Whistleblowing and collecting the cash

Now more than ever it is time for Australian organisations to sharpen their focus on the management and protection of whistleblowers. A recent report on Whistleblower Protections published by the Parliamentary Joint Committee on Corporations and Financial Services sets out a roadmap for legislative change. When draft legislation is some months off, it may be tempting for organisations to take a "wait and see" approach. However the focus on internal procedure and culture in the Report warrant early and comprehensive engagement.

The Committee made a number of recommendations to enhance whistleblower protections across the public and private sectors, including a controversial recommendation to introduce a bounty system that could provide financial rewards to eligible whistleblowers - some of the highlights are discussed in more detail below.

The Committee is not the first to recommend reform of Australia's whistleblower regime. However there are a number of drivers in the current political landscape pushing for these reforms which did not exist in the past. The reforms have strong support from backbenchers. As part of its commitments as a member of the Open Government Partnership, Australia has also produced an Open Government National Action Plan, which lists the improvement of whistleblower protections in the tax and corporate sectors as a priority and schedules the introduction of new legislation in the corporate sector, with a parliamentary vote no later than 30 June 2018.

A new whistleblower oversight authority

The Committee has recommended the establishment of a Whistleblower Protection Authority (to be housed within a single body or an existing body) as a "one-stop shop" for both the public and private sectors. This "one-stop shop" approach is popular with the current government, who announced a similar "one-stop shop" for financial complaints in the Federal Budget which will be housed within the Australian Securities and Investments Commission. The Whistleblower Protection Authority would be prescribed with certain powers, such as:

• investigating criminal reprisals against whistleblowers and making referrals to the Australian Federal Police and other prosecutorial bodies;
• overseeing the investigations of non-criminal reprisal undertaken by other regulators or public sector agencies (public sector whistleblower protection oversight functions are currently the ambit of the Commonwealth Ombudsmen);
• taking non-criminal matters to the workplace tribunal or courts and acting on behalf of whistleblowers who have suffered reprisals or detrimental outcomes;
• paying a replacement wage commensurate to the whistleblower's current salary as an advance of reasonably projected compensation;
• setting standards for internal disclosure procedures in the public sector (where internal disclosures are mandated before external disclosures are permitted) and the private sector (which may include mandatory internal disclosures for large organisations); and
• producing annual reports to Parliament for both the public and private sectors.

Introduction of more comprehensive private sector legislation

The current private sector whistleblowing regime is fragmented and consists of a number of different Acts designed to cover specific industries or types of offences and many industries (such as taxation) are not covered at all. The Committee emphasised the need for consistent protections across the private sector and has recommended the introduction of a single Act to cover the field in the private sector which would run in parallel with an updated public sector act.

Introduction of a bounty system

The Committee has recommended a new reward system for whistleblowers which would allow them to obtain a percentage of any penalty imposed against their employer in relation to matters which were raised by the whistleblower or uncovered as a result of an investigation instigated from the whistleblowing.

The Committee has recommended that the reward amount be uncapped and be determined by the court (or other body) imposing the penalty within a legislated range of percentages. That body would take a number of factors into account, including:

• whether there was an appropriate and accessible whistleblowing procedure within the company that the whistleblower felt comfortable to access without reprisal;
• the degree to which the whistleblower's information led to the imposition of the penalty;
• the timeliness of the disclosure;
• whether the whistleblower disclosed the matter to the media without disclosing it to a regulator first or whether the whistleblower provided the regulator with adequate time to investigate before disclosing to the media;
• whether the whistleblower received any other compensation for adverse action taken against them from their employer or from the Whistleblower Protection Authority; and
• any involvement by the whistleblower in the conduct for which the penalty was imposed. If a whistleblower was involved in the conduct they may receive immunity or a reduced penalty but will not receive a reward as it would constitute proceeds of crime.

We have previously expressed concerns that a rewards-based system risks encouraging unreliable and speculative claims by people motivated by potential monetary gain, rather than altruism. Furthermore, the introduction of bounties may also deter altruistic whistleblowers who do not want to be associated with acting for monetary gain. This race to make an external disclosure may also encourage whistleblowers to bypass internal disclosure mechanisms, thereby robbing companies of the opportunity to correct misconduct before it is widely publicised.

Any compensation arrangements which are introduced should support internal whisteblowing at first instance, where it is reasonably open to a whistleblower to do so. The Committee has recommended reducing the amount of any award given to a whistleblower where they did not utilise internal reporting mechanisms which were appropriate and accessible first. However this safeguard is undermined as the Committee has only recommended it apply if the whistleblower felt comfortable to access internal whistleblowing procedures without reprisal. This subjective test could easily be relied on by vexatious whistleblowers, as it is very difficult to prove that a whistleblower felt comfortable utilising such procedures.

Only time will tell how Parliament choose to draft the legislation and whether it takes all of the Committee's recommendations on board. We support the Committee's recommendation to have the Authority provide annual reports to Parliament on the effective operation of whistleblower laws in both the public and private sectors. Any bounty system should be re-examined to ensure it operates as intended in practice.

Broader protections and stronger remedies and sanctions for reprisals

The Committee has also recommended aligning the public and private sector with the protections, remedies and sanctions for reprisals in the Fair Work (Registered Organisations) Act 2009. This Act was amended last year and its stronger protections only covers whistleblowers within trade unions and employer associations.

It also recommends broadening the private sector definition of disclosable conduct to include a breach of any Commonwealth, State or Territory law, and broadening the category of people who can access whistleblower protections to include both former and current staff that could make a disclosure, or are suspected of making a disclosure.

It has endorsed an extension of the people within a corporation to whom a disclosure can be made and has recommended protections for anonymous disclosures across the public and private sectors, as well as stronger protections for the confidentiality of disclosures and of the whistleblower's identity. The Committee has also espoused the importance of keeping the whistleblower informed throughout the investigation process.

More reporting channels

Finally, the Committee recommends the adoption of a tiered approach to disclosures which would allow whistleblowers to retain statutory protections when making external disclosures to third parties such as a member of Federal Parliament, a registered organisation or the media in some circumstances, such as where either there is a risk of serious harm or death, or a disclosure in the public interest has been made to an Australian law enforcement agency and, after a reasonable length of time, no action has been taken by the agency.

While this recommendation enhances protections for some genuine whistleblowers, Parliament must be cautious in drafting the legislation to ensure that the protection of disclosures to the media is not misused as a vehicle for politics or to air grievances.

What does this mean for you?

The proposed amendments to Australia's whistleblower regime will enhance the protection of whistleblowers in both the public and private sectors, and provide a clear avenue for a whistleblower to escalate concerns if they feel that they have not been listened to, or have otherwise been mistreated by their employer. The proposed changes will also provide whistleblowers with more incentive than ever before to disclose corporate misconduct internally, directly to a regulator or, in certain circumstances, an external third party.

Therefore, it is critical that Australian organisations examine, and where necessary strengthen, their internal whistleblower arrangements, and cultivate a strong culture of compliance to ensure that they have an opportunity to address internal misconduct before it is escalated outside the organisation and causes potential reputational and financial damage.