Corporate whistleblowers call for protection and compensation

Protection for corporate whistleblowers is on the increase. For example, China and India have recently followed the US lead in enacting legislation. Despite enhanced rewards and protections, whistleblowing laws also pose significant risks and corporates, their risk managers and their insurers will need to be aware of the changing legal landscape in all of the territories where they operate.

In November 2016, the Australian government announced that it would be implementing enhanced legislative protections for corporate and public whistleblowers by mid-2018.

As part of the Australian government’s commitment to legislative reform for whistleblower protections, an inquiry into corporate and public sector whistleblower protections in Australia by the Joint Parliamentary Committee on Corporations and Financial Services is due to report on 30 June 2017.

The first phase of the inquiry was completed in February 2017, with the Parliamentary Committee conducting its first public hearing and receiving more than 30 submissions from various industry groups, individuals and law firms.

Under the current whistleblower regime in Part 9.4AAA of the Corporations Act 2001 (Cth) (the Corporations Act), corporate whistleblowers are only protected from civil or criminal liability and victimisation if they:
• make a disclosure in good faith to an appropriate person (ie ASIC, the company’s auditor, or a director or senior manager of the company);
• identify themselves by name; and
• have reasonable grounds to suspect that the company by which they are employed or contracted to may have breached the Corporations Act or the Australian Securities and Investments Commission Act 2001 (Cth).

The information disclosed and the identity of the person making the disclosure is also treated as confidential by the person to whom a protected disclosure is made.

It is currently necessary for corporations to design and implement their own whistleblower protection system, as the legislative regime in Australia does not provide all the relevant protections to whistleblowers.

Legislative reform has arisen from criticism of the existing legislative provisions, which have not offered adequate protection to corporate whistleblowers, who have exposed recent misconduct in the financial services industry such as the high-profile issues in the Australian banking, financial planning and life insurance sectors.

The main criticism has been that Australian corporate whistleblowers have no right to compensation, where they have lost their jobs and livelihoods after blowing the whistle at their former employers and then encounter difficulties in securing employment elsewhere.

The key message from the Australian government is that the enhanced whistleblower protections which are on the radar for corporate and public sector whistleblowers will be at least as strong as the protections which have been recently legislated for union members and officials who become whistleblowers, under the Fair Work (Registered Organisations) Amendment Act 2016 (Cth).

If the new union whistleblower protections are treated as a baseline for the changes ahead for the corporate sector, it is likely that any regime proposed will provide for anonymity, prescribed timeframes for dealing with issues raised, protection for witnesses, a positive duty on organisations to take steps to prevent victimisation and the potential awarding of damages for victimisation.

While the potential award of damages for victimisation under the proposed reforms will go some way towards compensating corporate whistleblowers who suffer detriment, it is also possible that the future Australian legislative regime may contemplate “bounties” for whistleblowers, similar to the highly lucrative bounties which are currently available for whistleblowers in the US, such as the recent payout of US$3.75 million by the US government to the first Australian employee to receive a US whistleblower bounty in relation to a tip off to US investigators about BHP Billiton’s overseas activities several years ago.

The potential for an Australian bounty rewards programme is being considered by the Joint Parliamentary Committee on Corporations and Financial Services inquiry.

Australian companies will need to start considering whether their existing whistleblower policies and frameworks will still be suitable under the more robust regime. Once the enhanced protections are put into place, they are likely to motivate more whistleblowers to come forward in reporting corporate misconduct, especially in an environment where lucrative bounty rewards may be on offer.