Protecting reputation in the event of whistleblowing by employees.

 7 rules to be prepared for a crisis – Changes resulting from the Whistleblower Protection Act.

Protecting reputation in the event of whistleblowing by employees.

Companies have to be professionally prepared for whistleblowing in order to protect their image and reputation. What are the important aspects when considering the Whistleblower Protection Act – which may take effect as early as May?

A cashier reports that a supermarket chain is relabeling spoiled merchandise. The employee of a food producer blows the whistle on false organic certifications. Or an accountant discovers balance sheet manipulations. In the future, cases like these will be covered by the scope of the new Whistleblower Protection Act (HinSchG) to the same extent as corruption, data protection violations, money laundering or inadequate product safety. In contrast, the explanatory memorandum states that reports regarding unethical or immoral actions will not be protected. As already reported, the new law may take effect as early as May, provided that the Bundesrat grants its approval at its first plenary session on February 10.

Reputation damage when whistleblowing is abused

If the public becomes aware of incidents, companies can face major damage to their reputation. As a consequence, many companies fear the downside of whistleblower protection: the risk of abuse, such as when terminated employees spread false information about the company or individuals. As a rule, the motivation behind a report matters little when it comes to the protection of whistleblowers. The rights of whistleblowers have to be weighed against the employer’s interest in loyalty and confidentiality in each individual case. They can appeal to a freedom of occupation pursuant to Article 12 of the Basic Law as well as their corporate personality rights and the protection of their reputation in business dealings, which arise from Art. 2(1) in conjunction with Art. 19(3) of the Basic Law. We describe the important aspects and what you need to know for the worst case, and how to protect the company’s good reputation.

  1. Protection of trade secrets
    If a whistleblower’s report affects a trade secret as defined in Section 2(1) of the German Act on the Protection of Trade Secrets, Section 6 of the Whistleblower Protection Act (HinSchG) set limits: The disclosure of the trade secret is only permissible if a whistleblower had reasonable grounds to believe that passing or disclosing such information was necessary to expose a violation.
  2. Information does not have to be true
    Furthermore, Section 6 of the Whistleblower Protection Act (HinSchG) stipulates that the requirements of Section 33(1), (2), and (3) of the Whistleblower Protection Act (HinSchG) also apply: The whistleblower must have reasonable grounds to believe that the information is true. In addition, the violations must also fall within the scope of the law. Naturally, the disclosure of incorrect information on violations pursuant to Section 32(2) of the Whistleblower Protection Act (HinSchG) is prohibited.
    It is important to be aware that it is both necessary and also sufficient that the whistleblower believes the factual and legal conditions of the violation in good faith. Therefore, the information need not actually be true.
    What are the whistleblower’s duties of due diligence and investigation with regard to the truthfulness of their report? Neither the Whistleblower Protection Act (HinSchG) nor the EU Whistleblower Directive regulate this issue. The decisive factor is whether the whistleblower could have believed the information to be true based on their individual personal knowledge and abilities. Above all, the whistleblower would have to evaluate all of the available information prior to submitting a report. The Whistleblower Protection Act (HinSchG) does not stipulate any further investigation obligations.
  3. Damage claims for false reports
    Whistleblowers are not protected in the event that they deliberately submit false reports or are grossly negligent. In this case, the company is entitled to claim compensation for damages pursuant to Section 38 of the Whistleblower Protection Act (HinSchG).
  4. Disclosure to the media or via social media as a last resort
    In addition to internal and external reporting, Section 32 of the Whistleblower Protection Act (HinSchG) also permits publication in print and online media or via social networks as a last resort. However, the protection of whistleblowers is then subject to conditions. These include if the external report was unsuccessful, in an emergency situation, if a threat to public interest exists such as spoiled meat, or if there is a risk that evidence will be suppressed.
  5. The media must comply with the standards for reporting suspicions
    If the press, radio or television intends to publish the leaked information, they are bound by the standards for reporting suspicions as implemented by the Federal Court of Justice:

    • These standards require that the media first conduct sufficient research before reporting on a suspicion and identifying possible culprits rather than anonymizing the persons or companies concerned.
    • A minimum amount of evidence is required which would indicate the truth of the information and which gives the information “public value” as a result.
    • The issue must be a matter of “grave importance” making the disclosure justified by the need to inform the general public.
    • A consultation is also necessary, during which the editorial team obtains a statement from persons or companies concerned prior to publication.
    • Prejudgment must not occur: The reporting must be balanced by also discussing exonerating circumstances or the possibly dishonest motives on the part of the whistleblower, for example.

    To prevent a scandal, the parties concerned may take legal action against the publication pursuant to press law and, for example, file an action for injunction on the grounds of prohibited identifying written reporting.

  6. Attractive internal reporting channels are the best protection
    In their own interest, companies are strongly advised to make their internal reporting channels as appealing as possible with the help of incentives as per Section 7(3)(1) of the Whistleblower Protection Act (HinSchG). This would encourage whistleblowers to trustingly utilize these channels as the first line of action. We have already reported on this. In the process, companies would retain the ability to clarify and resolve any problems internally before they are disclosed to the public. The same also applies to the obligation set forth in Section 16(1) of the Whistleblower Protection Act (HinSchG), which requires both internal and external channels to enable and process anonymous reports.
  7. Emergency plan for crisis communication
    Now, at the latest, companies need to prepare a crisis communication plan to deal with whistleblowing. In an emergency, the deadlines for a response to a press inquiry are very short, frequently only several hours. Companies need to be able to immediately answer questions such as the following to enable them to rapidly react to imminent legal issues resulting from reporting: Did the whistleblower comply with the reporting system? Are trade secrets involved? Does the press inquiry contain incorrect or incomplete information which needs to be corrected or expanded? Did the media comply with the principles of reporting suspicions when publishing the article?
    A sophisticated internal communication strategy is also a must. The rumor mill needs to be suppressed. “Salami tactics” whereby the company admits to a situation piece by piece or even repeatedly corrects its position on the issue are unsuitable.

When it comes to whistleblowing by employees, protecting the company’s reputation is more than simply a legal matter. The communication is at least as important: As already reported, a good communication culture among employees and with managers helps to reveal misconduct and grievances before the company’s reputation is ruined or the authorities get involved. That is why promoting an encouraging social responsibility and take consistent action against violations are highly recommended.