After the whistle is blown: protecting employees who speak out - The Law Society of NSW

By Alan J. McDonald

In recent times, a submission to a parliamentary enquiry into whistle-blower protections makes for distressing reading. A former Commonwealth Bank employee blew the whistle on dodgy practices within the bank, along with the aftermath of his disclosures.

McDonald Murholme Principal Lawyer Andrew Jewell states if an employee exposes wrongdoing by raising concerns and receives disciplinary action, then it is up to the individual to run a Federal Court action to enforce protections available to them under existing legislation.

After the whistle is blown: protecting employees who speak out – The Law Society of NSW

A submission to a recent parliamentary inquiry into whistleblower protections by former Commonwealth Bank employee Jeff Morris makes for harrowing reading. Eleven heavily redacted pages recount the day, in 2008, when Morris first blew the whistle on dodgy practices in the bank’s financial planning arm, along with the devastating aftermath of his disclosures, including smear campaigns, cover-ups and psychological turmoil.

But the most chilling moment? Talk of ‘shooting’ made me wonder if I had put my family at risk of being collateral damage he explains. I came home to an empty house one night. My wife had left with my children … [She] was opposed to me blowing the whistle on CBA from the beginning. Her refrain was that they would destroy me … Many times over the years she asked me why I was doing all this for people we didn’t know.” For Morris, like so many other whistleblowers, the answer was straightforward: because it’s the right thing to do.

A high price to pay Morris’s disclosures led to a number of positive outcomes, many of which are still unfolding. Several rogue financial planners were banned from practice, more than $50 million in compensation was paid to victims of poor financial advice, and a Senate inquiry into the Australian Securities and Investments Commission was established

Morris acknowledges that most whistleblowers “never have the satisfaction of this sort of vindication”. However, it’s hard to overlook the steep personal and professional price he’s paid.

Andrew Jewell, principal lawyer at McDonald Murholme, says whistleblowers often fight the good fight alone. If an employee exposes wrongdoing by raising concerns in an appropriate forum and is fired as a result, it’s then up to the individual to run a Federal Court action to enforce protections available to them under existing legislation,” he explains. They’re going up against a wellresourced opponent. If the whistleblower doesn’t have the resources to see it through, the protections are toothless.”

Released by the Parliamentary Joint Committee on Corporations and Financial Services in September this year, the Whistleblower Protections report highlighted the crucial role whistleblowers play in promoting integrity and accountability, and in deterring and exposing misconduct, fraud and corruption. Significantly, however, it identified that current legislation fails to protect whistleblowers from reprisals, which might include anything from demotion or job loss to verbal harassment or, as Morris experienced, death threats. The report highlighted legislative inconsistencies across states and sectors, and a lack of mechanisms through which whistleblowers could seek redress for harm. It further noted that complaints were usually poorly investigated, and perpetrators of misconduct rarely held to account.

Alex Grayson, principal of Maurice Blackburn Lawyers, welcomes the report’s proposed strengthening of whistleblower protections.

A major barrier [to disclosure] at the moment is people’s fear they won’t be protected, she explains.”

I’ve had a lot of people come to me, and have something very valid to [disclose], but they’re frightened of losing their employment.

The report recommended broadening the provisions related to anonymous disclosures and confidentiality, as well as those related to sanctions for reprisals. She says that recommendations to broaden the definitions of “whistleblower” and “reportable wrongdoing” and to increase the number of internal and external reporting channels, also represent important steps forward.

I’ve spoken to whistleblowers who haven’t been able to access protections because they had inadvertently disclosed to the wrong person, or missed one of the procedural requirements of current legislation,”she says.

Currently, for instance, the Public Interest Disclosure Act 2013 (Cth) provides minimal protection for disclosures made to anyone other than an “authorised officer” of an agency, while the Fair Work (Registered Organisations) Act 2009 (Cth) and Corporations Act 2001 (Cth) provide no protection.

Ideally, protections would extend to the same disclosures made publicly or to third parties, such as the media or labour unions, in some circumstances,” Grayson says. But is this enough?

Grayson believes there is scope to expand these provisions even further.

It’s not clear whether disclosures made to legal counsel are intended to be protected, and that’s something I’d like to see, she explains. “It’s not clear whether that’s part of the proposal, and that’s an area of concern.”

Bounty hunters

One of the report’s more well-publicised and controversial recommendations relates to the introduction of bounty systems, which already exist in countries such as the US and Canada, to reward people financially for speaking out.

Opponents flagged the potential for bounties to encourage frivolous or vexatious reporting, or to create conflicts of interest that might subsequently weaken prosecution cases in court. Others argued that incentives would undermine the cultivation of a civic-minded culture, in which individuals recognised their duty to speak out.

In his submission to the whistleblower protections inquiry, Dr Simon Longstaff from the Ethics Centre said regulators should focus less on splashing the cash, and more on remedying the circumstances that lead to whistleblowers suffering detriment in the first place.

“The solution.. is to provide adequate protections for individuals who have exhausted the internal mechanisms for raising their concerns,” he says.

However, proponents of bounty systems say they would encourage whistleblowers to come forward with valuable tips that otherwise would be difficult to obtain. The existence of bounties may also motivate companies to improve their internal whistleblower reporting systems, and to deal more proactively with illegal behaviour

Jewell points out that the proposed bounty system is less vulnerable to exploitation because rewards would be paid only for highvalue information that leads to successful enforcement action.

It’s doubtful whether the introduction of financial incentives will lead to people coming forward for improper purposes,” he says. “You don’t just get $10,000 for complaining about your boss.”

The report also recommended establishing an independent whistleblower protection authority, that would support and advocate for employees who put their jobs on the line by blowing the whistle. Designed as a “onestop shop”covering both the public and private sectors, the new authority would assess whistleblowing allegations, conduct investigations into reprisals and, where appropriate, refer cases to the Australian Federal Police.

The recommendation to introduce a “replacement wage” has received little attention so far, but Jewell believes it may turn out to be the most transformative in the lives of sacked whistleblower’s. The wage paid would be commensurate with the whistleblowers current salary, and would need to be repaid following the resolution of any compensation or adverse action claims.

Grayson agrees. “It’s important, because someone can suddenly find themselves out of work and having to litigate to try to address that wrong.. They’re then having to incur legal costs from a base of not having an income.”

Scandal after scandal

The first of 75 submissions to the parliamentary inquiry into whistleblower protections came from a hospital employee who claimed he was forced out of his job after flagging widespread infection control breaches and associated patient safety concerns. Ignored, harassed and denied equipment essential to his job, the worker claims management then “tried to paint me as mentally unstable to tarnish [my] credibility, before locking him out of the workplace altogether.

This story has a disturbingly familiar ring. Given the sheer number of scandals that have unfolded at all levels of the private, public and not for-profit sectors in recent years, we’re no longer surprised by the details. Yet it’s important to recognise that not all cases of whistleblowing involve a David and Goliath-style battle between an employee and a corporate behemoth.

According to David Morgan, who honed his forensic investigation skills at London’s Metropolitan Police and now heads PKF Forensic and Risk Services, more companies are setting up outsourced services through which employees may report internal wrongdoing. Some, he admits, signed up as a cynical exercise in compliance. However, CEOs are increasingly using these services to sniff out rotten eggs and to encourage expected behaviours in the workforce

The Association of Certified Fraud Examiners’ 2016 Global Fraud Survey found that internal tip-offs were the most common detection method, accounting for 39.1 per cent of cases. “it is people – an organisation’s employees, customers and contractors – who think, ‘That’s not quite right’, and blow the whistle,” says Morgan. “In one case, a new CEO was tackling systemic corruption head-on. When employees could see changes starting to happen, reporting increased, whereas in the past, the workforce lacked confidence that anything would be done about it.”

Lawyers estimate that the introduction of new legislation is at least a couple of years away – and there’s  no guarantee that all recommendations will be implemented. In the meantime, many more whistleblowers will struggle to preserve their professional reputations and careers

“I’m  involved in one case in which the dismissal took place in March this year,” Jewell explains. [As of September] we haven’t yet gotten to the first mediation, and the case will probably run to hearing in 18 months time. There’s been some reputational damage to our client, which is making it hard for him to get another job. So if, in 18 months, he gets a win, how much will he get back? And will it have been worth it?”

Reference: After the whistle is blown: protecting employees who speak out, The Law Society of NSW, November edition,