By Andrew Crean, Partner, Daniel White, Partner and Alison Robley, Paralegal
The reforms, which are expected to take effect on 1 July 2019, highlight an increased community scrutiny of corporate conduct, with the public expecting company directors and other senior officers of companies to ensure the corporations they control are ‘good citizens’, not just legally compliant.
Specifically, the reforms consolidate and broaden whistleblower protections within the corporate and financial sectors, and extend that protection to whistleblowers who disclose breaches of tax laws and tax avoidance, with the underlying policy intent being to ‘shine a light’ on corporate misconduct, both of corporations and individuals.
The reforms are of particular relevance to public companies and large private companies, who will need to set up internal whistleblower policies (or review their existing policies and procedures) and ensure compliance with the new laws.
Increased and extended whistleblower protections
The Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2019 (Cth) (Bill) specifically provides that it comes into effect from the first of 1 January, 1 April, 1 July or 1 October: whichever occurs 3 months after Royal Assent is given (consequently, this is most likely to be 1 July 2019) (commencement).
From commencement, the new laws will impose substantial compliance obligations on public companies, large proprietary companies and other entities captured by the reforms. Specifically, the Bill:
- Consolidates and broadens whistleblower protection regimes under Commonwealth legislation, including:
- Corporations Act 2001;
- Taxation Administration Act 1953;
- Banking Act 1959;
- Insurance Act 1973;
- Life Insurance Act 1995; and
- Superannuation Industry (Supervision) Act 1993,
- expands existing remedies for whistleblowers; and
- extends a whistleblower protection regime for whistleblowers who disclose breaches of tax laws.
- ‘relevant disclosures’ will be protected from commencement, but those disclosures can relate to misconduct that occurred before commencement.
- Remedies and compensation may also apply retrospectively (i.e. to disclosures that were made prior to commencement).
- Disclosure of personal work-related grievances is excluded from the protections (section 1317AADA, Corporations Act).
The key enhancements introduced by the Bill are:
- Requirement for corporations to have mandatory whistleblower policies, with specific content (section 1317AI, Corporations Act);
- Protection of disclosures about a wide range of misconduct, including the existence of an ‘improper state of affairs’ (sections 1317AA and 1317AAD, Corporations Act; section 14ZZT(2)(c), Taxation Administration Act);
- Protection of a greater range of people (‘eligible whistleblower’) who make protected disclosures;
- Protection of eligible whistleblowers on the basis that they make protected disclosures to ‘eligible recipients’ of the disclosure. These eligible recipients include officers, senior managers, auditors, actuaries or other authorised persons of corporations (sections 1317AA and 1317AAC, Corporations Act; section 14ZZV, Taxation Administration Act);
- Permits anonymous disclosures;
- Provides for protected ’emergency’ or ‘public interest’ disclosures to be made to the media or members of Parliament, where (section 1317AAD, Corporations Act):
- at least 90 days have passed since a protected disclosure has been made and not been acted upon; or
- there will be substantial and imminent danger to someone’s health or safety;
- Eliminates the requirement for the whistleblower to be acting in good faith in order to obtain the benefit of the protections. The whistleblower need only have reasonable grounds to suspect misconduct or an ‘improper state of affairs or circumstances’ (sections 1317AA and 1317AAD, Corporations Act).
- Expands the protections and remedies available to whistleblowers who suffer reprisals for making protected disclosures, and improves access to compensation (sections 1317AD AND 1317AE, Corporations Act; sections 14ZZZ, 14ZZZA, 14ZZZE, Taxation Administration Act);
- If a whistleblower has established they have suffered a detriment as a result of making a protected disclosure, the onus of proof shifts to the party responsible for the misconduct on the question of compensation (section 1317AD, Corporations Act; section 14ZZZ, Taxation Administration Act); and
- Increased penalties for victimization of whistleblowers and breaches of the obligations of confidentiality (sections 1317E(1) and 1317G(1G), 1317AC(1), (2) or (3), Corporations Act; section 14ZZY, Taxation Administration Act).
Expanded penalties for contravention
Set out below is a summary of the applicable penalties for companies (and, in some cases, individuals) where the new laws are contravened:
|Civil Penalty provisions (Corporations Act)||Under the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2019 (which was passed by both houses on 18 February 2019 and due to come into effect the day after Royal Assent (Penalty Bill), the maximum penalties will be:
|Criminal offences (generally Corporations Act and Taxation Administration Act)|
|Breach of confidentiality of identity of whistleblower||
|Victimisation or threatened victimisation of whistleblower||
|Failure to have whistleblower policy (Corporations Act only)||The new Penalty Bill does not impose criminal offences for this breach under the Corporations Act|
Prior to commencement, public companies, large proprietary companies and other entities to whom the new laws apply should have a compliant whistleblower policy in place (section 1317AI, Corporations Act). That policy will need to set out the following information:
- Protections available to whistleblowers;
- Persons and/or organisations to whom protected disclosures may be made, and how they can be made;
- How the company will support and protect whistleblowers;
- Investigation procedures for protected disclosures;
- Company’s processes and procedures for according natural justice to employees who are mentioned in, or who are the subject of, protected disclosures;
- The means by which the whistleblower policy is to be made available to officers and employees of the company; and
- Any other matters prescribed by the regulations.
For those entities with a whistleblower policy in place, it should be reviewed to ensure that procedures for handling ‘protected disclosures’ are appropriate and compliant in the context of the reforms, particularly given the stringent requirements in regard to confidentiality and disclosure during the investigation process. Further, ‘eligible recipients’, which may encompass a wide group of senior managers, will need to receive specific training to ensure that they can recognise a protected disclosure and how to deal with it when they receive one.
 Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2019 (Cth)
 This will only apply to prior disclosures that would have been protected had the Bill been in force at the time they were disclosed.