Additional Comments from Labor Senators
At the outset of these additional comments, Labor Senators on this
committee wish to thank the members of the Parliamentary Joint Committee (PJC)
on Corporations and Financial Services as well as the secretariat in delivering
their final report on whistleblowing reform. Labor Senators acknowledge the
significant work that went into a comprehensive, bipartisan report.
Labor Senators also want to thank Professor AJ Brown for his tireless
efforts in advocacy for best practice whistleblowing policies both here in
Australia and abroad. Labor Senators thank him for his submission and testimony
to both this inquiry and the PJC report.
Labor Senators endorse the sentiment of witnesses such as Mr Jeff
Morris, who succinctly stated that whistleblowing plays a crucial role in good
the whistleblower is not the enemy; he is the last line of defence
in corporate governance.
Whistleblowing often involves disclosures by current employees or past
employees. Labor Senators believe that all employees should feel safe in their
workplaces and that any acceptable whistleblowing framework must ensure that
there are strong protections and that there are severe consequences when
The government is acting on Whistleblowing Reform—because it was forced to—and
yet still takes a minimalist approach
The government previously committed to introducing a bill which would
make changes to whistleblower protections 'consistent with the recommendations'
of the PJC Report and an expert advisory panel, and which, at a minimum, would match
the 'substance and detail' of the whistleblower protections included in the
Fair Work (Registered Organisations) Amendment Bill 2014.
However, this bill falls far short of the PJC report.
What is also clear is that, in some key areas, the whistleblowing
protections set out in this bill set a lower bar than the whistleblowing
protections set out under the Registered Organisations bill. Under the
Registered Organisations bill, registered organisations have an explicit duty
to support and protect whistleblowers and whistleblowers have a lower threshold
to meet when seeking compensation. The Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
does not place an explicit duty to support and protect whistleblowers and sets
a higher threshold for whistleblowers who are seeking compensation.
Witnesses were divided on whether the duty in the Registered
Organisations Bill was an appropriate duty to use. Professor Brown was supportive
of this standard. By contrast, Dr Chaikin doubted the workability of this duty
and stated that it
may have an unintended consequence of imposing onerous,
complex and costly obligations on companies.
Despite these differing views, one thing did become clear during the
course of the hearings before this committee. This government has decided that
a standard which it applied, without hesitation, to Australia's unions, is now
not appropriate for Australia's corporations and banks.
Labor Senators also see the links between this legislation and the
Banking Royal Commission - a Government forced to act despite the volume of
evidence pointing to the need for action and, when the Government finally acts,
there are questions over their commitment to true reform. As put by Mr Morris:
I guess I see this as a bit of a parallel thing to the
banking royal commission, where the government's finally, kicking and
screaming, bowed to the inevitable and had a banking royal commission, but it
has scandalously under-resourced it—one commissioner for 12 months. It's kind
of like just playing a game of paying lip-service to something. What troubles
me is the parallel here—that this is called whistleblower legislation but,
compared to what it could achieve, this is just a pale shadow of the real
thing. I guess you could say we've got a clayton's royal commission and, in a
sense, this is clayton's whistleblower legislation. When you look at the
recommendations of the PJC, and indeed, the submission of Professor Brown, it's
just apparent that there's so much more that could be so easily achieved. What
I don't understand is that the benefits that would flow through it are so
Role of Unions
This bill contains no mention of the role that unions could play in
providing assistance to people looking to make disclosures. This was raised in
evidence from the ACTU.
Senator KETTER: Why have unions been cut out of this
Mr Clarke: I'm not sure, but I can simply point to: if you
conceive of this as a situation that is highly likely to operate, whereby
employees are being the whistleblower on their employers, and you're setting up
legal protections for employees against the actions of their employers, I just
can't see a basis consistent with the way the rest of the law works to say that
you'd exclude the role of free unions there.
Questions on notice to Professor Brown also indicate his support for
unions, professional associations and Employee Assistance Programs in providing
professional assistance to those seeking to make disclosures.
Labor Senators remain concerned that the attitude of this Government is
to establish one rule for companies and other rule for unions. This bill, and
the lack of inclusion of registered organisations such as unions, is yet
another sign of this political philosophy.
There are also concerns that this bill might be the Government’s only
response to whistleblowing in this term of parliament. Treasury officials
reiterated that the Government is yet to release its response to the PJC
report, tabled on 13 September 2017. According to Treasury:
It's probably not correct to characterise the task as
implementation of the PJC report, because the PJC report still has to be
accepted by government. The process that the panel was involved in was
providing a considered view and feedback and so forth about the PJC report, as
well as about an earlier version of this bill. That's the process that it was
engaged in, and that was to assist the government to come to a view about,
firstly, the bill and then, secondly, about the PJC report. The second part is
still with the government, and I don't know what the government's position on
that will be.
Given the current reporting time of this report, the lack of public
commitment by the Government to release its response in the near future and
that there may only be 12 or so months until the next election, Labor Senators
find it unlikely that this Government will introduce further legislation to
implement additional whistleblowing reform in this term of parliament.
Concerns about the effectiveness of this legislation
Concerns raised about this legislation were widespread and varied.
Professor Brown raised five concerns in particular:
of criminal and civil remedies;
civil remedies available for detriment flowing from a failure in duty to
support or protect (irrespective of individual intent or belief)
- A best
practice version of the reverse onus of proof
reasonable filter against individual personal and employment grievances
and appropriate protection for third party (e.g. media/public) disclosure.
Professor Brown's submission also makes it clear that this legislation
is actually a departure from the PJC's recommendation to bring together
whistleblowing legislation into a single act.
I think the history shows, including history internationally,
that most agencies will say that it's easier if, if the legislation pertains to
them, that it be contained in their own legislation. The recommendation of the
parliamentary joint committee, which I certainly advocated for and support, was
specifically to take a step back from that and look at, for the Australian
circumstances, what's the most efficient and effective way to approach it from
a business regulatory point of view. That is why everybody from the Law Council
to the Governance Institute to the Australian Council for Superannuation
Investors et cetera have all ended up advocating that, yes, it should be, if it
can be-and technically I think it can be-placed all in a single act. Even though
there will clearly be different implications and consequential amendments still
for different regulators.
These concerns are so serious that Professor Brown expressed scepticism
about whether the scheme could work effectively without further amendments:
The thing is that unless these things are fixed, in my view
the scheme won't work. I'm just happy that they can be fixed, and that there is
still an opportunity to fix them.
Regarding the separation of civil and criminal liability, Labor Senators
note the responses by Dr Chaikin and Treasury Officials in response to this
specific concern, and also note responses to Questions on Notice from Professor
Brown that reiterates the concerns about issues arising from the lack of
separation despite the evidence heard during the hearing.
The Uniting Church summarises the bill this way:
The Bill fails to provide actual proactive support for
whistleblowers and will leave them still having to find a lawyer and fend for
themselves in accessing protection or seeking compensation for retaliatory
Mr Morris expressed similar concerns:
The subtle thing about this bill is that it is tied up in
trying to put in place a legal process for compensation, among other things. It
is such an overly legalistic process that I think the people who have drawn up
this bill have perhaps lost sight of the fact that to a prospective
whistleblower the prospect of having to navigate a legal minefield with the
possibility of getting some compensation is only marginally more attractive
than the current situation, and, as I said, the vast majority of people won't
It is incumbent on the Government to explain how this bill will not lead
to outcomes suggested by witnesses such as the Uniting Church and Mr Morris.
On external disclosures, many submissions stated that the current test
of an 'imminent risk of serious harm or danger to public health or safety or to
the financial system if the information is not acted on immediately' is too
The design of protections for external disclosures warrants careful
consideration. Some submissions noted that the design of such provisions must
keep in mind the importance of not prejudicing ongoing investigations. However,
Professor Brown put the view forward that making adequate provision for
external disclosures would help to incentivise a high standard of systems and
procedures for internal whistleblowing. He also noted that Jeff Morris would
not have been protected under this bill when he made his disclosure to the
Senator KETTER: Is there a risk that limiting external
disclosures lowers the bar for internal procedures that companies set?
Prof. Brown: It's not just a risk; it's a certainty because
part of the policy reason for acknowledging the legitimacy of media
disclosures, at least as a last resort or in necessary circumstances, is the
imperative that gives to companies and employers to get their own
whistleblowing misconduct processes in order, in order to limit and prevent the
need for people to go public. I think it's understood now, within government
and more broadly, that that's a policy objective. So, unless the threshold
operates correctly to provide that incentive, it doesn't provide that incentive
to actually make companies set up good systems and procedures, because
companies can accurately look at the act and say, 'They've got no chance of
being protected if they go public anyway'.
CHAIR: So you're saying that the matters that Mr Morris took
to the media back then wouldn't meet the statutory test in this bill?
Prof. Brown: Not in my opinion.
This outcome is in contrast with the previous assurances of Minister
O’Dwyer who last year said that ‘the Turnbull Government is determined to
change our whistleblower laws to better protect people like Jeff Morris’.
One notable departure between the corporate whistleblowing and tax
whistleblowing regimes is that corporate whistleblowing allows for emergency
disclosures to a journalist or a member of parliament while tax whistleblowing
is not afforded the same opportunity. The explanatory memorandum uses an
example to make it very clear:
Example 3.5: Disclosures to third parties
Andrew believes his current employer, a multinational
enterprise, is avoiding tax through the use of artificial arrangements
involving related offshore entities, and has disclosed this to the ATO.
Andrew regularly contacts the ATO seeking updates on the
action taken in response to his disclosure. However, the taxpayer
confidentiality laws prevent the ATO from divulging taxpayer information to
Andrew. Andrew decides to provide the relevant information to a newspaper which
subsequently publishes it. As a consequence Andrew loses his job and is unable
to get another job in his field because his former employer won’t provide him with
Andrew’s disclosure to the media is not eligible for
protection under the tax whistleblower protection laws, and he is unable to use
those laws to seek compensation.
The Uniting Church on this matter states that:
We are concerned that the ability to make disclosure to the
media (s.1317AAD) in the amendments to the Corporations Act are not repeated in
the amendments to the Income Tax Assessment Act. That would appear to mean that
public whistleblowing about corporate tax avoidance and tax evasion is not
contemplated under the Income Tax Assessment Act.
However, if the tax evasion or tax avoidance is by a
corporation then the whistleblower making a public disclosure would gain the
protection of the amendments to the Corporations Act, but that would not apply
if the public disclosure was about a person or an entity not covered by the
Corporations Act. Further, the ability to make disclosures to the media are too
limited and should be permitted where the appropriate authorities have not
responded adequately to a disclosure within a reasonable period of time.
Other concerns about the bill
Labor Senators also wish to mention other issues which, at the time of
this report, have not been sufficiently addressed by this Government:
concern raised by the Queensland Nurses and Midwives Union that large charities
and not-for-profits might not be captured under this legislation (in the
context of whistleblowing in aged care facilities)
- The Law
Council of Australia’s concern that volunteers are not covered by this
legislation (noting that Dr Chaikin advises that they would be covered as 'unpaid
partnerships, such as those of the big four accounting firms would not be
captured under the corporate whistleblower protections. Both the Law Council of
Australia and Treasury could not conclusively answer this question:
Senator KETTER: You've mentioned that partnerships are not
covered by the scope of the bill. Of the big four accounting firms, are any of
those covered by the scope of this bill?
Mr Golding: I am not an expert on the legal organisation of
large accounting firms, but my suspicion, on what I do know, is that no, they
wouldn't be covered. There are some incorporated entities within those
accounting firms, but the employer would typically be the partnership, I would
expect, but I am no expert on corporate law.
Mr Bailes: In as far as the law is concerned, there are two
models. Certainly the traditional model is a partnership model. There are now
incorporated legal practices, but they are less than more. I too can't speak
for the accounting world.
Senator KETTER: I move on to another subject. Time is
limited. I've been asking other witnesses about the status of the big four
accounting firms because of the fact that they're considered to be
partnerships. Whether they have other structures as well is another question. I
put to you the situation of an employee of a big-four accounting firm who blows
the whistle on his or her employer because of the fact that the firm is
promoting aggressive tax practices amongst its clientele. Is that whistleblower
Ms Mills: My understanding is that the accounting firms like
the large law firms—and I was a partner of a large law firm—set up service
companies and the service companies employ the staff. I don't know whether
that's the case in relation to every single accounting firm or every single
partnership that's a law partnership, but it's a quite common practice. To that
extent, certainly the employee would be covered. If it's the case that they're
a true partnership and there's no company sitting behind it, then, yes, there's
a risk that they would not have any protection under this bill, but it would
depend on whether they're making the complaint purely about the accounting firm
in that scenario or whether, in fact, because that advice is ultimately being
provided to a company, it's about the regulated affairs of that company, and
therefore they would have protection because that is a corporation that's
covered by this bill.
Labor Senators also note concerns raised about adequate resourcing for
These include, for example, the committee's recommendations
relating it to the creation of a single whistleblower protection act covering
all areas of Commonwealth regulation beyond the bill's corporate financial
service and tax entities; access to non-judicial remedies, for instance,
through the Fair Work Commission under the Public Interest Disclosure Act 2013;
an agency empowered to implement the regime, such as a whistleblower protection
authority; and appropriate resourcing for effective implementation (emphasis
Submissions from stakeholders such as the Law Council of Australia, ,
Australian Institute of Company Directors (AICD), Australian Banking Association,
Herbert Smith Freehills, and the Governance Institute of Australia raised
concerns that the broad array of eligible recipients might place undue burden
on internal compliance policies within companies. Quite junior supervisors
might have to go through complex training so as to be able to properly handle
disclosures that are made to them.
Refining the definition of ‘eligible recipients’ to ensure
that the designation is only applied to people who are in an appropriate
position and to prevent extending the responsibility for handling disclosures
to people who may not be appropriately qualified (recognising the penalties
that can flow from mishandling).
The expanded definition of eligible recipient now includes a
person who supervises or manages the individual. In some organisations this may
be relatively junior employees and this will place a substantial training and
compliance burden on organisations. Given the very broad scope of disclosable
conduct, companies may be required to expend a lot of time responding to
complaints which are outside the intended scope of the legislation. If this
change is to proceed, clarification is needed to ensure that the obligations
imposed are realistically achievable.
Mr Trevor Clarke of the Australian Council of Trade Unions suggested one
way to resolve this matter was through the use of external investigators, but
also acknowledged that the current drafting of the bill may make it difficult
to pass on confidential information to the appropriate people:
I'll raise a couple of points in response to some of the
written material. The Institute of Company Directors raised a point about the
appropriateness or otherwise of allowing disclosures to be made to line
managers. To balance that out, I would say, firstly, that the internal
management procedures and policies that are contemplated by the bill permit
organisations to appoint another person—external investigators. The extent of
the line managers properly trained under the policy may well be to refer the
person to the external investigators appointed by the company to deal with
these things. I've pointed out in the submission all the reasons as to why
companies might want to go down that path.
The management of investigations can be difficult in terms of
who is actually given the job of doing the investigation. Not everybody who
receives a disclosure or is entitled to receive a disclosure is actually going
to be the right person to try and investigate the thing. That's when you run
into these problems with the way the confidentiality provisions operate. You
can't have every line manager in the business fully trained to conduct an
internal investigation. You need potentially some relief in relation to the way
the confidentiality provisions operate so that you don't get in a situation
where there's no way for the internal manager to refer the thing up the train
without disclosing information that could lead to the identity of the
whistleblower becoming apparent. I think that's one of the technical areas
where some additional thought needs to be given to it. Perhaps the way around
that at a practical level is to take the hint that's given in relation to the
way policies should be drafted, for companies to basically appoint the KPMGs of
the world to be their external investigators in relation to these matter. There
are clearly benefits also for a company, legal and otherwise, to be able to say
a disclosure was made about this and it was fully investigated by an
It is incumbent on this Government to explain how this problem will be
resolved, and the provision of guidance on internal whistleblowing policies in
a timely fashion would help to provide such guidance.
Position of Labor Senators
The Government should release its response to PJC report as soon as
The Government should release guidance on internal whistleblowing
policies in a timely manner, particularly given the concerns raised about the
range of eligible recipients.
Noting the issues raised during the course of the inquiry, Labor
Senators will continue to consult with stakeholders on this bill.
Senator Chris Ketter
Senator for New South Wales
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