Australia – Whistle While You Work: Whistleblower Protections Reforms For The Private Sector Have Passed.

What you need to know

 

• On 19 February 2019, the Commonwealth Parliament passed the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2018 (Cth), introducing important reforms to the whistleblower protections regimes that apply to the private sector in Australia. The Bill is now awaiting royal assent.
• The reforms will see a significant expansion in the range of people who can make a protected disclosure and in the range of conduct that may be the subject of a protected disclosure.
• Whistleblowers will also be conferred stronger protections from reprisal action, and will have access to a broader range of remedies should they suffer detriment on account of having made, proposing to make, or potentially having an ability to make a protected disclosure.
• The reforms introduce a requirement for certain businesses to have a whistleblower policy in place. Public companies will need to have a compliant whistleblower policy in place by 1 January 2020 while large proprietary companies will generally be required to have a compliant whistleblower policy by 1 January 2020, depending on the timing of its financial year. 
• Corporations may also be exposed to significantly higher civil penalties once the Whistleblower Reforms and a related bill on penalties both commence operation. This includes civil penalties of up to $1,050,000 for individuals and up to $10,500,000 for companies, or potentially more in certain circumstances.

 

What you need to do

 

• You will need to understand the amendments introduced by the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2018 (Cth) as they apply to your business, and take steps to ensure ongoing compliance.
• This will likely include ensuring you have a compliant whistleblower policy.
• Businesses should also consider providing training to ensure compliance with the reforms to the whistleblower protections regime for the private sector.

 

Background

 

On 19 February 2019, the Commonwealth Parliament passed the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2018 (Cth) (Whistleblower Reforms). Provided the Bill receives royal assent by the end of March 2019, most of the reforms will commence on 1 July 2019. The amendments introduced by the Whistleblower Reforms will apply to all new disclosures even if the subject matter relates to conduct prior to July 2019.

 

The Whistleblower Reforms aim to expand whistleblower protections to encourage disclosure of crime and misconduct in the private sector as well as to consolidate and strengthen the national whistleblower protections regime. It will consolidate the multiple different whistleblower protection regimes that currently exist in the corporate, banking, insurance and superannuation sectors in Australia into two whistleblower protection regimes under the Corporations Act 2001 (Cth) (Corporations Act) and the Taxation Administration Act 1953 (Cth) (TAA). The existing regimes under the Banking Act 1959 (Cth), Insurance Act 1973 (Cth), Life Insurance Act 1995 (Cth) and Superannuation Industry (Supervision) Act 1993 (Cth) will be repealed by the Whistleblower Reforms.

 

Reforms to the Corporations Act regime

 

Summary of protected disclosures

 

The Whistleblower Reforms significantly expand the scope of the protected disclosures under the Corporations Act regime. Once the Whistleblower Reforms have commenced, a disclosure will qualify for protection if the following requirements are met:

 

1.	The disclosure is made by an eligible whistleblower	An eligible whistleblower is now defined to include current or former officers, employees, contractors (including employees of contractors) and individual associates of the regulated entity or a related body corporate, or their current or former relatives or dependents, which includes a spouse or former spouse. A regulated entity includes companies, other constitutional corporations as well as the entities that are covered by the existing regimes in the banking, insurance and superannuation sectors.  The previous Corporations Act regime only applied to whistleblowers who were at the time of the disclosure an existing officer, employee or contractor of a company.
2.	The disclosure is made to a prescribed entity or person	The disclosure generally must be to the Australian Securities and Investments Commission (ASIC), the Australian Prudential Regulation Authority (APRA), a prescribed Commonwealth authority, or an "eligible recipient" such as an officer, a senior manager, an auditor, or a person authorised by the regulated entity to receive disclosures whether that be an internal or external person. Additional persons are named as an eligible recipient if the regulated entity is a superannuation entity. The Bill that was first tabled in the Senate in 2017 proposed to protect a disclosure received by the whistleblower's manager or supervisor. The amendments made in the Senate in December 2018 now exclude this broader category of eligible recipients. In particular circumstances, a protected disclosure may be made to a legal practitioner, a journalist or a parliamentarian. We will outline the protected third party disclosures to a journalist or parliamentarian further below.
3.	The disclosure must be about a disclosable matter and must fall outside of the personal work-related grievance carve out	The whistleblower must have reasonable grounds to suspect the information concerns "misconduct or an improper state of affairs or circumstances". The reforms also provide a non-exhaustive list of conduct that is considered a disclosable matter, which includes contraventions of certain laws administered by ASIC or APRA, offences against any other Commonwealth law that is punishable by at least 12 months' imprisonment, or conduct that represents a danger to the public or the financial system. However, "misconduct or an improper state of affairs or circumstances" is very broad and is not limited by the list of conduct that amounts to a disclosable matter. It may go as far as to include conduct that is not in contravention of any particular legislation. In late December 2018, the Senate introduced a carve-out for "personal work-related grievances" from what would otherwise constitute a disclosable matter. A disclosure of misconduct concerning a personal work-related grievance of the whistleblower will only be protected if it meets specific conditions, which include where the disclosure concerns alleged victimisation of the whistleblower, has significant implications extending beyond the whistleblower, or the disclosure is made to a legal practitioner for the purposes of obtaining legal advice or legal representation in relation to the operation of the whistleblower provisions.

Previously, the Corporations Act regime only protected disclosures about a potential contravention of the Corporations Act. Accordingly, even with the personal work-related grievance carve-out, the new range of disclosable conduct will be substantially broader than the previous regime.

 

The Whistleblower Reforms will now allow for anonymous disclosures by removing the previous requirement that the whistleblower disclose their identity before making the disclosure.

 

Whistleblowers are also no longer required to make a disclosure in "good faith". This requirement undermined the previous Corporations Act regime by rendering a whistleblower ineligible for protection if they have other concerns or motivations against a company when making a disclosure.

 

Public interest disclosures and emergency disclosures

 

The Whistleblower Reforms will also extend the whistleblower protections to certain external disclosures.

 

Public interest disclosures to a journalist or parliamentarian may be protected if:

 

• the whistleblower first makes a protected disclosure of the disclosable matter to a regulator (previous disclosure);
• at least 90 days have passed since the previous disclosure was made;
• the whistleblower does not have reasonable grounds to believe that action is being, or has been, taken to address the matters relating to the previous disclosures;
• the whistleblower has reasonable grounds to believe that making a further disclosure of the information would be in the public interest;
• after 90 days have elapsed after the previous disclosure, the whistleblower makes a written notification to the recipient of the previous disclosure that the whistleblower intends to make a public interest disclosure and includes sufficient information to identify the previous disclosure; and
• the disclosure to the journalist or parliamentarian is no greater than is necessary to inform the recipient of the misconduct or the improper state of affairs or circumstances.

 

Emergency disclosures may also be made to a journalist or parliamentarian if the whistleblower has reasonable grounds to believe that the information concerns a substantial and imminent danger to the health or safety of one or more persons or to the natural environment. There is no waiting requirement in the case of an emergency disclosure, although the whistleblower must still have made a previous disclosure and also given prior written notification to the recipient of the previous disclosure.

 

Increased protections to whistleblowers

 

The Whistleblower Reforms will increase the available protections to provide for the following:

 

Protection	Details
Some immunities	A whistleblower will have immunity from civil, criminal or administrative liability (such as disciplinary action) for making a protected disclosure.
Inadmissible information	Information received from certain protected disclosures will not be admissible into evidence against the whistleblower in criminal proceedings or in proceedings for the imposition of a penalty, unless the proceedings relate to the falsity of the information.
No enforcement or exercise of certain rights or remedies	As was provided for under the previous regime, no contractual or other remedies or rights may be enforced or exercised against a disclosure on the basis of the protected disclosure.
No termination of contract	A contract cannot be terminated on the basis that the disclosure constitutes a breach of contract.
Confidentiality obligations	It is both an offence and a breach of a civil penalty provision if a person discloses either the identity of the whistleblower or information that is likely to lead to the identification of the whistleblower if they obtained the information directly or indirectly from a protected disclosure and the person is not otherwise authorised to make the disclosure under the Corporations Act regime.
Prohibition of victimisation	It is both an offence and a breach of a civil penalty provision if a person engages in conduct that actually causes detriment or threatens detrimental conduct to a second person because the victimiser believes or suspects that a protected disclosure has or may be made.

Remedies where a whistleblower suffers "detriment"

 

The remedies available to a whistleblower who suffers detriment will be significantly amended by the Whistleblower Reforms. Detriment will now be defined with a non-exhaustive list that includes dismissal, an injury in their employment, discrimination, harassment or intimidation, harm or injury (including psychological harm), reputational damage and other types of damage.

 

If a whistleblower suffers detriment because of conduct or a threat of detrimental conduct, then a claim may be brought before a court against:

 

• the individual or company who engaged in the detrimental conduct;
• if the detrimental conduct was engaged by a company, then current or former officers and employees who conspired or were knowingly concerned in the detrimental conduct; or
• a company which has a duty to prevent an individual from engaging in detrimental conduct.

 

Significantly, the Whistleblower Reforms also introduce a reverse onus of proof in respect of both claims against an individual as well as claims against a company, in favour of the whistleblower. The elements that the respondent will bear the onus of proof for will depend on the type of claim but will generally include proving that a belief or suspicion that a protected disclosure was, may or could be made was not part of the reason for the detrimental conduct.

 

If a whistleblower succeeds in their application, then they may seek compensation, an injunction, an apology, reinstatement of their employment or, in certain circumstances, exemplary damages.

 

Finally, the Whistleblower Reforms change the position in relation to legal costs such that the applicant for a remedy from detriment may only be exposed to a costs order if:

 

• they instituted the proceedings vexatiously or without reasonable cause; or 
• their unreasonable act or omission caused the other party to incur the costs. 

 

This will likely make bringing such an application more attractive to those who have suffered detriment from conduct or threats of detrimental conduct on account of making, proposing to make, or potentially having an ability to make a protected disclosure.

 

Mandatory whistleblower policies

 

The Whistleblower Reforms will require businesses to maintain a compliant whistleblower policy if the business is a public company or a large private company (which is defined as a company that has at least $25 million consolidated revenue per financial year, $12.5 million in assets or 50 employees). There are mandatory content requirements to the whistleblower policy, including information about the protections available to whistleblowers, the persons to whom disclosures may be made and how they can be made, how the company will support whistleblowers, investigate disclosures and ensure fair treatment of employees who are mentioned in protected disclosures, and how the policy will be made available to officers and employees of the company.

 

Significant increases to civil penalties

 

The Whistleblower Reforms, together with the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018 (Cth) which was recently passed on 18 February 2019, will substantially increase both the criminal and civil penalties that apply for breach of relevant provisions. Once the amendments to the Corporations Act in both Bills commence operation, a person found to have contravened relevant provisions may face penalties of up to:

 

	Individuals	Companies
Civil penalties	$1.05 million (as at February 2019); or  3 times the value of the benefit derived or detriment avoided	$10.5 million (as at February 2019); or 3 times the value  of the benefit derived or detriment avoided; or 10% of annual turnover (capped at 1 million penalty units, which is $210 million as at February 2019)
Offences	$25,200 and/or 2 years' imprisonment	$126,000

New TAA regime

 

The new whistleblower protections regime that will be inserted into the TAA is broadly similar to the Corporations Act regime. The key differences between the two regimes include the following:

 

TAA Regime Provision	Details
Eligible whistleblower definition	The definition for eligible whistleblower specifically refers to a current or former spouse or child, rather than the general reference to "relative" under the Corporations Act regime.
Recipients of protected disclosures	A protected disclosure may be made to the Commissioner of Taxation or an "eligible recipient". Eligible recipient is generally defined to include an auditor, a member of an audit team conducting an audit, prescribed tax agents or a person authorised by the entity to receive such disclosures. However, if the entity is a body corporate, then the meaning of eligible recipient is extended to include a director, secretary, senior manager or any other employee or officer who has functions or duties relating to the tax affairs of the body corporate.
Other differences in the requirements for protection	If the disclosure is to the Commissioner, then the discloser must consider that the information may assist the Commissioner to perform their functions or duties under a taxation law in relation to an entity or an associate. If the disclosure is to an eligible recipient, then the discloser must: have reasonable grounds to suspect that the information indicates misconduct or an improper state of affairs or circumstances; and the information may assist the eligible recipient to perform functions or duties in relation to the tax affairs of the entity or an associate. Tax affairs is defined as affairs relating to any tax imposed by or under, or assessed or collected under, a law administered by the Commissioner. Unlike under the Corporations Act regime, there is no personal work-related grievance carve-out under the TAA regime.
No protections for certain external disclosures	The whistleblower protections do not extend to public interest disclosures or emergency disclosures.
Other key differences	There are no civil penalty provisions under the TAA regime. There is also no separate content requirements for whistleblower policies under the TAA regime.

What's next?

 

Compliance with whistleblower policy requirements

 

If your business is a public company, then you will be required to have a compliant whistleblower policy in place by 1 January 2020.

 

If your business is a large proprietary company, then depending on the financial year that applies to your business, you will likely be required to have a compliant whistleblower policy in place by 1 January 2020. The deadline that will apply to a large proprietary company will depend in part on the financial year applicable to a company.

 

Workplace training

 

There are various types of workplace training that your business may wish to consider to ensure that it complies with its obligations under the whistleblower protections regime, including the following types:

 

Who?	Reason
Eligible recipients	Training should be provided to ensure that they understand the regulatory framework and are able to handle whistleblower concerns in accordance with their legal obligation and the business' policies and procedures
Workforce generally	Training on the existence of the whistleblower protections regime may: be considered a reasonable step that the company has taken to ensure a worker does not engage in the detrimental conduct; and assist with building a culture that encourages whistleblowing.
Employees or officers responsible for ensuring regulatory compliance	Training on the regulatory framework will help equip the relevant employees or officers who are responsible for ensuring the company remains compliant with the whistleblower protections regime.
Employees or officers who may conduct investigations into whistleblower concerns	We recommend that you consider the available skillsets within your business to conduct internal investigations. If relevant, those responsible for conducting such investigations should receive training on the whistleblower protections regime. Depending on the nature of particular whistleblower concerns, the business may also need to consider whether it is more appropriate to engage an external investigator.

Ashurst can design and deliver client-tailored training programs such as those outlined above, and also has experience in conducting external investigations in relation to both workplace complaints and whistleblower concerns. Please contact us if you would like further information about how we can assist your business.

 

Monitor potential reforms on the horizon

 

Businesses should also monitor the upcoming Federal election, which may lead to further reform to Australia's whistleblower protections regime particularly if there is a change in government. On 3 February 2019, the ALP issued a media release announcing its policy in relation to whistleblower protections ahead of the Federal election, which indicates that the Whistleblower Reforms may simply be the first wave of reform should the ALP win the next election.

 

The ALP media release indicates that a Shorten Government would seek to:

 

• establish a single Whistleblowing Act;
• establish a Whistleblower Protection Authority to protect and support whistleblowers;
• introduce a "Whistleblower Rewards System", which would allow whistleblowers to receive a percentage of the imposed penalties arising out of their whistleblowing; and
• fund a special prosecutor for corporate criminals.

 

If there is further reform to Australia's whistleblower protections regime to be introduced, it is likely that regard will be given to the Report tabled on 14 September 2017 by the Parliamentary Joint Committee on Corporations and Financial Services. We have previously considered the Parliamentary Joint Committee Report in our Employment Alert.