Whistleblowing and protection of confidential information
Protection of confidential information is not absolute and is subject to limitations, for instance where there is a public interest. Subject to certain conditions, a person who has a nondisclosure obligation may lawfully use the entrusted information despite the confidentiality obligation. At the moment there is no all-embracing regulation on this issue, but this may change soon.
The first reports of misconduct in an organisation usually come from people working at the organisation. Whistleblowing can relate to the actions of authorities or the private sector. The situations reported can be a breach of law, such as corruption, tax avoidance, or infringement of privacy or employee rights, but can also be unethical conduct, conflict of interest, or concealment of misconduct in the organisation. Whistleblowing can have a positive effect on an organisation and serve as a preventative and corrective mechanism for risk control. On the other hand, there is a danger of it being abused, for example bad-faith reporting intended to damage a business or specific units.
Whistleblowers run a risk of being accused of breach of rules of conduct, such as violation of an obligation of loyalty towards their employer, confidentiality, or personality rights, especially as they are often unable to gather sufficient evidence of the observed misconduct. This could deter whistleblowers due to fear of the repercussions for their employment relationship or claims for infringement of personality rights, and even criminal charges for example concerning defamation.
Protection of whistleblowers in Europe
At the moment only a few European countries, such as France, Hungary, Italy and the UK, have comprehensive regulations protecting whistleblowers. In most countries, among them Poland, there is only fragmentary regulation. Whistleblowers have generally applicable protection rules, for example under the principle of equal treatment of parties or protection against unfair termination. Research has shown, however, that protection under labour law is illusory in such cases, and many people, for example those working on a non-employment basis (external service providers), as a rule do not have any defence against repercussions for reporting misconduct.
The need for protection of whistleblowers has been remarked upon in European Court of Human Rights case law and international law, in which these issues are associated for example with freedom of expression. One particular example is the recommendation (CM/Rec(2014)7) of the Committee of Ministers of the Council of Europe calling upon the member states to introduce rules to protect whistleblowers according to standards laid down in a resolution and the Council of Europe Civil Law Convention on Corruption of 1999, to which Poland is party. This requires the signatories to ensure that national law provides adequate protection against any unjustified sanctions for employees who have reason to suspect corruption and report their suspicions in good faith to the appropriate people or authorities.
Whistleblowing an exception to trade secret confidentiality
The problem of the status of whistleblowers has also been discerned in EU law. Under the Trade Secrets Directive (2016/943), using or disclosing trade secrets to reveal misconduct, wrongdoing or illegal activity does not fall under the rule of protection of trade secrets if done in the public interest. This means that a whistleblower should be exempt from liability for breach of trade secrets. This exception is also provided for in Polish legislation to implement the directive, in a bill amending the Unfair Competition Act.
In addition, on 23 April 2018, the European Commission published a proposal for a directive completely addressing the question of protection of whistleblowers reporting breach of EU law (COM(2018 218 final, 2018/0106 COD). This provides minimum standards of protection for persons reporting unlawful activities and abuse of law through employment in the public or private sector, when the reporting concerns particular areas of law listed in the proposal, which include:
- Public procurement
- Financial services, prevention of money laundering and terrorist financing
- Product safety
- Transport safety
- Environmental protection
- Nuclear safety
- Food and feed safety, animal health and welfare
- Public health
- Consumer protection
- Protection of privacy and personal data, and security of network and information systems
- Breaches affecting the financial interests of the Community.
The proposal states that as a rule misconduct should be reported inside an organisation, and to the responsible authority in justified cases. Publicising information about a breach, for example by disclosure to the media, would be covered by protection provided that the whistleblower used other means of reporting but appropriate action was not taken, and when the whistleblower could not realistically be expected to use the procedures inside the organisation or inform the competent authorities due to the direct threat to the public interest, special circumstances of the case, or risk of irreparable damage.
Under the proposal, a person who reports or makes public information in the justified conviction that the information is true at the time it is reported and is covered by the directive should not face any negative consequences. In the event of a dispute, the burden of proof that action taken is not retaliation against a whistleblower but is objectively justified lies with the employer. Introduction of the relevant remedies giving whistleblowers effective protection is left to the member states. Among other things, under the directive, whistleblowers would receive legal advice free of charge and support from the authorities, including a statement of classification as a whistleblower and the applicable protection. The introduction of effective sanctions for reporting in bad faith would also be up to the member states.
The proposal for the directive also requires member states to ensure that entities in the public and private sectors create internal procedures for reporting and investigating misconduct. Any entity in the private sector with a headcount of 50 or more would be required to introduce such a procedure. This obligation would also apply to smaller entities exceeding certain turnover thresholds or operating in certain industries.
The proposal for the directive lays down requirements for that procedure, such as maintaining the confidentiality of reports, specifying the units tasked with reviewing cases, and providing a reasonable time limit for review of complaints regarding feedback given to the whistleblower, of no more than three months from the time of reporting.
The directive is to be implemented by 15 May 2021.
Proposals for regulation of the status of whistleblowers in Poland
Meanwhile, in Poland, work began on a proposal for the Act on Transparency of Public Life before the proposal for a whistleblower directive was published. The Polish bill provides protection for whistleblowers and requires businesses with a headcount of 50 or more to introduce effective internal anticorruption procedures, including internal misconduct reporting procedures.
Under the bill, which is currently in the governmental legislative phase, whistleblower status would be granted by the prosecutor where credible information is submitted about commission of specific offences, such as influence-peddling, organised crime, falsification of invoices involving large amounts, fraud, inflicting damage in commercial transactions, bribery, money laundering, frustration of creditors, false recordkeeping, and spreading false rumours in securities trading.
Whistleblowers would be protected in the form of a long-term contractual relationship with the entity being reported. It would not be possible to terminate or amend the agreement with the whistleblower to the detriment of the whistleblower without the prosecutor’s consent for the duration of the proceedings and a year following discontinuance of the proceedings or issuance of a judgment in criminal proceedings against the perpetrator. In the event of failure to comply the act would provide significant compensation for whistleblowers. In the case of employment contracts this would be two years’ salary, and in the case of people performing work on some other basis, the service provider’s entire fee specified in the agreement.
In additional to the government’s proposal, a proposal for an act on protection of whistleblowers drawn up by Polish NGOs (the Stefan Batory Foundation, the Helsinki Foundation for Human Rights, the Trade Unions Forum and the Institute of Public Affairs) is undergoing public consultations. The proposal fully regulates the legal status of people who in connection with their duties, work, or performance of an agreement report or assist in reporting misconduct. It also provides for a rebuttable presumption of good faith on the part of a whistleblower. Under the proposal, with regard to legal remedies, legal action taken in retaliation against a whistleblower within three years of information about reporting coming to light would be invalid by law, and the burden of proof that actions against the whistleblower during this time are not a form of retaliation would lie with the employer.
The legislation discussed above indicates two trends. The first is increasing levels of protection for whistleblowers against retaliation for reporting misconduct. Comprehensive regulation of this issue can be expected in the long term. This will present a challenge to employers, as staff will be able to claim whistleblower protection, shifting the burden of proof to the employer.
The second is that legislative work is aimed at requiring businesses to introduce internal misconduct reporting procedures. The question remains how specific the requirements for these procedures will be and to what extent it is up to a business to select the appropriate measures. In any case, responsibility for holding an inquiry into a report while observing a whistleblower’s rights and the rights of the subjects of the whistleblowing will lie with the employer.
Dr Marta Derlacz-Wawrowska, legal adviser, Employment practice, Wardyński & Partners