German government publishes draft of Whistleblower Protection Act

The EU Whistleblower Directive (EU) 2019/1937 has been in force since 16 December 2019 and was to be implemented in national law by 17 December 2021. With considerable delay, the German Federal Cabinet approved on 27 July 2022 a government draft of the Whistleblower Protection Act (Entwurf zum Hinweisschutzgebergesetz, HinSchG-E), so that the further legislative process has been initiated.

The obligation to establish a whistleblower system shall apply to companies with at least 50 employees (§ 12(2) HinSchG-E). Regardless of the number of employees, companies of the financial sector and related industries, are also required to set up reporting channels (§ 12(3) HinSchG-E).

The scope of the HinSchG-E includes any person who has obtained information about infringements in connection with their professional activities (§ 1(1) HinSchG-E). The new law shall therefore primarily cover employees of a company. Furthermore, the HinSchG-E also protects the confidentiality needs of persons who are either the subject of a report or disclosure or who are affected by it (§ 1(2) HinSchG-E). This applies to internal and external reports as well as to the disclosure of information to the public.

The HinSchG-E is intended to cover reports of “significant infringements.” This includes criminal offences under German law as well as administrative offences. This primarily concerns violations that are subject to a fine, insofar as the violated provision serves to protect life, limb, or health or to protect the rights of employees or their representative bodies. According to the legislator’s intention, the regulation is to be understood broadly. This includes, for example, provisions from the following areas listed in the draft law: i) occupational health and safety, ii) health protection, iii) violations of the German minimum wage, iv) provisions relating to temporary agency work, as well as v) provisions on fines sanctioning violations against works councils, central works councils, group works councils and economic committees.

In addition, all violations of legal norms adopted to implement European regulations are included. This includes a variety of different areas included in the HinSchG to implement the EU Whistleblower Directive. These are, for example, the following areas: i) regulations on combating money laundering, ii) regulations on product safety, iii) regulations on the transport of dangerous goods, iv) regulations on environmental protection and radiation protection, v) food and feed safety, vi) quality and safety standards for medicinal products and medical devices, vii) regulations on consumer protection, viii) regulations on data protection, ix) security in information technology, x) public procurement law, xi) regulations on accounting for corporations xii)  as well as both European and German antitrust law (§ 2(1) HinSchG-E).

As the government draft shall serve to protect whistleblowers, the primary protection is provided by the prohibition of reprisals (§ 36(1) HinSchG-E). The term “reprisal” is defined broadly and ranges from termination to disciplinary measures, and covers mobbing, discrimination, or exclusion. If a whistleblower is pressured into a legal transaction, such as a termination agreement is deemed to be null and void.

Furthermore, the draft law provides for a reversal of the burden of proof in favour of the whistleblower. It is thus presumed to be a case of reprisal if the whistleblower is disadvantaged in their professional activities after making the report. The company must then prove that there were sufficiently justified reasons for a different treatment or that such treatment has no connection to the report. In the event of an infringement of the prohibition of reprisals, companies are obliged to damages to the whistleblower (§ 37(1) HinSchG-E). Furthermore, reprisals can lead to a fine of up to EUR 100’000 (§ 40(2)(3) & (6) HinSchG-E).

It is expected that the German legislator will deal with the draft law after the summer break in September. Currently, only 10 of 27 EU Member States have implemented the Whistleblower Directive. After France passed the corresponding implementation law at the beginning of 2022, many international corporations looked towards Germany with a wait-and-see attitude to initiate the necessary adjustments in the European corporate units. It has proven to be a resource-efficient approach to first develop a common denominator based on a company’s core markets that considers the legal requirements of the core markets while such standard might then be adapted for the smaller markets as a first analysis shows.

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Thursday, 21 March 2024
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