Australia: New Recommendations For Radical Whistleblowing Laws In Australia: Time To Rethink Your Policies

Last Updated: 18 October 2017
Article by Georgie Farrant and Michael Michalandos

The Parliamentary Joint Committee on Corporations and Financial Services (Joint Committee) has released its report on recommended changes to whistleblower protections in the corporate, public and not-for-profit sectors. If implemented, these recommendations would significantly increase the protections and rewards available for whistleblowers.

The challenge for companies will be to ensure that their policies and procedures are consistent with any new laws passed and sufficiently encourage employees to report wrongdoing internally and promptly, in order to maximise the company's opportunity to address the wrongdoing and minimise its negative impact.

The key recommendations

The most notable recommendations from the Joint Committee include the following:

  1. The establishment of a "one-stop shop" Whistleblower Protection Authority which has the power to investigate reprisals against whistleblowers and have oversight over investigations of non-criminal undertaken by a regulator or public sector agency. It is also proposed that the Whistleblower Protection Authority would be able to approve payment of a wage replacement commensurate to the whistleblower's current salary, to a whistleblower suffering adverse action or reprisal;
  2. The introduction of financial rewards for whistleblowers, where their information results in the imposition of a penalty against a wrongdoer. The proposed reward system would have a cap on the amount paid to the whistleblower and the amount to be paid would be reflective of the information disclosed and be determined against a number of factors, such as the timeliness of the disclosure, the degree to which the information led to the imposition of the penalty and the involvement of the whistleblower in the relevant conduct;
  3. Stronger protections for whistleblowers in the private sector to match those currently available in the public sector. These would include:

    • protections from harassment, harm (including psychological harm) and damage to property or reputation;
    • remedies for exemplary damages; and
    • sanctions, including civil penalties;
  4. Broadening the definition of "disclosable conduct" so that protections would apply to:

    • a contravention of any law of the Commonwealth;
    • a contravention of any law of a State or Territory where the disclosure relates to the employer of the whistleblower and the employer is an entity covered by the Fair Work Act 2009 or relates to a constitutional corporation; or
    • any breach of an industry code or professional standard that has force in law or is prescribed in regulations under a Whistleblowing Protection Act;
  5. Private sector whistleblowing legislation should expressly allow and provide protections for anonymous disclosures, which would make it consistent with public sector legislation. Currently the whistleblowing protections under the Corporations Act do not apply to anonymous reports;
  6. Whistleblower protections should extend to current and former staff, contractors and volunteers, and also extend to people who propose to make a disclosure or who are suspected of making a disclosure;
  7. The requirement for whistleblowers to show that they reported in "good faith" in order to obtain the relevant protection should be removed and replaced with a requirement of a "reasonable belief" of the existence of disclosable conduct; and
  8. An inquiry should be conducted by Parliament or the Australian Small Business and Family Enterprise Ombudsman for protections for small/medium businesses that may suffer reprisals where an employee of those businesses disclose disclosable conduct by larger businesses.

Does my company need a whistleblowing policy?

In Australia, companies are not obliged to have a whistleblowing policy. However, for listed entities, Recommendation 3.1 of the ASX Corporate Governance Principles and Recommendations provides that listed entities should have a code of conduct which should "identify the measures the organisation follows to encourage the reporting of unlawful or unethical behaviour".

The key reason for a company to have an effective whistleblowing policy, supported by appropriate procedures, is because it is in the company's best interest to:

  • be made aware as soon as possible of any wrongful conduct occurring within the company; and
  • be informed of such conduct internally by a whistleblower, rather than for the whistleblower to first report to regulators or the media. Even if ultimately some information reported by whistleblowers need to be self-reported to a regulator, it is always preferable for the company to be in control of that process.

The Joint Committee has recommended that the Whistleblower Protection Authority be given powers to set standards for internal disclosures including potentially introducing mandatory internal disclosures in organisations above a prescribed size. This could mean that in order to be afforded the relevant protections an employee in those organisations would have to first report internally, and only if no action was taken by the organisation could they obtain protection by reporting externally.

However, unless and until the Joint Committee's recommendations are implemented, a company's ability to persuade its employees to report internally is dependent on it having:

  • a policy which clearly sets out the protections offered to whistleblowers who report in accordance with the policy; and
  • the necessary procedures in place to ensure that whistleblower reports are dealt with in accordance with that policy and necessary steps are taken to ensure that whistleblowers actually receive those protections. If whistleblowers believe that no action is taken when they make reports, or that whistleblowers do suffer reprisals from making reports, they are unlikely to make further reports and are likely to negatively report about the process to other employees which could discourage internal reporting;

Will the recommended changes encourage false reports?

A large number of submissions to the Joint Committee focused on the risks of introducing a rewards system in Australia including by reference to the UK who did not introduce such a reward scheme for reasons that included the risk of "malicious reporting or entrapment." The Joint Committee considered that the introduction of a capped amount that could be recovered as a reward would decease the risk of this issue in comparison to the US where multi-million dollar rewards have been awarded to whistleblowers.

In addition, the removal of the requirement for reports to be made in "good faith" before obtaining whistleblowing protections may be perceived as increasing the risk of bad faith reports being made.

A good whistleblowing policy will specify what type of conduct is reportable and will receive protection. Currently policies often refer to reports needing to be made in "good faith" and will also set out the consequences of making a vexatious or malicious complaint, including the possibility of disciplinary action against a person found to have made such a report. Although the wording of such policies may have to change if legislative changes are introduced, it would still be the case that reports made without a "reasonable belief" would not be subject to protections and could entitle a company to take disciplinary action against that employee.

Next steps

It is currently expected that the Federal Government will implement changes to the whistleblowing laws by 30 June 2018. In the meantime, companies should consider the adequacy of their own whistleblowing policies and procedures.

It is often remarked that a company whose whistleblowing hotlines are silent should have little concern for compliance. However, this is equally likely to reflect a culture where employees do not feel comfortable to report known violations. If these violations are left unresolved, they could have serious financial and reputational consequences for the company. A whistleblowing policy on its own will not be enough to change such a culture. It needs to be supported by the necessary procedures, communications and evidence of the company acting on such reports. Employees need to feel comfortable that they will not suffer reprisals if they raise issues internally. In turn, this means that companies need to ensure the integrity of their internal reporting and handling of complaints procedures.

In our view, it is inevitable that the Government will introduce changes designed to encourage and protect circumstances. Whether these changes go as far as the Joint Committee's recommendations remains to be seen. In the face of this inevitability, employers should be considering, ahead of these changes, what steps need to be taken to align their workplace culture and practices to best meet these obligations. This should include reviewing existing whistleblowing policies, conducting training to managers and employees as to complaint procedures, and reinforcing zero tolerance towards the victimisation of whistleblowers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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