The impact of the law upon companies
In brief
The German Whistleblower Protection Act (GWPA) has now (finally) been passed on 12 May 2023, after several attempts, following final amendments proposed by the Mediation Committee on 9 May 2023, which have now been accepted by the Federal Parliament (Bundestag) and the Federal Council (Bundesrat). The long overdue law serves to implement the European Whistleblower Directive (Directive (EU) 2019/1937), which actually provided for an implementation deadline of December 2021. The law will now come into force in mid-June 2023. For companies with fewer than 250 employees, the law still provides for an implementation period until 17 December 2023. For companies with more than 249 employees, the law then applies immediately.
Contents
- In depth
In depth
Main changes made by the Mediation Committee
- Internal and external reporting offices are not obliged to allow anonymous reports to be submitted, but are expected to process them.
- Violations of the law will be subject to lower fines than originally envisaged.
- The presumption of retaliation when whistleblowers experience disadvantage after filing a report requires that they allege a connection between the report and the subsequent disadvantage.
- Whistleblowers are not entitled to appropriate monetary compensation for damages that are not pecuniary damages.
Latest developments in the legislative process
On 27 July 2022, the Federal Cabinet adopted a government draft of the GWPA. After several (partly) extensive recommendations for change by the Legal Affairs Committee (Rechtsausschuss), the Federal Parliament passed the law on 16 December 2022. However, the Federal Council did not approve the bill. Accordingly, the Federal Government called the Mediation Committee on 5 April 2023, which reached the agreement that was subsequently adopted by the Bundestag and Bundesrat.
Purpose of the German Whistleblowing Protection Act
The GWPA implements the Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019. It serves to improve and sustain the protection of whistleblowers. As whistleblowers make a significant contribution to the detection, prevention and prosecution of misconduct in companies, the GWPA intends to provide them with legal certainty and clarity.
Core elements of the German Whistleblower Protection Act
Companies with at least 50 employees are obliged to implement a whistleblowing system (Sec. 12 para. 2 GWPA). The GWPA contains several core elements that every company that falls under the scope of applicability of the GWPA must consider. We summarize these core elements below:
Whistleblower protection
Sec. 2 GWPA regulates which whistleblower reports are covered. In short, this includes all references to “significant violations”. Criminal offenses and administrative offenses are included, as well as other regulations specified in Sec. 2 GWPA – administrative offenses. However, the GWPA only applies to administrative offenses because the violated regulation serves to protect the life, limb, health or the rights of employees or their representatives (e.g., works council members). Violations of (only) internal company policies and requirements are excluded from the scope of protection. It is important, however, that the reported or disclosed violation occurred in the context of a professional, entrepreneurial or administrative activity (Sec. 3 para. 2 GWPA). Accordingly, the GWPA only applies to reports and disclosures that relate to the company or other entity with which the whistleblower was in contact as a result of his or her professional activities (Section 3 para. 3 – 5 GWPA).
The GWPA protects not only the person providing the information, but also all persons who are the subject of a report or disclosure, as well as persons who are affected by a report or disclosure (Sec. 1 para. 2 GWPA). In addition, the GWPA also protects persons who have confidentially assisted the whistleblower in making the report and persons who are associated with the whistleblower who have themselves suffered reprisals in a professional context (Sec. 34 para. 1 and para. 2 GWPA).
Whistleblower protection is the core element of the GWPA. Thus, it sets outs a prohibition against reprisals (Sec. 36 Abs. 1 GWPA). Even attempted or threatened reprisals are prohibited. A reprisal is any kind of disadvantage that occurs as a result of a report. The term “reprisal” covers not only dismissal and disciplinary measures, but also mobbing, discrimination, exclusion and unequal treatment.
To protect whistleblowers, the law provides for a reversal of the burden of proof if they experience disadvantages following a report or disclosure in connection with their professional activities. In this case, the existence of a reprisal is presumed. According to the amendments of the Mediation Committee, this presumption only applies if whistleblowers claim they have suffered disadvantages as a result of their report or disclosure.
Confidentiality requirement
Another core element is the confidentiality requirement (Sec. 8 GWPA). The confidentiality the protected persons’ identities must be maintained at every stage of the proceedings. The whistleblower must be able to rely on the protection of confidentiality so that they will not suffer any disadvantages as a result of the report. Sec. 8 GWPA intends to prevent the other protected persons from being exposed to false suspicions, being defamed or being influenced in their role as witnesses. The confidentiality requirement covers not only the identities of the persons named in a report, but also all other information from which these persons’ identities can be inferred.
Modalities of the whistleblowing system
Legislation has largely left the design of whistleblowing systems to companies’ discretion. The GWPA merely stipulates that reports must be made in writing, orally or, at the whistleblower’s request, in person within a reasonable period of time (with consent also possible virtually) (Sec. 16 para. 3 GWPA). Therefore, according to the legislator, the online platforms or e-mail addresses that are widely used in practice, are sufficient for written reports. Oral reports must be made by telephone or other voice transmission.
There is no obligation to allow anonymous reports, but anonymous reports should be processed. The handling of anonymous reports was probably the most controversial point of the government draft, on which only the Mediation Committee was able to agree.
If a company receives a report via its whistleblowing system, it must confirm receipt of the report to the whistleblower within seven days (Sec. 17 para. 1 No. 1 GWPA). After a further three months, the company must provide the whistleblower with feedback on the actions planned and already taken (Sec. 17 para. 2 GWPA).
Consequences of violations
For violations of the GWPA, companies face a fine of up to EUR 50.000. The government draft originally proposed a fine of up to EUR 100.000, which was reduced at the suggestion of the Mediation Committee.
What companies should do now
Currently, 20 of the 27 Member States have implemented the Whistleblower Directive. After France passed its implementing law in early 2022, many international companies took a wait-and-see approach in Germany. Now that the GWPA is (finally) available, the time has come to make the necessary adjustments in the European corporate units.
However, companies do not have to implement 27 different whistleblowing systems. According to the GWPA, it is sufficient to establish one group-wide whistleblowing system. It has proven to be a resource-efficient approach to first develop a common denominator based on a company’s core markets, considering the legal requirements of the core markets. This transnational standard can then be adapted for the smaller markets, provided that the scope of application is open.
What is at stake for companies?
As with any modern compliance law, violations of the EU Whistleblower Directive and its implementing legislation can result in fines (of up to EUR 50.000), particularly if a company fails to protect a whistleblower’s confidentiality or violates the prohibition on retaliation. Unlike other laws, the fines are monetary amounts and are not calculated as a percentage of the company’s turnover. However, because there is no central authority to oversee implementation across the EU, companies from up to 27 Member States can be subject to enforcement.
Click here to access the german version.
