The European Parliament is wrestling with a directive that would mandate that all European Union member states codify certain whistleblower protections into law.
In comments submitted to the European Commission earlier this year, Phillips & Cohen partner Erika Kelton recommended strengthening the whistleblower directive in several ways.
Kelton, who has represented whistleblowers for more than 20 years, recommends striking certain requirements that could act as barriers to whistleblowing and adding a provision for monetary rewards for whistleblowers.
The barriers include a mandatory requirement for internal reporting, a required waiting period in certain instances before wrongdoing may be reported to authorities and penalties for whistleblower reports deemed “malicious and abusive.”
Kelton emphasized the social and economic value of whistleblowers, encouraging the European Commission to recognize their contributions to law enforcement by creating a system to reward whistleblowers for the personal and professional risks they take by stepping forward.
European Commission’s whistleblower directive’s proposed framework
The European Commission’s proposed directive would mandate that all EU member states enact a legal framework of whistleblower protections based on the directive’s requirements.
The directive establishes multiple obligations:
- Businesses and organizations must create internal channels for fielding complaints/reports from whistleblowers about misconduct.
- Whistleblowers would be required in many instances to use these internal channels before reporting wrongdoing to external entities.
- Business must respond to whistleblowers using the internal channels.
- Whistleblowers would only be allowed to lodge complaints with regulatory and enforcement authorities after the business has responded to the complaint or after business has failed to respond in a timely manner.
The proposed directive allows for some exceptions to the outlined procedures. If whistleblowers feel that evidence is likely to be destroyed, that their internal complaint will be ineffective, or if they fear immediate reprisal, they can ignore the waiting period and take their complaints directly to authorities with information about wrongdoing.
The directive contains no provisions that would guarantee rewards for whistleblowers.
Internal compliance systems: often “ineffective or sham functions”
Kelton levelled her harshest criticism at the internal reporting requirement. She argues that internal reporting channels “are often ineffective or sham functions” that would allow wrongdoers to go through bureaucratic motions without facing real accountability. Kelton also notes that internal reporting can’t be a “one-size-fits-all” model.
Regarding other key mandates, Kelton argues that:
- A mandated waiting period before whistleblowers could report their concerns externally could buy fraudsters time to hide or destroy evidence of wrongdoing.
- The internal reporting requirement can easily compromise a whistleblower’s identity, leading to retaliation.
- There is no guarantee of anonymity.
- The exceptions to the reporting requirements are faulty and ambiguous.
- As written, the burden of justifying the exceptions falls on whistleblowers, creating a chilling effect on reporting.
- Prescribing penalties for “malicious of abusive reports” is vague and arbitrary and “is duplicative [of EU member states’ laws] and would likely subject whistleblowers to harassment and unfounded accusations of abuse.”
Most EU laws originate with the European Commission, which submits the legislative proposal to the Parliament and Council. If the European Parliament (directly elected) and Council of the EU (composed of representatives of each member country) support the directive, it becomes law. Disagreements will send the directive back to the Commission for re-drafting.
The directive is currently with the European Parliament. Conservative Maltese MEP Francis Zammit Dimech has tabled amendments to the directive.
Kelton represents whistleblowers in Europe as well as the US and is an advocate of stronger whistleblower protections and rewards. The UK Parliamentary Commission on Banking Standards quoted from Kelton’s testimony to the commission in its report, “Changing Banking for Good.” She also has consulted on whistleblower programs with policymakers and legislators in Europe and Asia.
About Phillips & Cohen LLP
Phillips & Cohen is the most successful law firm representing whistleblowers, with recoveries from our cases totaling over $12.3 billion. We have been recognized on such lists as the “Hot List of Plaintiffs’ Attorneys” (National Law Journal), “500 Leading Lawyers in America” (Lawdragon) and “Best Lawyers” (US News and World Report). Our attorneys and cases have often been in The New York Times, The Wall Street Journal, the Financial Times and other news publications, and three of our cases have been featured in the CBS series, “Whistleblower.” The firm’s roster includes former federal prosecutors, the first head of the SEC Office of the Whistleblower, a former deputy administrator of the Centers for Medicare and Medicaid Services, the author of a leading treatise on the False Claims Act and attorneys with decades of experience representing whistleblowers.