Whistleblower protection
and claims

Whistleblower protection and claims

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In recent years, a series of scandals involving the Commonwealth Bank, IOOF, 7 Eleven, NAB and Reserve Bank owned company, Securency, have highlighted the difficulties experienced by employee whistleblowers. However, current laws governing the private sector provide little protection and are in need of urgent reform.

Whistleblower law reform in Australia is currently the topic of much debate in political and commercial circles. In November 2016, the Australian Federal Government agreed to legislate stronger protections for whistleblowers in both the public and private sector. In late December 2016, the Government released a consultation paper addressing tax and corporate whistleblower protections in Australia, questioning whether current laws are adequate and whether protections and rewards offered in jurisdictions such as the United States would be more appropriate.

In April 2017, Josh Bornstein made a submission to the Joint Parliamentary Committee on Corporations and Financial Services inquiry into whistleblower protection arguing for adequate financial compensation for whistleblowers.

Whistleblowing in the private sector

Corporations Act

Protections are notionally available for whistleblowers in the private sector. However the reality is that in the overwhelming number of cases, their limitations mean that they are rarely successfully invoked.

The Corporations Act 2001 (Cth) seeks to confer protections on employees who give information relating to breaches of that Act or the Australian Securities and Investments Commission Act 2001 (Cth). Whistleblowers reporting on breaches of these acts are said to be protected from defamation, civil and criminal liability. Protections include:

  • qualified privilege against defamation;
  • preclusion from contractual or other remedies being enforced against the whistleblower;
  • protection from civil and criminal liability for making the disclosure; and
  • the possibility of criminal sanctions being imposed on those who take reprisal action against whistleblowers.

However, there are a number of requirements that must be first satisfied prior to an individual being granted the protection, including that they must:

  • be an officer or employee of the company, or a person who has a contract for the supply of services or goods to a company, or an employee of the contracting company;
  • provide their name before making the disclosure;
  • have reasonable grounds for asserting that the company has contravened the relevant legislation;
  • act in ‘good faith’; and
  • make their disclosure to:   
    • ASIC;
    • an auditor of the company in question;
    • a director, secretary or senior manager of the company; or
    • another person authorised to receive disclosures, such as an outsourced internal audit team.

In addition, it is important to note that the whistleblower protection regime under the Corporations Act imposes a number of limits, including:

  • the scope of individuals who are protected – for example, former employees are not protected;
  • anonymity is not permitted – individuals must disclose their identity; and
  • only particular breaches are protected – “qualifying disclosures” only extend to the breaches of the Corporations Act and the ASIC Act. Breaches of other legislation may only be covered where secondary offences under those Acts have occurred.

Fair Work Act protections can work

While there are very limited protections available to whistleblowers in the private sector under the Corporations Act, the Fair Work Act 2009 (Cth) provides an alternate avenue for protection, in some circumstances, for whistleblowers making complaints to their employer in relation to aspects of their employment.

Under the Fair Work Act it is unlawful for an employee to be adversely treated at work because they have exercised, or propose to exercise, a workplace right. A “workplace right” can include an individual making a complaint or inquiry in relation to their employment. Adverse treatment can include:

  • an employee’s employment being terminated;
  • an employee being “injured” in their employment, through, for example the institution of performance management;
  • an employee’s employment being “altered to their detriment”, through, for example, demotion; or
  • an employee being discriminated against in comparison to other employees in the workplace.

The important requirements here are that:

  • the complaint or inquiry must be in relation to the “employment”, although this phrase has been broadly construed; and
  • the adverse action must have been taken against the employee “because of” the employee’s complaint or whistleblowing activity.

The Employment Team at Maurice Blackburn has represented clients who have made whistleblower complaints in General Protections Adverse Action claims in instances involving bribery, corruption, bullying and OH&S breaches. We also represented an employee who was a whistleblower on bribery and corruption within Securency, a company owned by the Reserve Bank of Australia.

A majority of these cases have settled out of court and were settled with mutual confidentiality obligations preventing either party from disclosing both the content of the complaint and the settlement of it.

Whistleblowers in the public sector

Public sector employees have stronger whistleblower protections than private sector employees at both State and Commonwealth levels. 

Victorian public sector employees can make a protected disclosure about a Victorian public body or public officer under the Protected Disclosure Act 2012 (Vic) on the basis that a person, public officer or public body has engaged, is engaging or proposes to engage in improper conduct.

“Public bodies” and “Public Officers” can include government departments and agencies, statutory authorities, local councillors, universities, public hospitals and government appointed boards and committees.

“Improper conduct” includes corrupt conduct, a criminal offence or conduct that would constitute reasonable grounds for dismissal. Depending on the public body or public officer concerned, a protected disclosure can be made to a nominated person within the public body, Independent Broad based Anti-Corruption Commission (IBAC) or the Victorian Ombudsman.

Protection afforded to Victorian public sector employees includes:

  • the ability to sue a person for damages or to seek an injunction against them if they take detrimental action in reprisal for a protected disclosure;
  • immunity against civil or criminal liability or administrative process, including disciplinary action for making the disclosure;
  • immunity against any penalty that may arise from disclosing information that would otherwise breach confidentiality provisions;
  • a privilege against a defamation action; and
  • recourse to court ordered remedies for reprisal action.

Criminal charges can also be brought against any person or body that reveals the identity of the person who made an assessable disclosure or the contents of an assessable disclosure.

Commonwealth public sector employees are able to make a protected disclosure under the Public Interest Disclosure Act 2013 (Cth) if there has been “disclosable conduct” by either an agency, a public official in connection with their position or an officer or employee of a contracted service provider. “Disclosable conduct” can include conduct that contravenes a Commonwealth, state or territory law, is corrupt, perverts the course of justice or is an abuse of public trust.

Commonwealth public sector employees who make a protected disclosure may receive protection from civil and criminal liability and support and protection from any reprisal as a consequence of the disclosure.

Protection afforded to Commonwealth public sector employees includes:

  • protection of the discloser’s identity;
  • immunity from civil, criminal or administrative liability;
  • support and protection from reprisal; and
  • recourse to court ordered remedies for reprisal action.

Protection of whistleblowers in the United States – a superior approach

In contrast to the situation in Australia, whistleblower laws in the US confer much greater protections and incentives for employees and are considered to be an essential feature of a robust corporate governance regime. In some situations, Australian employees may be eligible for the significant protections and incentives offered under these US laws.

Following the global financial crisis in 2010, the US Congress enacted legislation which established the US Securities and Investment Exchange (SEC) Whistleblower Program. The SEC Whistleblower Program offers eligible whistleblowers significant employment protections, monetary awards and the ability to anonymously report on possible securities violations. Importantly, each year, Australia has ranked in the top five countries for individuals submitting information to the SEC Whistleblower Program. In August 2016, an Australian employee of BHP Billiton was awarded $3.75 million as a result of successful enforcement arising from information the employee provided to the SEC concerning BHP’s securities violations. 

Employment Protections

The law in the United States is clear: employers may not, directly or indirectly, discharge, demote, suspend, threaten, harass, or in any way discriminate against whistleblowers who:

  • provide information to the SEC;
  • initiate, testify in, or assist in an SEC investigation or related enforcement action; or
  • make any disclosures required or protected by law.

If a whistleblower is subjected to retaliation in violation of the law, they have the right to immediately sue their employers in federal court, without having to exhaust the administrative process before filing. The types of remedies available include reinstatement with equivalent seniority, back pay with interest, reimbursement of legal fees and other litigation related expenses.

SEC whistleblowers are able to remain anonymous, as long as they are legally represented and provide their legal representative with a signed copy of their whistleblower submission, signed under the penalty of perjury. However, at the point they apply to receive a monetary award, they are required to disclose their identity to the SEC, who will make every effort to keep it confidential.

Monetary Awards

Under the SEC Whistleblower Program, the SEC is required to pay eligible whistleblowers 10-30% of the monetary sanctions collected as a result of a successful SEC enforcement action or actions in which the sanctions exceed $1 million. In recent years, the SEC has secured more than $4 billion in monetary sanctions per year against offending companies.

A number of factors are considered by the SEC in determining the size of an award to a whistleblower, including:

  • any culpability of the whistleblower in the illegal activity;
  • significance of the information provided;
  • assistance provided by the whistleblower; and
  • participation of the whistleblower in internal reporting systems.

Watch this space

This area of law is currently under review and is assured of change. One option for change is the introduction of a US style system that protects whistleblowers and provides anonymity to those reporting wrongdoing.

Submissions for the current review of Australian tax and corporate whistleblower protections will close on 10 February 2017. The review will be made available to the Parliamentary Inquiry into whistleblower protections in the corporate, public and not-for-profit sectors. The Joint Parliamentary Committee on Corporations and Financial Services which is undertaking the Parliamentary Inquiry is due to release its final report by 30 June 2017.

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