What the German Whistleblower Protection Act Means for Employers

​Germany's Whistleblower Protection Act took effect on July 2 after a long period of deliberation.

"One of the main intentions [of the Whistleblower Protection Act] is to help companies become aware of things that go wrong within the company, and then to address these matters, and then at the same time to protect these persons if they do notify the company or external parties about such violations, that they will not be subject to repercussions for doing so," said Nils Neumann, an attorney with K&L Gates in Berlin.

The European Union's (EU's) Whistleblower Directive inspired the Whistleblower Protection Act in Germany, but the policies differ in important ways.

"In Germany, we didn't really have any kind of whistleblowing protection in the past, whereas other countries might have had," Neumann said. "The idea of the European directive is to provide for a base level of harmonization where things will be the same or very similar throughout Europe. The most important differences in Germany are that the material scope of the law is much broader."

The German law currently applies to companies with more than 250 employees, and by the end of the year, it will expand to include companies with more than 50 employees.

Anonymous Whistleblowing Harder in Germany

While the EU directive allows for anonymous whistleblowing, the German law makes it harder for whistleblowers to stay anonymous.

"The European directive has an intention, or wants to facilitate, the possibility of making an anonymous report," Neumann said, "whereas the German law does allow anonymous reporting, but the law does not require companies to follow up on an anonymous report. So if an anonymous report comes in, they could theoretically ignore it" until the whistleblower reveals their identity.

This stipulation of Germany's law can cut both ways, both potentially discouraging people from whistleblowing when it's harder to do anonymously and preventing false claims from employees hiding behind anonymity.

Setting Up Internal Reporting Channels

The main requirement of the Whistleblower Protection Act is that companies set up internal reporting channels for employees.

"That can be something very low-level, like an email address where people could send reports—that's theoretically possible," Neumann said. "But typically, you would set up a more sophisticated system in which people can really file a report, and then it would be internally handled." 

The German law allows for company groups to centralize their internal reporting channel, which may avoid some logistical problems with implementation.

"While the EU Whistleblower Directive—like the German—says that each legal entity with more than 50 employees has to have its own whistleblower system, the explanatory note states that a company group can appoint one legal entity to operate a centralized whistleblower channel for the whole group," said Stefan Bartz, an attorney with Latham & Watkins in Frankfurt and Hamburg, Germany. "To be honest, for large companies, it's just not feasible to have individual reporting channels for each of their legal subsidiaries, and Germany has taken this into account. The EU Commission has, however, made it clear in two letters that it thinks that such a centralized approach is not in line with the EU Whistleblower Directive."

When a company sets up an internal reporting channel, especially if in conjunction with a third party, it needs to make sure it is abiding by other laws, including local data protection laws, Neumann said.

"If you have a group of companies, can you share the data? Do you need special mechanisms to protect the data? Because all of that in the end can result in complications and legal claims as well, so that you might have a reporting channel that complies with the Whistleblower Act, but you might be violating data privacy laws and then have another issue at the same time," he explained. 

Companies could have to pay fines and damages for violating the Whistleblower Protection Act, though the fines won't go into effect until December. Employers must also make sure employee terminations don't violate the act.

"From an employment law perspective, with the strengthened whistleblower protection, we will probably see more employees in the future blowing the whistle in advance of larger restructuring, or where they suspect that their work might be in danger," Bartz said. 

Katie Nadworny is a freelance writer in Istanbul.