Whistleblower Protection In Hong Kong - The Sooner The Better!

Legal News & Analysis - Asia Pacific - Hong Kong - Regulatory & Compliance

Asia Pacific Legal Updates

 

5 October, 2018

 

Whistleblower Protection In Hong Kong - The Sooner The Better!

 

The recent explosive uncovering of the railway construction scandal by whistleblowers not only flagged concerns about its potential impact on public safety, but also alerted employers to the importance of having a whistleblowing framework in place for the protection of their employees who report malpractices.

 

Usually, frontline employees of an organisation will be the first to know of a wrongdoing since they have access to firsthand information in their workplaces. Whistleblowing happens when such employees report misconduct or malpractice that has occurred within their organisation. It is therefore crucial to have a whistleblowing policy in place to ensure compliance with the law, and prevent corporate wrongdoing from turning into a crisis or disaster as otherwise, it could easily get into public eyes, attracting adverse publicity or ridicule beyond management.

 

Should whistleblowing be encouraged at your company?

 

“Organisations, be they government or private, rely on individuals, particularly employees, to bring to their attention information on actual or potential misconduct that may be occurring in the workplace.” - International Bar Association[1]

 

The railway construction scandal and other well-publicised high-profile cases around the world in recent years all show that whistleblowing is a vital tool to help organisations detect and correct unlawful conduct or irregularities that occurred in the workplace more efficiently. According to the Organisation for Economic Co-operation and Development (OECD) 2014 Report[2], of all the bribery cases between 1999 and 2014 which they have analysed, 33% were detected through whistleblowing. Furthermore, the statistics published in the OECD 2016 Report[3] reveal that of the private sector employees who have reported to the US Securities and Exchange Commission (SEC) Office of the Whistleblower, over 80% first raised their concerns internally before reporting to the SEC. Only 18% of the private sector employees in the United States chose to report externally.

 

Often, when employees become aware of wrongdoing in a company, whether or not they will report the matter depends on whether there exists a mechanism to protect against the risk of retaliation. The hard truth is – the less protection there is for whistleblowing, the more likely an employee will be at risk, whether in terms of losing his or her job or other interests that hang in the balance. Surveys conducted in the past ten years reveal the different forms that a fear of retaliation can take, such as apprehension of being disciplined, fired, sued or prosecuted, and even threat of personal safety. These are among the top reasons why employees would not blow the whistle[4].

 

Analyses on whistleblower protection over the years show that effective whistleblower protection requires both robust internal corporate whistleblowing policies as well as a comprehensive legislative/regulatory regime.

 

Legal protection for whistleblowers

 

Regrettably, Hong Kong lags behind on whistleblower protection in comparison with other member countries of the OECD. It is therefore not surprising for Hong Kong employees to be less willing to come forward.

 

The common law does not provide much protection for whistleblowers except in certain circumstances. For instance, an employee may have a defence to a claim for breach of confidentiality if the disclosure of such information is in the public interest.

 

In terms of legislation, there is currently no single comprehensive whistleblowing legislation to protect whistleblowers in Hong Kong. There are, however, piecemeal provisions in various ordinances that provide protection to specific whistleblowers for the reporting of specific offences.

 

These are listed below:

 

Legislation 

Protection

Employment Ordinance (EO)

 

  • An employer cannot terminate an employment by reason of the employee giving evidence in proceedings or enquiry for the enforcement of the EO, or in any proceedings or enquiry in relation to safety at work.
  • Employers in breach will be liable to a fine as well as paying compensation to the victimised employee.

Sex Discrimination Ordinance, Disability Discrimination Ordinance, Family Status Discrimination Ordinance, and Race Discrimination Ordinance  (collectively “Discrimination Ordinances”)

  • Under the Discrimination Ordinances, it is unlawful for a person (discriminator) to discriminate against another person (person victimised) on the ground that the person victimised has brought proceedings against the discriminator or given evidence or information in connection with proceedings brought by others against the discriminator.
  • The Court has power to order the discriminator to employ, re-employ or promote the person victimised, or to pay him/her compensation or damages.

Drug Trafficking (Recovery of Proceeds) Ordinance (DTRPO), Organized and Serious Crimes Ordinance (OSCO), United Nations (Anti-Terrorism Measures) Ordinance (UNATMO)

  • A whistleblower who makes a disclosure of suspected proceeds of drug trafficking, money laundering or crimes to an authorised officer under the DTRPO, OSCO and UNATMO, will not be regarded as in breach of any restriction against disclosure of information imposed by contract or by any enactment, rule of conduct or other provision, or render the whistleblower liable in damages for any loss arising out of the disclosure.
  • Under the DTRPO and the OSCO, witnesses in any civil or criminal proceedings are not required to reveal the identity of the person making the disclosure.

Prevention of Bribery Ordinance (POBO)

 

  • Under the POBO, the name and address of an informer have to be kept confidential and any documents that may lead to disclosure of the informer’s identity have to be redacted prior to disclosure in civil or criminal proceedings.
  • The Independent Commission Against Corruption (ICAC) informers are entitled to witness protection under the Witness Protection Ordinance, including protection for personal safety or well-being.

Securities and Futures Ordinance

  • A whistleblower will be protected against any civil liability whether arising in contract, tort, defamation, equity or otherwise for reporting any financial irregularities or non-compliance with any financial resources rules which occurred in the company.

Competition Ordinance

 

  • Under the Leniency Policy for undertakings engaged in cartel conduct, immunity from fines is granted to the first undertaking which enters into a leniency agreement with the Competition Commission (CC). The CC may consider a lower level of enforcement action for undertakings which do not qualify for leniency but cooperate with CC.
  • The CC is under a general obligation to preserve the confidentiality of any confidential information provided to it. Under the Leniency Policy, the CC will use its best endeavours to appropriately protect its records of the leniency application process, including the leniency agreement.
  • An employer is prohibited from terminating or threatening to terminate the employment, discriminating in any way, intimidating or harassing, or causing any injury, loss or damage to an employee who provides material to the CC in connection with the CC’s functions, or gives or agrees to give evidence in any proceedings brought by the CC.

 

In summary, the existing legislative measures in Hong Kong are fragmented and only afford a limited scope of protection to certain whistleblowers. 

 

The UK model

 

The OECD 2012 Report advocates that the enactment of a comprehensive law is the most effective means of providing whistleblower protection, as it gives the law visibility, thereby making its promotion easier for employers[5]. In contrast, the Blueprint for Free Speech 2018 Report on whistleblowing laws in the EU found that piecemeal approach to protecting whistleblowers is largely ineffective. Among the 9 European countries that have standalone whistleblower protection law covering public and private sector employees, UK attracts a top protection rating. The UK Public Interest Disclosure Act 1998 (PIDA) is considered to be one of the most developed and comprehensive whistleblower protection legislations in the world[6], and has been used by several countries as a model in developing their whistleblower protection regimes[7].

 

The PIDA, which came into force in 1999, is part and parcel of the Employment Rights Act 1996. It applies to every employee in the private, public and the not-for-profit sectors, and operates in the following manner:

 

(a) Under the PIDA, it is unlawful for an employer to dismiss an employee or subject a worker to a detriment on the ground that he or she has made a “protected disclosure”. “Worker” includes limited liability partnership members, NHS job applicants, homeworkers, non-employees undergoing training, self-employed medical professionals, agency workers and police officers, etc.

 

(b) To be protected, a disclosure must, in the reasonable belief of the whistleblower, fall within one of the prescribed categories of information (qualifying disclosure)[8] (or if such disclosure is made on or after 25 June 2013, then in his reasonable belief that the disclosure is in the public interest), and such disclosure must be made to one of the prescribed categories of people[9]. Employees may, subject to certain conditions, choose any of the prescribed disclosure channels.

 

(c) As far as relief is concerned, employees who are unfairly dismissed, or workers who are subjected to any detriment, by reason that they have made a protected disclosure, can bring a claim against their employers. Further, employers may be vicariously liable for detriment caused by employees and workers unless they have taken all reasonable steps to prevent it from happening. Workers or agents with employer’s authority who victimise whistleblower colleagues will be personally liable.                 

 

Hong Kong needs a comprehensive whistleblower protection legislation     

 

While Hong Kong continues to boast its status as an international financial centre, the legislations in place to tackle practical consequences associated with whistleblowing are merely piecemeal in nature. Compared to the broad scope of the PIDA, it can be readily seen that the whistleblower protection legislations in Hong Kong fall far short of international standards in many aspects.

 

There is uncertainty on the extent of coverage of persons, the reporting channel is unclear and there is no definition on the scope of disclosure that would be protected or what constitute retaliatory actions. Even if employees are willing to come forward, there are as yet no clear procedures for reporting retaliation or remedies that are open to those who suffered retaliation as a result of making a report.

 

To promote and encourage whistleblowing, a comprehensive legal regime should be introduced, the sooner the better! In a survey conducted in 2014, 27 countries have already adopted some dedicated whistleblower protection laws[10]. It is therefore high time for the Hong Kong government to consider enacting a comprehensive whistleblower protection regime in line with international standards and practices without delay.

 

Internal protection for whistleblowers

 

“Effective whistleblower programs, capable of receiving and responding to disclosures from whistleblowers in an efficient and effective way, and of protecting them from inappropriate retaliation, are a critical element of modern corporate governance and risk management frameworks.” - Australian Banking Association[11]

 

Although the current laws of Hong Kong do not require employers to have a whistleblowing policy in place, it is good practice for employers to implement appropriate measures not only to stave off wrongdoing which could develop into a corporate disaster, but also to demonstrate their commitment to solving problems by listening to their employees’ concerns[12].

 

Whistleblowing policy

 

Each company is different, employers should therefore be proactive in developing their own whistleblowing policies to meet their own ethical and moral concerns. In any case, a good whistleblowing policy should be clear and easy to understand and include guidelines for the effective management of whistleblowing such as the following[13]:

 

  • A list of the type of concerns that should be reported.
  • The procedures for raising concerns.
  • An assurance to train employees at all levels of the organisation on whistleblowing policy and any applicable laws.
  • An assurance to treat all disclosures appropriately, consistently and fairly.
  • An assurance to take all reasonable steps to maintain the confidentiality of the whistleblower where it is requested.
  • Ways in which the organization will respond to the whistleblower.
  • An assurance that victimization of a whistleblower is not acceptable.
  • Clear channels for making disclosure. Alternative reporting procedures should also be made available in the event that an employee does not feel comfortable to approach their line manager. For example, organisations may establish whistleblower hotlines with their legal advisors for the reporting of misconduct.

 

Awareness-raising, communication and training

 

To ensure cooperation, participation and support by employees, the purpose and goals of whistleblower protection should be promoted through effective awareness-raising, communication and training such as providing clear explanation to employees of their rights and obligations when disclosing wrongdoing. The following approaches represent some of the best practices an employer could adopt for raising awareness of the whistleblowing policy or procedures[14]:

 

  • Making policy accessible on staff intranet, briefing at team meetings, including the policy in staff handbooks and new joiners’ induction packs.
  • Introducing training to all employees on how disclosures should be made.
  • Introducing training to managers on how to handle disclosures, protect personal information, receive reports, recognise and prevent occurrence of discriminatory and disciplinary actions taken against whistleblowers.
  • Conducting regular trainings for managers and employees to help refresh their minds on the whistleblowing policy and procedures.

 

Conclusion

 

The OECD found that whistleblowers that are provided with internal reporting protection can help companies learn earlier of wrongdoing and avail themselves of the earliest opportunity to deal with it before it turns into a crisis[15]. Whistleblowing is a powerful internal system of “checks and balances” for a company to maintain business integrity, thereby promoting a healthy working culture. Compared to the more developed UK model, the existing legislative framework in Hong Kong is clearly inadequate, which calls for urgent reform by the government to provide better protection for whistleblowers.

 

In the meantime, for companies that do not have whistleblower policies, it is in their best interests to develop and adopt whistleblower protection programmes as part of their corporate governance/integrity management, and to introduce such programmes to their employees through awareness raising initiatives. Companies that already have policies in place should review them periodically to ensure compliance with the legislative framework in force, and update them as and when reform is introduced.

For further information, please contact:

 

Cynthia Chung, Partner, Deacons

cynthia.chung@deacons.com.hk
 

[1] “Whistleblower Protections: A Guide”, International Bar Association (April 2018)

[2] OECD Foreign Bribery Report (2014)

[3] OECD (2016), “Committing to Effective Whistleblower Protection

[4] Blueprint for Free Speech – “Gaps in the System: Whistleblower Laws in the EU (2018)

[5] OECD - “Whistleblower protection: encouraging reporting” July 2012

[6] “Whistleblower Protections: A Guide”, International Bar Association (April 2018)

[7] Paul Matimer & AJ Brown, “Whistleblower Laws: International Best Practice (2008)”. The countries include Ireland, Japan and South Africa

[8] Qualifying disclosure: Criminal offences; non-compliance of any legal obligation; miscarriages of justice; threats to people’s health and safety; damage to the environment; information of any of the above is being or is likely to be concealed deliberately

[9] Prescribed disclosure channels : the worker’s employer; the person responsible for the relevant failure; legal advisers; government ministers; a person prescribed by an order made by the Secretary of State; and a person who is not covered by the list above provided certain conditions are met

[10] OECD (2016), “Committing to Effective Whistleblower Protection

[11] “Review of Whistleblowing Protections by Australian Banks”- prepared for the Australian Banking Association (August 2016)

[12] “Whistleblowing: Guidance for Employers and Code of Practice” (March 2015), UK Department for Business Innovation & SKill

[13] “Whistleblowing: Guidance for Employers and Code of Practice” (March 2015), UK Department for Business Innovation & Skill

[14] OECD (2010), Good Practice Guidance on Internal Controls, Ethics and Compliance

[15] OECD (2017), “The Role of Whistleblowers and Whistleblower Protection”