Whistleblower Protection Reforms: A model for India and Australia

Australia has proposed a whistleblower protection model which can act as a blueprint for other common law countries, including India, which seek to enhance protections to those who blow the whistle on corporate misconduct and corruption

In my last article published on 18 May 2017, my colleague from Johnson Winter & Slattery, Tom Barnes, and I, argued the case for reforming whistleblower laws in Australia and India. Australia has now proposed a whistleblower protection model that can act as a blueprint for other common law countries, including India, who each look to enhance the protections to those who blow the whistle on corporate misconduct as a means to tackle the ever-present scourge of commercial crime, corruption and corporate illegality.

Australia's Whistleblower Protections Review

During 2017, a substantial review of Australia's whistleblower protection laws covering the private and not-for-profit sectors has been undertaken. In September 2017, the Parliamentary Joint Committee on Corporations and Financial Services (the Joint Committee) published its Whistleblower Protections Report (the Report). The Report was a result of several months of detailed examination by the Joint Committee of whistleblower protection laws throughout Australia. The Joint Committee received over 70 submissions from regulators, private lawyers, public lawyers, non-government organizations and individuals. Almost all of the submissions, bar one, called for substantial reform.

The Joint Committee found that across the private sector:

Whistleblower protections remain largely theoretical with little practical effect across sectors and across industries. This was due in large part to the near impossibility under current laws in Australia of:

• Protecting whistleblowers from reprisals (retaliatory action);
• Holding those responsible for reprisals to account;
• Effectively investigating alleged reprisals; and
• Whistleblowers being able to seek redress for reprisals.

The Joint Committee found significant inconsistencies existed not only between numerous Commonwealth public and private sector whistleblower laws but across different types of legislation that applied across different sectors. The Joint Committee also looked at the international initiatives to enhance whistleblower protections as part of global moves to target corruption. The report looked at numerous submissions which addressed the state of "corporate culture" within Australia, the perception of there being a poor corporate culture in Australia and rolling scandals that generate media and political commentary yet rarely result in any substantial reform. The importance of promoting an ethical culture of respecting those individuals who call out corporate misconduct and for action to be taken is as important in Australia as it is in India. The public in India, no less than the public in Australia, dislikes corporate misconduct and an attitude of "let's shoot the messenger" as that is easier than dealing with the substantive issue.

A Model for Enhanced Whistleblower Protections

The Joint Committee published a series of wide-ranging recommendations which set out a comprehensive framework to address the inadequacy of whistleblower protection laws in Australia and to ensure that those individuals who blow the whistle in relation to any allegations of illegality or improper behavior are themselves valued and respected. The model recommended by the Joint Committee included the following key features:

1. All private sector legislation for whistleblower protection should be included in a single act to ensure consistency across the private and notfor-profit sectors. This will promote a clearer framework for whistleblowers and business and be less of a regulatory burden than numerous laws covering different sectors with different requirements.
2. The definition of reportable wrongdoing and/or "disclosable conduct" should be broad, to capture the breach of any Commonwealth, State or Territory law or an industry code that has the force of law or is prescribed under a law. Any definition should not require a technical approach to defining what conduct is or is not disclosable.
3. The definition of who is a protected whistleblower needs to capture former as well as current employees, contractors and agents and those working under a former or current contract of service for supply of goods or services. In addition, there need to be appropriate protections in favor of the recipient of information so action can be taken on the complaint.
4. The threshold for protection should be consistent across the private and public sector and there should be no requirement that any whistleblower acts "in good faith". The motive of a whistleblower is irrelevant to the public interest in the disclosure of corporate misconduct. The focus should be on the veracity of the complaint, not upon the character of the complainant. Professor AJ Brown of Griffith University, Queensland and a leading expert on the subject, made the point in clear terms².

Motives are notoriously difficult to identify and may well change in the process of reporting, for example, when an internal disclosure is ignored or results in the worker suffering reprisals. Because it is such a subjective and openended requirement, the likely effect of a good faith test is negative – that workers simply choose not to report their suspicions about wrongdoing because they are unsure whether or how this test would be applied to their circumstances.

The proper tests are simply whether the disclosure is based on an honest belief, on reasonable grounds, that the information shows or tends to show defined wrongdoing.

5. In terms of how disclosable conduct should be reported, internally and/or externally, the Joint Committee

   recommended a tiered approach consisting of³:

a. internal disclosure within an organization, which is safe and appropriate (including to a nominated hotline);

b. regulatory disclosure to the appropriate body or agency wherever a regulator exists to receive such complaints and an internal disclosure was:

i. unsafe or unviable;

ii.inappropriate as the organization was unlikely to act on it; and

iii.was made but did not lead to satisfactory action; and

c. external disclosure where:

i. there is a risk of serious harm or death; or

ii. a disclosure in the public interest has been made to an Australian law enforcement agency and after a reasonable length of time, no action has been taken by the agency.

6. Where there was any external reporting to a third party, those communications should be protected.
7. There should be provisions for and protections in favor of any individual whistleblower who sought to make an anonymous disclosure, subject to orders of a court that might be made in terms of the giving of admissible evidence. The Joint Committee recognized that the confidentiality of disclosures and of the identity of a whistleblower were paramount and anonymous reporting would bring the private sector in line with public sector protections⁴.
8. There should be a comprehensive set of remedies, both civil and criminal, for any retaliation against a whistleblower, with sanctions ranging from significant fines to terms of imprisonment. The Joint Committee considered that⁵:

Remedies, including compensation, should be determined by the level of detriment suffered by the whistleblower and that a whistleblower should be fully reassured for simply doing the right thing, without needing to have a financial motive.

In this context, the Joint Committee believed there should be a separation of the grounds for criminal and civil liability, distinguishing between the criminal offense of reprisal and the wide range of circumstances that might give rise to civil remedies for detrimental outcomes⁶.

9. A reward system should be introduced in Australia. The proposed model would permit the Whistleblower

   Protection Agency (of which, see below), when imposing a penalty on a wrongdoer, to allocate a "reward" to any relevant whistleblower as a proportion of the penalty imposed on the employer. The range of a reward would be determined by a court (or other body), taking into account identified factors such as the extent to which the disclosure led to the imposed penalty, the timeliness of the disclosure, the extent of internal reporting lines, whether a disclosure had been made internally and/or externally with a lack of adequate response, the extent of any compensation received by the whistleblower and the overall conduct of the whistleblower. A cap on the reward, together with the relevant criteria, would mitigate the perceived negative consequences of a USstyle bounty system. On a reward scheme, the Joint Committee said this⁷:

A reward system would motivate whistleblowers to come forward with high quality information. This information would otherwise be difficult to obtain. The committee considers that a reward system will motivate companies to improve internal whistleblower reporting systems and to deal more proactively with illegal behavior.

10. An independent Whistleblower Protection Authority should be established that had priority for the support of whistleblowers, a statutory power to investigate reprisals, the ability to undertake administrative and/or civil proceedings and overall oversight of implementation of the statutory whistleblower regime. The current approach for the Australian public sector was fragmented. In the private sector, ASIC (as the corporate regulator) has been criticized in the media as consistently failing to respond to whistleblowers. Almost all submissions to the Joint Committee, including from ASIC, recommended the creation of an independent oversight agency for whistleblowers⁸. The Joint Committee recognized, with some concern, what it described as the "manifest and systemic power imbalance"⁹ between a whistleblower and an agency, a department or an employer where any dispute arose about a disclosure.
11. The Joint Committee considered that a Whistleblower Protection Agency should be empowered to exercise the following functions¹⁰:

a. Act as a clearing house for whistleblowers making public interest disclosures;

b. Provide advice and assistance to whistleblowers; and

c. Support and protect whistleblowers, including by:

i. Investigating non-criminal reprisals in public and private sectors; and

ii. Taking non-criminal matters to court on behalf of whistleblowers or on the Agency's own motion to remedy reprisals or detrimental outcomes.

12. The Joint Committee saw several benefits in having one independent body to focus on whistleblowers. These benefits included¹¹:

a. Having independent investigations of alleged reprisal activity across public and private sectors;

b. Avoid reprisal investigations being undertaken by the agency whose conduct is under review;

c. Provide a consistent approach across public and private sectors;

d. Alleviate the lack of specific requirements under the Corporations Act to investigate reprisals; and

e. To allow ASIC and other regulators to investigate serious misconduct revealed by the whistleblower.

13. The Whistleblower Protection Authority should submit annual reports to Parliament covering both the public and private sectors in a consistent format to facilitate comparison and an assessment of the effectiveness of whistleblower protection laws across both sectors.

Reflections on the Whistleblower Protections Model

For many years, Australia has looked at whistleblowers but has done very little to protect them. The Whistleblower Protections Report is the most comprehensive review of the laws covering the public and private sectors and finally and unambiguously, lays bare the complete inadequacy of whistleblower protections in the private sector in Australia. While India has the Whistleblowers Protection Act, 2014, which provides some protections in relation to the disclosure of corruption, wilfull misuse of power or discretion or a criminal offence by a public servant, Indian law is silent on any protections for a whistleblower in the private sector. An employee or any individual is alone when a private sector whistle is blown. This is not and indeed, cannot be healthy in India's campaign to target endemic corruption (in the public or private sectors). The absence of any protections in India in the private sector operate as a real disincentive to any disclosure and in turn, promote an unhealthy sense of entitlement and a lack of transparency and accountability upon those who seek to act improperly and/or illegally. According to Deloitte in India¹²:

There are enough instances of retaliation against whistleblowers in corporations and government-driven organizations including some where whistleblowers are known to have lost their lives in their fight against fraud and corruption.

The Australian Government as much as the Indian Government, promote the virtues of tackling corruption and corporate misconduct. Empowering and properly protecting whistleblowers goes a long way to achieving those goals consistent with the increasing demand of society to stamp out corporate misconduct.

Footnote:
1 Partner, Johnson Winter & Slattery, Sydney Australia, ©2017. The opinions in this article are those of the author and do not necessarily represent the views of his firm or its clients.
2 Joint Committee, Whistleblower Protections Report, Canberra, September 2017 at page 77.
3 Whistleblower Protections Report, pages 89 to 98.
4 See section 28(2) Public Interest Disclosure Act 2013 (Cth).
5 Whistleblower Protections Report at page 113.
6 Whistleblower Protections Report at page 121.
7 Whistleblower Protections Report at page 138.
8 Whistleblower Protections Report at page 143.
9 Whistleblower Protections Report at page 155.
10 Whistleblower Protections Report at page 157.
11 Whistleblower Protections Report at page 156.
12 https://www2.deloitte.com/in/en/pages/finance/articles/whistleblower-protection-in-india.html.

Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.