The regulation of whistleblowing is an additional guarantee that law will be respected that has a disciplining effect on employers and businesses and provides a mechanism for bringing infringements to light that may otherwise go undetected in areas such as public procurement, product safety and financial services.
As whistleblowing entails certain inconveniences and risks for the whistleblower, the new compliance regime which Member States are required to put in place by the end of 2021 has the principal aim of protecting whistleblowers.
The new legal framework will have a direct effect on some businesses, insofar as certain companies will have to develop and put in place internal policies and procedures to ensure that certain categories of persons (the so-called whistleblowers) are able to blow the whistle on alleged wrongdoing within their organisation. The legal framework will have a positive disciplining effect on management to ensure compliance with the new set of rules.
From a legal perspective, the new regime is linked to the transposition of Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of whistleblowers (‘the Directive’). The underlying idea of the recently adopted EU legal framework is to introduce rules on whistleblowing infringement, determine the categories of whistleblowers, the rules to be followed in whistleblowing, the relevant safeguards and competent authorities.
A major issue for business is the so-called substantive scope of Bulgaria’s national law, i.e. determining the areas in which infringements are to be reported.
The matter should be followed up at local level, as Member States currently have a choice as to whether to report infringements in the areas specifically listed in the Directive (e.g. public procurement, financial services, competition, tax law, etc.) or whether the scope should be broadened, so that whistleblowing covers a comprehensive range of infringement of both EU and national law.
Any expansion of the areas regulated by national law inevitably results in greater administrative burden for business and should therefore be approached with care and in a gradual manner. Extended substantive coverage is envisaged in a number of countries in Europe, including France, Sweden, the Czech Republic and Ireland. In some countries it is even possible to report breaches of ethical rules and standards of conduct (USA).
The Directive defines ‘whistleblower’ as an extremely broad category, which includes employees or workers reporting on employers, shareholders, board members, etc., as well as third parties that are external to the organisation – self-employed persons, suppliers, contractors, volunteers, paid and unpaid interns, precontractual entrants, etc.
Given the scope of ‘whistleblowers’ thus defined, there is an enormous potential for cases to be reported by whistleblowers who do not act in good faith. As a safeguard against this type of conduct, the Directive requires that whistleblowers have reasonable grounds to believe that the allegations they make about the existence of potential infringements are in fact true. It is currently unclear whether this is a sufficiently reliable protection against abuse. In order to avoid arbitrariness, individuals must have strong reasons for reporting alleged infringements.
As a general rule, the Directive will apply to companies with more than 50 employees, i.e. the aim is to exclude micro and small enterprises from the scope of regulation. However, Member States may, entirely at their own discretion, envisage the possibility to lower this threshold – an approach taken by the Czech Republic, where the threshold is 25 workers.
The protection afforded to persons recognized as whistleblowers will also raise interesting practical issues. The Directive envisages a ‘prohibition of retaliation’, including measures such as prohibition of suspension, dismissal, firing, prohibition of transfer of duties, change of the location where the employee works, lowering the salary, taking disciplinary action, unfair treatment, etc.
Regarding the bodies that will have the power to investigate whistleblower reports, it is possible to envisage a single institution, independent from the bodies of the executive branch of power, which will act as a ‘mailbox’, forwarding reports according to the relevant competent institution. By way of comparison, this approach has been adopted in the Netherlands, where such powers have been delegated to the so-called Dutch Whistleblowing Authority. Of course, the possibility remains that whistleblower reports can also be submitted to the relevant competent authorities – the Consumer Protection Commission, the Commission for Protection against Discrimination, the Commission for the Protection of Competition, etc.
As the Directive is to be transposed into national law by mid-December 2021, the approach taken by the national lawmaker in implementing the new requirements will be essential. In this respect, business should closely follow the legislative process for the adoption of the new law with a view to taking timely measures to ensure domestic regulatory compliance. This is why the newly elected Parliament should take swift and timely action as early as this year, prioritizing the issue.
Asen Apostolov Ana Krusteva
