Last updated 9 May 2022

Where do Not for Profits stand with Whistleblower laws? 

In a nutshell, Whistleblower laws are there to protect someone who wishes to speak out about misconduct by an employer or organisation that contracts them, without facing a reprisal.

Described as being important to the function of the rule of law and democracy, these laws aim to encourage accountability – especially in an environment where Freedom of Information requests prove less and less helpful to probing journalists.

Common questions that arise in this context include:

1.  What protections do these laws provide for employees and contractors to Not for Profits?

2. What should Not for Profits be aware of if someone in their organisation makes a disclosure?

In this current Insight, Birchgrove Legal summarises some of the main legal takeaways for Not for Profits.

Notable whistleblower cases

Clubs NSW v Stolz

The protracted battle between Clubs NSW and their former employee, Troy Stolz, underlines the very real challenges of whistleblowing cases.

Stolz was Club NSW’s former Anti-money Laundering and Counter-Terrorism Financing Manager. Wanting to speak out, Stolz put his trust and fate in whistleblowing laws to allege that the sizeable organisation was laundering money through the State’s poker machines.

Clubs NSW, which says it abides by AICD’s Not for Profit Governance rules, has most recently sought a gag order on the former employee, and is now suing Stolz for breach of confidence in the Federal Court.  Stolz argues whistleblower protections apply – a claim Clubs NSW firmly rejects.

This follows a Federal Court order for Stolz to hand over his communications with the independent MP Andrew Wilkie before Wilkie tried to table a document in Parliament.[1] Wilkie has since asked Parliament to consider intervening in the case saying the Federal Court Order has serious implications for Parliamentary privilege.

The overlapping Court disputes between Clubs NSW and their former employee have been costly to both parties, with Stolz also claiming he is now unable to find work in the sector.

This saga brings the scope and strength of Australia’s Whistleblower laws into sharp focus.

Not for profits who are service providers under Commonwealth contracts can find themselves at the frontier of very sensitive knowledge about potential misconduct and systemic problems in public administration.

Save the Children

In 2015, child protection workers within the charity, Save the Children, alleged child sexual abuse, violence and self-harm in Nauru in a submission to the Australian Human Rights Commission. They were subsequently investigated by the Australian Federal Police under section 70 of the Crimes Act for ‘disclosure of information by Commonwealth officers’.  A single disclosure includes a penalty up to 2 years in jail. The Department of Immigration and Border Protection requested the investigation. The workers did not name themselves in the AHRC submission out of fear that they would be breaching contractual confidentiality requirements.[2]

Several years later, a dispute arose between Save the Children and the same Department in relation to the deportation of 9 charity workers from Nauru, leading to a successful claim of compensation, including for harm to reputation.[3]

The untested question remains, if a Not for Profit like Save the Children attempted to instead rely on whistleblowing laws in making public interest disclosures, what would have been the outcome?

The scope for a person within a Not for Profit who is contracted by a government or corporate agency to make disclosures about that government or corporate agency appears to be an untested area of law.

While whistleblowing protections for the corporate sector have been strengthened in the past few years, their scope and strength remain contested, especially for those engaged in the public sector.

Do Not for Profits have obligations and protections under whistleblowing law?

The 2019 Whistleblowing reforms[4] (“The Whistleblower Act”) to the corporate sector do not cover all Not for Profits.

The reforms cover Not for Profit Companies that are limited by guarantee and fall within the Commonwealth’s constitutional powers, such as an incorporated association or other body corporate that is a trading or financial corporation.

A trading or financial corporation includes an organisation that trades in goods or services, lend or borrow money, or provide other financial services, and their trading or financial activities make up a sufficiently significant proportion of their overall activities. Below are examples used by ASIC[5]:

  1. Not for profit sporting clubs: A not-for-profit sporting club was found to be a trading corporation where it paid players, charged admission to spectators for matches, and sold television and advertising rights connected with matches. Conversely, a not-for-profit sporting club was found not to be a trading corporation where it generally did not pay players or charge spectators admission. The court found that, although the club engaged in some trading activities, this was not of sufficient significance to require it to be characterised as a trading corporation.
  2. Charities: An animal welfare charity was found to be a trading corporation on the basis that it earned substantial income from trading activities, whereas a medical research charity was found not to be a trading corporation where its trading activities were insubstantial and peripheral to the central activity of medical research and only generated a small proportion of its revenue.

Not-for-profit finance organisations: The court has found that not-for-profit building societies have been found to be financial corporations, despite performing an important social function, as they lent money at interest and were therefore engaged in commercial dealing in finance. Similarly, a not-for-profit superannuation entity incorporated under state law was found to be a financial corporation as its investments providing commercial and housing loans were a substantial and significant part of its overall activities.

Who is protected by whistleblowing laws?

Public sector contractors

Laws enacted to protect Federal public sector whistleblowers are contained in the Public Interest Disclosure Act 2013 (Cth) (“PID Act”). It not only protects public servants and parliamentary service officers, but service providers under Commonwealth contracts, which can include Not for Profits, can make disclosures to the relevant Government agency, a Commonwealth Ombudsman, or the IGIS (if it relates to a security intelligence matter).[6]

Fair Work registered organisations

The Fair Work (Registered Organisations) Act 2009 (Cth) (“FRWO Act”) also provides protections for whistleblowers wishing to make disclosures about employer associations and unions. These organisations can often be Not for Profits.

Who can be a whistleblower?

An ‘eligible whistleblower’ is now defined at law as current and former employees and officers of regulated entities or related bodies corporate, all peoples and their employees who provide goods and services to these entities, and all unpaid workers, associates, close relatives and dependents.[7]

The tax regime takes a broad approach too, protecting individuals with insider knowledge of tax law breaches, including current and former employees, volunteers and contractors.

The FWRO Act allows for disclosures by current and former officers, employees, members and disclosures by contractors.

Types of disclosures

Disclosures can be in relation to misconduct or breach of law. In addition, some special categories of disclosure include:

  1. Emergency disclosure: The discloser must have reasonable grounds to believe there is substantial and imminent danger to the health and safety of one or more persons, or the environment.
  2. Public Interest: A disclosure about wrongdoing in the public sector that serves the public interest.
  3. Tax-related: The Whistleblower Act brings all tax law breaches, including those relating to not-for-profits, within the scope of protected disclosure.
  4. Personal Work-related grievances and matters: The Whistleblower protections under the Corporations Act limit protections for disclosures about solely personal employment related matters. However, a person is protected if they are victimised because of disclosures about systemic issues, or because they disclose about reprisals against a whistleblower.

Requirements on the Not for Profit sector for investigating misconduct

The Government has introduced requirements for public companies and large proprietary companies to have a whistleblower policy.[8] Charities or not-for-profits structured as public companies limited by guarantee will need a whistleblower policy if their annual (consolidated) revenue is $1 million or more.[9]

However, some Not for Profits are still subject to the regime even if they’re not required to have a policy.

Good practice by Not for Profits includes ensuring their employees and other associated persons are aware of their ability to report any misconduct internally and that they have confidence that any such reports will be dealt with confidentiality as required by Whistleblowing Legislation. This practice can be done through instituting a whistleblowing policy and including that policy in ongoing training.  Lacking a practical framework for handling disclosures can be a common pitfall for organisations.[10]

Disclosing to an outside agency

Corporate related disclosures can be made directly to ASIC or APRA.

Tax related disclosures can be made to the Commissioner of Taxation.

These agencies have discretion to share with another agency, including law enforcement. However, they are not under obligation to share the disclosure, meaning that if a discloser submits it to the wrong place, they can’t feel assured that it will end up in the right place.

The situation is a bit different for disclosures made under the PID Act, where the agency to which the underlying conduct relates should receive the first disclosure.

The FWRO Act provides for disclosures to be made to the Registered Organisations Commissioner, Fair Work Ombudsman or members of the Fair Work Commission.

Disclosures about an incorporated association or other body corporate

ASIC will likely not be able to take action on a whistleblower’s allegations about the governance or operations of an incorporated association or other body corporate.

Generally, this is because these organisations are registered under state or territory legislation, which sets out the governance and operational requirements for these organisations, and ASIC does not administer these requirements.

If the incorporated association or other body corporate is registered as a charity with the ACNC, whistleblowers may also wish to report their concerns about the charity’s operations to the ACNC.

Whistleblowers will be entitled to the protections under the whistleblower protection regime from when they report their concerns to an eligible recipient. Eligible recipients as defined in the whistleblower protection provisions would include an officer, senior manager, auditor, or actuary of the incorporated association or body corporate, or alternatively ASIC (or APRA if relevant).[11]

Addressing blanket retaliatory action against whistleblowing

The Whistleblower Act extends protections to persons who may suffer a reprisal due to being directly or indirectly associated (as well as knowingly or unknowingly) with a disclosure.

Allowing disclosures to be made anonymously

The Whistleblower Act repealed the requirement that the discloser provide their name. The Government notes that private sector legislation, including the new tax regime, is now aligned with the Public Interest Disclosure Act 2013, FWRO Act and ‘international best practice in protecting anonymous disclosures’.[12]

However, the ASIC Commissioner recently outlined concerns that companies weren’t passing on this information to employees. Close to half of the policies examined by ASIC did not fully explain how staff could report misconduct and qualify for legal protection. One fifth of the policies reviewed by ASIC incorrectly said staff who blew the whistle anonymously would not qualify for protection.[13]

Keeping the discloser’s identity confidential in registered organisations

In 2019, the Australian Government agreed to amend the FWRO act to strengthen the confidentiality protections for whistleblowers in unions or employer associations, bringing those protections in line with the Whistleblower Act. [14]

Disclosures to media and politicians are protected in some cases

The Whistleblower Act also protects public interest disclosures and emergency disclosures made under the Corporations Act to a Member of Parliament or a Journalist, subject to certain criteria, including the requirement that they first disclose to ASIC or APRA. For public interest disclosures, the person who intends to disclose to an MP or Journalist must allow for reasonable time to pass before proceeding.[15]

The Government agreed in 2019 to amend the FRWO Act to protect disclosures in the media, in line with the protections of the Whistleblower Act.[16]

Where a whistleblower reports to a law enforcement agency

When a whistleblower discloses criminal conduct to a law enforcement agency, there is no requirement that the agency keep the discloser informed of whether the matter is being investigated or transferred to another agency. A Parliamentary inquiry recommended this change, but the Australian Government declined to adopt it. [17]

Reprisals by employers can lead to criminal or civil proceedings

Victimisation is a criminal and civil offence in the Whistleblower Act. The Whistleblower Act, PID Act and FWRO Act each allow a person to bring civil proceedings if a prosecution for a criminal offence has not or cannot be brought.

Compensation for Whistleblowers

All relevant legislation provides for uncapped compensation through the Courts.  Under the Whistleblower Act, the Court will have discretion in determining the compensation available to whistleblowers to put them back in the position they were prior to making the disclosure (similar to a torts damage test). The Act also permits a Court to make other orders including: injunctions, apologies, reinstatement, exemplary damages, and other orders it considers appropriate.

What might future reforms hold?

A federal parliamentary review recommended a reward be considered for whistleblowers, and that one-stop-shop Whistleblower Protection Authority be established to cover both the private and public sectors. The Australian Government noted these recommendations, saying they would consider a merit and cost case for a new authority in a further review of whistleblower legislation within five years (by 2024).

If you have any questions regarding this Insight, or your organisation in general, feel free to reach out to the team at Birchgrove Legal.

[1] Registered Clubs Association of New South Wales v Stolz [2021] FCA 576]

[2] Ben Doherty, ‘Police investigate Save the Children whistleblowers over Nauru abuse report’, ABC Media Watch (online, 4 March 2015) < https://www.abc.net.au/mediawatch/transcripts/1524_guardian.pdf>

[3] Sarah Whyte, ‘Government pays compensation to Save the Children workers removed from Nauru’, ABC News (online, updated 23 February 2018) <https://www.abc.net.au/news/2017-01-31/save-the-children-workers-government-pays-compensation/8217686?nw=0>.  Helen Davidson, ‘Government pays compensation to sacked Nauru Save the Children Staff’, The Guardian (online,31 January 2017)< https://www.theguardian.com/australia-news/2017/jan/31/government-pays-compensation-to-sacked-nauru-save-the-children-staff>.

[4]  Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 (Cth).

[5] https://asic.gov.au/about-asic/asic-investigations-and-enforcement/whistleblowing/whistleblower-protections-for-not-for-profit-organisations/#policy

[6] www.ombudsman.gov.au/__data/assets/pdf_file/0020/37415/Agency_Guide_to_the_PID_Act_Version_2.pdf

[7] For a full list, visit https://asic.gov.au/about-asic/asic-investigations-and-enforcement/whistleblowing/whistleblower-rights-and-protections/#who

[8] A guide for creating such a policy was issued in November 2019: https://asic.gov.au/regulatory-resources/find-a-document/regulatory-guides/rg-270-whistleblower-policies/

[9] ASIC Corporations (Whistleblower Policies) Instrument 2019/1146 <https://www.legislation.gov.au/Details/F2019L01457>

[10] Lachlan Colquhoun, ‘Australia has new whistleblowing laws. Now for the governance.’ 3 October 2019, In the Black online magazine.

[11] https://asic.gov.au/about-asic/asic-investigations-and-enforcement/whistleblowing/whistleblower-protections-for-not-for-profit-organisations/#policy

[12] Australian Government response to the Inquiry into Whistleblower protections in the corporate, public and not-for-profit sectors. Committee report tabled 13 September 2017. Government response received 9 April 2019; tabled in the Senate 2 July 2019; tabled in the House 4 July 2019, p.9.

[13] Clancy Yeates, ‘Corporate Whistleblower policies falling short: ASIC’, The Sydney Morning Herald (online, 5 May 2021) <https://www.smh.com.au/business/companies/corporate-whistleblower-policies-falling-short-asic-20210505-p57p5j.html>.

[14] Australian Government (n 12) 10.

[15] For further details see https://asic.gov.au/about-asic/asic-investigations-and-enforcement/whistleblowing/whistleblower-rights-and-protections

[16] Australian Government (n 12) 13

[17] Australian Government (n 12) 11.

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