Is Your Not-for-Profit Ready to Protect Whistleblowers? Here’s What You Need to Know

Introduction

For any not-for-profit organisation, understanding and upholding whistleblower protections is a critical aspect of good governance. The legal landscape, significantly shaped by the Corporations Act 2001 (Cth), requires not-for-profits to be diligent in meeting their obligations to protect individuals who report wrongdoing within their organisation.

This guide provides essential information to help your not-for-profit organisation understand these important whistleblower protection measures. It clarifies the responsibilities your organisation must address to foster a secure and compliant environment for whistleblowers, ensuring that individuals feel safe to speak up.

Understanding Which Whistleblower Laws Apply to Your Not-for-Profit Organisation

The Corporations Act & Its Reach for Not-for-Profit Organisations

The primary legislation governing whistleblower protections for many not-for-profit (NFP) organisations in Australia is the Corporations Act 2001 (Cth) (Corporations Act). NFP incorporated organisations that are considered constitutional corporations, specifically trading or financial corporations, must comply with the whistleblower protection regime outlined in Part 9.4AAA of this Act.

If your NFP organisation engages in significant trading or financial activities, it will likely be subject to these federal laws. These laws apply to various entities, including:

•   Companies registered with the Australian Securities and Investments Commission (ASIC)
•   Other incorporated bodies that qualify as trading or financial corporations under the Australian Constitution

It is important for your NFP organisation to determine if its activities bring it within the scope of the Corporations Act to understand its whistleblower obligations.

Identifying if Your Not-for-Profit Organisation is a Trading or Financial Corporation

Determining whether your NFP organisation is a “trading or financial corporation” depends on its specific activities. An organisation generally falls into this category if its trading or financial activities form a sufficiently significant proportion of its overall operations. This assessment must be made on a case-by-case basis.

Trading activities primarily involve the buying and selling of goods or services. Financial activities, on the other hand, encompass commercial dealings in finance, which can include:

•   Borrowing money
•   Lending money
•   Investing funds
•   Providing advice on financial matters

It’s important to note that simply selling goods or services to the public for fundraising, or having a loan or making financial investments to support operations, does not automatically classify an NFP organisation as a trading or financial corporation if these activities are not a significant part of its overall functions.

For instance, a medical research charity whose trading activities are minor and peripheral to its main research work might not be considered a trading corporation. Conversely, an animal welfare charity that earns substantial income from trading activities could be classified as such.

Similarly, an NFP sporting club that pays players, charges admission fees, and sells television and advertising rights has been found to be a trading corporation. If your organisation is uncertain about its status, seeking legal advice is recommended as ASIC cannot provide a definitive ruling.

Implications for Different Not-for-Profit Structures like Incorporated Associations & Charities

Various NFP structures can be subject to the whistleblower laws under the Corporations Act 2001 (Cth) if they are deemed to be trading or financial corporations. This applies even if these organisations are incorporated under state or territory legislation and established for a charitable or community benefit purpose.

The whistleblower protection provisions apply to a “regulated entity,” which includes:

•   All companies registered under the Corporations Act
•   Other incorporated entities that are constitutional corporations, such as trading or financial corporations

Therefore, if an incorporated association or an Australian Charities and Not-for-profits Commission (ACNC)-registered charity engages in trading or financial activities to a significant extent, it will likely be considered a trading or financial corporation.

Consequently, such an organisation must comply with the whistleblower protections, regardless of its NFP status or specific legal structure. This also applies to other bodies corporate, including NFP bodies corporate and incorporated organisations registered with ASIC as Australian registered bodies, if their activities meet the trading or financial corporation criteria.

Who Qualifies as an Eligible Whistleblower in a Not-for-Profit Organisation

Current & Former Staff & Officers of the Not-for-Profit Organisation

Individuals who are currently or were previously employed by an NFP organisation can be considered eligible whistleblowers. This important whistleblower protection also extends to current and former officers of the NFP organisation, such as directors or company secretaries.

These roles often place individuals in a position to observe potential misconduct, making their ability to report crucial for the integrity of the NFP sector. The protections afforded under legislation like the Corporations Act 2001 (Cth) recognise that these insiders are vital for bringing issues to light within an organisation.

Eligible whistleblowers in this category include:

• Current employees of the NFP organisation
• Former employees of the NFP organisation
• Current officers (directors, company secretaries)
• Former officers

Both present and past staff and officers are included to encourage comprehensive oversight and accountability in NFPs.

Suppliers Volunteers & Associates of the Not-for-Profit Organisation

The scope of who qualifies for whistleblower protection in relation to an NFP organisation extends beyond its direct employees and officers. This inclusive approach helps ensure that various parties interacting with an NFP have the necessary whistleblower protection.

Additional eligible whistleblowers include:

• Individuals or entities that supply goods or services to an NFP organisation
• Employees of suppliers to the NFP organisation
• Volunteers associated with the NFP organisation
• Associates of the NFP organisation (individuals or entities with whom the organisation acts in concert)

This coverage applies whether the services are rendered on a paid or unpaid basis, which importantly means that volunteers are likely included under these protections. Furthermore, the definition broadens the range of individuals who can confidently report wrongdoing.

Relatives & Dependants of Not-for-Profit Organisation Insiders

Whistleblower protections are also designed to cover individuals who have close connections to those directly involved with an NFP organisation. This provision acknowledges that information about misconduct within an organisation might be known to or discovered by those in close relationships with insiders.

The law extends eligibility to:

• Relatives of current or former employees, officers, suppliers, or associates
• Dependants of current or former employees, officers, suppliers, or associates
• Spouses of current or former employees, officers, suppliers, or associates

By including these individuals, the whistleblower protection framework aims to create a more comprehensive shield, encouraging the disclosure of wrongdoing from various sources connected to NFPs.

What Types of Whistleblower Reports & Disclosures Are Protected for Not-for-Profit Organisations

Disclosures About Misconduct or an Improper State of Affairs within the Not-for-Profit Organisation

For a whistleblower report concerning an NFP organisation to be protected, it must be based on reasonable grounds to suspect misconduct or an improper state of affairs or circumstances. This can relate to the NFP organisation itself, or an officer or employee of the NFP organisation.

The term ‘misconduct’ is broad and includes:

•   Fraud
•   Negligence
•   Default
•   Breach of trust
•   Breach of duty

An ‘improper state of affairs or circumstances’ is also intentionally broad. It may not necessarily involve unlawful conduct by the NFP organisation but could indicate a systemic issue or business practices that may cause harm.

A whistleblower needs to have more than a mere allegation; however, they are not required to prove their suspicions for the whistleblower protection to apply.

Reporting a Breach of the Corporations Act & Other Commonwealth Laws by the Organisation

Whistleblower protection extends to disclosures about an NFP organisation, or its officers or employees, engaging in conduct that breaches specific laws. If a whistleblower has reasonable grounds to suspect such a breach, their disclosure may qualify for protection.

These breaches include:

•   Contraventions of the Corporations Act 2001 (Cth) or the Australian Securities and Investments Commission Act 2001 (Cth)
•   Breaches of other financial sector laws enforced by ASIC or the Australian Prudential Regulation Authority (APRA)
•   Conduct that constitutes an offence against any other Commonwealth law that is punishable by imprisonment for a period of 12 months or more

For example, if an NFP organisation is found to be involved in activities that contravene financial reporting obligations under the Corporations Act 2001 (Cth), a disclosure about this would be a qualifying disclosure.

Disclosures Representing a Danger to the Public or the Financial System from Organisation Activities

Disclosures that concern conduct by an NFP organisation, or its officers or employees, which represents a danger to the public or the financial system are also protected. A whistleblower must have reasonable grounds to suspect that the information they are disclosing points to such a danger.

This category is significant as it covers situations that may not involve a direct breach of a specific law but still pose a considerable threat. For instance, if an NFP organisation’s activities, perhaps due to negligence, create a substantial and immediate danger to public health or safety, a report on this matter would likely qualify for whistleblower protection.

Understanding What is Not a Protected Disclosure for Not-for-Profit Organisations Personal Work-Related Grievances

It is important for individuals within an NFP organisation to understand that not all disclosures are protected under the whistleblower laws, particularly those concerning personal work-related grievances. Disclosures that relate solely to a whistleblower’s current or former employment and have implications only for them personally generally do not qualify for protection under the Corporations Act 2001 (Cth).

Examples of personal work-related grievances that are typically not protected include:

•   An interpersonal conflict between the discloser and another employee
•   A decision about the discloser’s employment, transfer, or promotion that does not involve a breach of workplace laws
•   A decision about the terms and conditions of the discloser’s engagement
•   A decision to suspend or terminate the discloser’s employment, or to otherwise discipline them

However, a disclosure involving a personal work-related grievance may still qualify for whistleblower protection in certain circumstances. This can occur if the disclosure:

• Also includes information about broader misconduct (a ‘mixed report’) – for example, if the grievance is part of a larger pattern of systemic issues within the NFP organisation
• Reveals that the NFP organisation has breached employment or other laws punishable by imprisonment for 12 months or more, or has engaged in conduct that represents a danger to the public
• Suggests misconduct that extends beyond the discloser’s personal circumstances and has significant implications for the NFP organisation
• Is made because the discloser suffers from, or is threatened with, detriment for making or proposing to make a disclosure
• Is made to a legal practitioner for the purpose of obtaining legal advice or legal representation about the operation of the whistleblower provisions in the Corporations Act 2001 (Cth)

If a disclosure is solely about a personal work-related grievance and does not meet these exceptions, it may be more appropriate to address it through other channels, such as internal human resources procedures or under the Fair Work Act 2009 (Cth).

Key Whistleblower Protections Your Not-for-Profit Organisation Must Uphold

Identity Protection & Confidentiality for the Whistleblower in Your Organisation

Your NFP organisation has strict legal obligations to maintain the confidentiality of a whistleblower’s identity. It is illegal for anyone in your organisation to disclose information that is likely to lead to the identification of a whistleblower who has made a qualifying disclosure under the Corporations Act 2001 (Cth). This protection is a cornerstone of the whistleblower protection framework, encouraging individuals to come forward.

There are very limited circumstances under which a whistleblower’s identity can be revealed, which include:

• With the whistleblower’s explicit consent.
• To ASIC, APRA, or the Australian Federal Police (AFP).
• To a legal practitioner for the purpose of obtaining legal advice or representation regarding the whistleblower provisions.
• If a court or tribunal orders the disclosure in the interests of justice.

Your organisation must take all reasonable steps to prevent the disclosure of a whistleblower’s identity during any investigation into the reported matters. Breaches of these confidentiality requirements can lead to significant penalties for both individuals and the organisation, as well as causing serious reputational damage.

Protection from Detrimental Conduct & Victimisation within the Not-for-Profit Organisation

A critical whistleblower protection your NFP organisation must ensure is the absolute prohibition of detrimental conduct against a whistleblower. It is illegal under the Corporations Act 2001 (Cth) for your organisation or any of its officers or employees to cause, or threaten to cause, any detriment to an individual because they believe or suspect that person has made, may make, or could make a whistleblower report. This protection applies even if a report has not yet been made.

Detrimental conduct is broadly defined and can encompass a range of actions, including but not limited to:

• Dismissal from employment.
• Injury in their employment or alteration of their position or duties to their disadvantage.
• Discrimination between the whistleblower and other employees.
• Harassment, intimidation, or victimisation.
• Harm or injury, including psychological harm.
• Damage to their property, reputation, business, or financial position.

Engaging in such conduct can result in severe consequences, including criminal charges, civil penalties, and significant fines for both the individuals involved and the NFP organisation. Therefore, your organisation must actively prevent any form of victimisation to uphold this vital whistleblower protection.

Compensation & Other Remedies Available to Whistleblowers

Whistleblowers who suffer loss, damage, or injury as a result of making a protected disclosure have the right to seek compensation and other remedies through the courts. If your NFP organisation fails to prevent detrimental conduct towards a whistleblower, it could be liable for such compensation. The Corporations Act 2001 (Cth) provides for uncapped compensation aimed at restoring the whistleblower to the position they were in before the detriment occurred.

In addition to financial compensation, courts can order other remedies to address the harm suffered by a whistleblower. These remedies may include:

• Reinstatement to their position if they were dismissed.
• Injunctions to prevent ongoing or future detrimental conduct.
• An apology from the organisation or individuals involved.
• Exemplary damages in certain circumstances.

It is the whistleblower’s responsibility to initiate legal action to seek these remedies. However, the law also provides some cost protection for whistleblowers pursuing such claims, unless the claim is found to be vexatious or brought unreasonably.

Protection from Legal Action for Making a Whistleblower Report

An important whistleblower protection afforded under the Corporations Act 2001 (Cth) is immunity from certain legal actions for making a protected disclosure. A whistleblower is protected from civil, criminal, and administrative liability that might otherwise arise from the act of making the report. For instance, a whistleblower cannot be successfully sued for breach of an employment contract or a duty of confidentiality solely for making a protected disclosure.

Furthermore, the information provided in a protected disclosure cannot be used against the whistleblower in a criminal prosecution, unless the disclosure itself is found to be false. Similarly, they are protected from administrative actions, such as disciplinary proceedings, being taken against them simply because they reported wrongdoing within the NFP organisation.

It is crucial to understand, however, that this immunity does not extend to any misconduct the whistleblower themselves may have been involved in, even if that misconduct is revealed through their own disclosure. The protection is specifically for the act of whistleblowing.

Whistleblower Policies: Does Your Not-for-Profit Organisation Need One

Legal Requirement for Certain Not-for-Profit Organisations to Have Whistleblower Policies

Certain NFP organisations are legally mandated to have a whistleblower policy under the Corporations Act 2001 (Cth). This requirement primarily applies to:

•   Public companies, which includes NFPs structured as public companies limited by guarantee
•   Particularly those with annual consolidated revenue of $1 million or more

These NFP organisations must establish and make available a whistleblower policy that complies with the legislative requirements. ASIC provides guidance on these obligations, and failure to comply can lead to penalties. It is important for your NFP organisation to assess if it falls into these categories to understand its specific duties regarding whistleblower policies.

Exemptions for Small Not-for-Profit Organisations & Charities from Mandatory Policies

While some NFP organisations must have a whistleblower policy, there are exemptions for smaller entities. Specifically, companies limited by guarantee, a common structure for many NFP organisations and charities, are exempt from the mandatory requirement if their annual consolidated revenue is less than $1 million. This exemption is detailed in ASIC Corporations (Whistleblower Policies) Instrument 2019/1146.

It is also important to note that incorporated associations or other similar bodies corporate are generally not subject to the mandatory requirement under the Corporations Act 2001 (Cth). However, even if exempt, all organisations must still comply with the broader whistleblower protection provisions if they are trading or financial corporations.

Benefits of Implementing Whistleblower Policies Even if Not Legally Required by Your Organisation

Even if your NFP organisation is not legally compelled to have a formal whistleblower policy, implementing one is considered good practice and offers significant benefits. A well-structured whistleblower policy can enhance your organisation’s governance and risk management frameworks by helping to uncover misconduct that might otherwise go undetected.

Furthermore, having a documented approach to whistleblowing can:

•   Provide better whistleblower protection for individuals who disclose wrongdoing within the organisation
•   Improve the whistleblowing culture and increase transparency in how your NFP handles such disclosures
•   Deter wrongdoing and promote better compliance with legal obligations
•   Serve as an essential tool in your organisation’s good governance toolkit, ultimately supporting its long-term sustainability and reputation

The ACNC also recommends that charities document their approach to whistleblowers, irrespective of legal mandates.

Key Elements ASIC Recommends for a Not-for-Profit Organisation’s Whistleblower Policies

ASIC’s Regulatory Guide 270 Whistleblower policies (RG 270) outlines key elements that an effective whistleblower policy for an NFP organisation should contain. While this guide is particularly for entities mandated to have a policy, it offers valuable insights for any NFP organisation wishing to establish robust whistleblowing procedures.

According to section 1317AI(5) of the Corporations Act 2001 (Cth), a compliant policy should include information about:

• Protections available to whistleblowers: This includes details on identity protection (confidentiality), safeguarding against detrimental conduct, rights to compensation and other remedies, and immunity from certain legal actions related to making the disclosure.
• To whom and how disclosures can be made: The policy must identify eligible recipients of disclosures within and outside the organisation, and describe the various channels through which a whistleblower can make a report, including options for anonymity.
• Support and practical protection for whistleblowers: It should outline the measures the NFP organisation will take to support disclosers and shield them from any form of detriment.
• Investigation of disclosures: The policy needs to detail how the organisation will investigate qualifying disclosures in a fair and timely manner, ensuring objectivity.
• Fair treatment of individuals mentioned: Information on how the NFP organisation will ensure fair treatment for employees who are mentioned in whistleblower reports, or who are the subject of such reports, is crucial.
• Availability of the policy: The policy must state how it will be made accessible to all officers and employees of the NFP organisation.

RG 270 also provides good practice guidance on aspects like fostering a positive whistleblowing culture, defining roles and responsibilities, ensuring privacy, and monitoring and reviewing the policy’s effectiveness. Adopting these elements can help your NFP organisation create a comprehensive and effective framework for managing whistleblower reports.

Conclusion

Understanding whistleblower protections under the Corporations Act 2001 (Cth) is vital for every NFP organisation, encompassing which laws apply, who qualifies as a whistleblower, what disclosures are protected, the key protections your organisation must uphold, and whether a whistleblower policy is necessary. By familiarising themselves with these critical areas, NFPs can foster a compliant and secure environment where individuals feel safe to report wrongdoing.

If your NFP organisation requires assistance in understanding its obligations or developing robust whistleblower policies and procedures, contact LawBridge today. Our experts offer trusted expertise in not-for-profit legal services to help ensure your organisation meets its legal requirements and promotes a culture of transparency and accountability.

Frequently Asked Questions for Not-for-Profit Organisations about Whistleblower Protection