After the failed whistleblowing proposal. What now?
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An overview of the relevant aspects of employment and data privacy law with regard to reporting and investigating grievances in the workplace.
Whistleblowers, i.e. employees who point out grievances at the workplace for ethical reasons or out of a sense of duty, are particularly exposed to the risk of criminal sanctions or, in the case of continued employment in the company, dismissal or other reprisals. This is particularly the case because the employee is prohibited by the obligation of loyalty and confidentiality under labour law from disclosing information about the employer to the public. There will be no new legal regulation for whistleblowing in Switzerland in the near future, given the rejection of the Federal Council’s proposal by the parliament. Currently, it is still up to the courts to make the assessment in the specific individual case. This magazine article therefore sheds light on the applicable aspects of labour and data protection law regarding the reporting of grievances in the workplace and their investigation.
No partial revision of the Swiss Code of Obligations concerning the protection of whistleblowers / Current situation in the EU
Since 2008, a partial revision of the Swiss Code of Obligations (“CO”) (protection in the event of reporting irregularities in the workplace) has been under discussion in parliament. The Federal Council wanted to create clear legal rules as to when irregularity reports are justified and lawful. Today, it is the courts that make this assessment in the specific individual case. On 5 March 2020 the proposal submitted by the Federal Council on the protection of reports of irregularities at the workplace was rejected for the second time since 2015. This means that there will be no new regulation on whistleblowing in Switzerland in the near future.
With the new legislation, the cascade principle developed by the Federal Supreme Court, according to which information to the public or third parties about grievances at the workplace would be permitted on the basis of a reasonable suspicion, provided that the report was first made to a suitable internal body, should have been incorporated into the law. Accordingly, forwarding the report to the competent authority or to the public, or even direct reporting to an authority, would have been permitted only under special circumstances. However, the proposal did not provide for any actual protection against dismissal. Furthermore, the proposal also did not contain any relief for employees in connection with the often almost insuperable lack of evidence (often the evidence is in the hands of the employer) in connection with wrongful termination of a whistleblower's employment contract or other retaliatory measures. In contrast to the regulation at EU level, the debated revised version of the Swiss Code of Obligations also did not provide for additional damage claims.
At EU level, a new Directive on the protection of whistleblowers came into force on 16 December 2019. Until 17 December 2021 the EU member states must have implemented the requirements of the EU Directive into national law. By then, the whistleblowers will therefore have secure channels for reporting grievances both within companies and to authorities through the obligation to set up an internal reporting system. In addition, whistleblowers are to be protected against retaliatory measures (e.g. dismissal, harassment, bullying, degradation, transfer, discrimination in promotion or refusal of wage increases, etc.), provided that the report is made legally. A further protection for whistleblowers is provided by the procedural reversal of the burden of proof in favour of the employee making the report. Likewise, appropriate and dissuasive sanctions for persons and companies should prevent unlawful reporting restrictions or retaliatory measures against whistleblowers and strengthen the protection of whistleblowers' personal rights. Furthermore, the Directive provides for the whistleblower's right to compensation not only for immediate damages but also for future financial losses and immaterial damages.
Due to the lack of a legal framework for whistleblowing in Switzerland, it is up to the Swiss employers to internally regulate the processes for reporting grievances in the workplace based on company guidelines, thus creating more legal certainty regarding the question of the admissibility of whistleblowing reports and strengthening their corporate governance. Internationally active companies in Switzerland are well advised to closely consider the internal implementation of the EU Directive, not only in the territory of the EU. However, it remains to be seen what particular influence the EU Directive will have on international and Swiss companies operating in Switzerland.
Duty and right of the employee to report
Under current Swiss law, employees have the right to report to their employer any grievances and misconduct of other employees, provided that they do not breach their duty of loyalty or cause damage (e.g. malicious false reports). This right to freedom of expression is also stipulated in art. 16 para. 1 and 2 of the Federal Constitution and in art. 10 of the European Convention on Human Rights.
Employees have a duty to report significant facts or incidents to their employer if there is a well-founded suspicion based on the employee's duty of loyalty (art. 321a CO), but also regarding grievances and misconduct of other employees detected at work.
On the other hand, the duty of loyalty (art. 321a para. 1 CO) and, in particular, the obligation to maintain secrecy (art. 321a para. 4 CO) may also give rise to obligation to refrain (external reporting ban; restriction of the fundamental right of freedom of expression).
The employee therefore currently must balance two conflicting sets of interest, i.e. the need to report grievances (internal and/or external) and the possible duty to refrain from reporting them externally.
The reporting of grievances by employees to a public authority or even the public is regularly contradicted by confidentiality obligations, particularly under criminal law. Justification reasons that legitimize such a report, if any, will regularly only be examined in the course of a criminal investigation against the employee.
Goals of an operational whistleblowing system
In contrast to European Law, an explicit obligation to implement an internal whistleblowing system is not provided for under current Swiss law. Corporate law requires effective internal control and appropriate organization of the risk management and compliance function. However, the law does not specify which essential structures such a system must contain. Nevertheless, with a well-functioning whistleblowing system, companies can demonstrate good corporate governance and minimize risks associated with workplace malpractice or their reporting.
A whistleblowing system can be designed individually for each company and implemented one-sided. The employer can define the whistleblowing processes and internal company procedures to be followed without consulting the employees.
A whistleblowing system enables the employer to identify legally relevant risk issues at an early stage, to detect violations of the law or internal company rules, to regularly check the effectiveness of its processes and to initiate any necessary measures. Furthermore, under certain circumstances, corporate responsibility can be avoided in accordance with art. 102 para. 2 of the Swiss Criminal Code.
Furthermore, a functioning whistleblowing system increases the employee's confidence in the company. By showing employees that their reports are taken seriously and investigated, the working climate can be improved, and a good corporate culture can be promoted. In addition, in the best-case scenario, it is possible to prevent reputation-damaging reports of grievances from going public before the malpractice has been internally investigated and remedied.
Occupational safety and data protection law aspects of a whistleblowing system
When designing a whistleblowing system, however, the employer must ensure that the whistleblowing process respects the personal rights of the employees (art. 328 CO). In doing so, the employer must ensure that both the whistleblower and the employee affected by a report are protected.
For data protection reasons, the employer must also inform its employees in advance about the whistleblowing system and its purpose. When selecting the reporting body (whether internal or external) it must be ensured that the data processing principles according to data protection law are fully adhered to.
Based on the employer's duty of care, the employer must investigate internal reports of irregularities. The employees concerned must be informed and consulted about the report and its content. The employees must be given the opportunity to comment on the allegations as soon as the internal investigation is no longer jeopardized by informing the employees concerned. However, due to the statutory duty of care, the employer must also protect the whistleblower who has lawfully drawn the employer's attention to an irregularity. On the one hand, the employer must ensure that the identity of the whistleblower is kept confidential and that the whistleblower is protected from retaliation. On the other hand, the employer must also refrain from retaliatory measures, provided the whistleblowing was carried out lawfully. A dismissal as a reaction to a permitted whistleblowing is considered abusive in both the legal doctrine as well as under case law and is to be compensated with up to six monthly salaries.
If no competent reporting body has been designated by the employer, the employee may report any grievances to an internal and appropriate reporting body that is entitled and competent to uncover and investigate the reported facts (e.g. the compliance or legal department). Due to the employee's duty of loyalty and the principle of proportionality, an external report to a competent authority is only permissible if the employee has an overriding personal, third-party or public interest in external disclosure. A report to an external authority is generally only permitted after internal reporting and only if the employer has not taken appropriate measures. However, direct external reporting may be permissible if the employer is itself involved in the grievance and/or is not prepared to take remedial action. Disclosure to the public is only permissible as the ultima ratio, namely if the authorities have not taken the necessary measures either.
In a nutshell
Employees and third parties who wish to report grievances externally are currently caught between the need to report grievances (internal and/or external) and a possible obligation to refrain from reporting them externally. They are also torn between moral or legal obligations (including the duty of loyalty under labour law) and the fear of possible reprisals. The employment law handling of whistleblowing by companies is largely determined by the employer's duty of care (protection of legitimate interests and protection of the employee's personal rights). Due to their duty of care, employers are obliged to investigate internal reports about grievances at the workplace and to protect the reporting employee from reprisals. Employers are therefore well advised to implement a well-functioning whistleblowing system and, in the case of international activities, to comply with the more far-reaching international whistleblowing rules. In the case of internal investigations, the employer must observe the data processing principles under data protection law and protect the reporting employee from discrediting and reprisals.
MME will be pleased to advise and support you in the design and implementation of whistleblowing processes and in the investigation of reports of grievances at the workplace.