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What does Germany's new Whistleblower Act mean for employees?

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DPA/The Local - [email protected]
What does Germany's new Whistleblower Act mean for employees?
A new law will make it harder for company whistleblowers in Germany to face consequences. Photo by freestocks on Unsplash

Starting on Sunday, July 2nd, a new law will go into effect which protects employees who report wrongdoing from companies and institutions. Will it encourage more whistleblowers to come forward?

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Back in June 2013, after famous US whistleblower Edward Snowden had exposed sensitive security documents he felt were in the public interest, one poll revealed that a full 50 percent of Germans said they considered him a hero. Thirty-five percent added that they would hide the then-fugitive in their own homes.

But do Germans also think so highly of their own whistleblowers, who expose what they see as wrongdoings from higher-ups, be it within a governmental institution or a corporation?

Ten years after the Snowden case, Germany is enacting a law that protects employees who sound the alarm: the Whistleblower Protection Act will come into force this Sunday, July 2nd. But critics say the legislation falls short of fully shielding whistleblowers or giving them the resources they need.

What is the act and why is it coming into effect on Sunday?

The Whistleblower Act affects companies with more than 50 employees as well as public authorities: in 2021, there were around 90,000 who fit into this category in the Bundesrepublik.

READ ALSO: Do internationals face discrimination in the German workplace?

The legislation is long overdue, as Germany was supposed to put a corresponding EU directive into national law by December 2021. 

When Germany didn't meet its deadline, the EU Commission took Germany to the European Court of Justice (ECJ) to ensure the groundbreaking law got put into force.

What protections does the Whistleblower Act provide for?

Whistleblowers who draw attention to misconduct in authorities and companies are to be protected from dismissal and harassment by the law. To this end, companies must create contact points that receive and process such reports confidentially. 

Anyone who violates the law will face a fine of up to €50,000. 

An external reporting office will also be created at the Federal Office of Justice. Whistleblowers can decide whether to report violations internally or externally.

Didn't something like this already exist?

According to the government's draft law, the majority of large companies already use reporting offices. According to its own information, the energy supplier Eon has had a central whistleblower system since 2016. Both employees and third parties can contact a whistleblower hotline in writing or by voice message.

The law does not bring any significant changes for VW, BMW and Mercedes-Benz either, the carmakers said.

 "We are merely sharpening the processes of communication with the HR department with regard to potential whistleblower disadvantage [...]", a BMW spokesperson told DPA.

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How many hotlines are missing and what will it cost?

While hotlines for reporting wrongdoing are already common practice in many large companies, small and medium-sized companies still have to set up about 10,000 hotlines, according to the federal government's draft law. Up to four companies could share one hotline.

The German government estimated that the one-time establishment of the internal hotlines will cost the German economy about €190 million. For medium-sized companies, this would mean an average of about €12,500 per reporting office, and for large companies up to twice as much. 

According to estimates by the federal government, the annual personnel and material costs will amount to about €5,800 per reporting office.

Why was there a dispute about the law?

A first draft by the government had been stopped by the Bundesrat, as the Christian Democratic (CDU)-led states feared an excessive financial burden on small and medium-sized enterprises. 

Several compromises were subsequently reached, including lowering the upper limit for fines from €100,000 to €50,000. 

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Can the compromised law really help to uncover abuses in the workplace?

While lawyer David Werdermann has called the directive a "milestone" for better protection of whistleblowers,  the procedural coordinator of the Society for Freedom (GFF) has criticised the final law. He said the compromises have watered down the law at a crucial point: failing to require anonymity.

"Although the law prohibits reprisals against whistleblowers, it will unfortunately not prevent them entirely," said the chairperson of the Whistleblower Network, Annegret Falter. 

A support fund, among other things, to finance legal and psychological counselling, is also not included in the final law.

The right to compensation for immaterial damage, for example as a result of bullying, had also fallen victim to the compromise.

What does the law mean for employees?

The Whistleblower Protection Act could contribute to a culture in companies in which whistleblowers are no longer considered troublemakers, said Anja Piel, member of the executive board of the German Trade Union Confederation (DGB).

"Anyone who has the courage to report wrongdoing should not have to fear reprisals and disadvantages, but deserves thanks and recognition."

What does the law mean for employers?

Especially for small and medium-sized enterprises that have to introduce a new reporting procedure, there will be high costs, according to the Confederation of German Employers' Associations (BDA). 

However, they also acknowledged that no employer could object to the early detection and correction of undesirable developments within their own company.

According to the BDA, the fact that the law does not require mandatory anonymity of the reporting procedures keeps the bureaucratic burden low and relieves small companies.

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Does the law herald change?

Some companies now want to promote a so-called "speak-up culture" to encourage their employees to report violations. 

Deutsche Post announced that it would clearly communicate to employees that "their reports will be treated with the utmost confidentiality and that they will be protected from retaliation if they make a report in good faith".

Bosch is also raising awareness of the issue in its day-to-day operations, "through on-site and digital compliance office activities, interactive offerings such as a compliance self-tests, departmental compliance dialogues and global awareness campaigns".

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