A Whistle in the Trees: New Whistleblower Protections in the Works
HLS LEGAL | December 6, 2019
By Amber Roncoroni
Since the Panama Papers, the Bahamas Leaks and the Paradise Papers were released in 2016 and 2017 the Australian Government has moved to improve the integrity of Australia’s tax system.
As part of this movement, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 was introduced to Parliament by the Coalition on 7 December 2017. The Bill, which is currently in the Senate as the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2018 (the Bill), is expected to be enacted sometime in 2019.
At the forefront of discussion of the Bill is its new protection for whistleblowers who disclose tax related misconduct of a company.
However, the Bill goes well beyond tax issues to significantly broaden whistleblowers’ protections through substantial amendments to the Corporations Act 2001 (Cth) (the Corporations Act).
The Bill, if passed, is likely to have a significant impact on how employers manage workplace investigations involving whistleblower disclosures and how they proactively manage whistleblower disclosures.
What are the Existing Laws?
Currently the Corporations Act protects and provides remedies for whistleblowers in respect of disclosures about actual or potential contraventions of the Corporations Act.
These protections and remedies include:
- Protection of the whistleblower from civil or criminal liability for making the disclosure (for example, protection from defamation);
- Constraints on an employer’s right to terminate a whistleblower’s employment;
- Prohibitions on victimising a whistleblower;
- The right for a whistleblower to seek compensation if damage is suffered as a result of victimisation; and
- Prohibitions against revealing the whistleblower’s identity or the information disclosed by the whistleblower, with limited exceptions.
The protections have been criticised as being too limited and overly complex.
Specifically, to qualify for protection a whistleblower must:
- Be a current officer or employee of the company in question or a current contractor to the company;
- Make the disclosure in good faith;
- Have reasonable grounds to suspect that either the company, or some of its officers or staff, have breached (or might have breached) a provision of the Corporations Act; and
- Provide their names before making the disclosure meaning that anonymous disclosures are not protected.
What are the new laws going to be?
If the Bill passes, amendments will be made to the Corporations Act to:
- Broaden protected disclosures to matters which the whistleblower has reasonable grounds to suspect concerns misconduct or an improper state of affairs or circumstances in relation to a company, whether or not these concerns are a contravention of the Corporations Act;
- Expands the people who may make a protected disclosure to include relatives, dependants and spouses of employees and contractors who are also eligible to be whistleblowers;
- Expands the type of entities which are subject to the laws to constitutional corporations and not just companies;
- Remove the requirement that the employment or contractor relationship of the whistleblower and the entity the disclosure is about needs to be current in order for the disclosure to be protected;
- Provide that secondary disclosures can be made to the media or a member of parliament if the whistleblower has reasonable grounds to believe that making the secondary disclosure would be in the public interest and 90 days has passed since the first disclosure was made; and
- Otherwise increase the level of protection for a whistleblower by:
- no longer requiring a whistleblower identify themselves when making a disclosure;
- preventing courts and tribunals from disclosing an anonymous whistleblower’s identity without an order;
- providing legal immunity to a whistleblower by providing that their disclosure is not admissible in evidence against the whistleblower in a prosecution;
- broadening the prohibition against victimisation, and in particular, detriment to a whistleblower in relation to a disclosure;
- providing that whistleblower will only be liable for costs in legal action where the whistleblower commenced the action vexatiously;
- significantly increasing the penalty for unlawfully disclosing a whistleblower’s identity and victimising a whistleblower;
- removing the requirement that a disclosure be in good faith in order to be protected and instead excluding from protection disclosures that are a personal work-related grievance only; and
- requiring public companies and large proprietary companies have whistleblower policies and to make the policies available to their officers and employees.
A personal work-related grievance will be defined as a grievance which concerns any matter in relation to the whistleblower’s employment (or former employment) that has (or tends to have) personal implications for the whistleblower.
However, a disclosure of a personal work-related grievance will be a protected disclosure if it:
- Concerns detriment to or victimisation of the whistleblower;
- Has significant implications for the employer that don’t relate to the whistleblower and which:
- relate to a potential breach of the Corporations Act;
- concerns conduct, or alleged conduct that could result in at least 12 months’ imprisonment for a person; or
- concerns conduct that represents a danger to the public or the financial system.
Detriment will be broadly defined as:
- Dismissal of an employee;
- Injury of an employee in his or her employment;
- Alteration of an employee’s position or duties to his or her disadvantage;
- Discrimination between an employee and other employees of the same employer;
- Harassment or intimidation of a person;
- Harm or injury to a person, including psychological harm;
- Damage to a person’s property;
- Damage to a person’s reputation;
- Damage to a person’s business or financial position; and
- Any other damage to a person.
The amendments in respect of whistleblower policies require public companies and large proprietary companies to have a policy with information about:
- The protections available to whistleblowers;
- How and to whom an individual can make a disclosure;
- How the company will support and protect whistleblowers;
- How investigations into a disclosure will proceed;
- How the company will ensure fair treatment of employees who are mentioned in whistleblower disclosures;
- How the policy will be made available; and
- Any matters prescribed by regulation.
According to s 45A(3) of the Corporations Act, a proprietary limited company is a large proprietary company if during a financial year it satisfies at least two of the following factors:
- The consolidated revenue of the company and the entities it controls(if any) is $25 million or more in a financial year;
- The value of the consolidated gross assetsat the end of the financial year of the company and the entities it controls (if any) is $12.5 million or more; and
- The company and the entities it controls(if any) have 50 or more employees at the end of the financial year.
Large proprietary companies will be given more time to comply with the law than a publically listed company.
What are the penalties?
Disclosure of an anonymous whistleblower’s identity or victimisation or threatened victimisation of a whistleblower attracts a maximum penalty of $200,000 for an individual and $1 million for a company.
Failure to comply with the requirement to have and make available a whistleblower policy will be an offence of strict liability with a maximum penalty of $63,000 which will be enforced by ASIC.
When will the changes take effect?
The changes are likely to take effect around October 2019 if the Bill passes.
What impact will the proposed amendments have on employers if they are enacted?
The stakes will be much higher for employers when responding to and investigating a whistleblower’s disclosure.
Employers investigating a disclosure or receiving a disclosure as part of a workplace investigation may find themselves having to determine if a disclosure is a personal work-related grievance which appears to be a complex question which employers and whistleblowers are likely to disagree.
In this respect, Employers may find themselves subject to threats of legal action or legal action by a whistleblower where the employer has taken steps in an investigation which the whistleblower perceives as causing or threatening detriment to them. In this situation, the employer will be subject to a reverse onus which places the burden on the employer to disprove the whistleblower’s allegations of detriment.
The reverse onus appears to work much like the general protections provisions of the Fair Work Act 2009 but with much higher maximum penalties in relation to victimisation.
Employers will also have the added pressure of responding to disclosures quickly or risk the disclosure being released to the media.
Employers will also have to be particularly careful not to disclose the identity of an anonymous whistleblower as the potential penalties are severe.
The strict liability in relation to having a whistleblower policy means that if the proposed amendments are enacted there will be no lawful excuse for an employer subject to the obligation not to have one.
Given the significance of the proposed amendments, it is recommended that employers prepare to review their systems for managing whistleblower disclosures and investigations with a view to ensuring compliance and minimising risk.
If you have any questions about how the proposed amendments to the Corporations Act may affect your business, please contact HLS Legal on (08) 9322 5202.
This article is intended to be informative only and does not constitute legal advice. If you are concerned about your individual circumstances, please contact a lawyer.
The importance of protecting corporate whistleblowers has been recognised for many years. However, legislative protections under the Corporations Act since 2004 have been sparingly used and are increasingly perceived as inadequate, having regard to recent advances in the public sector, other parts of the private sector and overseas.
As part of the Government’s tax integrity package, new arrangements to better protect those who blow the whistle on non-compliance with taxation laws were announced in the 2016-17 Budget.