People like Julian Assange, Edward Snowden and Chelsea Manning are world-famous whistleblowers. These are people who reveal abuses in authorities, institutions and companies. For their better protection, the Whistleblower Protection Act entered into force in Germany on July 2, 2023.
"The area of national security and secret services is excluded," says Louise Schlossen of Transparency Germany. So the German equivalent of Edward Snowden - would not be protected by this new law either.
As of July 2, all companies with more than 250 employees must establish a whistleblower office, i.e. have safe and reliable internal channels for reporting violations. From December 17, 2023, this obligation will also apply to all companies with at least 50 employees. For providers of financial services, the obligation already applies - regardless of the number of employees.
What does the whistleblower law provide?
Whistleblowers who draw attention to misconduct in government bodies, institutions and companies are protected by law from dismissal and harassment.
To be able to implement this, companies need to create an office where such reports are received and processed - confidentially. The law also states that institutions and companies must provide feedback no later than the following day - that the application has been registered and then react to it.
Anyone who breaks the law faces a fine of up to 50.000 euros. In addition, an external office for external reporting will be established at the Federal Institute of Justice in Bonn. Whistleblowers can decide whether to report a breach internally or externally.
Why was there a dispute over the law?
Germany was supposed to transpose the corresponding EU directive into national law in December 2021. Because of this, the EU Commission sued Germany before the European Court of Justice in February of this year.
And then the Bundesrat (the part of Parliament that makes up the council of 16 German states) did not accept the first draft of the Federal Government. That is why this law is a compromise.
German states governed by the CDU or CSU feared too much financial burden for small and medium-sized enterprises. The compromise that has now been reached provides that the planned whistleblower offices are not required to allow anonymous reports. The upper limit for fines has been reduced from EUR 100.000 to EUR 50.000.
Why is there no mandatory anonymity?
Lawyer David Verderman of the Society for Freedom Rights (GFF) says this is a turning point for better protection of whistleblowers, but criticized a key flaw: the lack of anonymity.
According to the Federation of German Employers' Associations (BDA), small and medium-sized enterprises that have to introduce a new application procedure have high costs.
However, no entrepreneur can be against discovering and correcting undesirable events in his own company at an early stage. According to the BDA, the fact that the mandatory anonymity of the application process is omitted reduces bureaucratic efforts and relieves small businesses.
At the same time: The biggest financial scandals in Germany, Cum-Ex or Wierkard, were discovered precisely thanks to - anonymous tips from whistleblowers.
There is no fund for compensation, legal and psychological assistance
Chair of the Whistleblower Network, Anegret Falter, says: "Although the law prohibits reprisals against whistleblowers, unfortunately it will not prevent them completely."
She also criticizes that no support fund is planned, among other things for financing legal and psychological advice. There is also no provision for the right to compensation for non-material damage, for example as a result of mobbing.
Anja Piel, member of the board of directors of the Confederation of German Trade Unions (DGB) says that "the law on the protection of whistleblowers could contribute to creating an atmosphere in companies where whistleblowers are no longer considered troublemakers. This is a good thing. Anyone who has the courage to report something that is wrong should not fear retribution and harm, but deserves thanks and recognition."
How much will it cost?
According to data from the Federal Statistical Office, there were about 2021 companies with more than 90.000 employees in Germany in 50. Most large companies already have offices where whistleblowers can make a report. Among them are the energy giant Eon, Volkswagen, BMW and Mercedes-Benz.
Small and medium enterprises have yet to establish about 10.000 such offices. Under the draft law, up to four companies can share one whistleblower office.
The German government estimates that the establishment of internal whistleblower offices alone will cost the German economy around 190 million euros. For medium-sized companies, it is on average about 12.500 euros per office, for large ones it is up to twice as much. According to the government's estimates, the annual costs of personnel and materials should amount to around 5.800 euros per office.
What does science say about the effectiveness of whistleblowing?
The report on whistleblowers, which was compiled by the Swiss University of Applied Sciences Graubinden together with the consulting house EKS Group, came to the data - that more than a third of companies in Germany recorded at least one case of illegal or unethical behavior in 2020. Almost 80 percent of the affected companies suffered financial damage.
At the same time, companies that had already established a whistleblower office indicated that almost 45 percent of the reports received were relevant, while 10 percent were irrelevant. Malicious reports were not more common among companies that offer anonymous channels compared to those where the whistleblower can be identified.
"Whistleblower offices can therefore be considered an effective tool for uncovering misconduct," the study authors conclude.
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