The new Whistleblower and Duty to Report laws in Australia pose substantial risk to companies and individuals.
Thynne + Macartney touch on some of these risks and how they can be dealt with.
New Whistleblower Laws
Australia introduced new national whistleblower laws on 1 July 2019. They are contained in the Corporations Act 2001 and the Taxation Administration Act 1953. These laws look to promote ethical whistleblowing, discourage corporate crime, and to protect the whistleblower. There are substantial penalties and civil liability for business who breach these laws, especially if they fail to properly protect a whistleblower or have a written policy in place.
Right to be a whistleblower
A “whistleblower” is a person who discloses information about a person or a company to expose misconduct (eg tax fraud, corruption or environmental damage) or an improper state of affairs or circumstances (eg failure to properly report PAYG or GST) so that the wrongdoing can be stopped or prevented from reoccurring.
Whistleblowers can include (but are not limited to) current and former:
- Company officers and employees (internal whistleblowers), and
- Contractors & suppliers (whether paid or unpaid eg external company accountant) (supply whistleblowers), and
- Associates, spouses and relatives of internal and supply whistleblowers (external whilstleblowers).
Because they often have a very close relationship with a business, whistleblowers will know of conduct and information which authorities are unaware of. Whistleblowers therefore play a critical role in identifying and calling out misconduct and harm to consumers and the community. To encourage whistleblowers to come forward, these laws give whistleblowers various legal rights and protections.
Famous Whistleblowers – Tobacco and Deep Throat
In Australia, we do not have a long history of whistleblowing. One example however is Christopher Dale,
formerly a partner with Clayton Utz Lawyers. Dale revealed the British American Tobacco (BAT) Document Retention Policy, which required widespread destruction of scientific reports after a certain time period. The Policy itself was specifically designed for BAT by Clayton Utz Lawyers to destroy potentially dangerous documents — documents that could be used against the BAT Group in tobacco illness related litigation.
Perhaps the most famous whistleblower however is Mark Felt, who used the alias “Deep Throat”. He was the Associate Director of the FBI, the number-two job in the FBI. He leaked information about President Richard Nixon’s involvement in the Watergate scandal, which initially lead to the indictment of the president. The would eventually lead to the resignation of the president, and prison terms for White House Chief of Staff H. R. Haldeman and presidential adviser John Ehrlichman.
Which businesses are affected? Everyone really
The laws apply when the organisation the whistleblower discloses information about (ie not necessarily the whistleblower’s employer) is either:
- A company (so basically all businesses);
- A bank;
- A provider of general insurance or life insurance;
- A superannuation entity or a superannuation trustee, or
- An incorporated association or other body corporate that is a trading or financial corporation.
Substantial penalties and civil liability to pay compensation applies to anyone who breaches the laws.
1 January 2020 – written policy offence
Public companies (including any ‘public company limited by guarantee’, such as many not-for-profits and charities) and large proprietary companies, including foreign companies, were required to have a written whistleblowing policy in place by 1 January 2020. There are severe penalties if they did not have a written policy in place
Even if your business did not have to have a policy in writing by 1 January 2020, it will be difficult to understand and comply with the new laws if you do not have a written policy. All businesses should review their whistleblowing policies and processes now.
Employment and workplace grievances generally excluded
The protections do not generally extend to personal employment or workplace grievances. If however the disclosure relates to systemic issues or involves detrimental conduct to the whistleblower, the protections will apply. A person would also be protected in relation to a disclosure of a work-related grievance if it is made to a lawyer for legal advice or representation in relation to the whistleblower provisions.
Whistleblowers can make disclosures which will be subject to the protections to officers or senior managers of the company, or a person authorised by the company, amongst others. The disclosures can be made anonymously, but in all cases, the whistleblower must have reasonable grounds for their concern, that is, they must have objectively reasonable grounds to suspect wrongdoing.
What offences are there for the businesses and protections for Whistleblowers?
Whistleblowers who wish to remain anonymous must not be identified, and must not suffer any detriment for having made the disclosure.
- Companies may be liable to a civil penalty of the greater of:
- $10.5 million, or
- if a Court can determine the benefit derived or detriment avoided because of the contravention, three times that amount, or
- 10% of the annual turnover of the entity up to a maximum of $525 million.
- For an individual they will be the greater of:
- $1.05 million, or
- if a Court can determine the benefit derived or detriment avoided, three times that amount.
- The courts are empowered to make orders for compensation.
- Failure to comply with the confidentiality and detrimental conduct provisions will also be criminal offences, punishable by imprisonment and / or fines.
Duty to report – NOCLAR and New South Wales Crimes Act
The general rule is that there is no legal requirement to contact authorities about another person breaking the law. Specific exceptions include workplace health and safety accident reporting and anti-money laundering reporting by banks to AUSTRAC.
Under the accounting industry’s ethical conduct standards, individual accountants may have an obligation to report their clients or employer for non-compliance with laws and regulations’ (NOCLAR) eg wage and tax theft, financial and creditor abuse, money laundering, insolvent trading, and director misconduct.
In addition, under s 316 NSW Crimes Act:
- An offence is committed by A, if:
- A knows or believes that a “serious indictable offence” has been committed by B;
- A knows or believes that they have information that might be of material assistance in securing the apprehension, prosecution or conviction of B;
- A fails without reasonable excuse to bring that information to the attention of the NSW Police or other appropriate authority, and
- A’s profession vocation or calling is not listed in the regulations as one which gets protection from this section. Credit officers, managers, accountants and journalists are not listed.
- Up to five years jail can be imposed.
These new Whistleblower and Duty to Report laws in Australia pose substantial risk for businesses.
- Implement a compliant whistleblower policy, or risk severe penalties;
- Test their whistleblower policies and processes to ensure they provide robust avenues for employees to report improper conduct and that their anonymity can be preserved when doing so;
- Provide training for directors, senior managers and nominated staff to receive and respond to whistleblowing disclosures, and
- Consider whether they or their employees are exposed for failure to report offences under either NOCLAR or other laws.
Being able to display effective policies and procedures will assist companies operating in Australia to resist regulatory penalties and compensation claims implemented by the new legislation.
Author: Peter Mills (former Special Counsel)