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On 27 July 2022, the Federal Government published the draft of the “Act for Better Protection of Whistle-blowers and for the Implementation of the Directive on the Protection of Persons Reporting Breaches of Union Law (Whistle-blower Protection Act - HinSchG)”. This is intended to providethe Directive (EU) 2019/1937of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report violations of Union law (OJ L 305 dated 26/11/2019, p. 17), which is governed by Regulation (EU) 2020/1503 (OJ L 347 dated 20/10/2020, p. 1) can be implemented into national law. This should have been done as early as 17 December 2021, but is still pending. The draft law should now close this gap with the aim of improving whistle-blower protection in Germany sustainably and effectively.

Scope

The HinSchG-E regulates the protection of individuals who have obtained information about violations in connection with their professional activities or in the run-up to these activities and report or disclose them. This includes employees, trainees, interns and persons whose employment relationship has already ended. You can contact the internal and external reporting offices provided for in HinSchG-E.

If whistle-blowers confide in a hotline or even disclose a violation, they should be protected from reprisals. If they nevertheless suffer reprisals, i.e. unjustified disadvantages in a professional context, such as dismissal, negative appraisals or mobbing, the person responsible is obliged to compensate the whistle-blower for the resulting damage. In addition, there is a reversal of the burden of proof in favour of the whistle-blower. This means that if, following a report or disclosure, they suffer a disadvantage in connection with their professional activities, it is presumed that this disadvantage is a reprisal.

Other persons may also be covered by the scope of protection of HinSchG-E. This may be the case if they confidentially assist a whistle-blower with an internal or external report or disclosure in a professional context or are associated with the individual and have suffered professional reprisals in connection with the report or disclosure.

The material scope of application of the HinSchG-E includes offences subject to penalties and fines. The latter are only covered if the violated provision serves to protect life, limb or health or to protect the rights of employees or their representative bodies. In addition, the draft law lists other areas of law that may be subject to reporting, such as violations related to money laundering and terrorist financing, product safety, environmental protection, food safety and certain aspects of animal welfare.

Internal reporting offices

Employers (natural persons as well as legal entities under public and private law, partnerships with legal capacity and other associations of persons with legal capacity) with at least 50 employees as a rule shall operate internal reporting offices to which employees can turn with information. Certain employment providers, such as credit institutions, investment services companies, capital management companies and insurance companies, are required to establish internal reporting units regardless of a minimum number of employees.

Several private employers with usually 50 to 249 employees can set up and operate a joint internal reporting office.

Reports must be able to be made orally (for example, by telephone, voice transmission or, at the request of the person making the report, in a face-to-face meeting) or in text form. Various documentation and confidentiality requirements must be taken into account. Precautions to receive anonymous reports are not mandatory.

The internal reporting office shall confirm receipt of a report to the person making the report after seven days at the latest. It examines whether the reported infringement falls within the material scope of application and is valid. It shall maintain contact with the person providing the information, request further information if necessary and take appropriate follow-up action. Follow-up measures are in particular internal investigations, but they can also be the submission to a competent authority.

External reporting agencies and disclosure

In addition to the internal reporting offices, the HinSchG-E provides for the establishment of external reporting offices. These are established at the Federal Office of Justice, the Federal Financial Supervisory Authority, the (German) Federal Cartel Office and other offices of the Federal and State Governments. The whistle-blower is free to choose between an internal and an external reporting office for the submission of a report. The procedure for external reporting offices is similar to that of internal hotlines, but provides for further specific requirements.

Under certain circumstances, the disclosure of a reference, for example to the press, may also be covered by the scope of protection of the law. This is the case if the whistle-blower has initially made an external report and no appropriate follow-up action has been taken within the applicable time limits, or has not received feedback on the taking of such follow-up action. The same applies if

  • whistle-blowers have sufficient reason to believe that the violation may pose an immediate or obvious threat to the public interest because of an emergency, the risk of irreversible damage or comparable circumstances,
  • in the event of an external report, reprisals are to be feared or evidence could be suppressed or destroyed,
  • there is collusion between the relevant external reporting body and the author of the breach, and
  • due to other special circumstances, there is little prospect that the FIU will take effective follow-up action.

Scope of the whistle-blower

The whistle-blower must have had reasonable grounds to believe at the time of the report that the information reported or disclosed by him or her was true. In addition, the information must concern violations that fall within the scope of the HinSchG-E, or the person providing the information must have had sufficient reason to believe that this was the case at the time of the report.

Under certain conditions, the protection of the disclosing person even takes precedence over the prohibitions regulated in the Trade Secret Act.

Sanctioning

In addition to the aforementioned protective effects for persons providing information, the HinSchG-E provides for fines for non-compliance with certain requirements. For example, obstructing a report or taking a reprisal is sanctioned with a fine of up to EUR 100,000, and failing to set up or operate a reporting office is sanctioned with a fine of up to 20,000 euros.

In this context, it should be mentioned that disclosure of knowingly incorrect information can also result in a fine of up to EUR 20,000.

What to do now?

The requirements of the 100+ page draft paper for the protection of whistle-blowers are extensive. Therefore, business entities that do not yet operate a whistle-blower system, as well as those that have already established reporting channels, are urgently advised to deal with the requirements of the HinSchG-E and to set up the necessary measures. In order to strengthen the trust of the workforce and promote the use of internal reporting channels, a focus should be placed on building effective prevention measures as well as measures for the internal investigation of violations.

KPMG experts are happy to assist you in the design and implementation of reporting offices and reporting channels as well as in responding to reported violations. Get in touch.