The European Court of Human Rights (“ECtHR”) recently found a judgment on the topic of whistleblowing (ECtHR, Judgment dated 21.07.2011-28274/08). In this decision, the final judgment of the competent German Regional Labor Court of Berlin in a case for unfair dismissal—and in fact parts of German case law—was overruled. The decision of the ECtHR has led to an intensive debate on the topic of whistleblowing, as it may have an impact on the current view and the rules practices in Germany so far.
Whistleblowing in Germany
Whistleblowing is the reporting of unethical or unlawful conduct of the employer that has come to the attention of an employee. Although originating in the United States, the term “whistleblowing” is well known to many companies in Germany. Not only German based affiliates of United States companies subject to the Sarbanes-Oxley Act had to implement procedures and standards of reporting in companies; also other companies have implemented, or are interested in implementing, such schemes as part of compliance programs. Therefore, many companies have introduced respective rules.
In practice, various disclosure mechanisms are common. In some companies, the employer offers a hotline, and the employee who wants to report an incident can even do this on an anonymous basis. Other companies have implemented a rather complex structure.
Unlike in the United States, where whistleblowers are protected by the 2002 Sarbanes-Oxley Act, in Germany, no statutory laws or specific legislation regarding whistleblowing exist. There is, however, several case law and legal precedents.
It is settled that the employee must be loyal to his/her employer, and this duty generally includes reporting unlawful or unethical behavior to the employer. This is particularly true for employees having personnel responsibility, if the act or omission they became aware of is falling in the scope of their field of duties, and if there is a reasonable likelihood that further unlawful or unethical behavior would occur if they would not bring the incident to the attention of the employer.
An issue of high relevance in practice is the disclosure of unethical or unlawful behavior to third parties (e.g., authorities), in particular filing a criminal complaint against the employer. The question is whether the employer can take disciplinary action including dismissal against an employee blowing the whistle to external parties. In Germany, bringing a criminal complaint against one’s own employer is frequently regarded as a serious breach of trust. This fact highlights the differences between the culture in Germany and that in other countries like the United States where whistleblowers may be respected for their courage.
So far, the German courts have drawn the following lines on the validity of dismissing whistleblowers. The justification of the individual dismissal is subject to balancing the rights of the employee and the employer. If the interests of the employer prevail, the dismissal is valid. In this context, the courts consider that an employee is in first instance obliged to report misconduct or illegal behavior through internal channels within the company to give the employer the chance to take action against the situation. Filing a criminal complaint is the “last resort”. Only in extraordinary circumstances, internal reporting is not required; the courts have held that such is not to be expected from employees who themselves will be subject to criminal fines in case of not bringing the criminal complaint, or if the employer itself and not some of its employees have acted criminally. Further, German courts include the motivation of the whistleblower into their evaluation of the justification of a dismissal. They honor the motivation of employees acting purely in good faith to protect the company (or the public). In turn, employees blowing the whistle externally for the purpose of simply damaging the interests or the reputation of the employer are not heard by the courts. In particular, a dismissal is deemed valid by the German courts if the employee knowingly or recklessly made false statements when blowing the whistle.
As it is clear from the guidelines of the German courts, it is a fundamental question whether a dismissal is justified in an individual case. However, this leads to considerable uncertainty for employees who wish to disclose in specific situations. It will be difficult in most cases to see whether a dismissal is valid or not. The employee should always consider very carefully how he behaves in cases of wrongdoings in the company.
The situation may now become partly different because of the recent judgment of the ECtHR.
The Decision of the ECtHR
The ECtHR ruled that the termination of the employee on grounds of the criminal complaint filed against her employer is invalid even though the investigation was discontinued and the complaint could be viewed as frivolous. The Court points out that the employee acted in good faith and the “public interest” in the disclosure of wrongdoings outweighs the interests of the employer.
A geriatric nurse filed a criminal complaint against her employer and was subsequently dismissed because of it. Initially, the nurse had complained to her employer regarding deficiencies in staffing numbers, the quality of care and the documentation of services. After her employer rejected these complaints, the employee filed a criminal complaint by means of her lawyer against her employer on grounds of fraud. The employee was subsequently dismissed with notice on grounds of absenteeism. During the time of her dismissal notice, the geriatric nurse, supported by a trade union, distributed flyers in which she described her criminal complaint. Following this, her employer faced high attention in the media and dismissed her for cause with immediate effect. The Regional Labor Court for Berlin—in line with the principles laid out above—held the dismissal for cause with immediate effect as justified. The nurse did not even show the slightest proof on her allegations, and the court deemed her behavior as a serious breach of contract. Her purpose in bringing the complaint, the court held, was not criminal prosecution but rather a public and politically motivated campaign against the company that managed the nursing home. Consequently, the employer’s rights took precedence over the nurse’s right to bring a criminal complaint.
After losing in labor court and a constitutional challenge, the geriatric nurse appealed her case to the ECtHR. The court has now ruled that the filing of a criminal complaint falls under the protection of Art. 10 of the European Convention on Human Rights (freedom of expression). The public’s interest in the covering up of deficiencies in a nursing home outweighs the interests of the employer. According to the ECtHR, in an ageing society, deficiencies in the geriatric care provided by social institutions constitute public interest. The fact that the criminal complaint contained almost no facts was not the responsibility of the nurse. Rather, it had been up to the prosecutors to conduct proper investigations. The ECtHR further held that the whistleblowing nurse has not been motivated by a desire to impair her employer’s interests. On the contrary, she acted in order to protect patients from harm. Finally, the ECtHR honored that the nurse made internal complaints first before bringing the issue to the public.
Evaluation and Outlook
The decision has been criticized in legal circles. Initially, the higher labor court had referred to the complaint in this case as frivolous for good reasons. The approach of the geriatric nurse, which was approved by the European Court, publicly discredited the employer without the existence of sufficient evidence of misconduct. The ECtHR, however, has raised the hurdle higher for a dismissal on grounds of whistleblowing than the previous case law in Germany, at least if the employer is active in a sector or business of “public interest”. Companies engaging in sensitive businesses like the food industry, the aviation industry or the medical industry should take into account that the public could potentially be interested that they act in compliance—and that their employees could revert to the judgment of the ECtHR when making a(n even unfounded) criminal complaint.
On the other hand, even after the judgment of the ECtHR, whistleblowers do not enjoy absolute protection from dismissal. The ECtHR shares the view that the circumstances of the individual case are decisive and that interests have to be balanced. The court acknowledges that commercial interests and the reputation of the employer deserve protection. The law does therefore still not protect employees who wish to incriminate their employers or colleagues for malicious reasons. If an employee brings a criminal complaint solely for such reasons, a dismissal for cause is still an appropriate measure.
Finally, employers should, if they have not already, install clearly structured systems for the internal disclosure of wrongdoings and use whistleblowing as a chance to increase the efficiency of the company and to prevent misconduct.