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Whistleblower Reform

Rohan Harris, Libby Pallot, Rory Maguire

Put yourself in these shoes… You think your CFO boss is feeding false information to the company auditors to cover up accounting irregularities in the company financials. What would you do? Who should you tell? What protections are you entitled to receive?

You are a whistleblower – that is, someone who decides to reveal misconduct, misconduct which typically involves corruption, mismanagement, abuse of power or fraud and is almost always in the name of financial profit, sometimes at the cost of human safety and lives. 

Now, put yourself in the shoes of the Manager who is approached by the whistleblower employee.  What should you tell them?  What policies should you follow?  What should you do with the information?  What if the disclosure is anonymous?

Changes to the whistleblower regime – what it means for your business 

All public and large proprietary companies will be affected by the impending enactment of legislation that will create a single whistleblower regime to protect those who expose corporate misconduct.

Under the new regime, all existing corporate whistleblower legislation will be consolidated within the Corporations Act, with equivalent whistleblower protections to be created within the Taxation Administration Act to protect those who expose tax‑related misconduct.

The aim of the draft legislation is to address the perceived ‘little practical effect’ the current Australian whistleblower legislative landscape has. In particular, the new regime will bring Australia’s corporate whistleblower regime into line with other OECD countries and provide equivalent protections to those offered in the public sector.

Expanding the regime and protections

The new regime is focused largely on enabling disclosures to be made more readily whilst offering whistleblowers greater protections.

Under the current regime, a person only qualifies for whistleblower protection if they meet particular conditions, namely that:

  • they are a current officer, employee or contractor of a corporation;
  • they make a disclosure to ASIC, the corporation’s auditor, an officer or senior manager or a person the disclosure is not made anonymously but is made in good faith; and
  • they have reasonable grounds to suspect that the corporation, an officer or employee has or may have contravened corporations legislation.

However, under the proposed new regime:

  • a broader range of people can qualify for whistleblower protection, including:
    • former officers, employees or contractors of a corporation and a spouse, child or dependent of such persons; and
    • in some specific situations, journalists;
  • disclosures can also be made to APRA and the Australian Federal Police;
  • the discloser can be anonymous and an offence is created where a person discloses a whistleblower’s identity without the whistleblower’s consent; and
  • the requirement that the whistleblower is acting in good faith to gain the benefit of protections is abolished – the whistleblower merely needs to have objectively reasonable grounds to suspect misconduct or a contravention has occurred.

Further, the proposed new regime will establish immunity for whistleblowers in respect of information disclosed and expand the protections and compensation rights for whistleblowers who have been victimised.

The types of conduct covered by whistleblower protections have also been expanded to include, for example:

  • conduct that ‘represents a danger to the public or financial system’;
  • conduct that is an offence under any Commonwealth law that carries a penalty of 12 months or more for imprisonment; and
  • ‘misconduct or an improper state of affairs or circumstances’ in relation to a whistleblower regulated entity.

Call to action

The new legislation will come into force on 1 July 2018 and affected companies need to be proactive to ensure compliance.

Russell Kennedy is well placed to ensure that your company, its employees and its policies are ready for this new era of whistleblowing in Australia.

The reforms require companies to have a ‘whistleblower policy’ in place (by January 2019 for public companies and December 2019 for large proprietary companies).

Penalties will apply if policies are not in place by these dates.

A whistleblower policy will need to explain:

  • the protections available to whistleblowers under the new regime; and
  • how the company will ensure that whistleblowers are treated fairly in accordance with the requirements of the new regime.

Where companies already have whistleblower policies in place, we recommend a review of those policies to ensure that they reflect the new regime.

In light of the increased activity in whistleblowing that this new regime is designed to encourage, we also recommend companies consider:

  • implementing effective risk management and HR processes for handling whistleblower disclosures; and
  • providing adequate training programs, including:
    • how do the changes affect employees?
    • what to do in response to a whistleblower disclosure?
    • the risks of ignoring a disclosure or taking hostile action against a whistleblower.

For further assistance regarding the new whistleblower protection regime, please contact Rohan Harris, Libby Pallot, Rory Maguire.

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