The EU Whistleblowing Directive 2019/1937
It has been one year since the EU Directive on the protection of whistleblowers (hereinafter, the ‘Whistleblowing Directive’) entered into force.
This blog post summarises key aspects of this legal development, focusing on the conditions for qualifying as a whistleblower and conditions for granting protection to such individuals. Furthermore, it touches on some points that attract particular attention, such as whether it is desirable to introduce financial incentives to potential whistleblowers. Notably, this piece does not aim to offer an extensive commentary on this Directive; such commentary will follow in a future post.
The EU Whistleblowing Directive seeks to offer protection to persons who report breaches of EU law, commonly known as whistleblowers. It has been an overdue and most welcome initiative that aims to reinforce the fragmented (and at times non-existent) legal protection of whistleblowers across the EU Member States. Officially published on 26 November 2019, the Directive is due to be transposed into the national law of all Member States within less than a year from now; 17 December 2021.
Who may qualify as a whistleblower and what protection can be granted?
Persons that work for a private or public organisation, in any capacity, and report unlawful behaviour witnessed within said organisation fall within the definition of whistleblowers (Whistleblowing Directive, recital 1). Whistleblowers play a key role in exposing wrongdoing that may be harmful to the public interest and in safeguarding the welfare of society on a national and European level.
Eligible whistleblowers are protected against any form of direct or indirect retaliation from their employer including, but not limited to, termination of employment, demotion and/or lack of promotion, unjustified negative performance assessment, workplace transferring, harassment, discrimination, or unfair treatment. Moreover, this protection will be also extended to third parties that may be directly or indirectly connected to the whistleblower and might face consequences due to the latter’s decision to report on wrongdoing; such parties might include colleagues and/or relatives that were aware of the whistleblower’s intention and/or action.
Why protect whistleblowers?
Recent events, such as the Panama Papers and the Luxembourg Leaks (LuxLeaks), have shown that whistleblowers lack basic legal protection, despite their contribution to a more transparent society by exposing economic, political, and environmental scandals, amongst others. Such scandals would not have reached the general public if it weren’t for the people that blew the whistle. In the absence of sufficient legal protection, potential whistleblowers are discouraged from reporting wrongdoing as they fear retaliation within their organisation.
Within the institutional context of the EU, breaches of EU legislation are more likely to go undetected without whistleblowers, a status quo that neither serves nor promotes the European values and interests.
Why did the EU take action?
Having acknowledged that whistleblower protection within the EU is fragmented and uneven across the Member States, the EU decided to act with an aim to protect its interests and prevent any legislation breaches. It is worth noting that the Directive applies to breaches of EU law, though Member States wishing to extend the scope of protection by including breaches of national law may do so (Whistleblowing Directive, recital 5 and Article 2, para. 5). Breaches relating to public procurement, financial services, product and transport safety, environmental, consumer, and personal data protection as well as illegal activities entailing fraud and corruption, are areas where the reporting of whistleblowers can be crucial in safeguarding the public interest.
What are the conditions for granting protection to whistleblowers?
The Directive offers protection against any form of retaliation to any person reporting breaches of EU law only if certain conditions are met:
a) Whistleblowers must act in good faith
To begin with, whistleblowers must have reasonable ground to believe that the information included in their report is true at the time of their reporting, in the sense that the individual must be acting in good faith when submitting said report. This condition excludes any malicious or abusive reports from protection. However, protection is not lost if whistleblowers submit inaccurate reports unintentionally. Noticeably, any personal motive(s) of the reporting persons are irrelevant in the protection of these persons, provided that the information submitted is not intentionally false.
b) Whistleblowers must have some work affiliation with the relevant organisation
In addition, whistleblowers must be affiliated in any working capacity (past, present, or future) with the organisation concerned in their report; this capacity is as broad as possible and refers to any work-related activities, paid or unpaid. This also allows Member States to take into consideration this work-related context and adapt it into their national legislation accordingly. Protection shall be granted to persons in standard employment relationships, part-time workers, fixed-term contract workers, persons with a contract of employment with a temporary agency, as well as suppliers, consultants, self-employed persons, and others. Protection shall also be granted to workers that may not have a financial relationship with the organisation, like volunteers and unpaid interns.
c) Public disclosure as a last resort measure
Potential whistleblowers are encouraged under the Directive to submit any report via internal reporting channels, where and when possible. While it is up to each entity (private or public) to decide the type and structure of these channels, the Directive clearly indicates that all employees should have access to a system that will allow them to submit their report(s) in writing via mail, a physical complain box, an online platform, and/or a telephone hotline. If these are not possible, any report should be submitted via external channels provided through relevant public authorities within the Member States. It is important to note that public disclosure should be considered a last resort for whistleblowers (Whistleblowing Directive, Article 15). Whistleblowers that take that route will qualify for protection in the case where, despite internal and external reporting, their information remains unaddressed. Similarly, whistleblowers that act as sources for journalists will enjoy protection where their actions are aimed at enhancing the watchdog role of investigative journalism.
The fact that the Directive will also protect whistleblowers even if their actions result in a breach of confidentiality, gives rise to important ethical and competition-related concerns. Consider for instance the scenario where an employee leaves company A and thereafter is hired by a competitor company B and soon decides to report some misconduct of company A. Given that, under the Directive, the whistleblower’s motive is irrelevant when assessing the reporting process, the above mentioned scenario appears to be a grey area that requires further evaluation. It is likely that Member States may take steps to clarify and further specify this point within their national transposition laws.
Another interesting point is the role of financial incentives that is, yet again, dismissed in assessing the effectiveness of whistleblowing. While this Directive aims at increasing whistleblowing levels across the EU through safeguarding the legal protection of whistleblowers, it neglects the importance of financial incentives that could make another step towards the same end-goal. The United States of America are well known for their whistleblowing reward programmes, such as the Securities and Exchange Commission’s and the Internal Revenue Service’s Whistleblower Reward Programmes to name a few, and even though research underlines the importance of incentives in turning a potential whistleblower to an actual whistleblower, the EU has not taken any steps towards introducing financial incentives to encourage potential whistleblowers due to ethical concerns and the potential abuse of such schemes. It has been argued that whistleblowers should not report wrongdoing for their personal gain but rather for reasons related to their morals; offering financial incentives would shift the focus from the question of right and wrong towards a more cost and benefit analysis approach. In addition to that argument, it has been also said that reward programmes may increase reporting levels, including malicious and/or fictitious reports, which would in turn increase the resources needed to assess and investigate these false claims, thus abusing the system in hopes of monetary rewards.
What are Member States expected to do?
The EU Directive introduces new requirements both for the public and private sector. Each Member State is expected to designate a competent authority that will set up appropriate external reporting channels through which information will be received, assessed, and followed-up within a reasonable timeframe that will not exceed three months. The Directive provides that whistleblowers should be informed as regards the steps taken towards their report, the investigation’s progress, as well as its outcome.
At the same time, private companies are expected to establish internal reporting channels, regardless of the nature of their activities. Any information made available pertaining to the use of these channels must be clear and easily accessible to persons having any kind of working relationship with the organisation. Organisations with 250+ employees must comply with the EU Directive’s requirements by 17 December 2021. Smaller organisations employing between 50-249 individuals are granted more time, namely until 17 December 2023. Finally, businesses having less than 50 employees are encouraged to set up relevant channels but the Member States enjoy a wider degree of discretion in this respect (Whistleblowing Directive, recital 49, Article 8).
As of today, less than a year is left for Member States to transpose the EU Directive on whistleblowers’ protection. As of now, 17 Member States have started taking steps towards the transposition; these are Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, Germany, Greece, Ireland, Latvia, Poland, Portugal, Romania, Slovenia, Spain, Sweden, and the Netherlands. The progress across all Member States can be tracked via EU Whistleblowing Meter, developed by the Whistleblowing International Network.
By encouraging the reporting of breaches of EU law, this Directive is an important step towards safeguarding the legality of EU action and promoting good governance across the public and private sectors. It succeeds this by introducing clear and specific conditions for granting legal protection, hence reducing the regulatory uncertainty that often discourages potential whistleblowers.
Ms Stavroula Verda is a junior social scientist. She holds a BA in Sociology from Panteion University, Athens and an MSc in Counter Fraud & Counter Corruption and Intelligence from University of Portsmouth.