The draft Whist­leb­lower Act: what com­pa­nies need to keep in mind

At the start of April, the Federal Minis­try of Jus­ti­ce publis­hed a bill for an “Act for bet­ter pro­tec­tion of whistleblowers.”

The bill was based on Direc­ti­ve (EU) 2019/1937 (PDF) of 23 Octo­ber 2019 “on the pro­tec­tion of per­sons who report breaches of Uni­on law.”

The Direc­ti­ve set a dead­line of 17 Decem­ber 2021 for imple­men­ta­ti­on of the rele­vant pro­vi­si­ons into natio­nal law. Sin­ce Ger­man law­ma­kers fai­led to imple­ment the Direc­ti­ve befo­re the dead­line expi­red, a for­mal infrin­ge­ment pro­ce­du­re was initia­ted against Ger­ma­ny in Febru­a­ry 2022.

I.    What is it about?

Essen­ti­al­ly, the bill aims to pro­tect indi­vi­du­als (“whist­leb­lo­wers”) who publish infor­ma­ti­on of gre­at public impor­t­ance which was obtai­ned from a secret or pro­tec­ted source, par­ti­cu­lar­ly infor­ma­ti­on obtai­ned from an employ­ment relationship.

It pri­ma­ri­ly con­cerns infor­ma­ti­on rela­ting to cri­mi­nal acts, admi­nis­tra­ti­ve offen­ses and other legal vio­la­ti­ons in com­pa­nies or public authorities.

Under the cur­rent legal situa­ti­on, pro­tec­tions for such whist­leb­lo­wers are very incomplete.

Cur­rent prac­ti­ce in Ger­ma­ny is shaped by the case law of the civil and labor courts, which empha­si­ze the need to balan­ce the inte­rests of employees against tho­se of employers.

The pur­po­se of crea­ting the­se pro­tec­tions is to pro­vi­de legal cer­tain­ty for whist­leb­lo­wers and ensu­re that they will not be expo­sed to reta­lia­ti­on, such as ter­mi­na­ti­on, disci­pli­na­ry mea­su­res, discri­mi­na­ti­on or bullying.

II.    Who is affected?

The pro­po­sed law will app­ly to com­pa­nies with more than 250 employees, and com­pa­nies with more than 50 employees as of 2023, as well as muni­ci­pa­li­ties with more than 10,000 resi­dents.
The per­so­nal scope of the legis­la­ti­on is broad and inclu­des not only employees and public offi­cials, but also e.g. self-employed per­sons, share­hol­ders and peop­le who had know­ledge of vio­la­ti­ons befo­re ent­e­ring into the employ­ment relationship.

III.    Which pro­vi­si­ons will be included?

In terms of the mate­ri­al scope of the bill, the pro­po­sed pro­tec­tions go bey­ond the mini­mum requi­re­ments set in the EU Direc­ti­ve. For examp­le, the law will cover not only vio­la­ti­ons of EU law, but also vio­la­ti­ons of natio­nal law. An exten­si­ve repor­ting sys­tem will be set up to recei­ve and pro­cess infor­ma­ti­on from whist­leb­lo­wers. This sys­tem will have a dual struc­tu­re, con­sis­ting of an inter­nal repor­ting chan­nel wit­hin the com­pa­ny and an exter­nal repor­ting body at the federal level; whist­leb­lo­wers will have the right to choo­se bet­ween the­se two repor­ting channels.

Spe­ci­fi­cal­ly, com­pa­nies can estab­lish such a sys­tem by intro­du­cing an elec­tro­nic repor­ting sys­tem, inte­gra­ting whist­leb­lowing into their com­pli­an­ce depart­ment or appoin­ting a com­pa­ny ombudsperson.

The exter­nal repor­ting bodies at the federal level are the Federal Office of Jus­ti­ce and, in cases which fall under their spe­ci­fic juris­dic­tion, the finan­cial ser­vices regu­la­tors and the Federal Car­tel Office.

Whist­leb­lo­wers may only turn to the public if they recei­ve no respon­se from the repor­ting body wit­hin three mon­ths or if the­re are rea­son­ab­le grounds for assuming a “dan­ger to the public inte­rest.” The repor­ting bodies are gene­ral­ly requi­red to take action, except in the case of anony­mous reports.Moreover, the scope of this pro­vi­si­on exclu­des e.g. infor­ma­ti­on rela­ting to natio­nal secu­ri­ty, defen­se con­tracts or clas­si­fied infor­ma­ti­on, as well as tho­se which are sub­ject to medi­cal pri­va­cy or attorney-client privilege.

Vio­la­ti­ons of the law are to be sub­ject to penal­ty as admi­nis­tra­ti­ve offenses.

Whist­leb­lo­wers, com­pa­nies and public aut­ho­ri­ties may also be sub­ject to civil lia­bi­li­ty. Whist­leb­lo­wers who suf­fer reta­lia­ti­on becau­se of the infor­ma­ti­on they pro­vi­de may be able to assert claims for the resul­ting dama­ges. At the same time, whist­leb­lo­wers may be held liable for fal­se reports, if they act inten­tio­nal­ly or with gross negligence.

IV.    Out­look

Respon­ses to the pro­po­sed bill may be sub­mit­ted to the Minis­try of Jus­ti­ce through 11 May 2022, so that a cer­tain amount of chan­ges can be expec­ted. But we expect the legis­la­ti­ve pro­cess to advan­ce rapidly from this point on, and the new law should take effect in the autumn.

Com­pa­nies should also keep in mind that the Direc­ti­ve alrea­dy has a cer­tain amount of legal vali­di­ty, even though it has yet to be imple­men­ted into Ger­man law.

It is true that the Direc­ti­ve has no direct impact on the pri­va­te sec­tor, so that com­pa­nies are not yet requi­red to set up inter­nal repor­ting bodies and whist­leb­lo­wers do not yet have a direct claim against the com­pa­ny if they face retaliation.

Howe­ver, the Direc­ti­ve could still have an indi­rect impact, due to the fact that the courts are requi­red to inter­pret Ger­man law in con­for­mance with the Direc­ti­ve ever sin­ce the dead­line for imple­men­ta­ti­on expi­red. Accord­in­gly, we can­not rule out the pos­si­bi­li­ty that the courts will be gui­ded by the Directive’s pro­vi­si­ons in their inter­pre­ta­ti­on of unde­fi­ned legal terms. Affec­ted com­pa­nies should the­re­fo­re seek to imple­ment a whist­leb­lower sys­tem in a time­ly manner.

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