The new EU Whistleblower Protection Directive has now been approved. This approval means that new laws have been passed to establish EU-wide rules that will protect whistleblowers who report breaches of EU law. Below is an update to our previous post on the EU Whistleblower Protection Directive, as well as WhistleB's practical advice for what organisations can start to do already now. The article answers the following questions:
- What does the new EU Whistleblower Protection Directive mean in summary?
- Which types of organisation will be affected?
- How does the new law impact the procedures for whistleblowing and follow-up of whistleblowing reports?
- What is the deadline for complying?
- What obligations does the EU Whistleblower Protection Directive place on organisations?
- What can organisations start doing today in preparation?
What does the new EU Whistleblower Protection Directive mean in summary?
In its factsheet on whistleblower protection, the European Commission's Directorate-General for Justice and Consumers states: "The new law will establish safe channels for reporting both within an organisation and to public authorities. It will also protect whistleblowers against dismissal, demotion and other forms of retaliation and require national authorities to inform citizens and provide training for public authorities on how to deal with whistleblowers."
The EU Whistleblower Protection Directive will introduce sanctions on retaliation against whistleblowers. The new law protects whistleblowers from liability related to reporting breaches of law in accordance with the Directive.
The EU Whistleblower Protection Directive includes a wide array of European Union law that whistleblowers may report on including anti-money laundering and corporate taxation, data protection, protection of the Union's financial interests, food and product safety and environmental protection and nuclear safety. Moreover, as the European Commission's press release states, "Member States are free to extend these rules to other areas. The Commission encourages them to establish comprehensive frameworks for whistleblower protection based on the same principles."
What types of organisation will be affected by the new EU Whistleblower Protection Directive?
The new EU Whistleblower Protection Directive requires the following types of organisation to establish secure reporting channels:
- Private legal entities with 50 or more employees. However, provisions have been introduced to ease the burden on SMEs.
- Private legal entities operating in the area of financial services, products and markets.
- Private legal entities vulnerable to money laundering or terrorist financing.
- Entities governed by public law, with possible exceptions for municipalities with less than 10,000 residents or 50 employees.
How does the new EU Whistleblower Protection Directive impact procedures for whistleblowing and follow-up of whistleblowing reports?
Regarding internal whistleblowing and follow-up, the new EU Whistleblower Protection Directive states that the following elements should be included:
- Channels for receiving the reports, which are designed, set up and operated in a secure manner that ensure the confidentiality of the identity of the whistleblower and any third party mentioned in the report, and prevent access to non-authorised staff members. Such channels must allow for reporting in writing and/or orally, through telephone lines or other voice messaging systems, and upon request of the whistleblower, by means of a physical meeting within a reasonable timeframe.
- An acknowledgment of receipt of the report to the whistleblower within no more than seven days of receipt.
- The designation of an impartial person or department for following up on the reports, and maintaining communication, asking for further information and providing feedback to the whistleblower.
- Diligent follow-up of the report by the designated person or department.
- Diligent follow-up of anonymous reporting where provided for in national law.
- A reasonable timeframe for providing feedback to the whistleblower about the report follow-up, not exceeding three months from the acknowledgment of receipt.
- Clear and easily accessible information regarding the conditions and procedures for reporting externally to competent authorities.
Regarding external whistleblowing the new EU Whistleblower Protection Directive states that public authorities must establish independent and autonomous external reporting channels for receiving and handling information provided by the whistleblower. This means that such channels need to be designed, set up and operated in a manner that ensures the completeness, integrity and confidentiality of the information and prevents access to non-authorised staff members of the competent authority. Channels must enable the storage of durable information to allow for further investigations.
What is the deadline for complying?
April 2021. Member States must be ready to comply with the new EU Whistleblower Protection Directive no later than two years after adoption. With regard to legal entities with more than 50 and less than 250 employees, Member States have another two years after transposition to comply.
What are the major implications of the new EU Whistleblower Protection Directive for organisations?
- Penalties for non-compliance. The EU Whistleblower Protection Directive requires that penalties be imposed against those who attempt to hinder reporting, retaliate against whistleblowers, attempt to bring proceedings or who reveal the identity of the whistleblower. Any threats or attempts to retaliate against whistleblowers are also prohibited.
- WhistleB comment: WhistleB believes that an effective sanction regime is needed in order to ensure that organisations live up to the proposed law, and we therefore endorse such penalties for the acts described above.
- Internal, external reporting and public disclosure. While the new EU Whistleblower Protection Directive states that Member States are to encourage whistleblowers to use internal reporting channels first, the Directive acknowledges the necessity to allow the whistleblower to be able to choose the most appropriate channel, depending on the individual circumstances of the case. This means that the whistleblower may report internally or externally to competent authorities, and as a last resort, whistleblowers may make a public disclosure including to the media.
- WhistleB comment: As a whistleblower is allowed to choose the most appropriate channel to report through, without losing the protection granted by the new EU Whistleblower Protection Directive if reporting is done directly through external channels, it is more important than ever for organisations to offer a secure and effective internal whistleblowing channel. After all, it is better to deal with a wrongdoing internally, than risk sensitive information ending up in the public domain.
- Wide range of stakeholders protected. The new EU Whistleblower Protection Directive applies to those working in the private or public sector who acquire information on breaches in a work-related context.
- WhistleB comment: WhistleB is happy to see that a broad protection regime has been chosen. However, we note that certain whistleblowers, such as consumers, do not enjoy protection under the new EU Whistleblower Protection Directive. WhistleB advocates an even broader whistleblower protection, extending to any stakeholder of an organisation and consumers, as we know from experience that the most valuable tips and reports can come from anywhere.
- Anonymous and confidential reporting. The new EU Whistleblower Protection Directive does not affect the power of Member States to decide whether private or public entities and competent authorities need to accept and follow up on anonymous reports of breaches.
- WhistleB comment: WhistleB urges vigilance as anonymous reporting is key for creating trust and learning about wrongdoings and should be treated in the same way as non-anonymous reporting (see later point).
- Legal support to be made available to whistleblower. The new EU Whistleblower Protection Directive summarises various support measures for whistleblowers.
- WhistleB comment: WhistleB encourages Member States to make use of their power to provide financial assistance and support, including psychological support, for whistleblowers in the framework of legal proceedings. Member States have a duty to ensure a level playing field in order to avoid whistleblowers ending up in David versus Goliath situations.
What can organisations start doing today to ready themselves?
Below we summarise the main near-term actions you can take and questions you can start to consider in view of the upcoming obligations of the new EU Whistleblower Protection Directive.
1. Review your whistleblower reporting organisation
The new EU Whistleblower Protection Directive states that reporting channels may be operated internally by a person or department designated for that purpose or provided externally by a third party. Do you have competent resources in place for receiving and responding to reports? Do you have enough resources to be able to respond within the required timeframe? Do you have access to experts to help in investigations? Think through which roles might be appropriate in your whistleblowing team. This may involve non-operational individuals, such as members of the Board and internal audit as well as managers from a range of functions including Compliance, HR, Sustainability or the CFO.
2. Assess your current whistleblowing system
As described above, the new EU Whistleblower Protection Directive places strict demands on the procedures for internal reporting, and thereby any whistleblowing system supporting internal reporting. Does your system live up to the requirements? Is it currently a telephone hotline, email or a digital solution? Does it allow a whistleblower's identity to remain confidential? Can it handle a potential increase in the number of reports received? Is it easy to access and use so that whistleblowers are not discouraged to use it? Do you have an acknowledgement-of-receipt process in place? Does it adhere to the seven business days? Do you have a follow-up process in place with the whistleblower? Does it include a follow-up within a three-month period?
3. Familiarise yourself with third-party, professional, reporting channels
The requirements of the new EU Whistleblower Protection Directive do not necessarily mean a significant investment. Do you need to establish a new in-house system or could a ready-to-use solution with features that comply with the new directive be a more cost-effective option? Is there a system that can handle the flow from reporting to archiving? What solutions would work with your current compliance environment?
4. Consider your important external stakeholder groups
How do you accommodate the requirement to protect external whistleblowers? Is there a system that can be opened up to external parties so that it is easy for them to report directly to your organisation regarding misconduct committed by members of your organisation?
5. Assess your GDPR compliance
The new EU Whistleblower Protection Directive reminds organisations that any processing of personal data carried out pursuant to the Directive must be made in accordance with the GDPR. Make sure that your whistleblowing system allows archiving or deletion of personal data that is manifestly not relevant for the handling of a specific case without undue delay (GDPR principles of data minimisation and storage limitation). Additionally, the new Directive states that records must be kept of every report received, in compliance with GDPR principle of integrity and confidentiality or security. Ensure that your whistleblowing system allows for secure case management, traceability (automated) record keeping and deletion in line with the GDPR principle of accountability.
6. Update associated policies and training
The new EU Whistleblower Protection Directive requires that penalties be imposed for retaliation against whistleblowers. This requires that your Code of Conduct should identify and detail behaviour that could be defined as "retaliation" and explain that it is neither tolerated nor legal. Training related to the organisation's code of conduct and whistleblowing should also be updated in line with the new directive.
7. Foster the right culture
Once the new EU Whistleblower Protection Directive protects a whistleblower who may report externally, it is critical to encourage internal reporting as far as possible. Communication is a fundamental element in this. Show your employees and others that your organisation is open to whistleblowing, that it values whistleblowing information, and that leaders are committed to listen to and to act on reports received.
8. Allow and protect anonymous reporting
The new EU Whistleblower Protection Directive requires that internal reporting be set up and operated in a secure manner that ensures the confidentiality of the identity of the whistleblower. The Directive does not affect the power of Member States to decide whether private or public entities and competent authorities should accept and follow-up on anonymous reports of breaches. WhistleB believes that anonymous reporting is essential if you want to receive business critical information. We therefore recommend that your organisation also consider allowing whistleblowers to report anonymously. We know from experience that implementing truly anonymous channels increases the likelihood of your receiving reports on serious misconduct and hence being able to minimise damage and risks. This is because the only real way that people trust that they will be protected against retaliation is if they can remain anonymous both in the initial dialogue and throughout any investigation.
9. Use the new Directive to gain business value
As your organisation assesses options for compliance with the EU Whistleblower Protection Directive, the process need not merely be an exercise in compliance. Selecting the right organisation and/or system for internal reporting presents you with an ideal opportunity for getting real business value from whistleblowing. Many WhistleB customers implement a whistleblowing service as a preventive measure. The very fact that the system is in place prevents misconduct occurring to begin with. Others implement such a system to show stakeholders that their organisation is committed to building trust doing the right thing.
WhistleB is very pleased to see the approval of the EU Whistleblower Protection Directive.
With over 25 years of experience in compliance and ethics and a leading digital whistleblower system used by hundreds of organisations worldwide, WhistleB knows how to establish a whistleblowing channel that works. We stay ahead of the latest laws and embed compliance into effective solutions that fit your organisation's unique demands.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.