Are criminal sanctions the only thing organisations implementing a whistleblower protection system should fear? 

In this guest post, Attorney of Law Błażej Wągiel from Whistlelink partner IPSO Legal, Poland, delves into the significance of whistleblower solutions, potential criminal sanctions for non-compliance, and the implications for organisations. 

In today’s globalised world, where transparency and ethics in business are increasingly valued, whistleblower protection has become a key element of risk management in organisations. 

Implementing a whistleblower protection system is a complex and multi-stage process, involving numerous legal, organisational, and cultural challenges. Companies that fail to comply with their whistleblower protection obligations may face serious consequences that could affect their business for years to come. 

The provisions of the Polish Law on the Protection of Whistleblowers include several criminal sanctions for violations of certain provisions designed to ensure the safety and security of whistleblowers. However, criminal sanctions are only the tip of the iceberg. Organisations must also contend with other legal risks that may arise from the improper implementation of a whistleblower protection system. 

This article discusses in detail the criminal sanctions provided for in the Polish law implementing Directive 2019/1937 and other legal risks related to the protection of whistleblowers. It also demonstrates why the proper implementation of a whistleblower protection system is not only a legal obligation but also a crucial element of building trust and responsibility in business. 

Criminal sanctions contained in the Law on the Protection of Whistleblowers 

The provisions of the Polish Law on the Protection of Whistleblowers contain detailed regulations on criminal sanctions for violations to protect whistleblowers from various forms of repression and breaches of their rights. These sanctions are intended to discourage actions against whistleblowers and to ensure that their reports are taken seriously and responsibly. The various criminal sanctions for violations of the Act are as follows: 

• Preventing notification: A person who prevents or materially obstructs notification shall be liable to a fine of up to PLN 1,080,000, a restriction of liberty, or imprisonment of up to one year. If the perpetrator uses violence, unlawful threats, or deception, the penalty of imprisonment may be up to three years. 
  
   
• Retaliatory actions: Retaliation against a whistleblower, a person assisting in making a report, or a person associated with a whistleblower is punishable by a fine of up to PLN 1,080,000, a restriction of liberty, or imprisonment for up to two years. Persistent retaliation against a whistleblower is punishable by imprisonment for up to three years. 
  
   
• Disclosing the identity of a whistleblower: Conduct involving the disclosure of the identity of a whistleblower, a person assisting in making a report, or a person associated with a whistleblower is punishable by a fine of up to PLN 1,080,000, a restriction of liberty, or imprisonment for up to one year. 
  
   
• False reporting: A person who makes a report or public disclosure knowing that a violation of the law has not occurred is liable to a fine of up to PLN 1,080,000, a restriction of liberty, or imprisonment for up to two years. 
  
   
• Failure to establish an internal reporting procedure: A person responsible for establishing an internal reporting procedure who fails to do so or does so in material breach of the requirements of the Act is liable to a fine of up to PLN 5,000. 
  

Other legal risks 

 That is not all. In addition to criminal sanctions, entrepreneurs face other legal risks: 

• Civil liability: A whistleblower whose rights have been violated may seek civil compensation for the damage suffered as a result of retaliatory actions. The Law on the Protection of Whistleblowers indicates that a whistleblower against whom retaliation has been committed is entitled to compensation of at least the average monthly salary in the national economy, or to damages. 
  
  
• Loss of reputation: Public disclosure of breaches due to inadequate whistleblower protection within an organisation can lead to a significant loss of corporate reputation, which can result in an exodus of customers and business partners. Reputation is one of a company’s most important assets, and its loss can lead to long-term negative consequences, such as a decrease in market value, difficulties in attracting new customers, and problems with investor relations. 
  
  
• Internal problems: Improper management of whistleblowing can lead to tension and conflict among employees, which in turn can lower morale and productivity. An atmosphere of distrust and fear can discourage employees from reporting wrongdoing, which in the long term can lead to more incidents and a weakened organisational culture. 
  
  
• Inspections and audits: Companies whose internal whistleblowing system is not functioning properly may be subject to more frequent inspections and audits due to undisclosed cases of irregularities. Such actions can be costly and time-consuming, and the results may lead to additional sanctions (e.g. administrative fines or additional obligations) and the need to implement costly corrective measures. 
  
  
• Risk of losing contracts and public contracts: Companies that do not comply with whistleblower protection legislation may lose the opportunity to bid for contracts and public procurement. In many countries, compliance with whistleblower protection standards is one of the evaluation criteria in public tenders, and failure to do so can result in exclusion from participation. 
  

Protecting whistleblowers? It pays off!  

A paper by Stephen R. Stubben of the University of Utah and Kyle T. Welch of George Washington University on the use and effectiveness of internal whistleblowing systems was published in February 2020. The researchers, using an anonymised database (nearly two million internal reports), examined the relationship between the use of internal whistleblowing systems and the business performance of more than a thousand listed US companies. 

The study indicates that companies with a high use of internal whistleblowing systems have a higher ROA compared to companies where internal whistleblowing is used less frequently. The implication is that the more active a company is in the area of whistleblowing, the higher the ROA. 

The researchers indicate that more internal reporting results in fewer proceedings brought against a company in subsequent years. More reporting also affects the amount of resulting claims – the study found that a 10 per cent increase in whistleblower reporting was associated with a 2 per cent decrease in penalties received and a 1 per cent decrease in court settlement amounts in subsequent years. The study indicates that companies where corporate governance was found to be inadequate were characterised by lower internal reporting activity than companies that emphasised corporate governance. 

Summary 

Implementing a whistleblower protection system is not only a legal obligation but also part of building an organisational culture based on transparency and integrity. Criminal penalties for violating the provisions of the Whistleblower Protection Act are serious, but entrepreneurs must also pay attention to other legal risks. Proper implementation and management of a whistleblower protection system can help avoid many problems and contribute to improving the company’s image in the market. 

Please visit the IPSO Legal website to learn more about their services! 

For additional insights, be sure to read our other informative posts by Błażej Wągiel: A Few Tips on How to Manage Whistleblower Reports and Should you reward a whistleblower?

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