May 16, 2022
A number of global and large national companies already have centralized group-wide whistleblower systems in place and have relied on the adequacy of this global solution after 17 December 2021, when the new EU Whistleblowing Directive entered into force. But the European Commission has clearly rejected this interpretation, read more below.
Why a group-wide whistleblower system is not enough according to the EU
The idea of a centralized reporting system was rejected by the European Commission in the interpretative guidelines they published in response to a joint letter from industry associations from several Member States, in which these industry organizations criticized the need for groups with companies with more than 250 employees to set up completely separate whistleblowers.
The Commission explained that the Directive clarifies that each private entity with more than 50 employees is obliged to implement its own internal reporting system, regardless of whether the entity is part of a group or not.
The European Commission clarified in this regard that it is mandatory for all legal entities with more than 50 employees to provide their own whistleblower system (Article 8 (3) of the EU Whistleblower Directive). This is clear from the wording of the Directive and applies equally to independent companies and group companies, regardless of whether there is a group-wide system for whistleblowing or not.
This is considered necessary both for the efficiency of the systems and due to the expected different implementation of the EU Directive at national level. Consequently, in the view of the European Commission, group companies cannot be qualified as "third parties" in the field of whistleblower systems outsourcing.
The directive does not prohibit centralized group-wide whistleblower systems, but these can only exist in parallel with reporting systems at the individual company level. The Commission has justified its opinion by saying that the system is more effective if the problem is dealt with at company level where the case was reported and by the various legal provisions that will be adopted at national level.
All Member States must respect this interpretation when implementing the Directive. Therefore, if you have more than 50 employees, you should start preparing for the implementation of your own whistleblower system, even if you already have a comprehensive whistleblower system in place within the Group.
Are you in the beginning of implementing a group-wide or local whistleblower system? Read our checklist for a good whistleblower solution!
Sharing whistleblowing resources within a group is permitted, to some extent
If companies have up to 249 employees, they may, in accordance with the Directive, pool resources to examine a report with their parent company, but the following conditions must be met, according to the Commission's interpretation:
- The whistleblower must be able to report at subsidiary level, ie the subsidiary's internal whistleblower channels must be active and functional.
- The whistleblower must be informed about who at parent company level will have access to the report to carry out the investigation; The whistleblower must always have the opportunity to refuse the parent company to investigate the reported misconduct and request an investigation of the matter through the subsidiary's whistleblower system.
- The responsibility for maintaining the report's confidentiality, for giving the whistleblower feedback and for taking corrective action in connection with the reported misconduct always lies with the subsidiary.
However, the above simplifications do not apply to large (subsidiary) companies with more than 250 employees. In the opinion of the European Commission, it is therefore mandatory for these companies to have their own reporting system that can process incoming information independently of and outside any central whistleblower systems that may exist in parallel.
Corporate groups must therefore most certainly maintain a central whistleblowing system in parallel. However, this cannot replace a decentralized reporting system at each subsidiary level. If not all of the above points can be met, then groups, even if the companies within the group have less than 250 employees, cannot share a whistleblower system.
Implementing whistleblowing solutions for every business can be easy
It does not necessarily have to be cumbersome or particularly time-consuming to implement whistleblowing solutions for every company within the group. Each subsidiary can have its own whistleblower solution easily and smoothly, for example with the help of Visslan. We have plenty of experience of implementing solutions for whistleblowing and can also offer a whistleblower policy and external case management, if needed.
You can read more about Visslan's services here.
Being compliant benefits the entire group
Being compliant with the EU directive on whistleblowing is something that benefits the entire group. If a subsidiary, for example, receives negative attention in the press, this can spread and have a negative impact on other subsidiaries in the Group. Being compliant can be a way to avoid that. At the same time, it obviously benefits all employees and the work culture in general to offer sufficient means and opportunities to report malpractice, corruption and other serious malpractice, not to mention the risk of fines.