Corporate whistleblower protections in Australia: New case against Origin Energy tests ASIC protections
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Here’s a case study: an employee becomes aware of illegal misconduct within their company that could lead to serious reprimand by regulators. Since the employee only sees the misconduct increasing in scale and gravity, they report it to senior management. Soon thereafter, the employee is marginalised, and their position they are no longer needed by the company and is made redundant.
This is McDow’s story, a former senior compliance officer of Origin Energy who has brought proceedings against Origin Energy for a non-genuine redundancy and breach of the whistleblower protection under the Corporations Act 2001 (Cth) in addition to claims for workplace harassment and victimisation.
McDow alleges that Origin Energy covered up serious breaches of regulations on safety and the environment across hundreds of leaking wells Australia-wide alongside hiding these risks from the board. Among other incidents, McDow notes a gas explosion at Beharra Springs in Western Australia she concludes was caused by Origin’s management overlooking 13 systemic issues identified in audits over ten years. It is alleged that in a breach of confidence that as a result of notifying her concerns, Origin management told staff she was being investigated, told lies and that Ms McDow was having a mental breakdown, and was a "faker". These allegations amount to a breach of confidence by Origin.
What makes this case particularly interesting is this: McDow is a lawyer with 17 years' legal experience in senior compliance roles, working with international investigations and policy developments relating to money laundering, corruption, bribery, ethics and employee codes of conduct. Since her redundancy, she claims not to have been able to find suitable employment.
The Federal Court is currently reviewing McDow’s action against Origin Energy for breach of provisions which protect whistleblowers under the Corporations and Fair Work Acts and other associated allegations.
Generally speaking a whistleblower is an insider within an organisation, who in good faith, reports misconduct or dishonest or illegal activity that has occurred within that same organisation to a director, officer or senior person nominated to receive a disclosure.
The Corporations Act prohibits the victimisation of a person who discloses information about a company and provides relief, in the form of compensation, to a whistleblower who is victimised and suffers damage as a result. Further, a whistleblower who is terminated may be reinstated to that position or to a comparable level.
Rarely are issues of victimisation so black and white, resulting in a challenge to both the whistleblower who may seek protection under the Corporations Act and for the organisation (and its officers) in defending an allegation, be it before the court or the media.
However, it is well recognised that many whistleblowers have suffered directly or indirectly face great risk and serious consequences if they decide to reveal the wrongdoing of their employers. Many whistleblowers eventually find themselves in career oblivion.
There are various laws within Australia designed to offer protection, which appear to have done little to deter whistleblower retaliation. It is common to hear of whistleblowers being the subject of rumours, petty harassment and ostracism – actions which are hard to substantiate as damages under law. Given these factors, the law currently dissuades whistleblowers from pursing a case against their former employers for damages relating to whistleblowing. It is not surprising that McDow’s case is the first of its kind amongst whistleblowers in Australia.
Time to sit up and take notice?
Whistleblowers play a critical role in preventing and detecting corporate misconduct. They are indispensable to detecting and deterring complex behaviours which elude regulators and external bodies. Corporate cultures of ‘silence’ threaten trust and cooperation in an organisation, heightening the risk of financial and reputational loss and increasing compliance costs in the process. While the Origin case serves as a stark and exceptional example of this, whistleblowing should concern every company that is serious about building the public and regulators’ confidence in their integrity.
It is important that your business maintains a culture of transparency and accountability from the ‘bottom up’ by ensuring that employees feel comfortable to communicate freely and air any issues they may have with staff behaviour. It is equally important for policies and procedures to buttress effective whistleblowing from the ‘top down’.
At the Senate Estimates Committee hearing on whistleblowing, ASIC’s Chairman Greg Medcraft, recognised that whistleblowers should be rewarded for their deed. This reward approach was introduced not so long ago in the United States. The Senate Economics Reference Committee is due to release its report on combating Corporate Whistleblowing in Australia over the coming weeks and we believe that ASIC will renew its focus on this issue in 2017.
They're finally here: Higher standards for the financial services industry
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On 9 February 2017, the Federal Government passed the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 (Cth) amending the Corporations Act 2001 (Cth). The reforms require that financial advisers meet:
- specified and compulsory education standards;
- supervision requirements for new financial advisers;
- the implementation of a code of ethics for the financial industry;
- an exam to represent a common benchmark across the industry; and
- an ongoing professional development component.
The new requirements are set to commence on 1 January 2019. After this date, new advisers will be required to hold a relevant degree before they are eligible to commence their supervision year and to sit an exam. Existing advisers will have until 1 January 2021 to pass the exam and 1 January 2024 to complete, or raise their qualification(s), to a bachelor degree or equivalent qualification. The reforms establish a nationwide standard for financial advisers to adhere to and also introduce a standards body which governs the professional standing of the financial advice sector. The cost of setting up this body will be covered by the ‘Big Four’ banks and AMP. The body will also set educational standards and requirements, develop and set an exam and create a uniform Code of Ethics, which will commence on 1 January 2020.
Compliance with Current and Future Child Protection Laws – Embedding a Child Protection Culture. How can this be achieved?