In our previous article (What is the whistleblowing worth within the company?) we briefly summarized the meaning of a whistleblowing system, as companies having 250 or more employees, and later even the ones having 50 employees at least, will be required to introduce it. The Directive 2019/1937/EU on the protection of persons who report breaches of Union law has already been adopted and Member States are required to implement the legal framework accordingly, in the first part, by the end of this year.
In Hungary, most employers have so far voluntarily decided to establish whistleblowing systems, thus they have not been widespread. Therefore, the question arises as to what this system covers and how those concerned will be able to comply with the regulations.
In our three-part series of articles, we briefly summarize the essence of the internal reporting system, and then point out why it may be worthwhile for companies to establish such a procedure – beyond the legal obligation. Finally, we seek to review some aspects that can help those concerned to decide how to carry out the investigation of internal reports.
What is a whistleblowing system?
Whistleblowing system is a process established to ensure that reporting persons (i.e., employees, suppliers, shareholders, interns etc.) can report information on breaches that they became aware regarding specific subject area (e.g. corporate tax, competition, public procurement) without the fear of any retaliation such as negative performance assessment or even termination of contract. To provide that, companies are required to establish an internal whistleblowing system that guarantees to remedy the breach within the system concerned.
What needs to be regulated?
The whistleblowing policy must contain information on the method of the investigation, its deadline, and the contact information as well as how the reporting person will receive feedback from the company regarding the investigation.
The procedure can be carried out internally by a person or a department designated for that purpose or it also can be outsourced to an external third party. However, it is important that the identity of the whistleblower and the person involved in the breach must always be kept confidential and that no retaliation of any kind – either directly or indirectly – should be taken against the reporting person, unless it is taken in bad faith.
What happens if there is no internal policy?
If the employers required to establish a whistleblowing reporting system fail to set up the same within the set deadline, they could face severe sanctions. In this context it is important to highlight that it is not sufficient to establish the system, it also needs to be properly operated.
Parallelly with the internal whistleblowing system – or in case that is absent or inadequately functioning – reporting persons will also able to report breaches in the framework of external whistleblowing system, however, in that case the investigation will also be carried out by the authority, which may pose a significant reputational risk to the company, especially in view of the publicity.
Although the domestic legislative environment is not yet introduced, given the deadline of 17 December 2021 set by the Directive, we expect that details will be public soon.