Australia: Bounty Rewards And More On The Australian Government's Radar For Corporate Whistleblowers

The commitments announced by the government are extensive and designed to encourage increased whistleblower activity in the future. The government undertaking includes support for an inquiry to be conducted by a designated Parliamentary Committee into the extension of these provisions to the corporate and public sectors, with a reporting date of 30 June 2017. If the Parliamentary Committee report recommends the extension of protections to those sectors, an expert advisory panel will begin drafting new legislation to implement whistleblower reforms, which will be introduced into parliament by December 2017 and voted on by 30 June 2018.

The government undertaking also provides that the enhanced whistleblower protections for the corporate and public sectors in 2018 will include, at a minimum, the same types of whistleblower protections conferred on union members and officials by the recent RO Legislation. The government has also committed to giving Australian Securities and Investment Commission (ASIC) a mandated role for the protection of whistleblowers in the corporate sphere.

Current corporate whistleblower protections

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 (i.e. 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.

Bounty rewards on the table

The role played by 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 has triggered debate as to whether a US-style bounty rewards system should be introduced in Australia for corporate whistleblowers.

Under the US Sarbanes-Oxley Act, whistleblowers who provide high-quality information resulting in Securities and Exchange Commission actions can be rewarded with between 10 per cent and 30 per cent of the fines extracted from the company. The payouts under the US bounty system can be highly lucrative for whistleblowers, such as the recent payout of USD3.75 million by the US Government to the first Australian employee to receive a US whistleblower bounty. The Australian was a former BHP Billiton employee who provided detailed information to US investigators about BHP's overseas activities several years ago.

While the existing corporate whistleblower protections in Australia do not allow for a US-style bounty rewards system, the potential for an Australian bounty rewards program is being considered under the inquiry that will be conducted by the Joint Parliamentary Committee on Corporations and Financial Services.

The future state of corporate whistleblower protections

With the parliamentary inquiry into whistleblower protections and the government's commitment to improving the existing corporate whistleblower regime through its recent undertaking, all signs are pointing to a significant overhaul of the current protections in the Corporations Act by the government.

While the enhanced corporate whistleblower protections may not be identical to those which have already been passed by the government for union whistleblowers, they provide a flavour of what may be in store for the corporate sector, as the government has indicated that they will be treated as the minimum standard for the foreshadowed changes for the corporate sector.

The key differences between zero whistleblower protections in the RO Legislation and the existing protections for corporate whistleblowers include:

1. A broader definition of disclosers who are protected, including former employees, former officers and former employees of an organisation that had a contract with an organisation;
2. No requirement for whistleblowers to disclose their identities for protections to be triggered and the inclusion of disclosures by whistleblowers to their lawyers;
3. Introduction of prescribed timeframes for investigations into the disclosures to be allocated for handling within 14 days after the disclosure is made, and completed within 90 days after the allocation of the handling of the relevant disclosure;
4. Protection for witnesses involved in investigations into the disclosures and for persons to whom a disclosure is made;
5. A positive duty on the organisation to take steps to prevent reprisals against whistleblowers (akin to the concept of "victimisation" in the Corporations Act) and this can include reprisals in circumstances where the person believes or suspects (or should have known) that the whistleblower may have made a protected disclosure (rather than actual disclosures); and
6. Specified types of detriment which could be suffered by whistleblowers as a result of reprisals and the potential for a court to award exemplary damages for reprisals suffered by whistleblowers.

The regime will need to strike the right balance between facilitating bona fide whistleblowing, while not incentivising mischief. That is a difficult balance.

If the new union whistleblower protections are treated as a baseline for the changes ahead for the corporate sector, 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.

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