Whistleblower reforms - an update

At a glance

On 23 October 2017, the Government released for public consultation, an exposure draft of legislation designed to implement significant reforms to Australia's whistleblower regime for the corporate, financial and credit sectors. If passed, the reforms, which expand the kinds of disclosures and categories of people able to receive protection, protect whistleblower anonymity, mandate internal whistleblower policies, and make it easier for victimised whistleblowers to receive compensation, will apply from 1 July 2018.

Background

The Treasury Laws Amendment (Whistleblowers) Bill 2017 (the Draft Bill) reflects a 2016 Budget commitment to harmonise corporate sector whistleblower provisions with those existing in the public sector. It follows public consultation on a corporate and tax whistleblowing paper released by the Government in late 2016. That consultation process overlapped with the work of the Joint Parliamentary Committee on Corporations and Financial Services (Committee) on whistleblower protections which, after receiving submissions and conducting public hearings, made a series of recommendations for reform in a report issued on 14 September 2017 (Report). See our briefing paper for more on the Report.

The Draft Bill anticipated a number of the recommendations in the Report, but includes some amendments not dealt with in those recommendations. There are also a number of important recommendations in the Report not addressed by the Draft Bill, although the Government notes ongoing consideration of both the Report and the Draft Bill through an expert advisory panel established in late September 2017 (the Expert Panel).

Key reforms proposed

Key features of the amendments proposed by the Draft Bill, all of which were recommended in the Report (sometimes in slightly different terms), include:

  • consolidating, in the Corporations Act 2001 (Cth) (Corporations Act), the whistleblower protections currently spread across that Act and the Banking Act 1959 (Cth), the Insurance Act 1973 (Cth), the Life Insurance Act 1995 (Cth) and the Superannuation Industry (Supervision) Act 1993 (Cth).
  • expanding the type of conduct covered by whistleblower protections to include conduct that:
    • extends beyond breaches of the Corporations Act or the Australian Securities and Investments Commission Act 2001 (Cth), to civil breaches of other specified Commonwealth laws (such as those listed above);
    • involves offences against any other law of the Commonwealth that is punishable by imprisonment for a period of 12 months or more; or
    • represents a danger to the public or to the financial system.
  • broadening the categories of people eligible for whistleblower protections to include former as well as current officers, employees, contractors, suppliers and associates to the whistleblower entity; and spouses, children or dependants of any of these individuals. Trustees, custodians and investment managers of superannuation entities are also covered. However, the recommendation in the Report that protection extend to people in the whistleblower's management chain has not been taken up.
  • removing the requirement that whistleblowers make disclosures in 'good faith,' instead requiring only that whistleblowers have 'reasonable grounds to suspect' that the information disclosed indicates wrongdoing.
  • protecting anonymous disclosures, and prohibiting the disclosure of a whistleblower's identity or of information likely to lead to their identification (with the exception of disclosures between regulators or where consented to by the discloser).
  • allowing whistleblowers to make protected disclosures to members of parliament and journalists in limited circumstances, where a whistleblower's disclosure has not been acted upon by a regulator after a reasonable period and the whistleblower has reasonable grounds to believe that there is imminent risk of serious harm or danger to public health or safety, or to the financial system if their information is not acted on immediately.
  • improving compensation arrangements and protections against retaliation, including protecting victims seeking compensation from the costs of court proceedings (except in limited circumstances), making companies liable for the actions of officers and employees who threaten whistleblowers, and removing the requirement for victimisers to have actual knowledge of a disclosure.

The Draft Bill also includes proposed amendments which were the subject of submissions received by the Committee but not ultimately recommended by the Report:

  • requiring public companies and large proprietary companies to have a readily available whistleblower policy, with information about the protections available to whistleblowers, and how the company will ensure fair treatment of whistleblowers. If the Draft Bill becomes law, public companies and large proprietary companies will be required to have such policies in place from 1 January 2019, or risk facing penalties.
  • reversing the onus of proof where whistleblowers claim compensation for damage suffered from victimisation. Once a claimant shows damage because of victimising conduct, the onus is on the other party to prove that a reason for the conduct was not a belief or suspicion that the claimant made, may have made, proposed to make or could make a protected disclosure.

The Government has simultaneously released proposed amendments to the Taxation Administration Act 1953 (Cth), dealing with tax whistleblowers, which are broadly consistent with the proposed Corporation Act reforms.

Omissions from the Draft Bill

Notable omissions from the Draft Bill which were recommended by the Report include the controversial reward system for whistleblowers, obligations on regulators to keep whistleblowers informed about actions taken on their disclosures, and the establishment of a Whistleblower Protection Authority to support whistleblowers.

However, these may still be implemented - the explanatory notes to the Draft Bill, the consultation process and the work being conducted by the Expert Panel leaves the door open for further legislative reforms.

What's next

The consultation period for stakeholders to comment on the Draft Bill is due to close on 3 November 2017. Following consideration of the Expert Panel's advice and consultation feedback, the Government intends to introduce draft legislation into Parliament in the final sitting week of the year. The current deadline for a parliamentary vote on the legislation is 30 June 2018 and the Draft Bill is intended to commence from 1 July 2018.

In the meantime, public and large proprietary companies in particular should look at whether they have in place internal whistleblowing policies which are likely to meet the requirements of the Draft Bill, and which cater for the expanded whistleblower protections contemplated by that Bill. Additionally, a key consideration is having in place systems and processes to make sure that internal investigations based on whistleblower disclosures take place in a way congruent with the reformed protections - for example, protecting the identity of anonymous whistleblowers, or managing for potential protected disclosures being made to members of parliament or to journalists.

If you'd like our assistance in reviewing internal whistleblowing policies or processes in light of these potential reforms, please contact Rani John or William Thompson.