Strengthened whistleblower protection through new legislation

On December 17th this year, a new law concerning whistleblowing comes into force applicable to all private and public workplaces with at least 50 employees. The act has its origins in the EU directive adopted in autumn 2019. The purpose of the new legislation is to strengthen the protection for whistleblowers and to regulate how organizations process cases and ensure a safe channel for whistleblowing.

• For workplaces with more than 249 employees, the new legislation applies from 17th of July 2022. In other words, it is important for these businesses to establish whistleblowing procedures and processes in accordance with the new legislation or to check that the existing whistleblowing systems meet the new legal requirements.
• For organizations with 50-249 employees, the legal requirements for reporting will not take effect until 17th of December 2023. Although more time is available for establishing the new reporting requirements, it is still recommended that preparations are started as soon as possible.

Listed below are some of the main features of the new legislation applicable to private sector employers with 50-249 employees.

What does this mean for your organisation?

In short, the new legislation means that it must be possible to whistleblow either verbally or in writing and it should be possible to remain anonymous. The process should allow for a dialogue with the whistleblower and ensure that he or she remains anonymous. Furthermore, the whistleblowing process must be designed so that it can categorise cases, assess whether the case is in fact a whistleblowing matter and if so, make suggestions for handling the case.

The recipient of a whistleblowing case must be independent. This can be ensured by the appointment of an independent entity or persons, by the employer or by the appointment an external party acting as a whistleblowing function. There should be an instruction for the whistleblowing function as well as a process for how a case should best be handled and in which cases it needs to be investigated further. Put simply, the path for whistleblowing should proceed as follows:

1. The whistleblower reports a suspicion of misconduct, which opens a case.
2. The case is received by the whistleblowing function.
3. The whistleblower is informed that a case has been opened.
4. The case is assessed according to the whistleblowing procedures.
5. The case is dealt with in accordance with the whistleblowing procedures.
6. The case is categorized and archived.

The documentation requirements are that the internal reporting channels and all parts of the procedures must be documented in writing. The documentation of the entire whistleblowing function shall include;

• what channels for reporting are available,
• how reports are received,
• how confirmation of receipt is provided,
• how the reports are documented,
• how the circumstances surrounding the case are investigated and
• how the whistleblower receives updates

Benefits of a well functioning whistleblowing process

There are economic, organisational and cultural benefits to establishing a well functioning whistleblowing process, where potential abuse can be identified at an early stage.

The preparatory legal work highlights several positive effects of the new legislation:

“strengthening and clarifying the protection of whistleblowers (i.e. those reporting misconduct) improvement of psychosocial work environment, a tool for the early detection of errors and deficiencies in operations, reduced risk of a damaged brand and other financial business risks. Strengthened confidence in the business operations of employees, customers, suppliers, owners and the general public. Increased protection for whistleblowers can create better workplaces.”

Penalties

Article 19 of the EU Directive requires Member States to take necessary action to prohibit any form of retaliation against whistleblowers.  This is further developed in Article 23, which states that Member States shall provide for effective, proportionate and dissuasive sanctions for physical or legal persons who obstruct or attempt to obstruct whistleblowing and for those who take retaliating action.

The Swedish law states that anyone, who violates any of the prohibitions against taking obstructive measures for reporting misconduct or against retaliation shall pay damages to the whistleblower for the loss that occurs and for the violation that entails.

What else applies to sanctions in supervision is not currently clear, but it will be clarified when the government appoints supervisory authorities via the regulation procedure.

Summary

In conclusion, the new law clarifies the protection of whistleblowers and how organisations shall establish and operate the whistleblowing function. A well functioning whistleblowing function often has many positive effects for an organization and there are therefore several incentives for your organisation to start making adjustments internally to your whistleblowing process now to be ready for when the new legislation comes into force in July 2022.

Nils Ludvig Kulling

CEO Periculo AB

Periculo continuously monitors the development of regulatory changes in its compliance and risk management work. We also offer training on regulatory matters, e.g. on new capital adequacy rules. Visit our website for more information, www.periculo.se

Sources are listed above in the respective footnote and also in Law & Agreement, an article on whistleblowing (2020-09-17)