Protecting whistleblowers – it’s a delicate balance

Elizabeth Ticehurst, Director, Employment, KPMG Law

It is a truth universally acknowledged that whistleblowing contributes to the greater corporate and social good. Companies, and society in general, benefit from having wrong-doing exposed. There is also general consensus that whistleblowers too often suffer reprisals for bringing “dirty deeds” into the light, and need to be protected. However, this involves a difficult balancing act. The protection given to whistleblowers should not overly impede companies from managing their businesses, or expose them to frivolous and wasteful claims. On the other hand, whistleblowers must feel safe to expose misconduct, and need to know that their rights will be protected. Both parties will benefit from legislation that is clear and easy to understand.

The Federal Government seeks to walk this delicate line in the exposure draft of Australia’s proposed new whistleblower regime, released on October 23, 2017. The proposed new legislation highlights just how difficult it is to achieve a fair balance between these competing interests.

The exposure draft departs from the recommendations of the Joint Parliamentary Committee Inquiry into Whistleblower Protection in a number of ways, including:

  • the new laws are framed as an amendment to the Corporations Act and the Taxation Administration Act, rather than a standalone whistleblowing protection law;
  • as a result, there is no new agency charged with enforcing whistleblowing laws,
  • there is no reward or “bounty” system for whistleblowers; and
  • there is no explicit encouragement for whistleblowers to make disclosures via internal channels before turning to external parties such as regulatory agencies.

However, the new regime significantly expands the protections currently available to whistleblowers, and brings to the private sector for the first time a number of features

“Misconduct” a new disclosure category

The scope of things that whistleblowers can make a disclosure about is broadened from a suspected breach of the Corporations legislation to include “misconduct, or an improper state of affairs or circumstances” at the company. This makes things more certain for a whistleblower, who can be confident that a disclosure will be protected, even if they are unsure whether it is a breach of a law or not. It will significantly increase the compliance burden of companies however, who will have to treat every small grievance or complaint as a protected disclosure.

Compensation for victimisation

Whistleblowers can also seek compensation under the draft legislation for any victimisation they have suffered as a result of making a disclosure, and in these claims the onus of proof is reversed. This means that a company who has caused detriment to a whistleblower must prove that they were not motivated by the fact that a disclosure was made. This has the potential to make employee management very difficult, as employers could face compensation claims for making any detrimental changes to the employment of an employee who has raised a complaint – even if the complaint is about trivial breaches of internal policies. Any such decisions would need to be carefully documented to ensure that the company can prove it was not motivated by the disclosure or complaint.

Penalty for revealing the identity of an anonymous whistleblower

Most troubling for businesses, there is a significant penalty for revealing the identity of a whistleblower who wishes to remain anonymous. A company could be ordered to pay a fine of up to $1 million, or an individual up to $200,000 for disclosing the identity of a whistleblower, or information that is likely to lead to the identification of the whistleblower. There is no requirement that the disclosure be intentional or reckless, so even accidental disclosures (such as a mis-placed document or an e-mail that goes astray) could lead to heavy fines. Whilst the legislation is aimed at encouraging whistleblowing, these features could have the unintentional consequence of causing companies to avoid in-house internal disclosures.

While work remains to be done on the proposed new legislation, many of these features may come into effect in 2018. Companies who are yet to grapple with the idea of establishing grievance procedure or internal channels for disclosures need to start thinking now about how to handle whistleblowing reports, and at the same time protect themselves from liability.

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