German Whistleblower Protection Act on the home straight
After a few detours, the German Whistleblower Protection Act (the “Act”) now finally seems to be on the home straight. In its meeting yesterday, parliament’s cross-party mediation committee (the “Mediation Committee”) adopted a resolution with recommendations for amendments for submission to the Bundestag (Lower House of the German legislature) 20/6700). Prior to that there were reports that the federal and state governments had reached a compromise in a night session at the end of last week and that it would be submitted to the Bundestag by the Mediation Committee as a recommendation for amendment.
On 16 December 2022, the Bundestag passed the German Whistleblower Protection Act (20/4909) to implement the European Union’s Whistleblowing Directive (we reported here). However, in the session of the Bundesrat (Upper House of the German legislature) on 10 February 2023, the proposed law did not receive the required majority of 35 votes. The federal states in which the Union parties CDU/CSU are in government refused to give their consent, citing an excessive burden on small and medium-sized enterprises.
The federal government then made another attempt to have the law passed. On 14 March 2023, it presented draft amendments (“formulation aids”) to introduce two new bills from the body of the Bundestag. To this end, it divided the bill, which had been passed by the Bundestag but failed in the Bundesrat, into two parts. Part 1 (20/5992) was largely identical in content to the original failed bill, but it explicitly excluded from its scope civil servants working for the federal states, municipalities and municipal corporations and other public corporations, establishments and foundations subject to the supervision of a federal state as well as judges employed by a state. Part 2 (20/5991) then removed this restriction on the law’s scope. According to the explanatory memorandum, this artificial distinction was made solely in order to circumvent the necessity for the Bundesrat’s approval of Part 1.
At a hearing of the Legal Affairs Committee, the experts invited by the committee expressed considerable constitutional concerns about the division since it had not been made for objective reasons. As a result, after the members of the parliamentary groups on the Bundestag’s coordination committee (the “Council of Elders”) had agreed on this, the final readings of the new draft in the Bundestag scheduled for 30 March 2023 were removed at short notice from the agenda. Finally, on 5 April 2023, the federal government decided to refer the law originally passed by the Bundestag and vetoed by the Bundesrat to the Mediation Committee.
Amendments to the previous drafts
We have already reported extensively on the draft originally passed in several news articles (Bundestag beschließt Hinweisgeberschutzgesetz and Kein Ende der Hängepartie) and in a podcast with Michelle Althen-Punjabi and Daniel Happ . In this article we will briefly outline the changes proposed by the Mediation Committee.
Scope of application
Section 3(3) of the Act defines what is meant by “information on breaches”: Information on breaches only falls within the scope of the Act if it relates to an employer or another organisation with which the whistleblower was in contact through his or her work.
Relationship between internal and external reporting
Section 7(1) sentence 2 of the Act now provides that if effective internal action can be taken against a reported breach and the whistleblower does not fear retaliation as a result of their reporting, they should give preference to reporting the breach to an internal reporting channel. However, the right to choose between internal and external reporting channels is retained so that this is arguably simply a request to whistleblowers and is not intended to carry any legal weight. What has remained unchanged is that employers should create incentives for whistleblowers to contact their internal reporting channel.
No obligation to set up anonymous reporting channels
Section 16(1) of the Act now contains the most far-reaching amendment: it makes clear that there is no obligation to design reporting channels so that they enable anonymous reporting. Nevertheless, according to the resolution with recommendations for amendments, internal reporting channels should also process incoming reports anonymously. However, there is no express obligation to do so. At the end of the day, the same applies to external reporting channels. This is a remarkable step backwards as the obligation to establish anonymous reporting channels was only included in the failed bill on the recommendation of the Legal Affairs Committee and was not originally envisaged by the federal government.
Reversal of burden of proof only in case of assertion
The reversal of the burden of proof in section 36(2) of the Act has been somewhat watered down. Although there is still a general presumption of the existence of retaliation where a whistleblower suffers a detriment as a result of reporting a breach, this will only be the case if the whistleblower themself also asserts this. Consequently, a whistleblower would be required to plead a connection between the detriment and the reporting.
Reduction in the amount of fines
The maximum potential fine for certain offences has been reduced. Pursuant to section 40(6) of the Act, it will now only be EUR 50,000 instead of the previous amount of EUR 100,000. The fine applies to offences such as obstructing reporting, obstructing communication between whistleblowers and the reporting channel and retaliatory action against whistleblowers. It also covers attempts to commit these offences and breaches of the confidentiality of the identity of the reporting person and other persons.
Attention: Entry into force within one month
The planned entry into force of the Act is particularly relevant for practitioners. Unlike in the case of the rejected bill which, if passed, would not have entered into force for another three months from its publication in the Federal Law Gazette, the date for entry into force has been brought forward significantly. Thus the revised versions of the law will enter into force just one month after its promulgation. This significantly increases the pressure on companies to act. It is true that it provides that failure to establish internal reporting channels can only be prosecuted as an administrative offence six months after promulgation of the law. However, this grace period should not obscure the fact that the obligation to establish a reporting channel will apply beforehand and that if it is not established promptly, there is a risk that whistleblowers will immediately turn to external reporting channels.
Employers which usually have 50 to 249 employees will still only have to establish their internal reporting channels as from 17 December 2023. In this case too, however, proactive establishment should be in the interests of most companies.
If the Mediation Committee’s amendments deviate from those of the Bundestag, a new vote in the Bundestag is necessary. The Bundestag is to vote on the Mediation Committee’s recommendations for amendment on Thursday, 11 May 2023. There are no plans to debate the recommendations beforehand. As early as Friday, the Bundesrat is expected to give its consent and the law will then be submitted to the Federal President for signature. Since the key points have already been agreed between the federal government and the federal states, the bill is expected to succeed. Thus after lots of bends and twists, the German Whistleblower Protection Act is finally on the home straight and expected to enter into force as early as mid-June 2023.
Companies should therefore now at the latest consider what requirements the Act places on them and whether any whistleblower systems already in place meet these requirements. We would be happy to assist you in doing this!