Employees are often reluctant to report suspected misconduct
because they fear retaliation from those that are engaged in the
misconduct. This often prevents companies from discovering
employee-related fraud at its early stages. While
employer surveillance can go a long way to discovering
wrongdoing in the workplace, employees are in a better position to
know what their colleagues are doing and employers should have
mechanisms in place to encourage their employees to report
wrongdoing. In a
previous post, we referenced the recent $2 million alleged
fraud by several York University employees. The University
eventually became aware of the situation through a whistleblower,
but by that time, it had been ongoing for over 7 years.
This illustrates the importance of having transparent
whistleblower protection policies that provide employees with a
safe route for registering issues or complaints of wrongdoing
within the company. Such protection policies will encourage early
reporting to the employer and facilitate earlier discovery of
wrongdoing thereby reducing the potential losses incurred. In
addition, employees will be less likely to make the complaint
externally, for example, directly to the media, if they know that
their complaint will be taken seriously by the employer and
In the United States, there is fairly broad legal protection for
whistleblowers. The Sarbanes
Oxley Act imposes criminal sanctions on employers for
retaliation against employees who inform law enforcement officials
of corporate wrongdoing, as well as gives employees the right to
initiate civil claims against their employers. In 2010, the United
States enacted the
Dodd-Frank Act which goes one step further by rewarding
employees who blow the whistle on wrongdoing to the Securities
Although whistleblower protection law is sparse in Canada, there
is a trend towards greater protection. For example,
Transparency International Canada has recently called for
Canada and its provinces to step up their whistleblower protection
laws. While there is federal legislation protecting public sector
employees and 6 provinces have public sector whistleblower laws,
currently, whistleblower protection in the private sector is
governed primarily by the Criminal Code.
Section 425.1 prohibits employers from retaliating or
threatening to retaliate against employees who provide information
to law enforcement officials. Violating this section could lead to
imprisonment up to 5 years. However, the scope of this provision is
limited, as it only applies to employer wrongdoing that constitutes
a criminal offence or is otherwise unlawful, and only protects
employees who report to law enforcement officials. The Criminal
Code does not protect employees who report wrongdoing such as
misappropriation of funds internally within a company.
In Ontario, whistleblowers have some protection under the
Occupational Health and Safety Act,
Environmental Protection Act, and the
Employment Standards Act, but this protection is limited to
employees who raise issues or concerns of wrongdoing that are
specific violations under those respective pieces of legislation
and not general wrongdoing. In addition, under the Employment
Standards Act, the protection is limited to situations where
the employee brings the complaint to the Ministry of Labour or an
employment standards officer. As such, even under the
Employment Standards Act, whistleblowing on fraud
occurring within the company would not be protected.
Although not been many cases in Canada have considered
whistleblower protection, courts and other adjudicators clearly
recognize the importance of the competing interests of an
employee's duty of fidelity and loyalty and the need for early
reporting of wrongdoing. In
Anderson v. IMTT-Quebec Inc., a decision released last year,
the Federal Court of Appeal supported the principle that employees
must exhaust internal whistleblowing mechanisms before going
public. In coming to their decision, the Federal Court of Appeal
considered the words of Justice Binnie in the Supreme Court of
Canada case of
Merk v. International Association of Bridge, Structural, Ornamental
and Reinforcing Iron Workers, Local 771 at paras. 25-26: that
the failure of employees to try and resolve such matters internally
qualifies as disloyal and inappropriate conduct. Having a robust
and transparent internal whistleblower protection policy will
therefore protect the employer both in terms of early discovery of
wrongdoing by its employees and in justifying taking disciplinary
action against employees who breach confidentiality obligations and
their duty of loyalty.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
A former teacher at Bodwell High School has learned a valuable lesson from the B.C. Human Rights Tribunal— it is not discriminatory for an employer to offer child-related benefits to only employees with children.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).