EU Whistleblower Directive

What is Whistleblowing?

Whistleblowing is the reporting of illegal behaviour or other malpractices within a company, authority, or other organisation. There are basically two types of reporting: internal reporting to superiors, management, or a complaints office set up for this purpose, etc., and external reporting, for example to law enforcement or supervisory authorities, the media, and other institutions.

Whistleblowing brings together different legal positions, for which a balance must be found in accordance with the law and case law. The whistleblower must be protected in their right to freedom of expression (Art. 5 Basic Law). The company has its right to freedom of enterprise (Art. 12 Basic Law), which includes protection of reputation, protection of confidential information, preservation of industrial peace, and duties of loyalty of its employees. Finally, the general public has an interest in the investigation of criminal offences, the elimination of wrongdoing, and the preservation of legal certainty.

What has been the case so far?

In recent years, case law, in particular Germany’s Federal Labour Court, has repeatedly dealt with whistleblowing. This has been mainly in connection with sanctions such as dismissals of whistleblowers who have reported (alleged) corporate malpractices to the supervisory or prosecuting authorities. In 2011, in the so-called Heinisch case, the European Court of Human Rights (ECHR) carried out a comprehensive balancing of interests and a proportionality test of the conflicting legal positions of the employee reporting the offence, the employer concerned, and the general public, and strengthened the civil rights of the wrongfully dismissed employee. It is important to note that the reporting is not based on knowingly or recklessly false information and that reasonable attempts to rectify the situation internally have remained unsuccessful.

Currently, the only legal bases for rectifying the legal violations reported are special laws on individual risk areas such as § 48 of the Money Laundering Act, § 27 of the General Equal Treatment Act (AGG), and § 17 of the Labour Protection Act, as well as in regulations specific to the financial sector.

In corporate practice, numerous whistleblower systems have been developed on these legal bases and implemented within the framework of the respective compliance management system.

In the case of employers with co-determination, the structure of a company whistleblower system is subject to co-determination by the works council under Section 87 (1) no. 1 of the Works Constitution Act.

The new EU Whistleblower Directive

The EU Directive (EU) of the European Parliament and of the Council dated October 23, 2019 on the protection of persons reporting breaches of union law¹ has now set minimum standards for the effective protection of whistleblowers, which Member States must transpose into national law by December 17, 2021.

The most important thing to note is that whistleblowers reporting regulatory breaches in companies are fully protected from disadvantages resulting from their report. Companies with 50 or more employees must set up an internal whistleblower system, and this is also obligatory for public offices.

The reporting channels can be either internal (certain persons or departments within the company) or external (a third party). Internal reporting and external reporting are considered to be of equal importance.

In Germany, there is currently a draft from the responsible Federal Ministry of Justice and Consumer Protection² for the implementation of this directive.

Whether this can be achieved within the implementation period in 2021 – the year in which German federal elections are held – is rather questionable. The draft published so far essentially corresponds with the directive’s provisions. Employers with fewer than 250 employees can also accomplish this objective through a joint reporting office or commission a third party to do so.

Practical tip

Employers with at least 50 employees should already start looking into setting up an in-house whistleblower system that complies with the policies and guidelines.

Genuine denunciations are rather rare in practice, as the experience of the last few years has shown. (Anonymous accusations in social media are much more prevalent nowadays.) Having an internal whistleblower system helps identify and prevent regulatory violations and undesirable developments at an early stage. Companies should take steps to avoid having these violations and potential problems reported externally because unwanted media attention and a damaged reputation are much greater risks. Companies should therefore ensure that the reporting options available to whistleblowers within the company are transparent, simple, and motivating. Doing so requires careful planning and implementation, so don`t wait until year end (or later) to begin taking the necessary steps.

Do you have questions or want to know more?

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This is a post from our newsletter "People in Business" 1-2021. The entire newsletter can be found here. You can also subscribe to this newsletter and receive the current issue directly on the release date.

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¹https://eur-lex.europa.eu/legal-content/DE/TXT/?uri=uriserv:OJ.L_.2019.305.01.0017.01.DEU&toc=OJ:L:2019:305:TOC

²https://www.whistleblower-net.de/wp-content/uploads/2021/02/2020_11_26-Referentenentwurf-Whistleblowing- BMJV-1.pdf