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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