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Whistleblowers In The Private Sector

05 March 2014

Whistleblowers in the Private Sector

Edward Snowden and others have put the spotlight on whistleblowing as a global phenomenon, exposing government secrets. But whistleblowing also occurs in the private sector, and it can cause significant costs for businesses. Is there any way to limit these costs?

In New Zealand we have the Protected Disclosures Act 2000 which protects a whistleblower in certain circumstances. The Act applies to both the public and private sector and has two purposes. Firstly it’s there to facilitate disclosure and the investigation of serious wrongdoing in organisations. Its second purpose is to protect employees who “blow the whistle” regarding serious wrongdoings.

The scope of the Act is wide. An “organisation” is not only a limited liability company, it also extends to a sole trader where that person is operating a business. An “employee” includes current as well as former employees of the organisation, and also its contractors.

However the Act only protects disclosure of “serious wrongdoing”. In the private sector serious wrongdoing includes the organisation acting in a way that constitutes a serious risk to public health or safety or to the environment, or acting in a way that is an offence under other legislation.

The legislation says that if you take retaliatory action against your whistleblowing employee it can be cause for them to take a personal grievance claim. Further protection is that your employee can’t be prosecuted in civil or criminal proceedings for making the disclosure. Therefore, as an employer, you can’t necessarily rely on confidentiality clauses in your employment and contractor agreements.

To gain this protection your employee must make their disclosure in the way set out in the legislation. The issue must be a “serious wrongdoing”, your employee must believe that the information is true, and they must be making the disclosure so that the wrongdoing can be investigated.

If your business has an internal procedure for the disclosure of wrongdoings your employee must follow that procedure. If there’s no internal procedure, or it’s not possible to use the procedure, the Act provides other methods. The first step is for your employee to approach the chief executive of your organisation. Alternatively the legislation provides a list of “appropriate authorities” to which your employee can make a disclosure.

What is fairly certain is that going to the media is not protected by the Act, as the media doesn’t generally qualify as an “appropriate authority”. Also where your employee makes false allegations or acts in bad faith, they won’t be protected.

What does this mean for a business in the private sector? The first matter to consider is whether you should implement a “protected disclosure policy”. While there will be some time, effort and cost involved, having a policy gives you the opportunity to gain awareness of issues (whether “serious” or not) early on in the disclosure process. This can reduce the on-going costs of dealing with issues raised and could limit negative publicity. As the legislation requires your employees to comply with the policy this provides an early warning system.

Where your business doesn’t have a disclosure policy in place, your senior managers still need to be aware of the provisions of the Act. Most importantly, you need to know that if an employee makes a “disclosure”, action (to deal with the wrongdoing) needs to be taken within 20 working days. After that time your employee may make the disclosure to an appropriate authority and the ability to control how the issue is dealt with will have been lost.

In conclusion, there are some steps you can take to limit the costs to your business of a whistleblower, whether or not the issue raised meets the “serious wrongdoing” level.

 

Dan Moore is a partner at Norris Ward McKinnon. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters. Find out more about us here.