In the past 15 years, the way whistleblower protection has been enforced in the EU has varied between Nation States. Not only has whistleblower protection been fragmented and insufficient across most EU States, but since the EU Directive was introduced in 2019, many European countries have not yet implemented the new rules. The EU recently sued Germany, Luxembourg, Hungary, Poland, Spain, Italy, Estonia, and the Czech Republic over a lack of whistleblower protections and rights and a failure to implement the new Directive. The Directive is designed to enhance protection for those who disclose wrongdoing in the workplace but many countries still have a long way to go.
How Whistleblower Protection in EU Is Enforced
Enforcing whistleblower protection EU lawmakers have introduced has varied greatly from country to country. The new EU Directive signals a new era of recognition for whistleblowers as deserving of protection and legitimate reporters of misconduct. The purpose of the EU Whistleblower Directive is to enhance the enforcement of whistleblower rights and protections and reduce breaches in certain policy areas and European Union laws. The EU Directive focuses on protecting those who disclose violations of European Union legislation, especially when they have the potential to cause harm to the public.
The Directive encourages Member States to extend protections to those who disclose wrongdoing, although each country is required to do only the minimum when it comes to transposing it into national law. The goal is to increase the chance that employees will report misconduct when they see it, which would enhance a company’s ability to detect violations of the law. The two methods the EU has used to deal with violations have been sanctions and leniency programs.
Leniency Programs
The European Commission has handed fines for antitrust violations to companies and organisations and is increasingly involved in areas such as emissions regulations. It has offered leniency to the first reporting firm in return for their cooperation. The method does not protect entities from being sued for damages by private parties. This approach has been an effective way of reducing antitrust misconduct. In a 2020 report, the ECA revealed that between 2010 and 2017, 23 out of 25 investigations had applied leniency, while only two were a result of the EC’s own work.
Sanctions
The EU sees sanctions as an important tool for influencing change and reducing harmful policies and activities. Yet, there is currently no set minimum penalty for companies and organisations that don’t comply with the EU Whistleblower Directive. Instead, each Member State is expected to apply its own version of the law to those who prevent reporting of wrongdoing, fail to maintain confidentiality of whistleblowers, or retaliate against them. The EC has, however, suing governments who have failed to transpose the Directive nationally.
Who Is Enforcing Whistleblower Law?
There are a few issues with the way whistleblower protection is enforced in the EU. Nyrerod and Kohn note that there is a big variation in each industry and in the resources (and competence) authorities have in dealing with whistleblower cases across Member States. Each State has used varying levels of sanctions, regulations, and programs, and has its own approach to dealing with investigations. The most severe Union law violations are typically investigated by the European Commission (EC). However, tax evasion and securities or procurement fraud have been the responsibility of each EU Member State.
Part of the challenge with the transposition of the EU Directive has been this diversity in approaches and law enforcement capabilities, including knowing who is responsible for what. Nyrerod and Kohn argue that like the enforcement of whistleblower rights and protections in Europe, regimes like the Sarbanes-Oxley Act in the United States have been ambiguous in their approach. Results in many cases have had a low success rate, raising questions about how effective the EU Directive will be at protecting whistleblowers from retaliation.
One possible deterrent is the use of non-disclosure agreements by companies and organisations and the desire to protect trade secrets. Laws protecting trade secrets “have great potential for abuse and muddying the legal waters for potential whistlelbowers”, say Nyrerod and Kohn. Another potential difficulty is the lack of incentive for whistleblowers to come forward with information. Unlike the US, the EU has not used programs such as monetary rewards in return for information about fraud, tax evasion, pollution, and corruption. These have been shown to complement areas with regulatory gaps and reduce insider trading and accounting fraud. While rewards programs have become popular in countries like Brazil, Canada, Peru, Hungary, Lithuania, Malaysia, Taiwan, Pakistan, and the UK, there is currently no whistleblower reward rule in the EU.
Need for Enhanced EU Whistleblower Protection
There is no question that the EU has needed enhanced whistleblower protection for years. In 2015, German car manufacturer, Volkswagen, recalled millions of cars worldwide, costing the company billions, reducing the value of shares, and leading to fines by regulators like the EPA. The testing procedure for measuring emissions had been rigged to run vehicles below normal performance. In reality, the engines were emitting nitrogen oxide pollutants up to 40 times above what is allowed in the US. The problem quickly spread to the UK, Canada, Germany, South Korea, Canada, and France, all of whom opened investigations into the problem. The cars had already been on the road for years.
Dieselgate shows that even when protections are in place, it may take years before misconduct is revealed and employees are not likely to blow the whistle. Rules are not always effective in reducing misconduct in the workplace. The new EU Whistleblower Directive is likely to enhance the enforcement of Union laws, but the question remains whether whistleblowers will be treated equally across all Member States. As the EU improves its capacity to deal with whistleblower cases, the ability to detect wrongdoing is also increasing.
The EU Directive also attempts to remedy the issue of NDAs with a ‘no waiver of rights’ clause in Article 24. The new rule states that “Member States shall ensure that the rights and remedies provided for under this Directive cannot be waived or limited by any agreement, policy, form or condition of employment” (EU Directive).
