Whistleblowers: the Corporations Act and Confidentiality Agreements – how do they apply?

People seldom turn their mind to the whistleblower protections in the Corporations Act 2001 (Cth) (Act).  However, comprehensive amendments proposed to commence on 1 July 2018 will see that change, and they may obtain some additional attention given the continuing revelations in the Hayne Royal Commission, regarding Australia's largest corporations.  This article examines the current protections, the proposed amendments and what they mean for a company’s confidentiality agreements.

Sharee Darwinkel, Maddocks Lawyers

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Whistleblower protections under the Corporations Act

Historically, whistleblower protection had not been done well in Australia and the common law was unable to provide employees a right to disclose information about their workplace while also protecting them from reprisals. 

In 2004 the federal government, following several unsuccessful attempts to implement whistleblower protections, noted that the culture of corporate silence was allowing organisational wrongdoing to go undetected.  At this time, the government inserted the first comprehensive whistleblower protections into the Corporations Act 2001 (Act), which were designed to protect people who met certain criteria from litigation and victimisation.[1]

These people, known as 'whistleblowers', are encouraged to come forward and report the information they hold to either the company’s officers or regulators, in exchange for statutory protection.

Under the Act, to be considered a whistleblower, the person must meet the following conditions:

• Role: in relation to the company the subject of a whistleblower disclosure, the person must be a:
  • current officer of the company (this usually means a company secretary or director);
  • current employee; or
  • contractor who has a current contract to supply good or services to the company, or an employee of a contractor;
• Recipient: to be a disclosure capable of protection, the disclosure must be made to one of the following people:
  • the company’s auditor;
  • a director, secretary or senior manager of the company;
  • a person authorised by the company to receive whistleblower disclosures; or
  • the Australian Securities and Investment Commission (ASIC);
• Identity: the whistleblower must provide their identity to the person they are disclosing to, before the disclosure is made – this means that anonymous disclosures will not be protected, whether or not the person’s identity is later discovered;
• Reasonableness: the whistleblower must have reasonable grounds to suspect the information indicates that either the company or an officer of the company has breached either the Act or the Australian Securities and Investments Commission Act 2001 (ASIC Act); and
• Good faith: the whistleblower must make the disclosure in good faith.

Where all of the above conditions are met, the whistleblower is granted the following protections:

• statutory immunity from civil or criminal liability for making the disclosure;
• their employer is constrained from enforcing a contractual remedy against the whistleblower for making the disclosure;
• victimisation is prohibited;
• compensation is available if the whistleblower suffers damage as a result of victimisation; and
• the whistleblower’s identity or their information (subject to very limited exceptions) cannot be revealed.

Following the introduction of the above protections, further whistleblower protections were inserted variously into the Banking Act 1959 (Cth), the Life Insurance Act 1995 (Cth), the Superannuation Industry (Supervision) Act 1993 (Cth) and the Fair Work (Registered Organisations) Act 2009 (Cth).

The July 2018 amendments to the Whistleblower provisions

In 2009, following the global financial crisis and citing the increasing need to detect corporate misconduct, the federal Minister for Financial Services announced a review in relation to improving the protections for corporate whistleblowers. 

It was noted that while the above protections were inserted into the Act in 2004, the provisions were rarely used or discussed.  In fact, between 2004 and 2009, the protections had only been used 4 times by whistleblowers providing information to ASIC.

After a lengthy review and consultation process, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 (Cth) (Bill) was tabled in parliament which if passed, will amend the above provisions from 1 July 2018.  The main changes include:

• Expanded definition of whistleblowers: whistleblowers will now include former employees, officers, contractors, associates or the company and their relatives;
• Expanded legislative reach: the provisions will now protect disclosures in relation to a breach of the Banking Act 1959 (Cth), the Life Insurance Act 1995 (Cth), the Superannuation Industry (Supervision) Act 1993, Financial Sector (Collection of Data) Act 2001, the Insurance Act 1973, and the National Consumer Credit Protection Act 2009;
• Anonymity: there will now no longer be a requirement for the whistleblower to disclose their identity;
• Expanded range of recipients: a disclosure may be made to a broader range of external bodies, including APRA and the Australian Federal Police. Further, if the whistleblower has disclosed to a relevant entity and a reasonable period of time has passed, and the whistleblower believes on reasonable grounds that if the information is not acted upon that there is an imminent risk of serious harm or danger to public health or safety, or to the financial system, the whistleblower may further disclose to a parliamentarian or a journalist; and
• Policy: public companies and large proprietary companies will be required to have a whistleblower policy.

The Bill will also implement new protections for taxation whistleblowers into the Taxation Administration Act 1953 (Cth), which did not previously exist.

How relevant are these changes to addressing behaviour of the type disclosed in the Hayne Royal Commission?

Many of the examples of egregious corporate behaviour in the Royal Commission directly relate to breaches of Chapter 7 of the Act in relation to financial services, and the financial services conduct provisions of the ASIC Act.  Accordingly, the whisteblower provisions of the Act – including the proposed provisions – provide a viable avenue for officers and employees to shed light on corporate malpractice.

How do the whistleblower provisions interact with corporate documents?

The whistleblower protections are intended to limit the ability of a contracting party to enforce a contractual remedy as a result of the disclosure. 

This means, for example, that if a disclosure is made which breaches the terms of a confidentiality agreement in place with the whistleblower, no contractual remedy or right can be enforced against the whistleblower under such an agreement.

It is therefore important that the officers of companies are aware of the whistleblower provisions, particularly from 1 July 2018 if the Bill is passed, and consider their position carefully before responding to reported whistleblowing.

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Commercial team.

More Cleardocs information on related topics

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[1] You will find the current provisions in Part 9.4AAA of the Act.