This year, many large Australian companies will have met their obligations under the Corporations Act to implement a whistleblower policy by January 2020.
These reforms were aimed at supporting whistleblowers better in order to reduce corporate crime and misconduct, and breaches of tax and other regulatory laws by Australian businesses.
The obligation to implement a whistleblower policy applies to:
- Public companies (exceptions apply);
- Large proprietary companies (at least two of the following apply: $50m+ revenue, $25m+ assets or 100+ employees); and
- Proprietary companies that are trustees of registrable superannuation entities.
However, the new whistleblower protection obligations in the Corporations Act apply to individuals and companies whether or not your business is legally required to have a policy. Penalties in the millions of dollars can apply. So, are you protecting your whistleblowers?
The protections under the Act apply to Eligible Whistleblowers who disclose Disclosable Matters in relation to a Regulated Entity to an Eligible Recipient[1]. Let’s break that down:
Eligible Whistleblowers include people like current and former directors and employees, suppliers of goods and services, an associate of the Regulated Entity, or their relatives.
Regulated Entities include companies, banks, insurance providers, superannuation entities and trading or financial corporations (some not-for-profits are exempt).
Disclosable Matters means misconduct or an improper state of affairs in relation to the Regulated Entity or a related entity. It includes offences under legislation such as the Corporations Act, the ASIC and APRA legislation, and any Commonwealth offence punishable by imprisonment for a period of 12 months or more. It includes conduct that is a danger to the public or financial system but does not include personal work-related grievances. There must be reasonable grounds to suspect such conduct has occurred. Part IVD of the Taxation Administration Act provides similar protection for whistleblowers in relation to tax affairs.
Eligible Recipients include company officers and senior managers, auditors, actuaries, and persons authorised by the Regulated Entity to receive whistleblower disclosures.
This legislation doesn’t grant disclosers a licence to publicly criticise Australian companies, but Eligible Whistleblowers should be afforded an opportunity to disclose Disclosable Matters in relation to a Regulated Entity to an Eligible Recipient on an anonymous basis, and to remain anonymous even after the investigation has ended.
Information that is disclosed must be stored securely, with confidentiality maintained. It is an offence to release disclosed information that would reveal the identity of the Eligible Whistleblower without consent.
The protections protect Eligible Whistleblowers by making Detrimental Conduct an offence and allowing them to seek compensation for loss caused by Detrimental Conduct. Eligible Whistleblowers are also protected from civil, criminal and administrative liability for making a disclosure (but not with respect to their own misconduct).
Directors, senior managers and business owners should take note that individuals may be held personally liable for an Eligible Whistleblower’s damages. Employers may be held vicariously liable for acts of their employees if they have failed to take reasonable precautions to prevent Detrimental Conduct.
Encouraging the people who work in your business to appropriately address the type of wrongdoing that could land company directors in jail or result in crippling fines or legal claims is a good idea. Implementing a Whistleblower Policy in your organisation seems a good way to do that, whether or not this is mandated by the Corporations Act.
[1] Protections under this scheme extend further to obtaining advice from legal practitioners and making disclosures to regulatory bodies and others nominated in the legislation