Trends in workplace whistleblowing — An HR primer

The OSC policy is similar to that in the United States and around the globe. Governments and regulators are providing more incentives for whistleblowers to “go public” about all types of corporate misconduct. For example, many of the health and safety complaints made to regulators across Canada every year are from anonymous whistleblowers. Therein lies a dilemma — does the employer encourage its own internal whistleblowing to achieve regulatory compliance, or does it risk individuals going behind its back for fear of reprisal and becoming anonymous government whistleblowers?

Canadians are close neighbours and trading partners with the United States and therefore are highly influenced by American legislative and enforcement initiatives relating to whistleblowing. Canadian courts have also been called upon to deal with various issues arising from whistleblowers from foreign countries. For example, the Supreme Court of Canada is the first national high court in the world to recognize and protect the role of whistleblowers from disclosure and criminal prosecution. In its decision World Bank Group v. Wallace, it addressed the subject of whistleblower immunity in an international corruption case.

The Supreme Court confirmed that the World Bank Group did not waive their immunities by voluntarily providing that whistleblower information to Canadian law enforcement officials. This included two confidential tipsters who told the bank’s investigative unit that SNC-Lavalin was in the process of bribing Bangladeshi officials to grant the Canadian engineering firm a contract to supervise the Padma Bridge project.

The court held that two of the five institutions that make up the World Bank Group are protected by the immunities in their constituent treaty, which Canada implemented in the Federal Bretton Woods and Related Agreements Act. These immunities generally insulate members of the World Bank Group from being compelled by domestic court orders to produce their officials and documents in criminal prosecutions.

While criminal defence lawyers may be concerned regarding the international organization’s immunity from domestic criminal disclosure obligations, employment lawyers may be concerned about the ability to protect employers’ confidential business information and encourage internal reporting of regulatory, employment or criminal activity in the workplace.

Federal whistleblower laws in Canada

Section 425.1 of the Canadian Criminal Code offers protection to employee whistleblowers in all jurisdictions in the private and public sectors. It is a criminal offence for an employer or person acting on its behalf to engage in or threaten a reprisal against an employee with the intent of keeping the employee from providing information about an offence under federal or provincial legislation to a person whose duties include the enforcement of that law. Section 425.1 only applies to criminal or quasi-criminal misconduct, and employees are only protected if they approach a law enforcement official. There is no protection if employees contact any other person or organization. An offence under s. 425.1 is a hybrid offence — this means the Crown may prosecute summarily or by indictment. If the Crown proceeds by indictment, the maximum term of imprisonment for violating s. 425.1 is five years. The monetary penalty for a corporation where the Crown proceeds by indictment is unlimited.

Federal public sector employees

The Public Servants Disclosure Act (PSDPA) provides protection to whistleblowers in the federal public sector. The purpose of the PSDPA is to encourage public servants to disclose wrongdoings and protect them from reprisal. In comparison to s. 425.1 of the Criminal Code, the scope of wrongdoing that may be disclosed, as well as the individual that the employee may make the disclosure to, is broader. The PDSA provides that wrongdoings include a contravention of any Act of Parliament or of the legislature of a province, misuse of public funds or a public asset and gross mismanagement in the public sector may be disclosed to the Public Sector Integrity Commissioner, as well as a supervisor in the organization.

Section 19 of the PSDPA provides that “no person shall take any reprisal against a public servant or direct that one be taken against a public servant.” Sections 19.1(1) and (2) provide that where a public servant or former public servant believes, on reasonable grounds, that a reprisal has been taken against her, the public servant may file a complaint within 60 days with the Office of the Public Sector Integrity Commissioner, a new agency created under the PSDPA. The commissioner reviews all complaints and may investigate if there are grounds to believe a reprisal has been made. After investigating, the commissioner may refer a complaint to the Public Servants Disclosure Protection Tribunal, a quasi-judicial body that adjudicates reprisal complaints. The tribunal has the power to order remedies and to make orders against a person who has engaged in a reprisal. In addition to any other applicable legal penalty, a public servant who has engaged in a reprisal may be subject to disciplinary action up to termination of employment as determined by the tribunal.

The PSDPA, the commissioner and the tribunal have been the subject of criticism. Critics note that perpetrators can escape punishment under the PDSPA regime by pursuing employment in the private sector. Compounding this issue is the fact that the commissioner does not disclose the identities of wrongdoers, which means that prospective employers do not became aware of prior misconduct. According to Transparency International Canada, over a seven-year period, only six out of 140 reprisal cases were referred by the commissioner to the tribunal and the commissioner declined to ask the tribunal for disciplinary actions against the employers despite identifying specific acts of reprisal. As well, during Christiane Ouimet’s three-year tenure as Integrity Commissioner from 2007 to 2010, no wrongdoing or reprisals were found among the more than 200 complaints filed.

Provincial public sector employees

Six of Canada’s 10 provinces have public sector whistleblower legislation — Ontario, Manitoba, Nova Scotia, Saskatchewan, New Brunswick, and Alberta. The remaining four provinces and three territories have no whistleblower legislation for provincial public servants.

Provincial private sector employees

In most provinces, there are currently no free-standing whistleblower laws applicable to the private sector, and no legal obligation to report wrongdoing. Almost all provinces have employment standards and health and safety legislation that prohibit private sector employers from engaging in reprisals, but those protections apply only to employees who, among other things, seek enforcement of or file complaints under those pieces of legislation. The anti-reprisal provisions in the New Brunswick Employment Standards Act and the Saskatchewan Labour Standards Act, hoswever, extend anti-reprisal protection to employees who provide information to authorities about violations of other pieces of provincial and federal legislation.

The OSC Whistleblower Program

On Oct. 28, 2015, the OSC — the securities regulator of Canada’s largest and most populous province — published OSC Policy 15-601, Whistleblower Program, for public comment. The program is now in effect and intended to encourage reporting of securities misconduct by, among other things, providing individuals who submit information about securities violations may be eligible for a financial award.

The program contains a draft procedure for individuals to submit information confidentially to the OSC. Once information is submitted, the OSC may request additional information, but whistleblowers are generally not expected to obtain other documents or information that is not already in their possession. OSC staff will take reasonable efforts to protect the identity of whistleblowers, and the OSC plans to recommend specific legislative amendments to provide reprisal protections to employees who report a securities violation. The OSC does not grant immunity from prosecution; however, if a whistleblower reports a violation law in which she is complicit, the OSC has discretion to not prosecute.

In order to qualify for a financial award, information must be original, high quality, and contain timely, specific and credible facts pertaining to serious securities violations that would render meaningful assistance to investigators in obtaining the imposition of monetary sanctions or voluntary payments of $1 million or more. Further, the appeal period in relation to the sanctions must have expired or any appeal must have been concluded.

Best practices for establishing and managing whistleblowing systems

Employers, both public and private, have an interest in encouraging early and internal reporting of wrongdoing through a whistleblower system. This allows organizations to investigate alleged wrongdoing, take appropriate corrective action in cases of proven wrongdoing, and implement strategies to control the legal and reputational risks. A clear, effective internal whistleblowing system is essential for early and internal reporting. The following best practices may assist to achieve that end:

Establish a clear code of conduct that applies to all employees, agents and representatives of the organization. Ensure knowledge and agreement through document training and verification initiatives.

Make compliance and internal reporting a priority. The senior levels of any organization should explicitly and publicly support compliance and internal reporting procedures. A policy statement, signed by senior offices, outlining the organization’s commitment to internal procedures is a simple step that can go far to creating a compliance culture that encourages early and internal whistleblowing.

Simple and independent reporting processes. Whistleblowing procedures should be clear, user-friendly and independent from the business line. Whistleblowers may be discouraged if the reporting mechanism is not perceived to be independent or is too confusing. 

Prescribe the scope of reportable conduct. Organizations may choose to limit the subject matter of reports to those required by applicable law, or they may choose to allow reports about a wider scope of matters. The latter may require a larger and better resourced whistleblowing structure but can help organizations to identify and manage a broader range of risks.

The appropriateness of anonymity. Anonymous reporting can encourage whistleblowing, but it may also make it more difficult to investigate, particularly if the original complaint does not have much information. Requiring a whistleblower to identify herself can provide an opportunity to follow up for more information. Note that certain jurisdictions require organizations to allow anonymous reporting.

Communicate whistleblowing procedures. Organizations should train employees on the whistleblowing procedures. Third parties, who are eligible to make reports, should also be made aware of the whistleblowing procedures.

Incentivize reporting. While internal reporting is preferable, in some jurisdictions organizations must compete with external regulators offering financial incentives to whistleblowers. While organizations may not be able to match those incentives, consider offering incentives to facilitate internal compliance, such as larger bonuses.

Explicitly prohibit reprisal and enforce anti-reprisal protections. Applicable law may prohibit reprisals against whistleblowers, but whistleblowers may be unaware of those protections and, as a result, may be reluctant to make a report. An explicit statement that reprisals are prohibited can encourage reporting, but it will only be effective if anti-reprisal protections are consistently enforced.

Accept, investigate and act on credible reports. All whistleblowing reports should be accepted and screened to eliminate those that are frivolous, vexatious or outside the scope of the whistleblowing procedures. Screening can also ensure there is sufficient information to investigate. Credible reports should be promptly and fully investigated by qualified individuals and appropriate corrective action taken.

Maintain confidentiality and security. Organizations should implement safeguards to ensure the security and confidentiality of reports and prohibit disclosure except in accordance with the whistleblowing system and as required by law.

Monitor and audit the whistleblowing system. Regular internal monitoring, an independent audit of the system, and a selection of closed whistleblowing cases are crucial to ensuring the procedure is effective. Where deficiencies are noted, corrective action should be promptly taken.

Consider the role of solicitor-client privilege. It may be appropriate for an investigation to be conducted under attorney solicitor-client privilege. In such cases, the organization’s external lawyers may direct an investigation for the purposes of providing legal advice to the organization. The investigation and disclosure of the report must be carefully and closely managed to maintain legal privilege.

For more information see:

• World Bank Group v. Wallace, 2016 CarswellOnt 6580 (S.C.C.).