Decided matter: Bundestag and Bundesrat pass Whistleblower Protection Act
On May 11, 2023, the Bundestag accepted the compromise of the Mediation Committee on the Whistleblower Protection Act (“HinSchG”) and passed the Act in its amended version. One day later, on May 12, 2023, the Bundesrat also unanimously approved the Act. Just a few days earlier, the compromise had been reached in the Mediation Committee (link to the Mediation Committee’s recommended resolution of May 9, 2023 – only German version available). This means that the draft law, which failed to gain the approval of the Bundesrat in February (see our postdated 13.02.2023), will probably enter into force with just a few amendments as early as mid-June 2023.
This means that companies have little time left to comply with the obligations imposed by the law, in particular to establish internal reporting channels and implement a whistleblowing system that complies with the law. Only companies with less than 250 employees still have time until December 2023 for establishing an internal reporting channel.
In terms of the content, the Act contains the amendments outlined below to the draft law that was subject of the session of the Bundestag on December 16, 2022:
No obligations in case of anonymous reporting
Whereas the previous draft law, as amended, had stipulated that anonymously submitted reports must be processed on a mandatory basis, the law does not provide for such an obligation for either internal or external reporting channels. The Mediation Committee refrains from imposing an obligation on companies to enable anonymous reporting and an obligation to investigate anonymously submitted reports. The wording included in the first draft law remains that the reporting offices “should” also investigate anonymous incoming reports, without any obligation to design the reporting offices in such a way that anonymous submission is made possible. This eliminates the feared additional costs and additional work, especially for small and medium-sized enterprises.
Preference for internal reporting procedures
Provided that effective internal action can be taken against the violation and no retaliation is to be feared, whistleblowers should preferably submit their report to an internal reporting channel of their employer. This “should”-provision for preferring internal reporting procedures is standardized in addition to the unchanged right to choose between internal and external reporting.
Such tendencies toward prioritizing internal reporting procedures were already apparent in the draft from December 2022: Companies were urged to create incentives for whistleblowers to contact the internal reporting office first, which is why clear and easily accessible information on the use of the internal reporting procedure should be provided for this purpose. At the same time, it is precisely the equal treatment of internal and external reporting procedures that should motivate companies to independently optimize their internal reporting system and promote a good speak-up culture. Moreover, companies will continue to have a vested interest in designing their reporting procedures in such a way that whistleblowers always turn to them first.
The retention period for reports regulated in Section 11 (5) HinSchG, which was initially 2 years and in the last draft 3 years after the conclusion of the procedure, caused discussion and, above all, implementation difficulties. Now, the retention period is to be extended in order to fulfill the requirements of other laws as well, insofar as this is necessary and proportionate. This is intended to explicitly bring the retention period under the HinSchG into line with other legal requirements for documentation, retention and deletion. The legislator continues to leave unanswered the relevant and controversial question in practice as to the point in time of the conclusion of the procedure in the internal reporting procedure, which represents the beginning of the retention period.
Limited compensation and reduction of the maximum fine
The draft law from December 2022 had for the first time provided that immaterial damages of whistleblowers had to be compensated. This now no longer applies. By contrast, the right to compensation for pecuniary loss will remain unchanged. In addition, the upper limit of the corporate fine for violations of the Whistleblower Protection Act will be reduced from EUR 100,000 to EUR 50,000.
Clarification of the scope of application
The change in the wording of the law in § 3 on the scope of application of the Whistleblower Protection Act is only of a clarifying nature. Accordingly, only those violations fall under the HinSchG that have been or will be committed at the employer where the whistleblower is or was employed or at another office with which the whistleblower is or was in contact due to his or her professional activity.
Reversal of the burden of proof in favor of the whistleblower
The reversal of the burden of proof in favor of the whistleblower that a disadvantage in connection with his or her professional activity is a retaliation, which has been regulated in the law to date and which has also been discussed, is to be included unchanged in the law to be promulgated. However, the presumption that he or she has suffered this disadvantage as a result of a report or disclosure is only to apply if the whistleblower also asserts this himself or herself. This obligation to assert the causal connection is in line with the EU Whistleblower Protection Directive. The draft law had gone beyond this and provided for a double legal presumption in favor of the whistleblower. This was justified by the comprehensive protection of the whistleblower and the facilitation of the presentation of evidence. The causal connection between the report and the disadvantage is not always easy to prove, not least because the person who has taken a disadvantageous measure towards the whistleblower has the information and documents available that served as the basis for the measure. This informational advantage should be offset by the presumption in favor of the whistleblower, which has now been dispensed with.
No change of the ‘Group solution’
As far as the long-awaited issue of the so-called ‘group solution’ is concerned, the German legislator is sticking to its previously held line and continues to allow a central, group-wide design of the internal reporting office. This was not to be expected otherwise, as this aspect was not subject of discussions in the Bundesrat and did not lead to the refusal of approval in February.
With our expertise in the areas of whistleblower protection and internal investigations, we are happy to support you in setting up, designing, implementing, or improving your whistleblower systems in a national and international context. In addition to meeting future, changing legal requirements, we will also be happy to advise you on finding a suitable and effective solution for your company.