PID e-News - June 2019 - Issue 38

June 2019 | Issue 38

Welcome

We welcome you to Issue 38 of our PID e-newsletter. This issue brings to you news on the new Commonwealth whistle-blower laws that commence 1 July 2019.

Feel free to forward this newsletter to interested colleagues who can subscribe to receive the PID e-News directly through this link.

Regards
PID Unit

New Commonwealth whistleblower laws commence 1 July 2019 with potentially serious implications for some State entities

Executive summary

New whistleblower protection provisions in the Cth Corporations Act 2001 will take effect from 1 July 2019. Those provisions will apply not only to companies but also to any entity that is a ‘trading or financial corporation’ within the meaning of the Constitution. This is likely to include a significant number of entities established under NSW laws, including state owned corporations, some agencies in the health and transport portfolios, and may include a number of local councils and universities.

All NSW public authorities will continue to be subject to the NSW Public Interest Disclosures Act 1994, and must continue to comply with their obligations under that Act, even if they also become subject to the Commonwealth legislation.

NSW entities that may be subject to the Commonwealth legislation should seek urgent advice on their compliance obligations under that Act, noting that the (civil and criminal) sanctions for breaches are significant.

The NSW Ombudsman has raised concerns with the NSW Government about the concurrent application of the Commonwealth legislation to some NSW entities. 

__________________________

The Commonwealth Treasury Laws Amendment (Enhancing Whistle-blower Protections) Act 2019 (Cth Act)waspassed by Parliament and assented to on 12 March 2019. The provisions with potential relevance to NSW entities will commence on 1 July 2019.

The Cth Act inserts provisions intended to strengthen whistleblower protections in the Corporations Act 2001 (Cth), the Superannuation Industry (Supervision) Act 1983 (Cth), the Banking Act 1959 (Cth), the Life Insurance Act 1995 (Cth) and the Taxation Administration Act 1953 (Cth).

It is the amendments to the Corporations Act that will have particular relevance to a number of NSW entities.

Key provisions

The protections under the Cth Act will apply to disclosures made on or after commencement (that is, on or after 1 July 2019) and can relate to matters occurring before or after that date. Some parts of the Act (including provisions relating to compensation and remedies) will apply retrospectively to disclosures that were made prior to 1 July 2019.

The new regime:

  • provides for a broad scope   of conduct that can be the subject of a protected disclosure, including the   occurrence of ‘misconduct or an improper state of affairs or circumstances’
  • provides for disclosures   to be protected if made by a wide range of persons, including current and   former staff, their relatives and dependents, and contractors and suppliers
  • removes any requirement   that the whistleblower be acting in good faith when making the disclosure,   while requiring that the whistleblower have had ‘reasonable grounds to   suspect’ the misconduct or improper state of affairs or circumstances
  • allows whistleblowers to   remain anonymous
  • excludes most disclosures   of personal work-related grievances from protection
  • allows for certain   disclosures to the media or Members of Parliament in exceptional cases,   including that at least 90 days have passed since an earlier protected disclosure   was made and not acted upon, or there is substantial and imminent danger to   someone’s health or safety
  • generally prohibits the   disclosure of the identity of a whistleblower (or information that is likely   to lead to identification), with only very limited exceptions
  • authorises whistleblowers   to seek compensation for harm arising from victimisation (and reverses the   onus of proof when seeking compensation, once they have shown that they have   suffered detriment)
  • greatly increases the   penalties (including criminal penalties for individuals) for disclosing the   identity of a whistleblower or for victimising a whistleblower.

Application to some State entities

The amendments in the Cth Act are expressed to apply not only to any company, but also to ’a corporation to which paragraph 51(xx) of the Constitution applies’. This means that any entity that is a trading or financial corporation to which paragraph 51(xx) of the Constitution applies will be subject to the new regime.[i]

The scope of paragraph 51(xx) of the Constitution is not entirely clear. However, High Court authority[ii] and especially Federal Court authority[iii] suggest that a significant number of entities established under NSW laws may be constitutional corporations, and therefore will be subject to the new Cth whistleblower regime.

This could potentially include a number of local councils, health bodies, state owned corporations, universities, and transport agencies.

Continued application of the NSW PID Act

The Corporations Act is an unusual Commonwealth statute in that it expressly provides that it is intended to operate concurrently with State law. Particularly given that provision, we do not expect that the new sections to be inserted by the new Cth Act will be taken to have been intended to ‘cover the field’, in the sense of operating to the exclusion of existing State whistleblower laws.

Accordingly, any entity that is currently subject to the NSW Public Interest Disclosures Act 1994 (PID Act) will continue to be required to comply with the requirements of the PID Act, even if it also becomes subject to the Commonwealth regime.[iv]

Importance of seeking advice

The consequences of a contravention of the new Commonwealth legislation are extremely serious. For example, disclosing the identity of a whistleblower (otherwise than pursuant to one of the limited exceptions provided for in the Act) is a criminal offence punishable, in the case of an individual, by up to 6 months’ imprisonment.

NSW entities that may be subject to the Commonwealth regime will need to be particularly careful to identify whether and when a disclosure meets the thresholds for protection under either the Commonwealth Act, the PID Act or both. The criteria for protection under the two regimes are different but overlapping including in terms of the persons who make disclosures, the persons to whom such disclosures are made, the subject matter of the disclosure, and the circumstances where disclosures will be protected if made to external recipients (such as a Member of Parliament or a journalist). The consequences of a disclosure being protected under each regime will also be different, including in terms of the confidentiality obligations owed to the person making the disclosure and the criminal and civil liabilities that may apply.

Any NSW entity that identifies a disclosure as being subject to both regimes will need to be mindful of any practical implications that could arise. For example, NSW entities that receive a public interest disclosure under the PID Act are currently expected to take certain steps in relation to reporting[v] and investigating[vi] the disclosure that might in future risk inconsistency with the strict prohibition in the Cth Act on disclosing the whistleblower’s identity to any person.

The NSW Ombudsman is currently reviewing its guidance materials for public authorities in relation to the PID Act, to identify any changes that may need to be made in light of the potentially concurrent operation of the Cth Act for some entities.

In the interim, it is important that all NSW entities that could potentially be subject to the new laws seek urgent advice on their obligations under the new Cth Act, including what changes to internal policies may need to be made to minimise the risk of inadvertent non-compliance.

Possible future exclusion

It is not clear whether the coverage of some NSW entities, which are already covered by the NSW PID Act, was an intended policy outcome of the legislation. It may be possible that such entities could be excluded from the operation of the Commonwealth regime in the future by:

(a)    the Commonwealth Government making a regulation under the Cth Act to exclude those entities from the operation of the Act, or

(b)    the NSW Parliament enacting legislation in accordance with s 5F of the Corporations Act to provide that the provisions inserted by the Cth Act do not apply to those entities.[vii]

However, neither of these actions has been taken to date and we are not aware of any plans to do so.

___________________

Endnotes:

[i] There are some provisions of the Cth Act that apply to only certain sub-categories of regulated entities. For example, s 1317AI, which imposes specific obligations with respect to whistleblower policies, applies only to a regulated entity that is a public company, a proprietary company of a particular size, or a trustee of a registrable superannuation entity.

[ii] eg., Communications etc and Allied Services Union of Australia v Queensland Rail (2015) 218 ALR 1; New South Wales v Commonwealth (2016) 229 CLR 1 (the Work Choices case).

[iii] eg., Quickenden v O’Connor (2001) 109 FCR 243 ( the University of Western Australia case); United Firefighters Union v Country Fire Authority (2015) 315 ALR 460.

[iv] This does not preclude the possibility that there could arise a direct inconsistency between the new Cth Act and the PID Act or some other NSW law. For example, there may be circumstances in which it is impossible to obey both the new Commonwealth law and a relevant NSW law. In such a case, section 109 of the Constitution (which generally provides that a Commonwealth law prevails to the extent of any inconsistency with a State law) may come into play.

[v] Eg., under s 11 of the Independent Commission Against Corruption Act 1988 certain matters must be disclosed to the ICAC. Currently, however, disclosure to the ICAC under this provision has not been prescribed as an exception to the prohibition on disclosure of the whistleblower’s identity in the Cth Act.

[vi] Eg., in order properly to investigate suspected wrongdoing and/or to afford procedural fairness during an investigation, it may be necessary to disclose information to certain persons relating to the identity of the whistleblower. Currently, under the Cth Act such disclosure is generally prohibited except with the consent of the whistleblower. (cf s 22 PID Act (Confidentiality Guideline)).

[vii] The Corporations Act, unusually, allows enactment of a State law to exclude the operation of the Corporations Act either in its entirety or by reference to specific provisions, in respect of that State.

Search publications

I am looking for:

In the publication category: