Commonly known scandals, such as the Panama Papers or Cambridge Analytica, made evident that whistleblowers can play an important role when it comes to unveiling misconduct inside companies and organisations. Until now, whistleblower protection in the European Union (EU) had only been regulated in a fragmented manner. However, with the Whistleblowing Directive the EU has introduced a minimum standard for a uniform level of protection throughout the EU.
In December 2019, the EU Whistleblowing Directive entered into force. Member States must now transpose the requirements into national law by December 2021. The Directive generally applies to EU Member States and consequently to all companies in the EU. However, Swiss companies are affected by the Directive if they have subsidiaries or affiliates in the EU.
While the regulation of details is left to the Member States, the Directive sets the minimum standards for persons who report breaches of Union law, among others, in the following areas:
- financial services, financial products and financial markets
- prevention of money laundering and terrorist financing
- protection of privacy and personal data
- competition law.
Companies with over 50 employees are obligated to implement effective and efficient reporting channels. For specific sectors (e.g. financial services) this threshold does not apply: they are subject to the requirements regardless of the number of employees. These channels can be either operated internally or outsourced to an independent third party. Under certain circumstances, companies may share resources needed for the receipt of reports and any investigations to be carried out. The Directive recommends a three-step reporting channel:
- internal reporting channels
- external reporting channels set up by public authorities in the Member States
- public disclosure (e.g. media).
The new rules require protection for employees, volunteers, interns, non-executive members, shareholders, etc. They must be protected against any form of retaliation, such as:
- downgrading or refusal of promotion
- coercion, intimidation, bullying, discrimination.
Companies with over 250 employees will have to have implemented these requirements internally by December 2021. A longer period of four years solely applies to companies with 50 to 249 employees with regards to the obligation to set up internal reporting channels. However, Member States may decide to transpose the requirements sooner. Companies may therefore be obliged to comply with the requirements before 2021 or 2023, respectively.
Need for action
Companies, including those in Switzerland, are well advised to develop and implement or enhance an appropriate and trustworthy incident reporting system at an early stage. An adequate whistleblowing system not only reduces the risk of public discrimination against named parties; companies acting as ethical role models also strengthen the trust of employees, third parties and the public. An appropriate whistleblowing system promotes ethical culture and demonstrates good corporate governance.
Do you need assistance, or would you like to learn more about whistleblowing? Contact our experts. We are happy to answer your questions and support you in your next steps!