Final Update on the German Whistleblower Protection Act

It’s hard to believe but on 12 May 2023, the Federal Council approved the amended German Whistleblower Protection Act (HinSchG). All’s well that ends well? Not really – with a delay of 18 months, the HinSchG will probably come into force in mid-June 2023 but ambiguities remain.

At the beginning of June 2022, we reported on the delayed activities of the German government to transpose the EU Directive 2019/1937 into national law (read the article here). In our second update, we briefly reported on the revised draft law from Berlin. Now, under considerable pressure from Brussels – the EU Commission had initiated penalty-based infringement proceedings against Germany. A final version of the HinSchG has been waved through via a mediation committee in Berlin. The new law will come into force one month after its promulgation, probably in mid-June 2023.

Once again, the government has not exactly excelled at the task. The legislation was put on hold for too long. The first drafts were constitutionally questionable and sloppy. The important issues of finally regulating corruption, compliance violations and other fraud in public offices and companies in Germany were not addressed.

Critical voices have not been silenced. On the contrary, this new law actually creates further legal uncertainties for companies. Companies and eventually the courts will again have to make up for lost time. Unfortunately, this is a recent development that can be observed more frequently across areas with attempts at regulation from the BMAS (Federal Ministry of Labor and Social Affairs) (keyword ArbZG (Working Time Act) and time recording) resulting in similar uncertainty.

What are the most important changes in the final HinSchG?

Mandatory “must” provisions have become “should” provisions. The obligation to receive anonymous reports has been removed. Internal and external hotlines are now “supposed” to accept and process anonymous reports. Internal hotlines “should” be preferred if they can effectively deal with the violation internally.

The professional and factual context is put in the foreground. Whistleblowers must therefore limit themselves to information on violations that relate to the employer or another entity with which the whistleblower is or was in professional contact.

Finally, the new law contains lower fines. The maximum fine has been reduced to half and is now only 50,000 Euros.

Summary: what to do now?

The HinSchG will come into force next month, and the clock is ticking for companies with at least 250 employees. Even for “smaller” private companies – with between 50 and 249 employees – the grace period granted is only a few months. By December 17, 2023, they must have set up internal reporting offices.

Co-determined companies have no time to lose. We urgently recommend checking the existing reporting channels and correcting or supplementing them, if necessary. We also recommend that companies check on the application of possibly mandatory co-determination rights of existing works councils according to § 87 I No. 1 and 6 BetrVG. Since internal reporting procedures are usually suitable for controlling the behavior of employees and ensuring order in the company, the works council will have a right of co-determination.

Companies should not underestimate the amount of time and money required for compliance. The measures begin with the definition of reporting categories, the description of escalation processes, the implementation of tests and “dry runs”, through to the final introduction of whistleblower systems. Internal communication and the successful implementation of whistleblower systems require professional expertise and experience.

Michael Magotsch has over 30 years of experience advising global companies in all aspects of German labor and employment law. His practice focuses on labor and employment issues in relation to national and cross-border restructurings, acquisitions, redundancies, and outsourcing measures. Mr. Magotsch advises C-level executives in transition or exit scenarios as well as supervisory boards in sensitive disputes with C-level executives. Mr. Magotsch has been recognized by Chambers Global, Legal 500 and Best Lawyers in Germany in Labor & Employment law for over a decade. Read more here.