When a person within an organisation discloses wrongdoing by that organisation, they are providing a valuable public service. Whistleblowers are often uniquely placed to reveal immoral or unlawful behaviour that would otherwise go undetected. Whistleblowing is a very powerful tool for fraud prevention and the promotion of open and transparent corporate governance.
Usually, in return for this valuable public service, whistleblowers can expect ostracism, isolation, disciplinary action, dismissal and punitive legal action. In Australia, laws which are supposed to protect whistleblowers and encourage then to come forward with valuable disclosures are fragmentary and largely ineffective. This is in the process of changing and if the recommendations of a recent parliamentary inquiry are adopted, the reforms to whistleblower protection laws in this country could be far more radical than most commentators have previously anticipated.
The current Whistleblower Protection regime in Australia
Broadly speaking, whistleblower protection regimes in this country make it unlawful to reveal a whistleblower’s identity, or to take detrimental action against them for disclosing information, provided that the information disclosed falls within prescribed categories and is reported in a prescribed way. Furthermore, in theory, whistleblowers can claim compensation for losses they suffer as a result of such disclosure or detrimental action.
One major problem with whistleblower protection in Australia is that the laws relating to it are fragmented and inconsistent. The whistleblower protection regime under the Corporations Act bears no resemblance to the scheme established for Commonwealth government departments and agencies by the Public Interest Disclosure Act 2013 (Cth) (PIDA), which in turn is substantially different from State government legislation bearing the same name, such as WA’s Public Interest Disclosure Act 2003. None of these regimes directly apply to incorporated bodies governed by the Associations Incorporation Act 2015.
Apart from being inconsistent, whistleblower protection laws in themselves are not particularly effective. The protections set out under the Corporations Act are contained in Part 9.4AAA, which is only five sections long. Even the far longer and more prescriptive PIDA, suffers from the fact that ultimately it is up to whistleblowers themselves to incur the costs, and much of the risk, of availing themselves of those protections if they end up in court. For this reason the protections and remedies available to whistleblowers are largely untested and theoretical – it is difficult to find any decided cases where these provisions have been used successfully, or at all.
Reform of the Whistleblower Protection regime
Whistleblower protection reform has been debated in Australia for many years, but it took a big step forward late last year with the passage of amendments to the Fair Work (Registered Organisations) Act 2009 (FWRO Act).
Among other things, these amendments provided for substantial new protections for whistleblowers reporting misconduct by employer organisations and unions. A reluctant Senate cross bench agreed to pass the amendments on the condition that similar reforms would be made to whistleblower reforms in the broader public and private sector.
To this end, in November 2016 the Parliamentary Joint Committee on Corporations and Financial Services commenced an inquiry into whistleblower protection laws in Australia, which handed down its report earlier this month. It makes for very interesting reading, and if the Committee’s recommendations are accepted, the nature and extent of whistleblower protection reform in Australia will be far greater than could have been anticipated this time last year, when the Government was battling the Senate about the FWRO Act.
The shape of things to come
Some of the Committee’s recommendations are predictable. In many cases the Committee has recommended that, in order to make them more consistent, whistleblower protection provisions in the Corporations Act and PIDA be aligned with the regime that now exists under the FWRO Act. This will not be a huge leap for PIDA, which already has elaborate provisions for receiving and investigating disclosures, keeping whistleblowers informed of the progress of investigations and making Commonwealth public authorities accountable for maintaining an internal whistleblower protection regime. It would be an enormous change for public and private companies governed by the Corporations Act, which currently contains none of these things – you can only fit so much into 5 sections.
However some of the Committee’s recommendations are more radical and two of those recommendations in particular would profoundly change Australia’s whistleblower protection laws if they were implemented.
A Whistleblower Protection Authority?
The first such recommendation is the establishment of a new entity for the protection of whistleblowers; the Committee’s working title for this new creature is the “Whistleblower Protection Authority” (WPA).
According to the Committee, the WPA would be a one stop shop for whistleblower protection. It would have the power to receive and investigate complaints from throughout the public and private sectors. Crucially, it would also provide direct advice and assistance to whistleblowers, such as taking on cases on behalf of whistleblowers, to remedy reprisals or detriments caused to whistleblowers as a result of their disclosures.
However the idea of an independent whistleblowing authority is not new and there would still be a lot of work to do, in order to develop the committee’s recommendation into a workable body which could operate across all sectors and levels of government.
Rewards for Whistleblowers!
The other potential game changer would be the Committee’s recommendations for rewarding whistleblowers. This has been a hotly debated issue in Australia for some years.
Opponents of a reward system usually point to the perceived disadvantages of the system that currently operates in the United States, where whistleblowers can be awarded an amount equal to 10% to 30% of penalties imposed from prosecutions that arise from their disclosure. The Committee was told that such a system could create perverse and counterproductive financial incentives for whistleblowers, particularly in the public sector where whistleblowers might have a duty to make the disclosure in any event. If such a system was to be introduced in Australia, it would have to take into account the far lower penalties that are usually imposed by Australian Courts.
Nonetheless, the Committee has recommended that whistleblowers should be in line for a reward if their disclosure results in the imposition of a penalty, with the amount to be determined at the complete discretion of the WPA or some other law enforcement agency.
Furthermore, the Committee has recognised that the concept of “compensation” for whistleblowers should be considerably expanded. A whistleblower who is outed and then sacked will often lose far more than a couple of months’ salary; their earning capacity can be compromised for years, and the non-financial damage caused by victimisation and harassment during and after their employment can be profound. Even without a reward, the monetary payments to whistleblowers could be substantial if compensation is viewed in this light.
A system for rewarding whistleblowers will not by itself cure Australia’s whistleblower protection regime. A Whistleblower Protection Authority would be a big part of such a cure, but the Committee’s report provides only a bare outline of how such a body might work.
Even if the Committee’s more radical proposals do not ultimately come to pass, its report foreshadows some substantial changes to Australia’s whistleblower protection laws, particularly for in the private sector.
If Australian companies are required to comply with the laws similar to those that already apply to registered organisations under the FWRO Act, the cost of compliance could be very high indeed. However the benefits of an effective whistleblowing protection programme are also substantial. If an organisation has effective internal mechanisms for people to ventilate well-founded concerns about what is going on within an organisation and to address those concerns, adverse outcomes can be minimised or avoided altogether.
The information published in this paper 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.