Legislation update

Whistleblower protection heralds new regime

By Andrew Tobin and Robyn Ferguson / 07 December 2018

Key issues:

  • The Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 has now been passed by the Senate.
  • The Bill will substantially amend the current whistleblower protections and house it predominantly in the Corporations Act 2001 (Cth).
  • Changes will also be made to the Taxation Administration Act 1953 (Cth) to create a whistleblower protection regime for those who disclose breaches of tax laws.

The Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 (Bill) has now been passed by the Senate and, subject to successful passage through the House of Representatives, will take effect on the first day of the second quarter following Royal Assent. Given parliament has now adjourned until February 2019, we anticipate most of the changes will commence from 1 July 2019. 

The Bill will substantially amend the current whistleblower protections (which exist more sporadically across the financial sector legislation) and house it predominantly in the Corporations Act. This will result in a further streamlined and strengthened whistleblower regime covering the corporate, financial and credit sectors. Changes will also be made to the Taxation Administration Act 1953 (Cth) to create a whistleblower protection regime for those who disclose breaches of tax laws. 

The proposed changes take whistleblower protection to a new level and represent a powerful catalyst in addressing cultural change within corporations. The Bill will also require that companies update their existing whistleblower policies to remain compliant within six months of commencement. The proposed amendments will provide whistleblowers with access to compensation and enhanced protection against victimisation.

What is a whistleblower?

In general, a whistleblower is an insider within an organisation who reports misconduct, dishonest or illegal activity that has occurred in the same organisation.

The current regime

The existing provisions in the Corporations Act were initially introduced in 2004 and confer protections and remedies on corporate whistleblowers in respect of actual or potential contraventions of Corporations legislation. The current regime includes:

  • prohibitions against victimisation;
  • constraints against employers that seek contractual remedies against a whistleblower;
  • limited protection from criminal or civil liability for disclosure;
  • prohibitions against revealing identity; and
  • rights for whistleblowers to seek compensation for damages suffered from victimisation.

What are the gaps?

The current regime’s protections have been criticised as being limited and overly complex. For example, to qualify for protection the whistleblower must:

  • be a current officer or employee of the company (meaning that past employees and contractors cannot make protected disclosure);
  • make the disclosure in good faith, meaning certain whistleblowers who have other grievances or motivations against a company, may not be protected;
  • have reasonable grounds to suspect that either the company or its employees have breached a provision of the Corporations Act, thereby limiting disclosures to breaches of that statute alone; and 
  • provide their names when making the disclosure, meaning any anonymous disclosures are not protected.

Key changes 

The new legislation will:

  • expand the scope of disclosures qualifying for protection;
  • expand the individuals qualifying for protection as being an individual who is in, or has been in, a relationship with an entity about which a disclosure is being made;
  • expand the entities about which a protected disclosure may be made to include companies, banks, life insurers, general insurers, superannuation entities and trustees of superannuation entities;
  • introduce the concept of emergency disclosure to a member of Parliament or a journalist;
  • allow anonymous disclosure;
  • introduce protections for tax whistleblowers under the Taxation Administration Act 1953;
  • introduce civil and criminal penalty provisions for the offence of victimisation of whistleblowers;
  • introduce  measures making it easier for a whistleblower to seek compensation for loss, damage or injury suffered because of the conduct of a victimiser; and
  • require public companies, large proprietary companies and proprietary companies that are trustees of registrable superannuation entities to implement a whistleblower policy.

Key impacts

If you are a publically listed company, a large proprietary company or a trustee for a registrable superannuation entity, then you will be required to have and make available, a whistleblower policy containing information about:

  • the protections available to whistleblowers;
  • how and to whom an individual can make a disclosure;
  • how the company will support and protect whistleblowers;
  • how investigations into a disclosure will proceed;
  • how the company will ensure fair treatment of employees who are mentioned in whistleblower disclosures;
  • how the policy will be made available; and
  • any matters prescribed by regulation.

Failure to comply with the requirement to have and make a whistleblower policy available is an offence of strict liability with a penalty of 60 penalty units (currently $12,600 for an individual). It will be incumbent on boards and senior managers to ensure that suitable whistleblower policies are in place to properly receive, investigate and respond to disclosures.  

It is also an offence to disclose the identity of a whistleblower under most circumstances. Under the current regime, the prosecuting agency must prove the elements of the offence beyond a reasonable doubt. The new amendments will also make whistleblower identity disclosure a civil penalty contravention with a maximum penalty of $200,000 for an individual and $1 million for a company.

ASIC guidance for whistleblowers

Last month, the Australian Securities and Investments Commission (ASIC) released an updated guidance paper for whistleblowers, INFO 52, that can be viewed here

If you require advice in relation to your obligations under the whistleblower protection regime, please contact HopgoodGanim Lawyers’ Corporate Advisory and Governance or Workplace and Employment team. 

Authors
Andrew Tobin
Partner
Andrew is a Partner and the head of HopgoodGanim Lawyers’ Workplace and Employment practice.
Robyn Ferguson
Partner
Robyn is a Partner in our Corporate practice with significant experience advising Australian corporations and their respective boards and senior management on capital raisings, IPOs, takeovers, mergers and acquisitions and compliance.
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