Amanda Lyras
Partner •
Sydney
A whistle-stop tour of key takeaways from recent Court and regulatory developments in whistleblowing
Historical whistleblowing disclosures, what will amount to reasonable grounds to suspect information giving rise to a whistleblowing disclosure, and ASIC's new Immunity Policy which could incentivise whistleblowers to raise disclosures with ASIC, are all under the microscope.
In July 2019, the whistleblowing regime in Australia underwent a significant transformation as a result of the introduction of the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 (Cth), which amended the whistleblowing provisions in the Corporations Act 2001 (Cth).
As we approach the biennial anniversary of these laws, it is an opportune time for corporations to take note of how recent Court decisions may impact on the practical management of whistleblowers in their workforce.
Additionally, corporations ought consider the effect of ASIC's inaugural Immunity Policy, which was released on 24 February 2021 and may well create greater incentive for whistleblowers involved in certain corporate misconduct to make a whistleblowing disclosure directly to ASIC, rather than through internal company channels, in order to obtain immunity from liability arising from any contravening conduct they have been involved in.
We touch on the key practical implications of these developments below.
1. Past whistleblower disclosures – is it wrong to think you're out of the woods?
In late 2020, the Federal Court of Australia[1] confirmed how the amended whistleblowing laws can apply retrospectively to whistleblowing disclosures made prior to these laws taking effect on 1 July 2019.
In its decision, the Court held that a whistleblower may only seek compensation for detrimental conduct under the amended whistleblowing laws where:
- they make a disclosure on or after 1 July 2019 that is protected by the amended legislation; or
- they make a disclosure prior to 1 July 2019 (ie. under the old legislation) but have continued to suffer detriment on or after 1 July 2019 and would be entitled to compensation under the amended legislation had they made their disclosure on or after 1 July 2019.
Implications for your business
In practical terms, this case confirms that reports made by whistleblowers under the now-superseded laws may allow them to seek remedies under the amended laws (including for compensation), where they have continued to suffer detriment following the passage of the amended laws.
Detriment is very broadly defined under the Corporations Act to include actions such as:
- dismissal of an employee;
- injury of an employee in their employment;
- alteration of an employee's position or duties to their disadvantage;
- discrimination between an employee and other employees of the same employer;
- harassment or intimidation of an individual;
- harm or injury to an individual (including psychological harm);
- damage to an individual's property;
- damage to an individual's reputation;
- damage to an individual's business or financial position; and
- any other damage to an individual.
Accordingly, there is potentially a very broad range of conduct that a whistleblower may allege amounts to detriment suffered by them post-1 July 2019 in connection with a historical whistleblower report. This can pose a practical dilemma for businesses in dealing with everyday workplace matters in relation to such individuals, such as making decisions in relation to:
- compensation and incentives (including long-term incentives, where decisions about vesting or forfeiture events can occur well into the future);
- conducting performance improvement processes and taking other reasonable management action;
- dealing with grievances or conducting workplace investigations; and
- implementing restructures or other business changes.
Of course businesses are entitled to engage in these everyday workplace matters for legitimate reasons, however care needs to be taken to ensure that:
- concerns raised with management are appropriately addressed in a timely fashion and closed off, with a view to drawing a line in the sand in relation to the company's response to an alleged whistleblowing disclosure;
- the legitimate reasons for taking any such action in relation to a whistleblower are documented to assist the business in demonstrating that such action was not taken for a prohibited reason (such as in response to a whistleblower disclosure); and
- ideally, the relevant decision-maker responsible for any action that may affect a whistleblower does not have knowledge of any historical whistleblower reports, so that it cannot be said that any such reports were part of the reason for their decision.
2. "Reasonable grounds" and record-keeping
The recent judgment of Quinlan v ERM Power Ltd & Ors [2021] QSC 35 has clarified that matters that are not known to a whistleblower at the time they make a disclosure, but rather come to light at a later date, are not relevant to the assessment of whether the whistleblower had "reasonable grounds" to suspect the matters which are the subject of their disclosure.
Rather, whether a whistleblower has "reasonable grounds" for suspecting the matters they have raised can only be assessed based on what the whistleblower actually knew at the time their disclosure was made. The whistleblower does not need to have actual proof of the relevant matters they are raising, but they must be aware of facts that form the basis of any suspicion they have as to those matters.
Mr Quinlan initiated the proceedings in the Supreme Court of Queensland seeking compensation for loss, damage and injury he alleged he had suffered as a result of victimisation caused by his former employer. The judgment concerns a successful application to strike out Mr Quinlan's statement of claim in the dispute, and it is likely Mr Quinlan will re-plead his case, so there may be more to come in relation to this matter.
Implications for your business
Quinlan demonstrates the importance of:
- businesses maintaining clear (and confidential) records as to the information disclosed by a whistleblower as part of their report and/or during any subsequent investigation, so there are clear parameters around what has been disclosed by them; and
- recipients of whistleblowing disclosures, where appropriate, clarifying the basis on which a whistleblower is raising the matters that constitute their disclosure, having regard to the information available to them.
Taking these steps can assist businesses in a range of ways, including:
- when assessing if a disclosure attracts protections under the Corporations Act or under a company policy;
- identifying where further information in the business may lie in order to investigate and/or make findings on the relevant allegations; and
- supporting the business to put in place appropriate measures to support the confidentiality and victimisation protections that apply to protected whistleblowers.
Care of course needs to be taken to ensure there is no further disclosure of matters raised by a protected whistleblower without their consent, unless an exception applies under the Corporations Act (such as to obtain legal advice in relation to the operation of the whistleblowing protections under the Corporations Act or to investigate the disclosure in certain limited circumstances).
3. ASIC Immunity Policy and whistleblower reports
ASIC launched an immunity policy for market misconduct offences in February 2021. Under it, individuals who may have contravened Part 7.10 of the Corporations Act (including, for example, market manipulation, insider trading, false trading and market rigging, and dishonest, misleading and deceptive conduct concerning financial products and services) with at least one other person will be immune from civil penalty or criminal proceedings if they give "full, frank and truthful disclosure" and co-operate "fully and expeditiously" with ASIC in its investigations and related court proceedings. The Policy is aimed at encouraging self-reporting by individuals and is the first of its kind for ASIC.
Impact of the Policy on reporting
The Immunity Policy may well have the practical effect of incentivising whistleblowers to make a whistleblower disclosure directly to ASIC rather than the corporation to which the disclosure relates, in order to be afforded immunity from liability arising from any contravening conduct they have been involved in. Immunity would not otherwise be available to the individual, noting the amended laws in the Corporations Act make it clear that whistleblowers are not generally immune to the consequences of their own misconduct.
Implications for your business
Ordinarily a business will be best placed to consider and investigate any matters raised in relation to its operations that concern alleged misconduct or an improper state of affairs or circumstances.
However, to the extent an individual approaches ASIC with a whistleblowing disclosure, corporations will need to ensure their policies and procedures address the potential for ASIC involvement in a matter that may concern its business, including the effects this may have on its internal investigation processes and any potential ASIC investigation that arises in response to the disclosure.
Businesses should also take the opportunity to remind staff and stakeholders about their whistleblowing programs and reporting channels, with a view to encouraging internal disclosures of any reportable conduct. This allows a business to be in a position to investigate and deal with any issues that arise, rather than be blindsided by issues that are raised through separate processes.
[1] Alexiou v Australia and New Zealand Banking Group Limited [2020] FCA 1777 Back to article
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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.