EU companies with more than 50 employees may need to implement changes to ensure compliance with the stringent new EU laws on whistleblowing. Non-EU subsidiaries may also be affected.
The EU Whistleblower Directive (2019/1937) (“Directive”) aims to afford greater protection to whistleblowers, encouraging them to expose corporate breaches. The Directive gave EU Member States until December 2021 to bring their national laws into line for businesses with 250 employees or more (large organisations). Many countries have missed the deadline. However, affected companies are still encouraged to review and revise their current whistleblowing policies to plan for the impending changes. (Member States have until December 2023 to transpose the Directive in relation to medium sized business with 50-249 employees.)
Key points covered by the Directive to plan for now:
– Broad coverage of those entitled to protection – The Directive catches anyone with a “work-based relationship” with the EU company, for example, employees, contractors, supplier, employees of subsidiaries, whether paid or unpaid, whether they are EU nationals or not and whether they were/are in this capacity in the past, present or in the future.
– “Reverse Burden” – there is a presumption that any detriment caused to the whistleblower is presumed to be in retaliation to the whistleblowing. It is up to the company to prove otherwise. Sanctions and response procedures for whistleblowers should therefore be carefully considered.
– Internal reporting channel – this sets out the method of reporting within the company. The channel must be confidential and established at a local level, i.e. in the country in which the company operates. If various subsidiaries are involved, numerous local channels are likely to be required. This function may be outsourced provided it is distinct from the company. The channel must be made clear to all concerned. It is crucial to have this in place so that whistleblowers are not tempted to make public disclosures to the media.
– Intercompany sharing of reports: The whistleblower should be made aware that their report could be shared with a parent company or HQ and the whistleblower must have the right to object to this.
– Penalties will be put in place by national laws to dissuade non-compliant actions.
The position for UK and other non-EU Companies:
In contrast, the UK has no plans to adopt commensurate legislation concerning whistleblowers. In the UK, whistleblowing is governed by the Public Interest Disclosure Act 1998. This does contain some similar provisions to the EU Directive, however it is more limited in scope.
Things become more complicated in the event of a UK subsidiary of an EU-company to which the EU Directive applies. A UK-based whistleblower may then choose to report its concerns to the EU subsidiary, seeking greater protection. The EU Directive does protect non-EU citizens in connection with their work-related activities, meaning the application of the Directive is far broader than EU-based whistleblowers alone. Therefore, UK companies with EU affiliates should bear this in mind when considering their whistleblowing policies.
Recommended Action:
While Member State governments frantically work to put in place appropriate national laws implementing the Directive, we would recommend that all EU companies, and indeed UK companies with an EU affiliate, first seek to determine whether they are caught by the new directive, i.e. where they have 50 employees or more and then conduct a thorough review of all relevant policies and procedures.
With the new Directive in mind, these should be updated where necessary and protocols implemented where currently lacking. We would additionally recommend staff and anyone with whom the company is to have a working relationship are trained on, or at least notified about, such a policy to ensure they are aware of their rights and to encourage use of the reporting channels.
Where one or more non-EU subsidiary is involved, it may be worth considering alignment of differing whistleblowing policies to implement one company-wide procedure that is in compliance with the EU Directive for the future.
It does however remain to be seen how national laws may differ from the EU directive, possibly imposing even stricter requirements that must also be accounted for. We will keep an eye on how the situation evolves.
If you would like our advice or support in relation to this matter, including implementing a whistleblowing policy for your company, please get in touch.
Madeleine Rhodes email: mrhodes@redfernlegal.com
