WHISTLING WHILE THEY WORK

Foo Siew Li discusses the salient provisions of the Whistleblower Protection Act 2010

A whistleblower is defined in the Concise Oxford Dictionary (10th edition) as “a person who informs on someone engaged in an illicit activity”. The implementation of whistleblowing policies in the public or private sector ensures that a good early warning system is in place which allows the organisation to be alerted of any corruption, fraud, or other wrongdoings which may be taking place. This provides the organisation with the opportunity to take steps to eradicate the illicit activity before any irreparable damage is caused to it.
 

TO BLOW OR NOT TO BLOW THE WHISTLE?

More often than not, it is the employees of an organisation who are the ones with inside information on improper conduct by their employers or their colleagues in the workplace. These employees are then faced with the dilemma as to whether or not they should blow the whistle on their employers or their colleagues.

In particular, the risk of disclosing improper conduct of their employers is obvious. Such a situation arose in the Enron debacle in the United States, where the then vice-president of Enron, Sherron S. Watkins, expressed her concern in an internal memorandum to her then boss and company founder, Kenneth L. Lay, that the company could "implode in a wave of accounting scandals".

Sherron resigned after inaction by Lay and after being "demoted 33 floors from her mahogany executive suite to a 'skanky office' with a rickety metal desk and a pile of make-work projects". Sherron’s memorandum was discovered by an investigative committee after Enron's subsequent collapse into bankruptcy just 5 months later.


CHANGING THEIR TUNE

While whistleblowers who expose the illicit activity of their employers have previously been viewed in a negative light or as 'villains', there seems to have been a change in public perception of whistleblowers in recent years.

Today, the public appears more prepared to view whistleblowers as 'heroes' who are courageous enough to risk severe reprisal by their employers as a result of the disclosure of information which incriminates their employers. This could be the result of the growing public awareness of the need to combat corruption, fraud and other wrongdoings in the public and private sectors, which would be an impossible task if all employees were unwilling to 'stick their necks out' to blow the whistle on their employers. Hence, to encourage and facilitate these disclosures in the workplace, it is necessary for whistleblowers to be conferred some form of protection for their disclosures.

 

WHISTLEBLOWER PROTECTION IN MALAYSIA

The Malaysian Parliament has, in the past, introduced legal protection for whistleblowers, in particular officers and auditors of a company, in the Companies Act 1965 (Sections 174(8B), 368B(2) and 368B(3)) and the Capital Markets and Services Act 2007 (Section 320(2)) in its attempt to counter malpractices and fraud by companies.

The coming into force of the Whistleblower Protection Act 2010 ("WPA") on 15 December 2010 introduced, for the first time, employment-specific criminal liability for retaliatory or detrimental action taken by an employer against a whistleblower who has disclosed the improper conduct of their employer or colleagues. It is a significant step in the right direction for Malaysia in its efforts to combat corruption and promote good governance and brings Malaysia up to par with developed countries like the United States, the United Kingdom and Australia.


MERELY WHISTLING IN THE WIND?

While the aims and the purpose of the WPA are ambitious and noble, the million-dollar question is whether this legislation will be able to achieve all that it has set out to achieve, or whether the Act will be akin to a 'toothless tiger', one which is perhaps 'whistling in the wind'?

Although the actual impact of the WPA will only be apparent in time, the WPA cannot be said to be 'merely whistling in the wind' as it contains provisions which facilitate disclosure of improper conduct by employees and confers protection on employees who blow the whistle on their employers or colleagues at the workplace.

The WPA defines a 'whistleblower' as a person who makes a disclosure of improper conduct to an enforcement agency based on his reasonable belief that any other person has engaged, is engaging or is preparing to engage, in improper conduct, provided that such disclosure is not specifically prohibited by any written law.

While the phrase 'reasonable belief' is not defined in the WPA, the Court of Appeal in the UK case of Babula v Waltham Forest College [2007] IRLR 346 held that for an employee to be protected against detriment or dismissal on the grounds of making a protected disclosure under whistleblowing provisions, it will be sufficient for the employee to reasonably believe that the employer is in breach of a legal obligation, whether or not such belief turns out to be wrong.

Under the WPA, 'improper conduct' means any conduct which if proved, constitutes a disciplinary offence or a criminal offence.


WHISTLING TO THE RIGHT AUDIENCE

It is important to emphasize that in order to be entitled to the safeguards under the WPA, a whistleblower must disclose the information on improper conduct to an 'enforcement agency'. In this regard, the WPA provides a broad definition for 'enforcement agency' which includes any ministry, department, agency, or other body set up by the Federal Government of Malaysia, State Governments or local governments.

According to the Deputy Minister in the Prime Minister's Department, Datuk Liew Vui Keong, the WPA has been implemented by 7 government agencies, namely, the Royal Malaysian Police, the Malaysian Anti-Corruption Commission, the Royal Malaysian Customs Department, the Immigration Department, the Road Transport Department, the Companies Commission of Malaysia and the Securities Commission.

In other words, a whistleblower who makes the disclosure to his employer or to the media or to any other person will not be entitled to the protection under the WPA and his remedies for any detrimental action inflicted upon him by his employer would be under employment or contract law.

It is unfortunate that the protection under the WPA is not extended to disclosures made to the employer as there could be instances where an employee may wish to report improper conduct internally rather than to an enforcement agency, particularly where the illicit activity is committed by a co-worker.


PROTECTING THE WHISTLEBLOWER

The WPA confers 3 forms of protection on a whistleblower. First, the identities of the whistleblower and the person against whom a disclosure is made as well as the information disclosed by a whistleblower is to be kept confidential by any recipient of such information.

Second, a whistleblower is conferred immunity from any civil or criminal liability (including liability from administrative or disciplinary proceedings) for making a disclosure of improper conduct.

Third, a whistleblower is protected against “detrimental action” in reprisal for a disclosure of improper conduct made by him. “Detrimental action” includes any action that causes injury, loss or damage, intimidation or harassment, discrimination, demotion, suspension, termination or adverse treatment in relation to his employment as well as a threat of any of the abovementioned actions.

Each of the abovementioned forms of protection is also extended to any person who is related to, or associated with, the whistleblower.

The burden is on the employer to show that any detrimental action taken against a whistleblower is not taken as a result of the disclosure of improper conduct by the latter.

It is noteworthy that a person who commits a detrimental action against a whistleblower or any person related to, or associated with, a whistleblower in reprisal for a disclosure of improper conduct can now be held personally liable for damages or compensation. This is a significant change from the pre-WPA position whereby an employee who faced detrimental action by their employer as a result of the disclosure of improper conduct was usually left with no option but to leave their employment and make a claim for constructive dismissal against the employer.

Further, under the WPA, the whistleblower or any person related to, or associated with, him may, in certain circumstances, request the enforcement agency to apply in writing, for and on his behalf, to his employer for relocation of his place of employment.

In certain circumstances where the whistleblower or any person related to, or associated with, him are subject to detrimental action, or threats of detrimental action, by his employer, that person may apply to the Court for an injunction to prevent his employer from continuing, repeating or threatening to continue or repeat, the detrimental action.

 

A DUTY TO DANCE TO THE TUNE

Although the WPA does not impose a duty on any person to make a disclosure of improper conduct, it imposes a duty on an enforcement agency to investigate any disclosure of improper conduct and any complaint by a whistleblower of detrimental action taken against him.

Where any improper conduct constitutes a criminal offence, the enforcement agency is to refer the matter to the Public Prosecutor.

On the other hand, where improper conduct constitutes a disciplinary offence, the enforcement agency is to recommend that the appropriate disciplinary authority, or the employer, initiate disciplinary proceedings or take other appropriate action against the person who carried out the improper conduct. In such event, the WPA imposes an obligation on the appropriate disciplinary authority, or the employer, to report to the enforcement agency the steps it has taken to give effect to the finding and recommendation of the enforcement agency or its reasons for not taking any action. This is vital to ensure that a disclosure of improper conduct which has merit is acted upon.

 

REWARD FOR WHISTLEBLOWING

Another significant provision in the WPA which is likely to increase the efficacy of the WPA in encouraging whistleblowers to come forward is the provision that empowers the enforcement agency to order rewards to whistleblowers.

 

WITHDRAWING THE PROTECTION

The protection accorded to a whistleblower under the WPA can be revoked by the enforcement agency in certain situations, for instance where the whistleblower himself has participated in the improper conduct disclosed or where he wilfully makes, in his disclosure of improper conduct, a material statement which he knows or believes to be false or where the disclosure is made primarily with the view of avoiding dismissal or other disciplinary action.

 


THE WAY FORWARD

It has been reported by Bernama, the national news agency, on 4th December 2012 that the number of complaints filed with enforcement agencies under the WPA has risen from 1,960 in 2011 to 11,841 in 2012. The exponential increase in the number of disclosures shows the effectiveness of the WPA as a weapon to combat illicit activity in the workplace.

As the WPA imposes an obligation on employers to investigate improper conduct that constitutes a disciplinary offence, employers should establish a whistleblowing policy in their organisations to enable them to discharge this statutory obligation, should the need to do so arise.

A whistleblowing policy should be drafted in a manner that protects a whistleblower but prevents abuse by potential talebearers. A well-drafted whistleblowing policy will increase employees’ trust and confidence in their employers, which in turn is vital for the successful implementation of that policy and will lead to a change in the culture of the organisation towards greater transparency and integrity.

It is important to point out that this good corporate governance practice would only be effective where employers, employees and the relevant enforcement agencies acknowledge the importance of whistleblowing in the workplace and play their respective parts in implementing the WPA. As it is often said, “All that is necessary for the triumph of evil is that good men do nothing.”

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