An overview of the new whistleblower protections
A self-proclaimed “single, strengthened whistleblower protection regime [that] covers the corporate … sector” has been passed by Federal Parliament in February 2019. James Mattson and Jade Bond provide an overview of this new regime.
The Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2018 (Cth) will amend the Corporations Act 2001 (Cth) to vastly expand the whistleblower protections presently contained in Part 9.4AAA of the act.
The changes come into force on 1 July 2019 and represent a substantial alteration to Australia’s current piecemeal whistleblower protections. Following recent royal commissions, the new regime seeks to promote a more ethical corporate culture by encouraging whistleblowing.
In short, the laws will provide greater protection for whistleblowers, bestowing significant obligations on businesses to constructively deal with, and not ignore, disclosures.
The laws are broad and there are some complexities, which is why businesses need to prepare. Processes and policies will need to be developed and enhanced, while education and training of key staff – especially those authorised to receive disclosures – will be critical.
Disclosures can still be made to the relevant authorities (like ASIC and APRA), and to an auditor, officer, senior manager or other person authorised by the company to receive disclosures.
Here are some of the key changes worth knowing:
1. More people can now make a disclosure
Previously, only a company officer, employee, contractor or supplier could make a disclosure. Now, the list of ‘eligible whistleblowers’ has been expanded to include:
- former company officers, employees, contractors and suppliers; and
- relatives and dependants of officers, employees, contractors and suppliers.
2. Anonymous disclosures are allowed
Under the current regime, whistleblowers are not protected unless they disclose their name when making a disclosure. However, the new laws protect anonymous disclosures, which means their management requires careful consideration, including how to best investigate them.
3. More can be disclosed
Current whistleblowing protections are limited to circumstances where the discloser has ‘reasonable grounds’ to suspect that the company, an officer or an employee has contravened the Corporations Act.
The new protections apply to the disclosure of information where the discloser has ‘reasonable grounds’ to suspect that the information “concerns misconduct, or an improper state of affairs or circumstances” in relation to a company or a related body corporate.
This includes, but is not limited to, when the discloser has reasonable grounds to suspect that a company, or an officer or employee has:
- committed an offence against, or in contravention of, a range of legislation like the act;
- engaged in conduct that constitutes an offence against any law of the Commonwealth where the offence is punishable by imprisonment of 12 months or more; or engaged in conduct that represents a danger to the public or financial system.
As is apparent, the new laws open the protections to a large range of disclosures.
4. Removing ‘good faith’ requirement
The current protections only apply if a discloser is acting in ‘good faith’. This requirement has been removed from the bill, meaning that the motives behind a discloser’s actions are irrelevant.
5. Inaction may permit disclosures to members of Parliament or the media
The bill creates a new category of ‘public interest disclosures’ and ‘emergency disclosures’, both of which may be made to a member of Parliament and/or the media.
A ‘public interest disclosure’ may be made 90 days after the original disclosure when the discloser has reasonable grounds to believe that their original disclosure is not being acted on.
Where the discloser has reasonable grounds to believe that a further disclosure is in the public interest, they must then give notice of their intent to go public before telling a member of Parliament and/or the media.
An ‘emergency disclosure’ is one in which the discloser “has reasonable grounds to believe that the information concerns a substantial and imminent danger to the health or safety of one or more persons, or to the natural environment”.
To be protected, the discloser must notify the company of their intent to make an emergency disclosure before telling a member of Parliament and/or the media.
6. Greater protection for whistleblowers
The bill provides whistleblowers with confidentiality, broader immunity and protection against victimisation. It is an offence to disclose the identity of a discloser, including information that is likely to lead to the identification of the discloser, without their consent. A whistleblower cannot be subject to any civil, criminal or administrative liability (including disciplinary) for making a protected disclosure.
A whistleblower cannot be subjected to any detriment or a threat of detriment because they made, or are believed to have made, a protected disclosure. Like the Fair Work Act, the new laws: expand liability to those involved in a contravention; shift the evidential burden of proof to the defendant in circumstances where confidentiality has been breached; and the discloser cannot be ordered to pay costs incurred by the other party, except in limited circumstances.
These protections carry high penalties if they are breached. At the same time, the bill also provides for a variety of compensatory orders, including exemplary damages and reinstatement.
7. Significant penalties for non-compliance
The bill definitely packs a punch when it comes to penalties. Civil penalty provisions currently carry maximum fines of $200,000 for individuals and $1 million for a body corporate, and apply to cases where a whistleblower’s confidentiality has been breached or they have been victimised. However, these are set to increase under the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018, which was also recently passed.
Under the new laws, the civil penalties will increase to:
- for individuals: $1.05 million, or three times the benefit derived, or detriment avoided;
- for corporations: up to $10.5 million, or three times the benefit derived, or detriment avoided, or 10 per cent of the body corporate’s annual turnover (although it is capped).
8. Large companies must have a whistleblower policy
Public companies and large proprietary companies must implement (and make available) a whistleblower policy that outlines, among other things:
- the protections available to whistleblowers;
- to whom qualified disclosures may be made and how they may be made;
- the support available for whistleblowers; and
- how the company will investigate disclosures and ensure fair treatment.
Failure to put this policy in place can result in a $12,600 fine.
9. Is whistleblowing still a risk?
In short, yes. The bill definitely acts to increase the protections offered to whistleblowers. At the same time, hefty penalties for non-compliance provide a significant incentive for both companies and individuals to comply with the provisions.
However, the biggest issue with the new regime is the uncertainty surrounding what constitutes a ‘disclosable matter’, especially those disclosures that relate to ‘misconduct, or an improper state of affairs or circumstances’. This phrase is undefined.
Until there is some guidance regarding the limits of this expression, there is still a significant chance that a disclosure may not be treated with the appropriate protections, resulting in potential confidentiality breaches.
Although there are penalties for non-compliance, mishandling by companies of disclosures can do significant damage to reputations and the livelihood of whistleblowers.
James Mattson, partner at Bartier Perry, and Jade Bond, lawyer at Bartier Perry