News from Pohlmann & Company

13.02.2023

Whistleblower Protection Act: Refused Approval by the Bundesrat

Political Search for Compromise via Mediation Committee?

Introduction

The entry into force of the Whistleblower Protection Act continues to be delayed. The Bundestag passed the law with some amendments before Christmas (see our blog post from December 22, 2022). However, in the session of the Bundesrat on February 10, 2023, the required majority has not been reached. In particular, the CDU-/CSU-led federal states refused to approve it. The Union thus continues a dispute that already existed in the last legislative period between the partners of the Grand Coalition and led to the fact that at that time the law could not be adopted within the implementation period of the Directive (EU) 2019/1937. Consequently, the law cannot enter into force in spring 2023 as planned.

Background

The Whistleblower Protection Act is intended to regulate the handling of reports from employees on certain violations in companies as well as in public organizations and to contribute to protecting these persons from reprisals. Essentially, the Act serves to implement the EU Whistleblower Directive, which the German legislator should have transposed by December 17, 2021. Due to the unsuccessful failure to meet this deadline, the EU Commission has already initiated infringement proceedings against the Federal Republic of Germany.

Possible search for compromise via Mediation Committee

It remains to be seen whether the Bundestag and the Federal Government will call on the Mediation Committee and thus discuss a compromise with the Bundesrat. Under the constitution, the Mediation Committee, consisting of members of the Bundestag and Bundesrat, is responsible for reconciling the differing views of the two legislative bodies. Alternatively, the Act can be reintroduced to the Bundestag in a form that is not subject to approval – an aspect which has already been commented on Friday by Dr. Till Steffen (Bündnis 90/Die Grünen), a member of the Bundestag.

Mandatory processing of anonymous reports

The Act has been subjected to criticism, particularly from the federal states led by the CDU/CSU parties. According to media reports, the newly included amendment on mandatory processing of anonymous reports, which was not to come into force until January 1, 2025, was criticized. Non-governmental organizations countered that anonymity is part of the best practice of many companies and authorities anyway, and at the same time, it is of great importance for the protection of whistleblowers. In practice, many of the existing systems already allow anonymous reporting. Since the equivalent option of reporting to public authorities also permits the anonymous submission, and since companies should concurrently have an interest in first becoming aware of facts that are subject to reporting, they would be well advised to offer similar low-threshold access on their part. In addition, reports via anonymous e-mail inboxes will always be possible and have to be investigated if they give rise to sufficient concrete suspicion. In this respect, the concerns from CDU/CSU ultimately miss the point.

More costs and bureaucratic burdens especially for SMEs

Another reason given for the rejection is that the Act could lead to a competitive disadvantage for small and medium-sized enterprises, as the obligations it imposes, some of which are subject to fines, are accompanied by high bureaucratic burdens and high costs. In particular, the German draft bill is criticized in this context for going beyond the scope of the EU Directive. The latter extends the possibility of providing protected notifications of legal violations only to a few separately listed legal areas for which the EU has legislative competence. The German draft bill intended to extend this possibility to all criminal offenses and certain administrative offenses. In this respect, too, the opposition fears additional expenses for companies. However, such additional expense would only arise if companies first legally assess reports of violations and then, depending on whether or not they are covered by the EU Directive, apply different procedures to investigate and protect the whistleblower. Most companies therefore already apply a uniform system for internal investigations anyway, which overall preserves the principle of non-retaliation.

Legal uncertainty and time pressure at the same time

With the current rejection by the Bundesrat, legal uncertainty remains for whistleblowers and also for the companies obligated under the law. The implementation of the EU Directive in Germany is ultimately a question of time, which companies can use as an opportunity to review their whistleblowing systems and bring them up to a legally compliant standard.

 

We will be happy to support you in designing and implementing whistleblower systems suitable for your company to find appropriate and effective solutions and meet future legislative requirements. In addition, we also advise on the adaptation of existing whistleblower protection concepts, which includes not only the design of the system as such but the entire process from the receipt of reports to their processing and investigation. This requires clearly defined, uniform, and transparent legal principles and process flow as well as the assignment of trained resources. Following an internal investigation, we advise companies on sanctioning identified misconduct, taking mitigation and improvement measures, pursuing claims in or out of court, and ensuring that the whistleblower does not suffer any disadvantages.