An update to whistleblower laws

Posted on May 10, 2019 by Liam Tobin   |   Categories: Commercial & Business Law

The Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 Cth (“the Act”). received Royal Ascent on 12 March 2019 bringing with it strengthened whistleblower protections across the corporate, financial and credit sectors.

Public and large propriety companies must ensure that they have a compliant whistleblower policy in place no later than 1 January 2020 to avoid penalties.

Key Changes to Whistleblower Laws

Some of the key changes under the new legislation include:-

1. Disclosures
a. Disclosures can be made by a broader class of eligible Whistleblowers to include current and former officers and directors, employees, contractors, suppliers, unpaid workers, and an employee’s relatives or dependants;
b. Disclosures may be made anonymously with the ‘good faith’ requirement for disclosures replaced by an objective test requiring the person disclosing to have ‘reasonable grounds to suspect’ misconduct or other disclosable matters;
c. There is a broader range of conduct which can be reported and receive protection. The conduct needs to concern “misconduct” or an “improper state of affairs”, which are broadly defined. Previously the subject matter of protected disclosures was limited to contraventions of the Corporations legislation. A whistleblower protection regime is also introduced for protection of individuals who disclose breaches of tax laws and tax avoidance;
d. Disclosures about personal work-related grievances will only be protected if it relates to systemic issues, or involves detrimental conduct to the whistleblower. A disclosure of a work related grievance will also be protected if it is made to a legal practitioner to obtain legal advice or representation in relation to the whistleblower provisions;
e. Introduction of an “emergency disclosure” concept which provides protections for whistleblowers who report concerns to members of Parliament or to the media.

2. Eligible recipients of disclosures
a. The definition of ‘eligible recipient’ is now an ‘officer or senior manager of the body corporate or related body corporate’.

3. Protections for the Whistleblower
a. The protections for whistleblowers have been expanded to include anonymous disclosures;
b. Companies and individuals are liable for substantial civil and criminal penalties for the contravention in relation to Whistleblower confidentiality and Detrimental Conduct. These penalties include:-
i. Penalties for a body corporate of a maximum of the greater of $10,500,000, or if a Court can determine the benefit derived or detriment avoided because of the contravention, 3 times that amount, or 10% of the annual turnover of the entity up to a maximum of $525 million.
ii. Compensation payable by a body corporate if a third person engages in detrimental conduct towards a second person, based on a belief or suspicion that the second person is an actual or potential whistleblower, and the body corporate fails to fulfill any duty they have to prevent the third person from engaging in that detrimental conduct, or to take reasonable steps to ensure that the third person does not engage in detrimental conduct.
iii. Penalties for an individual will be the greater of $1,050,000, or if a Court can determine the benefit derived or detriment avoided, 3 times that amount.
iv. Criminal offences for failure to comply with the confidentiality and detrimental conduct provisions, punishable by imprisonment and / or fines.

4. Internal Whistleblower policy requirement
a. A large proprietary company, as defined under the Corporations Act, must have an internal Whistleblower Policy, which is required to be made available to all employees and officers. From 1 July 2019 a Large Proprietary Company shall be defined under the Corporations Act as a proprietary company that satisfies two of the following:-
i. the consolidated gross operating revenue for the financial year of the company and the entities it controls (if any) is $50 million or more;
ii. the value of the consolidated gross assets at the end of the financial year of the company and the entities it controls (if any) is $25 million or more;
iii. the company and the entities it controls (if any) have 100 or more employees at the end of the financial year.

5. New Tax Affairs Whistleblowing scheme.
a. These changes have a broader application than the Corporations Act scheme and will apply to all kinds of legal persons, including sole traders, companies, partnerships, body politics, any other unincorporated association or body of persons, trusts, superannuation funds, and approved deposit funds;
b. These provisions apply to both internal disclosures to the entity and external disclosures to the Commissioner for Taxation;
c. The victimisation provisions of the Tax Administration Act carry criminal penalties of up to 2 years prison and / or a fine of $50,400 for an individual and $252,000 for a body corporate. Breaching the confidentiality of a tax whistleblower carries a penalty of up to 6 months prison and / or $12,600 for an individual and $63,000 for a body corporate.

Large proprietary companies must implement a compliant whistleblower policy by 1 January 2020. Failure to have a policy will be a criminal offence. The maximum penalty for not having a policy is $126,000. ASIC will have the power to exempt a class of entities from complying with this requirement

Public or large propriety companies are at liberty to internally establish, administer and monitor a whistleblower policy, however engagement of a third party does have many advantages.

It is not uncommon for whistleblowers to feel hesitant to report complaints to an officer within the company, and are likely to look to a third party as a more comfortable option. There are statutory avenues for the reporting of whistleblower claims, including via ASIC, APRA, and other prescribed Commonwealth authorities, however it may be preferable to provide an option that entices whistleblowers to report breaches to a third party that is not a regulatory body themselves.

This is an area of law that is likely to continue to undergo further changes in future. An advantage to engaging a third-party service provider is that such providers generally provide services to update their clients on changes in the laws and required updates to whistleblower policies, in addition to convenient platforms.

The Act is due to be reviewed following 5 years from commencement, though the Australian Labor Party have also released their policy for further reform, stating that if elected they will introduce a single Whistleblower Act, a Whistleblower Protection Authority, and consider implementing rewards for whistleblowers. This may well be an issue for the upcoming election and a matter to keep an eye on.