The dawning of a new year is a time ripe for predictions.
In considering the area of whistleblower law reform, the ‘Treasury Laws Amendment (Whistleblowers) Bill 2017’ Exposure Draft (Exposure Draft), released in late October 2017, avoids the need for too much crystal ball gazing in so far as it provides a clear view of the reforms expected in early 2018.
The release forms part of a push by the Federal Government to have new corporate and tax whistleblower laws operational by July 2018.
Based on the Exposure Draft, we can expect to see:
- repeal of existing whistleblower protections in the Banking Act 1959 (Cth), Insurance Act 1973 (Cth), Life Insurance Act 1995 (Cth) and the Superannuation Industry (Supervision) Act 1993 (Cth) and consolidating them within the Corporations Act 2001 (Cth) (Corporations Act);
- reform to existing Corporations Act protections, taking into account recommendations from the recent Senate inquiry and consultation processes; and
- introduction of equivalent whistleblower protections in relation to taxation law.
The need for change
Australia’s current corporate whistleblower protections are widely criticised as narrow, ineffective, out of step with other OECD countries, and falling short of providing protections comparable to those afforded in the public sector. Despite having been in force since 2004, there appears to be no successful attempts at prosecuting victimisation of whistleblowers under the current regime in the Corporations Act.
The absence of meaningful protections for those genuinely seeking to reveal corporate and criminal misconduct has given rise to concerns as to corporate culture within Australian companies, the undermining of laws, and impacts on investor confidence.
Key issues with the existing laws include:
- Existing protections are fragmented under sector-specific laws, making it difficult for whistleblowers to understand the extent of their protection (if any).
- Protections are extremely narrow and apply only to disclosures made by current employees of the entity engaged in wrongdoing.
- There are no whistleblower protections for disclosures relating to tax matters or other conduct not regulated under the Corporations Act or sector specific legislation (for example foreign bribery and other criminal offences).
- Uncertainty as to the extent that a whistleblower’s identity will be protected, and potential for the whistleblower to be liable for adverse costs arising from a claim for compensation.
The key changes to the Corporations Act as proposed in the Exposure Draft are:
- Consolidation of private sector whistleblower protection laws under the Corporations Act
Some fragmentation will remain as protections for disclosures relating to the public sector, union and employer organisations, and tax operate under separate regimes.
- Expanding the class of persons protected to include former officers and employees of entities covered by the legislation, in addition to their spouse, children and dependents
- Expanding the scope of disclosures which are protected
Umbrella protection has been introduced for disclosures which concern ‘misconduct, or an improper state of affairs or circumstances, in relation to’ a company and other defined entities and includes protection for disclosures where conduct does not amount to breach of any law.
This general protection is in addition to an expanded list of expressly protected disclosures.
- Expanding persons to whom protected disclosures may be made
The Australian Federal Police (AFP) is added to the list of recipients which would trigger a protected disclosure.
The Exposure Draft also introduces a ‘second tier’ of recipients to whom a protected disclosure can be made, provided:
- the whistleblower has already disclosed information to a ‘first tier’ of recipient (e.g. ASIC, AFP or a company director);
- a reasonable period has passed since that disclosure was made; and
- the whistleblower believes there is an imminent risk of harm or danger if the information is not acted on immediately.
‘Second tier’ recipients are members of Commonwealth or State / Territory Parliament and professional journalists.
- Strengthened prohibition of victimisation
The current need to prove an intent to cause detriment to a whistleblower will be removed and ‘detriment’ will be defined to include dismissal from employment, harassment or intimidation, and the alteration of an employee’s position to their disadvantage.
In a claim for compensation, there will be a reverse onus of proof whereby the defendant must prove that the victimising conduct was due to a reason other than the whistleblower’s disclosure.
- Requirement to have a whistleblower policy
‘Public companies’ and ‘large proprietary companies’ (defined under the Corporations Act) must have a whistleblower policy covering the matters required by the legislation. A civil penalty applies for failure to comply.
- Partial immunity for whistleblowers
Evidence disclosed by the whistleblower will not be admissible in evidence against them in criminal or civil proceedings concerning the disclosed conduct.
This is not intended to provide full immunity from prosecution for the whistleblower’s participation in the disclosed conduct (e.g. a prosecution could be pursued on the basis of other evidence not disclosed by the whistleblower).
- Removing the requirement for whistleblower to disclose their name prior to making a disclosure
- Prohibiting disclosure of the whistleblower’s name in court proceedings
- Excluding the whistleblower’s liability for adverse costs in relation to a claim for compensation
Where to from here?
- The Exposure Draft is expected to be introduced to Federal Parliament as the Treasury Laws Amendment (Whistleblowers) Bill 2017 by the end of year.
- At this stage the ‘big-ticket’ changes such as the establishment of a whistleblowing oversight agency and introduction of a US-style rewards system have not been pursued.
Preparing for change
Companies should now consider:
1. Do they have in place adequate whistleblower policies and procedures?
2. Do HR processes provide for documented assessment of reasons for an employee’s termination?
3. Is there adequate training on areas including:
(a) The risks of failing to act in response to a whistleblower’s disclosure
(b) The risk of taking detrimental action against a whistleblower