  • from 1 January 2019 (or following that, no later than six months after a proprietary company first becomes a large proprietary company (as defined in section 45A(3) of the Corporations Act)) all public companies and large proprietary companies (Companies) will be required to have whistleblower policies consistent with the new requirements.

What these changes mean for you

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. 

Watch this space

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.

Insight By
-
Partner
+61 8 9413 8433
+61 400 011 978
Lawyer
+61 8 9413 8504

Categories

Areas of Expertise

Share This

AddThis: