It doesn’t have to be the so-called “Panama papers” or the documents on “Luxembourg leaks” that fall into the employee’s lap – often unintentionally and rather accidentally. But how should an employee behave if s/he becomes aware of irregularities in the company? Given the potentially far-reaching consequences of (unreported) irregularites, the question “What does this concern me?” seems to be rather misplaced for managing directors as well as for ordinary employees alike. In the following, I would therefore like to make a few comments and give some hints as to the “correct” behaviour in the event of irregularities within a company.
Generally, private individuals (who are not so-called “professional investigators”, such as police officers) are not obliged to report crimes that have already been committed. In principle, this also applies with regard to planned offences. Even then, private citizens do not have to inform the investigating authorities – unless they know of certain, particularly serious offences according to § 138 StGB (“Strafgesetzbuch”, the German Criminal Code), such as treason, murder or robbery. In such cases, also private individuals must file criminal charges.
This rather straight forward guideline becomes blurred, though, when the irregularites (which might be a crime but are not limited to) appear within the context of work: Here, a distinction must be made between the aforementioned obligation to report criminal offences, which is extremely rare, and the obligation or right to take action in the event of irregularities under German labor law. Within the framework of his or her duty of loyalty to the company for which s/he works, the employee must, among other things, protect the property of the company. If there is a recognisable threat of damage to the company, s/he might be oblidged to notify and to avert the damages.
Appropriate behaviour in this situation is already difficult in the case of irregularities committed by colleagues at the same hierarchical level. In such cases, the priniciple of “one loves betrayal, but not the traitor” often applies, i.e. the employee who reveals irregularities runs the risk of being regarded as a “traitor” by his colleagues. Also, the revealing employee might face considerable consequences, such as a warning, dismissal or even criminal proceedings if the accusations prove to be unjustified.
This conflict between the duty to maintain loyalty on the one hand and the potential consequences of a tip that subsequently proves to be incorrect on the other is intensified if the potential offender is a superior of the employee. In case the suspicion is true, following the internal chain of command information will prove to be futile in most cases. According to a decision of the European Court of Human Rights (ECHR) in 2011, in such cases the employee may also directly inform the law enforcement authorities or the media if s/he believes that internal reports are of no use and the matter is presumed to be of public interest.
After the national and European legislators had recognised that the protection of potential whistleblowers afforded by case law was rather patchy, they launched two separate legislative proposals, which were also intended to protect whistleblowers. However, the German legislative process is currently stalled, so that it is not possible to predict when the law will come into force. In view of the new elections to the EU Parliament in May 2019, it is also questionable whether the proposal for the EU Directive can still be adopted in due course.
In anticipation of the potential regulations and based on the previous case law, an employee who becomes aware of irregularities in the company is recommended to observe the following:
- First of all, s/he should try to grasp the facts as far as possible and secure any evidence – even in order not to get into evidence problems after disclosure.
- After that, s/he should consider whether to confront the colleague with his assumptions for fairness reasons.
- If the result of the consideration is that such a direct confrontation does not appear promising, for example because the colleague already reacted rather unconstructively in earlier incidents, or if a confrontation with the established facts does not lead to the necessary insight and change of course, the superior should be informed.
- If this step also turns out to be unsuccessful, the company’s C-suite should be informed accordingly.
- If this step also fails, the prosecution authorities should be informed (if necessary after consulting a lawyer). Only if the involvement of the prosecution authorities fails should the press be informed.
If, after weighing all these options, one comes to the conclusion that all the above-mentioned steps are not promising, the last option is to leave the company as quickly as possible – if there is no obligation to file a criminal complaint. This last recommendation alone illustrates the extent to which an employee who becomes aware of irregularities is potentially caught between a rock and a hard place.