OVERVIEW

Düsseldorf, June 14, 2023 – The Act Implementing the Whistleblower Directive (“Whistleblower Protection Act”- HinSchG) was promulgated on June 02, 2023, and comes into force one month after promulgation on July 02, 2023. Companies with 50 or more employees are required to set up whistleblower systems within a specified period. A transitional arrangement applies to companies with up to 250 employees: They do not have to implement the regulations until December 17, 2023.

IN DEPTH

1. BACKGROUND
The aim of the Whistleblower Protection Act (HinSchG) is to implement the so-called Whistleblower Directive (EU) 201971937 of October 23, 2019, for improved whistleblower protection and to create legal certainty when reporting or disclosing wrongdoing in companies and public authorities. The aim of the law is the protection of so-called “whistleblowers”, i.e., natural persons who have obtained information about violations throughout their professional activities and carry this information to designated reporting channels. In addition to persons who report breaches of Union law, the HinSchG also covers whistleblowers who report violations of national law.

2. WHO IS AFFECTED BY THE ACT?
In principle, whistleblower systems must be set up by legal entities in the private sector with at least 50 workers. All enterprises having up to 250 employees must have implemented the requirements of the Whistleblower Protection Act by December 17, 2023, at the latest. Companies with a workforce of more than 250 employees are required to implement as early as July 02, 2023. The same applies to highly regulated companies pursuant to Section 12 para. 3 HinSchG, regardless of their number of employees, such as capital management companies or insurance companies. For listed companies, A. 2 of the German Corporate Governance Code contains a recommendation to set up a whistleblower system, which is independent of the size or number of workers of the company.

3. OBLIGATIONS AND CONSEQUENCES FOR THE COMPANIES
Companies are required to establish and operate internal reporting channels for whistleblowers and to provide access to external reporting channels. Internal reporting channels to which the workers can turn will be set up and operated by the employer itself. The internal reporting channel can also be operated by a third party.

At the same time, whistleblowers are encouraged to turn to the internal reporting channel if this is likely to be successful and there is no fear of reprisals. However, whistleblowers have the choice of using an internal reporting channel or reporting their information to an external reporting channel– possibly also due to fears of a lack of anonymity. The act does not provide for any legal consequences for prioritizing the external reporting channel in a manner that deviates from the legislative intent.

External reporting channels are competent authorities that are authorized to receive reports. Such an external reporting channel is set up, for example, at the Federal Office of Justice or by the federal states in the respective state and local administrations. Internal and external reporting channels have in common that they are not required to set up anonymous reporting channels. However, anonymous reports must still be taken into account and processed.

The Whistleblower Protection Act also prohibits companies from taking reprisals against whistleblowers. Even the threat or attempt to impose sanctions are prohibited. This applies towards suspension, dismissal, salary reduction, non-renewal of a fixed-term employment contract and any intimidation attempts on the part of the employer towards its employees. The Act provides for an employee-protective reversal of the burden of proof, which in practice will not play a major role, at least in the main case of termination, due to the existing distribution of the burden of proof under the Dismissal Protection Act (Kündigungsschutzgesetz). Only in the case of terminations outside the scope of the Dismissal Protection Act may bring this reversal of the burden of proof a relevant change. Pursuant to Section 36para. 2 of the HinSchG, it is presumed that an occupational disadvantage following a report or disclosure is a reprisal. However, the reversal of the burden of proof only occurs if the person providing the information states the possible connection. In the event of a violation by the company, the whistleblower shall be entitled to compensation for the resulting damage.

If an employer who is covered by the HinSchG does not set up an internal reporting channel, fails to operate it properly or takes a reprisal, he commits an administrative offense. Violations of this kind can be punished under the HinSchG with a fine up to EUR 50,000.00.

4. RECOMMENDATION TO COMPANIES
Companies covered by the HinSchG should now, at the latest, endeavor to establish appropriate reporting channels within the timeframe set up the legislator. Particular attention should be paid to the fact that the Act will enter into force earlier compared to the previous draft. The act enters into force one month after promulgation–on July 02, 2023. Sanctions for employers who have not set up an internal reporting channel are only to be feared after the transitional period of six months, but before then there is already a risk that whistleblowers will immediately turn to external reporting channels.

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