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Focus: Senate calls for rewards and increased protections for whistleblowers

3 October 2017

In brief: A broadened definition of 'whistleblower', reforms to establish greater protections for whistleblowers and increased sanctions for retaliatory conduct are some of the recommendations by a Senate committee looking into whistleblower protections in the corporate, public and not-for-profit sector. We expect new laws to be introduced that will result in more corporate whistleblowing and companies should start preparing now. Partners Rachel Nicolson (view CV) and Peter Haig (view CV), and Lawyers Zainab Mahmood and Sarah Lunny report.

 
 

How does it affect you?

  • Corporations should be aware of the impending changes to the whistleblower protections regime in Australia, including a broadened definition of 'whistleblower' and an expansion of the types of disclosures to which whistleblowing protections apply.
  • Proposed changes to the law include:
    • whistleblower protections will be extended to cover certain internal disclosures made within the private sector;
    • in limited circumstances, disclosures made to the media will attract whistleblower protections; and
    • it will be easier for whistleblowers to obtain civil remedies against employers who retaliate against them.
  • Perhaps most surprisingly, the Senate has recommended for the establishment of a 'reward system' whereby whistleblowers could receive a proportion of any penalty imposed as a result of an investigation instigated by a whistleblower's disclosures.
  • If introduced, the new laws are expected to result in more corporate whistleblowing. Companies should review their whistleblower policies and practices to ensure that they are well-placed to respond to the new laws.

Background

On 30 November 2016, the Senate referred an inquiry into whistleblower protections in the corporate, public and not-for-profit sector (the Senate Inquiry) to the Joint Committee on Corporations and Financial Services (the Committee). The Senate Inquiry came in the wake of numerous high-profile cases of corporate misconduct brought to light by whistleblowers.

The Committee's terms of reference required it to address a number of matters, including:

  • expanding and enhancing whistleblower protections;
  • potential compensation arrangements, and other remedies that should be available to whistleblowers, such as the 'bounty system' used in the United States of America; and
  • the circumstances in which public interest disclosures to third parties or the media about corporate wrongdoing should attract protection.1

The Committee also had regard to a consultation paper released by the Department of Treasury on tax and corporate whistleblower protections.2

The Committee received 75 submissions, many of which canvassed the following key themes:

  • the introduction of standalone legislation for whistleblower protections in the corporate sector;
  • the expansion of the definition of whistleblower to include former employees;
  • the expansion of disclosures covered by whistleblower protections to include anonymous disclosures, and those disclosures not strictly relevant to the Corporations Legislation;
  • the elimination of the 'good faith' requirement;
  • the expansion of the remedies available to whistleblowers for detriment suffered as a result of their disclosures; and
  • the possibility of introducing a rewards scheme to incentivise potential whistleblowers.

On 14 September 2017, the Committee published its report, Whistleblower Protections.

Australia's current whistleblowing regime

Australia currently does not have a uniform whistleblowing protection regime for the corporate sector. Instead, corporate whistleblowers are protected under at least six federal statutes including the Corporations Act 2001 (Cth).

In broad terms, a person who makes disclosures regarding corporate wrongdoing will only qualify for whistleblower protections if:

  • they are a current officer, contractor or employee of a contractor of the company in question; and
  • their disclosures were not made anonymously, and were made in good faith to ASIC, the company's auditor or certain company officers.

Where these criteria are satisfied, whistleblowers are protected from any civil or criminal liability and no contractual or other remedy or right may be enforced against them on the basis of their disclosure.3 Whistleblowers cannot be victimised and where this occurs and they suffer damage, they have a right to compensation.4 The identity of whistleblowers and their disclosures are confidential and it is an offence for the receiver of that information to communicate it without the whistleblower's consent to parties other than ASIC, APRA, or the AFP.5

Currently, Australia does not have any statutory or common law protections available to people who disclose information about individuals or businesses which they believe may not be meeting their tax obligations (tax whistleblowers). Similarly, there are no remedies to compensate tax whistleblowers who suffer as a result of their actions, other than incidental protections afforded via general tax confidentiality provisions and privacy law.

The Committee's report

The Committee's report acknowledged that in its current state, Australia's whistleblower protection regime has 'little practical effect', due to its fragmented nature and the legislative hurdles in protecting whistleblowers from reprisals.

In order to address these issues, the Committee's report made 12 recommendations for reform. The key recommendations include:

  • bringing Commonwealth private sector whistleblowing legislation into a single, standalone piece of legislation, which would include introducing new protections for tax whistleblowers; 
  • introducing a 'bounty'-style reward system for whistleblowers (discussed further below);
  • broadening the definition of 'reportable wrongdoing' to include breaches by the corporate wrongdoer of any Commonwealth, State or Territory laws where: (i) the disclosure relates to the employer of the whistleblower and the employer is an entity covered by the Fair Work Act 2009; or (ii) the disclosure relates to a constitutional corporation;
  • broadening the definition of 'whistleblower' to extend protections to former staff, contractors and volunteers;
  • extending whistleblower protections to internal disclosures made by whistleblowers using internal reporting mechanisms;
  • removing the 'good faith' requirement for making whistleblowing disclosures (meaning that a whistleblower's subjective motivations for making a disclosure will no longer be under examination);
  • explicitly allowing, and providing protections for, anonymous disclosures; and
  • establishing a 'Whistleblower Protection Authority' (either as a standalone oversight authority, or as a part of an existing body) to support whistleblowers, investigate reprisals and oversee the implementation of the whistleblower regime, and set and promote standards for internal disclosures and procedures in the private sector.

In addition, the report also makes the following recommendations:

  • extending whistleblower protections to disclosures made to the media, where the same disclosure has already been made to an Australian law enforcement agency and, after a reasonable time, no steps have been taken by the agency;
  • aligning protections, remedies and sanctions for reprisals under the new standalone whistleblower legislation for the private sector with those already provided under the Fair Work Registered Organisations Act 2009; and
  • separating the grounds for criminal and civil liability in relation to employers who retaliate against whistleblowers, which is anticipated to provide a wider range of circumstances that may give rise to civil remedies for whistleblowers.

Bounty hunters?

Surprisingly, while a majority of the submissions received were against the implementation of a rewards scheme, the Committee also recommended that the standalone whistleblower protection legislation include a 'bounty'-style reward system similar to that in place in the United States.

Under the proposed rewards system, the Whistleblower Protection Authority will provide a reward to any whistleblowers whose disclosures result in prosecution of the corporate wrongdoer. The quantum of the reward will be a proportion of the penalty imposed on the corporate wrongdoer as determined by a court, calculated by reference to factors such as:

  • the degree to which the information led to the imposition of the penalty;
  • the timeliness with which the disclosure was made; and
  • whether there was an appropriate and accessible internal mechanism in place.

The provision of any reward will not prevent a whistleblower from seeking remedies using the compensation regime under the standalone Whistleblower Protection Act, for any loss or damage they suffer as a result of their whistleblowing.

The Committee's decision in favour of the rewards scheme represents a significant shift from the current regime, with many submissions expressing concern that rewards could lead to counter-productive and perverse outcomes.

Next steps

The Committee's report suggests that legislation for whistleblower protections in the corporate sector is expected to be introduced next year, with a parliamentary vote to be held no later than 30 June 2018. Since the report's release, the Federal Government has stated its intention to introduce draft legislation by the end of the year.6 In addition, on 28 September 2017, the Federal Government established an Expert Advisory Panel that will review and provide advice on the Committee's recommendations, and assist with the drafting of legislation for whistleblower protections. In advance of the new legislation coming into force, companies would benefit from auditing their internal whistleblowing policies and procedures for compliance in anticipation of the more stringent requirements proposed under the new regime.

Footnotes
  1. Whistleblower protections in the corporate, public and not-for-profit sectors, Committee terms of reference, Parliament of Australia.
  2. Review of tax and corporate whistleblower protections in Australia consultation paper, Department of Treasury.
  3. Corporations Act, s1317AB(1).
  4. Corporations Act, s1317AD.
  5. Corporations Act, s1317AE.
  6. 'Expert advisory panel on whistleblower protections' media release, the Minister for Revenue and Financial Services. 

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