10 July 2019
From 1 July 2019, important changes to the whistleblower regime under the Corporations Act 2001 (Cth) (Act) took effect.[1]
The changes are designed to encourage more people to report corporate wrongdoing by providing whistleblowers with stronger and more robust protections.
Some of the key changes, and what they mean for entities that are regulated by the regime, are considered below.
Mandatory whistleblower policy
From 1 January 2020, it is mandatory for all public companies, large proprietary companies and corporate trustees of registrable superannuation entities to have a compliant whistleblower policy, and to make that policy available to officers and employees. The policy must include information about:
- the protections available to whistleblowers;
- to whom an individual can make a disclosure;
- how an individual can make a disclosure;
- how the company will support and protect whistleblowers;
- how the company will investigate qualifying disclosures;
- how the company will ensure fair treatment of employees mentioned in whistleblower disclosures; and
- how the policy will be made available.
The definition of a ‘large proprietary company’ also changed with effect from 1 July 2019, with each of the threshold requirements doubling, so that a ‘large proprietary company’ is now a company that meets or passes at least two of the following thresholds:
- $50 million or more in consolidated revenue;
- $25 million or more in consolidated gross assets;
- 100 or more employees.[2]
More people can now make and receive a disclosure
Prior to 1 July 2019, a disclosure could only qualify for protection under the Act if it was made by a company officer, employee, supplier or contractor of the regulated entity. An ‘eligible whistleblower’ now includes:
- former officers, employees, suppliers and contractors (including paid and unpaid suppliers and contractors);
- an individual who is an associate of the company;[3] and
- relatives and dependants of officers, employees, suppliers and contractors.
The scope of to whom a disclosure can be made has also been expanded, so that ‘eligible recipients’ now include an officer, senior manager or auditor of a related body corporate.[4]
Where a qualifying disclosure has been made and the whistleblower has reasonable grounds to believe it is not being acted on, in certain circumstances they can make a ‘public interest disclosure’ to a politician or journalist.[5]
The scope of disclosable matters
Prior to 1 July 2019, a whistleblower could only qualify for protection where they had ‘reasonable grounds’ to suspect the company, an officer or an employee had contravened the Act, and they made a disclosure in good faith.
The new regime is significantly broader in scope. Whistleblowers may now be eligible for protection where they have ‘reasonable grounds’ to suspect that the information they disclose:
- ‘concerns misconduct, or an improper state of affairs or circumstances’ in relation to the regulated entity, a related body corporate; or
- indicates the regulated entity, an officer or employee, or related body corporate of the regulated entity, or an officer or employee of a related body corporate, has engaged in contravening conduct.[6]
The requirement to make a disclosure in ‘good faith’ has also been removed, with the effect that the motive of a whistleblower in making the disclosure is now not taken into account when determining whether the disclosure qualifies for protection.
‘Personal work-related grievances’ are specifically excluded from protection under the new regime, providing they do not concern victimisation of the whistleblower.[7]
Stronger whistleblower protections
The new regime extends the immunity that a whistleblower receives, by extending the pre-existing protection from any civil, criminal and contractual liability for making the disclosure to also include protection from administrative liability (including disciplinary action). A whistleblower that was involved in the misconduct cannot avail themselves of this protection.
The new regime also prohibits the information contained in a qualifying disclosure from being admitted in evidence against the discloser in criminal proceedings or in proceedings for the imposition of a penalty, other than proceedings in respect of the falsity of the information.
The Act now also permits and protects anonymous disclosures, bringing it into line with the anonymity protection that is afforded to public sector whistleblowers.[8]
Where an eligible recipient receives a qualifying disclosure from a whistleblower wishing to retain anonymity, it must not disclose any information that is likely to lead to the identification of the discloser. Therefore, where a discloser wishes to remain anonymous, any investigation undertaken as a consequence of the disclosure should be carefully managed to avoid an inadvertent breach of the confidentiality provisions under the new regime.
Consequences of non-compliance
Civil penalties apply for breaching the confidentiality of an eligible whistleblower’s identity or victimising the whistleblower (engaging in conduct that causes or threatens to cause detriment to the whistleblower). The maximum pecuniary penalty that a Court can order a person to pay for such a contravention is:
- for individuals, up to:
- $1.05 million (5,000 penalty units); or
- three times the amount of the benefit derived or detriment avoided because of the contravention,
whichever is higher.
- for companies, up to:
- $10.5 million (50,000 penalty units); or
- three times the amount of the benefit derived or detriment avoided;
- or 10% of the annual turnover (up to a cap of 2.5 million penalty units [$525 million]),
whichever is higher.
Corporations may also be fined up to $12,600 for failing to have a compliant Whistleblower Policy in place before 1 January 2020.
A person can be ordered to pay compensation to a whistleblower if they have victimised them because they believe or suspect the whistleblower has made, or proposes to make a disclosure. Under the new regime, the whistleblower only has the burden of adducing or pointing to evidence that suggests a reasonable possibility that they have been victimised. The burden of proof then shifts to the alleged victimiser to disprove the claim.[9] The difficulties in proving a ‘negative’ are obvious.
Where a person is sued by a whistleblower for victimisation, one of the factors the Court must have regard to in deciding whether to make a compensation order is whether the corporation ‘took reasonable precautions, and exercised due diligence, to avoid the detrimental conduct’.[10] This provides further impetus for corporations to consider having whistleblower policies that go above and beyond strict compliance with the Act, and take steps to ensure the policy is understood and implemented by their officers and employees.
Useful information
ASX-listed companies should consider the ASX Corporate Governance Principles and Recommendations, which include suggestions for the content of a whistleblower policy and which also make recommendations regarding the reporting of incidents to the company’s Board.
ASIC has published the following guidance for whistleblowers on their rights and protections and how ASIC handles their reports:
- Information Sheet 238 Whistleblower rights and protections (INFO 238)
- Information Sheet 239 How ASIC handles whistleblower reports (INFO 239)
Footnotes
[1] Those amendments arise from the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 (Cth), which substantially revise and expand PART 9.4AAA of the Act, and make consequential changes to section 9 of the Act.
[2] Reg. 1.0.02B of the Corporations Regulations 2001 (Cth).
[3] ‘associate’ is defined in sections 10 to 17 of the Act.
[4] Eligible recipients are listed at s 1317AAC of the Act.
[5] See s 1317AAD of the Act.
[6] As prescribed at s 1317AA.
[7] In accordance with the provisions of s 1317AADA of the Act.
[8] Eg, pursuant to the Public Interest Disclosure Act 2013 (Cth).
[9] Section 1317AD(2B).
[10] Section 1317AE(3).[/vc_column_text][/vc_column][/vc_row]
Disclaimer: The information published in this article is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.
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