After a lengthy spell in parliament, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2018 passed both Houses of Parliament on 19 February 2019.
The policy reasons for these new laws are stated in the Explanatory Memorandum:
Combating corporate crime is a longstanding law enforcement and public policy challenge. Corporate crime is estimated to cost Australia more than $8.5 billion a year and account for approximately 40 per cent of the total cost of crime in Australia.
Whistleblowing plays a critical role in uncovering corporate crime. It is a significant means of combating poor compliance cultures, as it ensures that companies, officers, and staff know that misconduct can be reported. Furthermore, the opaque and complex nature of corporate crime makes it difficult for law enforcement to detect misconduct. In many cases, corporate crime is only detected because individuals come forward, sometimes at significant personal and financial risk.
As previously discussed in our last blog regarding these amendments, they will overhaul and consolidate the existing protections and remedies for corporate and financial sector whistleblowers and are due to come into effect on 1 July 2019. Several changes have been incorporated as a result of the Report of the Senate Economics Legislation Committee, some of which are discussed below.
This article focuses primarily on amendments to the whistleblowing provisions of the Corporations Act 2001.
As previously discussed, in order to qualify as a protected disclosure, a disclosure must be regarding information that the whistleblower has reasonable grounds to suspect indicates misconduct, or an improper state of affairs or circumstances in relation to a regulated entity. The amendments elaborate on this by providing a non-exhaustive list of conduct that is a disclosable matter, which includes a contravention of the Corporations Act or the ASIC Act. This list also includes an offence against any other law of the Commonwealth that is punishable by imprisonment for 12 months or more and conduct that represents a danger to the public or the financial system.
A regulated entity broadly includes a company and a constitutional corporation, meaning that most businesses in the private sector will be subject to the legislation.
Activities that occurred prior to 1 July 2019 will be covered by these new laws.
No good faith requirement
A whistleblower is no longer required to make a disclosure in “good faith” to benefit from the protections now contained in the Corporations Act. The whistleblower’s motivation is now irrelevant, as it is enough that the person has objectively reasonable grounds to suspect misconduct or a contravention. Additionally, whistleblowers do not need to provide their identity for their disclosure to qualify as a protected disclosure. The ability for a whistleblower to remain anonymous will have significant implications for businesses when responding to protected disclosures, as they will have to consider how anonymous disclosures can be investigated while ensuring procedural fairness for other employees involved.
Penalties and orders
It is both an offence and a civil penalty contravention to disclose a whistleblower’s identity without authorisation.
Courts also have discretion to make orders of compensation or other remedies to whistleblowers, and in some cases individuals other than the whistleblower, who have suffered detrimental conduct as a result of making a protected disclosure. When making an order for compensation to a whistleblower who was directly impacted by an organisation’s detrimental conduct, if the whistleblower’s employment was terminated, or if they were forced to resign, the court must consider any period that the whistleblower is likely to be without employment as a result of the detrimental conduct.
Only in limited circumstances will a whistleblower risk a costs order if they are unsuccessful in their legal proceedings seeking compensation.
Personal work-related grievances excluded
A new section has been added to explicitly exclude personal work-related grievances from being a protected disclosure. Where a disclosure of information concerns a personal work-related grievance of the whistleblower, and this disclosure does not concern any victimisation or threats made to the whistleblower, this is not a disclosure that qualifies for protection. Examples of personal work-related grievances may include an interpersonal conflict between employees, or a decision to terminate a person’s employment.
Emergency and public interest disclosures
The draft legislation initially only allowed for emergency disclosures to a member of parliament or a journalist, arising in situations where the whistleblower has reasonable grounds to believe that there is an imminent risk of serious harm or danger to public health or safety, or to the financial system, if the information is not acted on immediately. More recent amendments have expanded on this, allowing for public interest disclosures in addition to emergency disclosures. In broad terms, public interest disclosures can be made to a journalist or member of Parliament where:
- there has been at least 90 days since a previous protected disclosure was made;
- the whistleblower has no reasonable grounds to believe that any action is being, or has been taken to address the matters in their disclosure; and
- the whistleblower has reasonable grounds to believe that this additional disclosure would be in the public interest.
This section now compels organisations to start responding to protected disclosures promptly or risk the reputational damage of a further disclosure to the media or Parliament.
Other noteworthy features of the new laws include:
- A disclosure to a legal practitioner for the purposes of seeking legal advice or representation in relation to the operation of the provisions will be protected
- Likewise a disclosure by a whistleblower in accordance with the new laws, to ASIC, APRA or similar regulatory body will be protected.
In addition to the above requirements which apply to all companies, some companies which include all public companies and large proprietary companies (large proprietary companies are private companies that satisfy at least 2 of the following: have at least $25 million consolidated revenue per financial year, $12.5 million in assets or 50 employees) are obliged to have a whistleblower policy that is available to officers and employees of the company. Failing to meet this obligation is an offence. This policy must set out the following information:
- what protections are available to whistleblowers;
- how protected disclosures may be made, and to whom;
- how whistleblowers will be supported and protected from detriment;
- how the company will investigate protected disclosures;
- how the company will ensure fair treatment of employees who are mentioned in protected disclosures; and
- how the policy is to be made available to officers and employees of the company.
Public companies are required to have a whistleblower policy addressing the above in place by 1 January 2020. At this stage it appears that large proprietary companies will generally need to have a policy in place by 1 January 2021.
Although only public companies, large proprietary companies and proprietary companies that are trustees of registrable superannuation entities are required to have such a policy under the legislation, all companies may wish to consider implementing a whistleblower policy. Such a policy is useful in clearly setting out how a company will consistently and transparently deal with any protected disclosures that may arise.
ALP platform on whistleblowing
If the Australian Labor Party wins the upcoming election, it has pledged to harmonise whistleblower regimes by including the public sector and unions alongside private companies. Additionally, Labor have proposed that whistleblowers should receive a percentage of penalties arising out of the wrongdoing that is revealed, rather than giving a court the discretion to make a compensation order to the whistleblower in certain circumstances.
Should you require assistance developing a whistleblower policy, developing appropriate training, or if you have any questions about these amendments more generally, please contact Magda Marciniak and Laura Douglas or another member of our team.