Archive for June, 2019

Whistleblowing: Dutch Style

Friday, June 14th, 2019

What Happened

On July 1, 2016, the Dutch Whistleblowers Act (Wet Huis voor klokkenluiders, “Whistleblowers Act”) came  into effect, requiring all employers in the Netherlands with 50 employees or more to implement internal reporting procedures and ban retaliatory acts against employees who report wrongdoing.  The Act also created an external administrative entity to assist whistleblowers, the House for Whistleblowers (“House”). The House performs both advisory and investigative functions.

What Did NOT Happen

Like other whistleblower laws in Europe, the law in the Netherlands did not create a mechanism for the whistleblower to commence an action on behalf of the government, or provide any award as an incentive for whistleblowers to come forward.

The Background

Before the July 2016 implementation of the Act, all whistleblower reports were handled by the Advice Center for Whistleblowers in the Netherlands. However, at the time, there was no specific legislation dedicated to whistleblowing.

The Motivation

As we have noted in separate blogs related to whistleblower laws in France, Canada, and Germany, a lack of uniform and meaningful whistleblower legislation leads to a shortage of whistleblowers. The lack of reporting motivated the Dutch Parliament to enact the Dutch Whistleblowers Act. The Act created the House for Whistleblowers that includes departments for Advice, Investigation, and Research and Prevention. Despite the enthusiasm and optimism in the Dutch Parliament for the Whistleblowers Act, the progress for moving reports through the House was slow. In 2017 and 2018, changes in the House leadership, increases in staffing, and new processes were aimed at streamlining whistleblower reporting.

Who Can Be A Whistleblower in the Netherlands?

Whistleblowers are broadly defined under the Whistleblowers Act as individuals in an employment relationship with a Dutch organization who report wrongdoing related to a public interest. Whistleblowers can be current employees, former employees, trainees, or volunteers. The wrongdoing must relate to non-compliance with legislation, risk to public health, danger to public safety, environmental hazards, or risk to a governmental organization. To receive protection under the Act, whistleblowers must have a reasonable suspicion of wrongdoing. A reasonable suspicion requires the whistleblowers to personally observe the wrongdoing, not base their reports on secondhand knowledge or rumors.

What Protections Can a Whistleblower Receive?

The Whistleblowers Act amended a number of Dutch laws (the Civil Code, the Central and Local Government Personnel Act, the Police Act of 2012, the Military Personnel Act of 1931, and the Works Councils Act) to protect whistleblowers in the public sector and the private sector from retaliation. Under the Act, whistleblowers may not be disadvantaged in any way for good faith reporting of suspected wrongdoing. “Disadvantages” include, but are not limited to: bullying; demotion; refusing a promotion; transfer; or dismissal. The Act also provides psychological and social support to whistleblowers (although more guidance is expected on this provision this year).

How to Blow the Whistle in the Netherlands

In the Netherlands, employees must first report wrongdoing internally to their employer. If the employer fails to address the reported concerns, the employees must then report to an external supervisor. If the external supervisor does not adequately address the report, the employees may submit a request for investigation to the Investigation Department of the House for Whistleblowers. This request for investigation may be submitted electronically on the House for Whistleblowers’ website or through the mail.

Even though it is not mandatory, the House for Whistleblowers encourages potential whistleblowers to contact the Advice Department of the House before submitting a request for investigation. The Advice Department advises and counsels whistleblowers regarding the reporting process, follow-up steps whistleblowers should take, and risks associated with blowing the whistle.

The Take Away

The Dutch Whistleblowers Act is a good first step toward a whistleblower program, but leaves much to be desired. While the Act prohibits retaliation against whistleblowers, it does not establish penalties for employers who retaliate. The Act requires employers to set up internal reporting procedures, but does not include consequences for employers who fail to do so. The Whistleblowers Act alludes to psychological support for whistleblowers, but does not provide details or procedures for implementing them. Critically, the Whistleblowers Act does not include a financial award to Dutch whistleblowers, in spite of the recognition by the House for Whistleblowers that financial hardships associated with blowing the whistle often prevent whistleblowers from following through with the reporting process. Without such incentives it is unlikely that the Act will have its intended impact.

Why the European Union Whistleblower Laws Are All Doomed To Fail

Monday, June 3rd, 2019

As seen on the EU blog,

Member States of the European Union, over the last several years, have passed a series of so-called “Whistleblower Laws.”  These laws are being implemented allegedly to bolster anti-corruption efforts throughout Europe.  While corruption is no stranger to either side of the Atlantic, the European Union would advance their fraud fighting efforts exponentially by taking a focused look at the highly successful American False Claims Act.

France, Ireland, Italy, Greece, Germany, Netherlands, Sweden, Hungary, Lithuania, Malta, Slovakia, the United Kingdom, as well as others, have passed or amended some type of a putative whistleblower law.  Here is the issue.  None of these whistleblower statutes, in our opinion, contain the basic tenents of a strong and effective whistleblower program.  The development of the whistleblower statutes within the United States of America illustrates the bedrock elements of an effective and successful whistleblower law.

In 1986, the U.S. Congress amended the existing whistleblower statute, the False Claims Act, which was passed during the American Civil War by President Abraham Lincoln.  The 1986 Amendments to the False Claims Act included provisions that finally gave the law real fraud combatting teeth. Examining these 1986 Amendments (and even more recent Amendments) illustrates the changes needed in the European Union member States’ whistleblowing statutes.  Without such robust amendments the European Union laws will never have a real and palpable impact on fraud, waste and abuse.

The American statute, known as federal False Claims Act, or the Qui Tam Law, has at its heart the following key provisions:

  • The United States has what is known as a “qui tam[4] or whistleblower provision.
  • A whistleblower who comes forward and meets the statutory requirements is authorized by the statute to bring an action on behalf of the government and is entitled to receive a set amount of any settlement or judgment the government receives from the defendant from 15% to 30%. This strong financial incentive has, singlehandedly, made the American statute the most successful fraud, waste and abuse statute in the world.  Of this fact there is no debate.
  • The United States’ Congress has provided strong protections against professional retaliation against whistleblowers. In contrast, the European statutes contain weak non-existent or watered down versions of this protection.  In fact, some of the European laws actually put the whistleblower at risk if he or she is incorrect in their allegations. 
  • The American whistleblower statute attracts skilled lawyers who take these cases on a contingent-fee basis, award legal fees and costs to whistleblowers and their counsel, if they prevail in their claims against a defendant.
  • The American statute provides government attorneys with muscular investigative powers. For example, while the case is under seal, the government can issue document requests, written interrogatories, take depositions of key individuals, etc.  These broad investigative tools are lacking in most of the current European statutes.
  • As a result of the key amendments in 1986, the American whistleblower statute has returned more than $62 billion to the U.S. Treasury. No other whistleblower law in Europe (or anywhere) has had such success.

The European legislative bodies still do appear to be committed (culturally or legally) to the type of whistleblowing legislation that will not make a real difference for their respective countries.  Here are some of the reasons why the statutes in Europe shall continue to be as ineffective as the pre-1986 American Whistleblower Law:

  • The European statutes do not truly embrace the concept that whistleblowers need to be encouraged to come forward to expose corruption inside large, well regarded institutions. The majority of the European laws do not contain any financial reward for successful whistleblowers.  Most importantly, none of the European statutes have a strong financial reward that would balance the risks against the rewards.  The European laws seem to go through the motions of supporting, yet not incentivizing, whistleblowers.
  • There is no clear and distinct prosecutorial entity in charge of effectively enforcing the individual European statutes.
  • Many of the European statutes lack strong protections for whistleblowers who come forward and risk their careers and livelihood. While there is a lot of “lip service,” there is no economic insurance that they will be protected.

While Americans and Europeans have shared and adopted approaches to governance over the centuries, their differences in efforts to curtail fraud, waste and abuse through whistleblower statutes is considerable.  Europe need look no further than its young sister state across the Atlantic for lessons that may be worth billions of dollars in recoveries.