The importance of whistleblowers in society has increased in recent years. Whereas previously often vilified, awareness is developing of the benefit whistleblowers can offer and how they should be protected. Concrete measures to protect whistleblowers, such as requiring companies to introduce anonymous whistleblower systems, are increasingly finding their way into national legislation.
European Whistleblower Legislation and Data Protection
Already in 2018, the European Commission took a major step forward in the protection of whistleblowers by proposing a directive. Among other things, it stipulated that whistleblowers must be provided with secure reporting channels in future and be entitled to special legal protection.
The European Parliament agreed upon this directive for EU-wide whistleblower protection April 2019. After its entry into force on December 16, 2019, the EU member states are now obliged to implement the regulations in their own national legislation within a two-years period.
The European Commission's directive stipulated that whistleblowers must be provided with secure reporting channels.
The EU General Data Protection Regulation (GDPR), which came into force in 2018, also impacts companies’ handling of whistleblowers. Companies must ensure that they treat whistleblower data (and the data of suspected persons) confidentially and comply with relevant data protection laws. This applies, for example, when data is transferred from one program to another for case processing purposes. Not even a year has gone by since the GDPR was introduced; the first sanctions have already been imposed for violations of data protection and it is to be expected that there will be further convictions.
National Actions on Whistleblower Protection – a Look to 2019
Whistleblower protection will also remain a hot topic in 2019. Alongside final consultation on the EU directive, the topic is gaining greater prominence in other European markets. We take a closer look:
The Money Laundering Act (Geldwäschegesetz - GwG), which requires companies in the financial and real estate sectors, among others, to set up anonymous whistleblowing systems, is already having a real impact on whistleblower protection. Although the legislation has been in force for over a year, the first checks by the supervisory authorities are not expected until 2019. It is therefore high time for companies and institutions to think about establishing a whistleblower system to avoid potential fines.
In addition, the Trade Secrets Act (Geschäftsgeheimnisgesetz - GeschGehG), which was passed on March 21, 2019, strengthens the rights of whistleblowers. The law finds the disclosure of trade secrets justified if the whistleblower acts in the public interest and the disclosure of information uncovers unlawful acts or other relevant misconduct (see § 5 (2) GeschGehG).
The French anti-corruption law Sapin II obliges companies with more than 50 employees to set up a confidential whistleblower system.
Although the French anti-corruption law Sapin II came into force over a year ago, not all French companies have taken concrete measures. The law obliges companies with more than 50 employees to set up a confidential whistleblower system. The French Anti-Corruption Agency (AFA) has already begun checks on whether companies had properly implemented the law. It is expected that checks will escalate in 2019. There is therefore an urgent need for action.
Many expect the British Parliament to continue the review of existing whistleblowing legislation (Public Interest Disclosure Act - PIDA) with the recent formation of an APPG on whistleblowing. Matters such as the establishment of an official whistleblower agency and compensation payments for whistleblowers are up for discussion. Recent public cases have heightened calls for stronger whistleblower protection laws: it was only in December that a large British bank was fined $15 million by the New York State Department of Financial Services after its Chief Executive attempted to unmask a whistleblower.
The Financial Reporting Council (FRC) and the Financial Conduct Authority (FCA) continue to focus on the importance of a functioning compliance culture. The revised Corporate Governance Code calls for the board to put dealings with whistleblowers firmly on the agenda (see in particular principle E and provision 6).
The UK financial regulator (FCA) recently called for regulated firms to improve their whistleblowing arrangements after extensive review and facilitated discussions on whether fostering speak-up culture contributes to improved psychological safety and mental health in the workplace.
The revised Corporate Governance Code calls for the board to put dealings with whistleblowers firmly on the agenda.
Switzerland laid the foundation for improved whistleblower protection at the end of last year. In September 2018 the Federal Council adopted a partial revision of the Swiss Code of Obligations which clarified the conditions for reporting grievances in accordance with the employee's duty of loyalty. In principle employees in Switzerland are obliged to report their observations first to their employer. Under certain conditions, however, they can now also report observations to a competent authority or to the public. The amendment also allows anonymous reporting of misconduct within the company – a clear strengthening of whistleblower protection.
In addition, the government in Bern is currently discussing a further revision of existing laws to strengthen whistleblower rights.
The Polish government passed a law that encourages companies to set up confidential whistleblower systems.
Polish companies are putting the establishment of whistleblowing systems firmly on the agenda as part of comprehensive compliance and anti-corruption measures. At the end of last year, the Warsaw Stock Exchange (WSE) published a guide for listed companies to build compliance standards in the company, recommending various internal anti-corruption measures including the introduction of an anti-corruption code, the implementation of a whistleblower system and the appointment of compliance managers.
On 8 January 2019, the Polish government adopted a law draft which will make collective enterprises liable for economic and tax offences. The law is expected to be passed in the second half of the year. Companies should now act proactively and implement comprehensive compliance guidelines and set up confidential whistleblower systems for the early detection of risks.
In 2019 companies should prepare for stricter laws to protect whistleblowers. The implementation of the European whistleblower directive, alongside national legislation, will be a game changer.
Use the remaining time to prepare proactively. In doing so, you may avoid the mistakes of acting too late, as many companies did when GDPR came into force.
Our suggested measures:
- Establish an (anonymous) whistleblower system that meets all relevant security standards and supports you in managing cases.
- Set processes for handling leads and inform your employees about the process prior to implementation.
- Further develop your corporate culture and make your employees aware of current compliance issues.
- Ensure your existing compliance measures fulfil the requirements.
Want a whistleblower system that meets the new legal requirements? Presenting the EQS Integrity Line. Contact us for a no-obligation introduction.