On July 2, 2023, the Act for Better Protection of Whistleblowers (Whistleblower Protection Act) (Hinweisgeberschutzgesetz, HinSchG) entered into force in Germany. The act aims to protect persons who report or disclose information on violations in a work-related context. The law prohibits retaliation against whistleblowers and obliges companies to establish secure channels for whistleblowing.
Protected Persons and Information
Persons who have gained information on violations in a work-related context and report or disclose this information are protected by the Whistleblower Protection Act. In addition to whistleblowers, the law protects persons who are the subject of or affected by such reports or disclosures. (Whistleblower Protection Act § 1.) Under the act, whistleblowers include not only permanent employees of the company but also trainees, civil servants, judges, or others who are employee-like workers. (§ 3, para. 8; Explanatory Memorandum at 74.)
The Whistleblower Protection Act protects the reporting of most kinds of work-related violations, including violations of criminal law; breaches subject to fines; and violations of other federal or state laws and of directly applicable European Union (EU) law in specific enumerated areas, such as the prevention of money laundering and terrorist financing or product safety and compliance. (Whistleblower Protection Act § 2.) The violation must be connected to the company the whistleblower works for or previously worked for. (§ 3, para. 2.)
Types of Whistleblowing
The act provides rules for internal reporting within an organization and external reporting to a special government agency. Persons who intend to report a violation can choose between internal and external reporting channels. (§ 7.) The act does not prioritize internal reporting. However, employees are encouraged to prioritize internal reporting if doing so is an effective way to proceed against the violation and they do not fear retaliation.
For this purpose, companies in Germany with 50 or more employees must establish internal reporting channels. (§ 12.) Smaller companies with fewer than 250 employees must implement reporting channels by December 17, 2023. For all other companies, the obligation applies immediately. (§ 42).
Furthermore, the act includes provisions on confidentiality, requiring that the confidentiality of the identity of the whistleblower, the persons who are the subject of a report, and any other persons mentioned be preserved. (§ 8.) The identity of these persons may be disclosed only to the person receiving the report and taking follow-up action. Other persons must be prevented from accessing the internal reporting channel. However, the act does not oblige companies to establish anonymous reporting channels.
The external reporting channels are established by the federal government. One reporting office will be set up at the Federal Office of Justice (Bundesamt für Justiz). (§§ 19, 23.) The German states may set up additional external reporting channels. (§ 20.) The German Federal Financial Supervisory Authority and the Federal Cartel Office are authorized to act as external reporting channels for specific violations that fall within their area of competence. (§§ 21, 22.)
Lastly, persons may also make public disclosures. However, public disclosures are subordinate to internal and external reporting and may be used only if, for example, the person made an external report and no appropriate follow-up action was taken, or if the violation poses an obvious threat to public interest due to an emergency. (§ 32.)
Fines for Retaliation
The act protects whistleblowers by prohibiting any retaliation or threats and attempts to retaliate. (§ 36.) Violators of this prohibition must compensate the whistleblower for the damage incurred. (§ 37.) Damages are material damages, such as compensation for actual and future financial losses or costs caused by changing jobs or being terminated. (Explanatory Memorandum at 112.) The burden of proof lies with the companies. Violations of the law are punishable by fines of up to 50,000 euros (about US$ 55,000). (Whistleblower Protection Act § 40.)
Reasons for the New Rules
The Whistleblower Protection Act implements Directive (EU) 2019/1937, the European Whistleblower Directive, into German law. The directive was due to be transposed into national law by December 17, 2021. In the spring of 2022, the European Commission started infringement proceedings against Germany for late transposition. An earlier draft of the national law failed due to differing opinions among the parties in the previous coalition government.
The federal and state governments were unable to agree on a compromise for over a year, until May 9, 2023. A mediation committee was necessary for the final amendments to be accepted by the German Bundestag (parliament) and the Bundesrat, the legislative body through which the German states participate in the legislative process.
Part of the compromise involved not including an obligation to establish reporting channels for submitting anonymous reports. Consequently, internal and external reporting channels do not need to provide for anonymous reports. Nevertheless, the competent bodies are encouraged to handle anonymous reports as well. Another part of the compromise was limiting fines to a maximum of 50,000 euros instead of the originally planned 100,000 euros.
Reactions
One political commentator has described the new law as “successful” but “passed far too late,” calling the German lawmakers’ long delay in passing it “embarrassing.”
Moreover, the nonpartisan Whistleblower Network (Whistleblower-Netzwerk e.V.) criticized the restrictive requirements for disclosures and the far-reaching exceptions for whistleblowers from the security system sector. In addition, they found it regrettable that the originally envisaged compensation for immaterial damages for whistleblowers who suffer retaliation was not included in the final version of the law.
Prepared by Lea Marie Ruschinzik, Law Library Intern, under the supervision of Jenny Gesley, Foreign Law Specialist
July 14, 2023
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