Whistleblowers reap the (reform) bounty 

What you need to know

• Whistleblower practices and procedures are integral to implementing and maintaining a corporate culture that promotes transparency, integrity and accountability, which in turn improve financial performance.
• A Parliamentary Joint Committee has tabled its highly anticipated report into whistleblower protections in the corporate, public and not-for-profit sectors, making 35 recommendations intended to overhaul the existing "largely theoretical" protections in both the public and private sectors.
• Some of the most notable recommendations include (a) greatly expanding the scope of protections in the public and private sectors, (b) establishing a single independent oversight agency across both sectors, and (c) (controversially) introducing a bounty-style reward system to encourage whistleblowers to come forward with information.
• A parliamentary vote on legislation to establish greater protections for whistleblowers in the corporate sector is scheduled to be held no later than 30 June 2018.

What you need to do

• We recommend that you carefully follow the Government's response to the inquiry and when appropriate, review your organisation's current whistleblower procedures and practices, and consider whether they will be adequate in light of any (likely) legal reform.

Australia's current whistleblower protections are haphazard

Whistleblowers play an important role in detecting and escalating misconduct within their organisations.  This can in turn deliver economic and financial benefits to those organisations. 

While Australia's public sector whistleblower regimes are generally perceived as robust, corresponding protections in the private sector are considerably weaker.  A fragmented and selective approach is taken to matters such as who is afforded legal recognition as a "whistleblower" and the circumstances which trigger the protections of the various private sector regimes. 

As reported in our Employment Alert dated 24 November 2016, the Federal Government committed to strengthening whistleblower protections in the public and private sectors in order to secure the passage of proposed legislation introducing broad powers to monitor and regulate trade unions and employer associations.  The Government's commitment included establishing a Parliamentary Committee inquiry into whistleblower protections, with reform of whistleblower regimes to then take place by 30 June 2018.

The Committee's key recommendations

The Committee has now delivered its report, making 35 recommendations designed to greatly strengthen existing whistleblower laws in the private and public sector.  The key recommendations include:

• introducing a (potentially controversial) bounty-style reward system for whistleblowers;
• combining all private sector whistleblower protections into a single piece of legislation;
• establishing an independent oversight and investigative authority;
• expanding the scope of protections in both the public and private sectors;
• extending protections to disclosures made anonymously; and
• introducing a tiered approach to disclosure – escalating from internal to regulatory and external channels  (including the media). 

We discuss below some of the most important or controversial aspects of these key recommendations.

Whistleblowers to receive financial incentives to report misconduct 

The recommendation most likely to be controversial is the adoption of a US-style bounty regime.  This would involve whistleblowers being entitled to a percentage of any penalty ultimately imposed in relation to matters raised by the whistleblower or uncovered as a result of their whistleblowing.  

In its report, the Committee concluded that financial incentives both encourage whistleblowers to come forward with high quality information, and encourage organisations, particularly large corporations, to improve internal reporting mechanisms as well as proactively address illegal and corrupt conduct.  The United States' best known bounty system under the Dodd-Frank Act has resulted in payouts to 34 whistleblowers totalling more than $111 million since 2012. 

To mitigate some of the arguably negative aspects of the US-style bounty regime, the Committee recommended capping the amount of the reward and that the amount should be determined by a body, such as a court, and be guided by the circumstances of the case and the conduct of the whistleblower. 

Given the current political climate, the introduction of a bounty-style rewards system may be challenging, and is not strictly necessary to discharge the Government's commitment to strengthen whistleblower protections. 

One stop shop - one Act and one (independent) oversight agency

The introduction of a single, comprehensive piece of legislation to regulate whistleblowing in the private sector is a welcome recommendation.  As noted above, the current approach to protecting whistleblowers in the private sector is selective and highly fragmented across different pieces of legislation, which makes it difficult for whistleblowers to identify whether protections are available, and for businesses to understand and comply with their obligations. 

The Committee considered that the public sector regime should remain in a separate piece of legislation, and that amendments be made to it in parallel with the legislation governing the private sector to ensure consistency to the extent appropriate. 

Although the public and private sectors will continue to be governed by separate Acts, the Committee recommended the establishment of an independent oversight agency – the Whistleblower Protection Authority – to oversee and investigate whistleblower reprisals (civil and criminal) in both the public and private sectors.    To effectively discharge its duties, the Whistleblower Protection Authority would need to regularly liaise with the Australian Federal Police, regulators and public sector agencies.  Significantly, the Whistleblower Protection Authority would be able to take non-criminal matters to various tribunals and courts on behalf of whistleblowers.      

Broad scope of coverage

The Committee recommended that both current and former employees, contractors and volunteers in the public and private sectors who disclose the following types of conduct should be afforded protection from reprisals:

• any contravention of any law of the Commonwealth;
• any law of a state or territory where the disclosure relates to the employer of the whistleblower who is either regulated under the Fair Work Act 2009, or a constitutional corporation; and
• any breach of an industry code or professional standard which has the force of law or is prescribed  under regulations. 

The breadth of these legal protections – both in terms of the people who are covered, and the potential misconduct that is caught – represents a substantial extension to existing regimes.  For example, the protections will cover people who propose to make a disclosure, could make a disclosure but choose not to, or are suspected of making or proposing to make a disclosure.  

Anonymity and confidentiality to be protected  

An aspect of the recommendations that will be highly relevant to organisations are those relating to confidentiality and anonymity.  The Committee recommended the creation of an offence for both the disclosure or use of identifying information, and also the disclosure or use of information likely to lead to the identification of the whistleblower.  Such a recommendation, in the event that it became law, would significantly increase an organisation's risk of exposure to penalties. 

The Committee also recommended extending protections to disclosures made anonymously.  This recommendation, coupled with the recommended removal of any "good faith" requirement, risks exposing organisations to difficulties associated with complying with onerous whistleblower protections rules in respect of potentially vexatious complaints.  

A tiered approach to disclosure - internal reporting channels potentially onerous

The Committee made several recommendations in relation to internal disclosures.  Whistleblower protections would be extended to internal disclosures within the private sector to:

• any person within the management chain for the whistleblower within the whistleblower's employer;
• any current officer of the company, or that company's Australian or ultimate parent; and
• any person specified in a policy published and distributed by an employer (or principal) of the whistleblower. 

This recommendation materially broadens the subset of people within an organisation to whom a protected disclosure can be made.    

The Committee's view is that internal disclosures within organisations should be encouraged at first instance, but it favoured a "tiered approach" to disclosure.  For example, after making an internal disclosure, a whistleblower would be entitled to escalate his or her concerns to the appropriate regulator and, in certain circumstances such as a risk of serious harm or death, to an authorised external recipient such as the media. 

What should your organisation do now?

Whistleblower protections, and corporate culture more broadly, are currently the focus of significant regulatory attention in Australia.  If an organisation fails to keep its internal procedures, practices and culture in line with regulatory expectations, there is a risk of civil or criminal liability and damage to commercial reputation as whistleblowers disclose their concerns to regulators, media or other third parties rather than raising them internally.

We recommend that you carefully follow the Government's response to the inquiry and when appropriate, review your organisation's current whistleblower procedures and practices, and consider whether they will be adequate in light of any (likely) legal reform.

Please listen to our podcast on whistleblowers reaping the (reform) bounty

Authors: Alyssa Phillips (Partner); Vince Rogers (Partner); James Clarke (Senior Associate); Laura Neill (Lawyer)