New Requirements for Whistleblower Systems and Protection of Whistleblowers

Scope of the Whistleblower System

The Whistleblower Act applies to violations of specifically listed EU legislation, other serious violations of the law and other serious matter which can be reported via the internal whistleblower systems. 

The relevant EU regulation includes regulation on public procurement, financial services, products and markets, and prevention of anti-money laundering and terrorist financing. “Other serious matters” include sexual harassment and other forms of gross harassment in the workplace. Ordinary confrontational issues between employees or regular com-plaints will generally not be covered by the scope of the Whistleblower Act. 


Internal Whistleblower System

All private and public employers with 50 employees or more must establish an internal whistleblower system where violations subject to the scope of the Whistleblower Act can be reported.  

The employer must appoint an impartial person or department to receive submissions and to be in contact with the whistleblower, follow up on reporting, and provide feedback to the whistleblower. This function may be outsourced to third parties who must comply with the obligations under the Whistleblower Act. Access from unauthorized persons must be avoided. 

Upon receipt of any report, the relevant authorized persons must secure that the whistleblower receives a confirmation of receipt within 7 days. The authorized persons are obligated to ensure thorough investigations as well as ensure that the whistleblower is informed of any actions, planned or executed, without undue delay and no later than 3 months after confirmation of receipt. 

Companies are obligated to document the whistleblower system and related procedures in writing. 


Protection

A general prohibition against employers imposing retaliatory measures against whistleblowers and related parties will be imposed. A condition for the protection against retaliatory measures is that the whistleblower assumed in good faith that the information con-tained in the reporting was correct and subject to the Whistleblower Act. 

Retaliatory measures include all types of unfavourable treatment of the whistleblower following the reporting, including any threats and attempts to prevent or discourage the use of the whistleblower system and termination of employment. If measures are taken by the company against the employee following use of the whistleblower system, the burden of proof will lie with the company, i.e. the company must prove that the measures were not taken as a retaliatory measure.

In addition to the whistleblowers themselves, the protection against retaliatory measures applies to all intermediaries, third parties and companies which the whistleblower owns, works for, or has a business relation to. 

In addition, the company is obligated to design, establish, and operate the whistleblower system in a manner which ensures confidentiality of the identity of the reporting person and the content of the reporting. The whistleblower will not be punishable for any viola-tion of confidentiality or non-disclosure obligations, if relevant. 


Sanctions

Any violation of the company’s obligations regarding the procedures for internal reporting and follow-up, appointment of internal authorized responsible person or department, provision of information and documentation may be fined.  
 
If a company takes retaliatory measures against a reporting person, the company must compensate the reporting persons according to the fine levels of the Danish Equal Opportunities Act. 

If a company dismisses a reporting person as a retaliatory measure in violation of the Whistleblower Act, the reporting person will be able to present a claim for re-employment. The reporting persons may freely choose between claiming compensation or re-employment.  

Employees who intentionally submit wrongful information via the whistleblower system may also be fined.


Enforcement Deadlines 

Companies with more than 250 employees must have established the whistleblower systems and procedures no later than 17 December 2021. 

Companies employing 50-249 employees must establish a whistleblower system before 17 December 2023 and may share resources with other companies for the operation of the whistleblower system and for performing the consequential investigations. 


Our Comments
We recommend that all companies start preparing for compliance with the new require-ments as soon as possible to secure implementation in due time. For companies currently operating a voluntary whistleblower system, we recommend that an assessment of any required adjustments is initiated to secure compliance when the directive comes into force. 


M&A Transactions
The current proposed legislation will become a point of attention in M&A transactions going forward. 

When an M&A transaction is in the due diligence process, it should be confirmed that the target is in the process of assessing the consequences of the proposed regulation and that steps are taken towards implementation and compliance. 

If target is a company employing 50 persons or more, and the company does not imple-ment and secure compliance with the new whistleblower requirements, this will consti-tute a breach of the whistleblower regulation after 17 December 2021 – depending on the Whistleblower Act being adopted in its proposed form. Accordingly, it should be duly confirmed in such case that the target is in taking steps towards implementation of the whistleblower system and whistleblower protection regulation.