Quick Update on German Whistleblowing

Insights Quick Update on German Whistleblowing Michael Magotsch · April 6, 2022

Germany had failed to implement the EU Whistleblowing Directive – now the Federal Minister of Justice, Marco Buschmann has finalized a new draft German Whistleblower Act (HinSchG)

The new draft Act shall be adopted by the German Federal Government this June 2022 and shall be in force by no later than autumn 2022. It is no surprise that the new draft follows a broad scope and provides for terms and regulations beyond the EU requirements.

What took so long?

No later than by December 17th, 2021, the EU directive ((EU) 2019/1937), should have been implemented into national law by the EU member states. By the end of April 2021, the latest draft German Whistleblower Act (HinSchG) was rejected by the German Government. Since then, the topic is stuck in legislative process and meanwhile the EU Commission initiated a formal infringement proceeding against Germany. Hence, the new “Ampel Coalition” needed to address the topic quickly to avoid sanctions. Also, it is fair to say that – until today – there are no harmonized sets of protection laws codified in Germany for whistleblowers; there is no explicit termination protection for whistleblowers provided by law.

What is the goal of the HinSchG?

The ultimate goal of the HinSchG is to improve the crime detection and to prevent illegal actions and behavior by means of providing better and more effective protection of whistleblowers against reprisals, as well as providing protection for companies against false allegations. While larger businesses have long established reporting channels and respective compliance schemes, smaller and more medium sized companies are still lacking respective reporting schemes and effective whistleblower channels.

To ease the prospective administrative burdens, the new draft Act provides for flexible options: thus, hiring third party service providers – law firms for example – to provide respective compliance assistance is permissible as well as group companies shall be allowed to use internal reporting channels centrally at group level. In addition, the Act calls for external reporting channels for those whistleblowers who do not trust their employers. The external reporting channels shall be set up at the level of the Federal Ministry of Justice (BfJ), which at the same time should serve as the internal reporting channel for the public sector. Whistleblowers are only permitted to directly approach public channels in exceptional cases and under strict requirements, such as imminent danger or irreversible damages.

Employers should be prepared

All companies, who neither have established a “hotline” for whistleblowers, nor other internal reporting channels should carefully consider actions to establish internal reporting channels, accessible for all staff and to guarantee independent decisions making of such channels, by educated and professionally trained personnel. Either by effective internal reporting channels or externally through third parties such as outside attorneys or other ombudsmen. It is highly recommended to review and check existing reporting schemes and channels, and if necessary to correct, amend or change them. Please always keep in mind potential mandatory co-determination rights of existing works councils pursuant Sec. 87 I Nr. 1 und 6 BetrVG, the German Shop Constitution Act.

The amount of time and the involved costs should not be underestimated by companies. Measures start with the definition of reporting categories, the description of escalation processes, the commencement of tests via “dry-runs” until the final launch of the whistleblowing systems. Internal communication and the successful selling of whistleblowing schemes require professional expertise and experience.

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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.