New whistleblower protection standards within the EU
Across the European Union, protection for whistleblowers used to consist of a patchwork of laws and measures varying tremendously in scope. While some member states lacked protection entirely, laws did not go far enough in others. The EU Whistleblowing Directive was introduced to create a single uniform protection standard across the bloc and while the transposition process has been slow, 20 out of 27 governments have now implemented its requirements.
The different interpretations at national level uphold the Directive’s requirement for companies with at least 50 employees and municipalities with more 10,000 employees to introduce whistleblowing systems while shielding those speaking out from all forms of discrimination such as dismissal and degradation. In most cases, the new laws in Europe extend protection to a wider range of stakeholders such as job applicants, former employees, journalists and external suppliers.
EU law and ramifications beyond Europe
Down through the years, the enactment and enforcement of extraterritorial legislation by the United States was well known. As the EU grew into a powerful international economic actor itself, it put similar measures into place whereby foreign behaviour influencing its markets could be regulated. That has seen the principle of territorial extension incorporated into EU law whereby countries outside the EU-27 have to comply with regulations directly influencing the single market.
There are numerous examples such as the EU’s Timber Regulation which stipulates that third-country operators have to ensure both timber and timber products meet certain EU due diligence standards. Likewise, seafarers serving on EU-registered vessels must receive training and certification meeting EU standards. If they are trained in a third country, for example, the level of training provided must be recognised by the EU as meeting all the requirements laid down in the Seafarers’ Training, Watchkeeping and Certification Convention.
Directives form part of the EU’s secondary law and they can have ramifications for non-EU countries. The EU Whistleblowing Directive is no exception, and it will impact non-EU companies employing personnel and operating within the 27 member states.
The EU Whistleblowing Directive and non-EU companies
Companies headquartered outside the EU that conduct business within an EU member state by maintaining branches or subsidiaries with at least 50 employees are subject to the requirements of the Directive. Whether they are based in Switzerland or the United States, organisations with an EU-presence need to examine whether the scale of that presence brings them within the scope of the Directive and implement appropriate measures if necessary.
After the recent divorce with the EU, employers in the UK should not have a false sense of security and think that the Directive will not apply to them in the wake of Brexit. Despite being a member of the EU until the end of January 2020, the UK does not have a legal obligation to transpose the Directive and it is held to the same conditions as any other non-EU country.
Organisations based outside Europe falling within the remit of the Directive may face some compliance hurdles. A key issue is that the Directive sets a common framework of minimum standards and each member state can go beyond them at their own discretion. For example, some countries have made anonymous whistleblowing mandatory as part of their national laws transposing the Directive while others have not enforced this requirement.
As a result, non-EU companies with a presence in multiple member states will have to examine the precise legal requirements across all of their markets and possibly introduce a patchwork compliance programme differing on a country-by-country basis. While a single framework is possible, organisations need to carefully assess whether it is universally applicable to all markets. They of course also have the option of complying with the rules from every jurisdiction at the highest possible protection standard and this is best achieved through the introduction of a comprehensive digital whistleblowing system.
EFTA and the Whistleblowing Directive
The European Economic Area (EEA) also includes the European Free Trade Association (EFTA) states of Iceland, Liechtenstein and Norway. While they are not EU member states, they are linked to the internal market by the same basic rules and they are obliged to adopt parts of EU law. This includes Directives regulating the internal market which have to be included in the EEA agreement and implemented into the respective countries’ national legislation.
According to the most recent EFTA update, the EU Whistleblowing Directive is still under scrutiny by Iceland, Liechtenstein and Norway. Oslo ordered a report to be compiled as to whether the new EU legislation will require changes in Norwegian law and it was published for public hearing in June 2022. It recommends implementing the Directive through a new EEA Whistleblower Act along with supplementary regulations for some of its provisions.
All three countries are certainly in a strong position for the rollout of a new EEA Whistleblower Act. Norway already offers protection for whistleblowers speaking out about working conditions, though it falls short of the Directive in some areas, particularly when it comes to extending the scope of protection to individuals beyond employees. In Liechtenstein, whistleblowers can submit reports to the Financial Market Authority Liechtenstein (FMA) either anonymously or by disclosing their identity. As opposed to the EU Directive, whistleblowers in Liechtenstein are not informed about any of the initiated measures.
Iceland adopted protective measures for whistleblowers in 2008 and they were strengthened in 2019 through the Disclosure Protection Act which dismisses liability for disclosing wrongdoing while preventing retaliation. Despite the existing legislation in Norway, Liechtenstein and Iceland, companies in all three countries should follow further developments closely, shore up existing business operations within the EU and prepare for the arrival of a new EEA Whistleblower Act at some point in the future.
With 26 million active companies, 131 million people employed, over half a billion consumers and a value of €14.5 billion, the European single market is a complex place governed by layers of bureaucracy. The EU Whistleblowing Directive is a landmark piece of legislation with major compliance ramifications for all organisations with 50 plus employees doing business in at least one of the 27 member states, even if their presence there only constitutes a branch office or subsidiary.
Businesses with a primary presence beyond EU borders but who may still be impacted by the Directive are advised to closely monitor developments and take several steps. They should conduct an internal clarification process to gauge the extent to which branches and subsidiaries are bound to comply with the new measures so internal processes can be revised accordingly. If they are indeed impacted by the Directive, they should take prompt action to introduce internal reporting channels and communicate the new rules to their employees and key stakeholders as quickly and as comprehensively as possible.
Whistleblowing Laws in the European Union
A glance at the implementation of the EU Whistleblowing Directive in EU Member States