As the first agenda item in its final session of 2022, the German Bundestag adopted the “Act to Improve the Protection of Whistleblowers and Transpose the Directive on the Protection of Persons who Report Breaches of Union Law” (“Whistleblower Act”) on Friday morning (16 December 2022). Two days earlier, on 14 December 2022, the Committee on Legal Affairs had submitted a corresponding decision recommendation (BT Printed Paper 20/4909) in response to an amendment application from several parliamentary groups concerning the government bill from July 2022 (see our article of 3 August 2022). The attempt to place the Act on the agenda of the Bundesrat’s last plenary session on Friday at short notice and with shortened time limits was rejected. The second round in the Bundesrat is therefore likely to take place in the first session next year on 10 February 2023 (concerning the Bundesrat’s statement in the first round on 16 September 2022 (BT Printed Paper 372/22)).
The good news: The adopted changes are not major. In light of recent events, the Bundestag and, prior to that, also the Committee on Legal Affairs, initially addressed the issue of the protection of persons who report anti-constitutional statements made by civil servants (keyword “Reichsbürger”). In addition, the now adopted Whistleblower Act contains some changes introduced by the Committee on Legal Affairs which are also relevant for corporate practice and setting up internal reporting channels:
- Finally – (late) agreement regarding anonymous reports
- One for all – the Committee on Legal Affairs also advocates the group solution
- What was two is now three – extension of the retention period
- Who is the fairest of them all?
- Bullying, stalking & co. – monetary payment for non-material damage
1. Finally – (late) agreement regarding anonymous reports
Under the amended Whistleblower Act, as of 1 January 2025, both internal and external reporting channels will, after all, have to provide means for making an anonymous report and for conducting the subsequent anonymous communication with the whistleblower. Whereas the processing of anonymous reports was merely recommended in the initial draft, the government bill contained a “should” provision. The processing of anonymous reports is now obligatory (cf. section 16(1), sentences 4-6 Whistleblower Act). From a compliance perspective, this change is welcome since it eliminates another potential barrier that makes employees reluctant to blow the whistle.
This change will entail costs for those companies whose reporting channel has so far been a traditional “complaints box” (mailbox). Such a mailbox is unlikely to satisfy the requirement of anonymous communication. It remains to be seen whether using a simple e-mail address as a reporting channel will (still) satisfy these requirements.
According to the transitional provision, the obligations pertaining to anonymous reports will not take effect until 1 January 2025 (section 42(2) Whistleblower Act). As justification for the later entry into force of this obligation, the legislator refers to the additional costs for the necessary technical devices or the commissioning of an ombudsperson as well as the extra work involved in actually setting up the reporting office (cf. Whistleblower Act decision recommendation, p. 61).
2. One for all – the Committee on Legal Affairs also advocates the group solution
It is particularly encouraging that the “group solution” is once again being touted. This possible solution has been explicitly addressed and welcomed by the Committee on Legal Affairs – without any specific reference to the proposed changes (cf. Whistleblower Act decision recommendation, p. 56). According to the group solution, individual group companies that generally do not have a compliance officer – much less a compliance department – of their own can outsource their internal reporting office to another company within the group. This assumes that the reporting office at the level of the group company complies with confidentiality obligations and is independent. In addition, the use of a group-wide central reporting office must not create any hurdles for the whistleblower, i.e. especially not any language barriers. It should therefore be possible to make a report in the working language of the individual company in question. The German legislator compares having a central, group reporting office to “outsourcing” the function to an external law firm; both are “third parties” within the meaning of Article 8(5) Whistleblowing Directive (EU) 2019/1937. The original responsibility to investigate, stop and punish the reported incident in any case remains with the individual group company.
However, cross-border companies with a central compliance office continue to face challenges from the European patchwork of national transpositions which, in some cases, require separate reporting offices for each group company.
3. What was two is now three – extension of the retention period
The original bill provided that the records documenting the report had to be deleted two years after the procedure was completed. In order to be consistent with the regular limitation period under civil law, section 11(5) Whistleblower Act now provides for a retention period of three years (cf. decision recommendation, p. 59). This still does not resolve the issue of how the seven-year retention period for the reporting procedure according to the Act on Corporate Due Diligence Obligations in Supply Chains is going to be handled in light of the three-year period under the Whistleblower Act. Companies will thus have to establish and maintain a strict deletion plan in the future.
4. Who is the fairest of them all?
The newly introduced section 7(3), sentence 1 Whistleblower Act calls upon employers who have whistleblower protection obligations to create incentives for whistleblowers to first contact their respective internal reporting office before making a report to an external one. This appeal is likely a final offshoot of the question of the priority of the internal reporting office, which was already hotly disputed when the EU Whistleblowing Directive was adopted. However, with this mere “should” provision, the Whistleblower Act only echoes what is already common consulting and corporate practice: making one’s own reporting channels as attractive as possible so that they will be preferable to the central, external (official) reporting channels. The decision recommendation is extremely reticent when it comes to the question of how such incentives could actually be created. It merely mentions the optimisation of internal reporting channels, a good communication culture, the promotion of social responsibility, effective action against violations and protection from retaliation (cf. decision recommendation, p. 58). In addition, employers must provide employees with clear and easily accessible information on the use of the internal reporting procedure (section 7(3), sentence 2 Whistleblower Act), and the possibility of reporting to an external channel must not be restricted or impeded by a system of incentives promoting the use of internal reporting channels (cf. section 7(3), sentence 3 Whistleblower Act).
5. Bullying, stalking & co. – monetary payment for non-material damage
The provision on damages has been enhanced: In the future, whistleblowers will be able to invoke a separate rule, namely section 37(1), sentence 2 Whistleblower Act and claim monetary compensation for damages that are not financial losses. In this way, an explicit statutory provision within the meaning of section 253(1) Civil Code has been created. Retaliation can take many different forms and, in the case of psychological methods such as bullying or stalking, it is often difficult to prove that the legal interests referred to in section 253(2) Civil Code have been violated, particularly since the courts find it difficult to classify the necessary assessment factors in these cases anyway. Full compensation takes sufficient account of the European requirements (Article 21(8) and recital 94 EU Whistleblowing Directive) and, through far-reaching protection of whistleblowers, also strengthens the trust of the latter in whistleblower systems, thereby also increasing their effectiveness.
Having a proper whistleblower system in place is important and should not be put off any longer. We are happy to provide support in connection with a GAP analysis of existing structures and concerning questions surrounding the implementation of a whistleblower system – just contact us.
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