Whistleblowing Study - Options

The preceding parts of this study have examined some background issues relating to whistleblowing, the protections already provided to employees under Canadian law, and a number of models for legislative reform adopted in Canada and the United States. We have also canvassed the views of academic commentators on the effectiveness of, and need for, whistleblower protection legislation. While all this information is extremely useful, the question remains: should specific protection for whistleblowers be provided in the area of competition law?

In my view, the best way to answer this question is to describe the main options for reform and examine their advantages and disadvantages. In this case, there are two main options for reform:

• a legislative amendment to the Competition Act, similar to the Private Members Bill C-266; or
• a non-legislative package of initiatives designed to educate employees about their rights, and to encourage employers to honour and protect their whistleblowing employees.

A third option would be to adopt broad legislation, such as the American state statutes described above, to protect all employees who report violations of federal laws. But that approach would be both too broad -- extending beyond the Competition Act -- and too narrow, since it would apply only to employees who fall within federal jurisdiction.

This concluding section of the study describes these two options, assesses their advantages and disadvantages, and suggests which option may be most appropriate in light of the issues and evidence discussed in this study.

A. The Legislative Model -- Express Statutory Protection for Whistleblowers

The first option would be to amend the Competition Act to specifically protect employees or others who disclose information about a corporation's suspected violation of the Act. This is the approach that has been proposed in the Private Members' Bill C-266, An Act to amend the Competition Act (protection of whistle-blowers), attached as Appendix D to this study. This Bill would add to the Act:

• a new section, s. 64.1, to protect the confidentiality of anonymous informers;
• another new section, s. 64.2, to prohibit employers from retaliating against whistleblowing employees; and
• new paragraphs to s. 36 to enable the whistleblowing employee to sue in court for compensatory damages, punitive damages or a reversal of any action taken by the employer.

(Although Bill C-266 refers repeatedly to persons notifying or testifying to the "Commission", we assume that it is referring to the Office of the Director.)

The provisions of Bill C-266 are just one model that could be used to add statute-specific whistleblower protections to the Competition Act. Other models can be found in the Canadian statutory provisions contained in Appendix A or the American provisions in Appendix B. The most sophisticated and thorough whistleblower provisions we have reviewed are those contained in Part IV of Ontario's Public Service and Labour Relations Statute Law, reproduced at Appendix C, which has not yet been proclaimed. It is useful, however, to examine the provisions of Bill C-266 as a basis for discussing the kinds of legislative protections that might be included.

The Provisions of Bill C-266
Section 64.1 -- Confidentiality

The confidentiality provisions in the proposed new s. 64.1 are as follows. Subsection 64.1(1) authorizes any person who has reasonable grounds to believe a person has committed, or intends to commit, an offence under the Act to notify the Director of the grounds and the particulars, and to request anonymity with respect to the notification. Subsection 64.1(2) requires the Director to keep confidential the identity of anyone who notifies the Director under subsection (1) and who requests anonymity. Subsection 64.1(3) provides that the confidentiality requirement in subsection (2) does not apply if it is determined that the person notifying the Director knowingly provided false information.

The provision of confidentiality to anonymous informers, as guaranteed under the first two subsections, makes sense from a policy perspective, though it is questionable whether it adds anything to the statutory and/or common law protections already available. Section 29 of the Act already prohibits any person enforcing or administering the Competition Act from communicating the names of informants to any person, other than to a Canadian law enforcement agency. Section 10(3) requires that the Director's inquiries be conducted in private. In addition, the identity of any informant is protected by the common law police informer privilege, which precludes not only disclosure of the informant's identity, but disclosure of any information -- even the smallest details -- that might implicitly reveal his or her identity.

Subsection (3), which allows the Director to disclose the informant's identity if the employee has knowingly provided false information, is a troubling provision. The police informer privilege has always had one exception only -- the informant's identity can be disclosed where it is necessary to demonstrate the innocence of the accused (see R. v. Leipert, (1997] 1 S.C.R. 281, 295). The police informer privilege is not waived merely because the informant is found to have knowingly provided false information. In my view, the same principles should apply to any confidentiality protections under the Competition Act. To discourage mischievous employees, it may be appropriate to deny protection from reprisals to persons who knowingly provide false tips to the Director. But it is draconian to apply the same principles to the confidentiality provisions, and deny informants the full protection they would enjoy under the common law.

Section 64.2 -- Criminal Prohibition of Reprisals

Section 64.2 prohibits employers from carrying out reprisals against whistleblowing employees, and creates a criminal offence for those who do so. It provides that no person "shall dismiss, suspend, demote, discipline, remove a benefit or privilege of employment from, terminate the contract of, harass, coerce or otherwise disadvantage an employee on the grounds that" an employee has notified or testified to the Director, refused to do any thing contrary to the Act, or done any thing required under the Act, or that the employer believes the employee will do any of the above. Contraventions are subject to onerous maximum penalties -- fines of up to $100,000 and/or two years imprisonment.

This prohibition is similar to those contained in the Canadian Human Rights Act, the Canada Labour Code, and Ontario's Environmental Protection Act, Environmental Bill of Rights and Occupational Health and Safety Act. Like these statutes, and the American legislation discussed above, it is intended to protect employees who are acting in accordance with legislation and reporting wrongdoing to the appropriate authorities. It does not apply to employees who decide to disclose information to the media. Unlike most of the other Canadian provisions, the s. 64.2 prohibition expressly creates a criminal offence, and allows for maximum fines and prison sentences that are far more severe than any of the U.S. jurisdictions. The prospect of these penalties would almost certainly cause an employer to pause before taking action that might run afoul of this prohibition.

One problematic aspect of the proposed s. 64.2 is that it appears to prohibit reprisals against any employee who notifies the Director that the employer has, or intends to, commit an offence, even if that employee has acted in bad faith by knowingly providing false information. This omission seems particularly surprising in view of s. 64.1(3), which, as discussed above, specifically exempts employees who knowingly provide false information from the confidentiality provisions. Although, for the reasons discussed above, s. 64.1(3) should not be used to reduce the employee's common law protections as a police informer, it seems perfectly appropriate to apply this kind of exception to the provisions of 64.2. Surely, employers should not be prohibited from taking disciplinary measures against an employee who has knowingly made a false accusation to the Director about his or her employer's conduct.

This defect could be remedied by moving s. 64.1(3), or some version of it, to s. 64.2. Alternatively, the prohibition in s. 64.2 could be modified by requiring that the employee who notifies or testifies to the Director act in good faith, and on the basis of reasonable belief. This type of provision can be found in many of the American statutes, and is contained in the whistleblowing protection provisions in Ontario's Environmental Bill of Rights (the good faith requirement in s. 105(3)) and in the unproclaimed provisions of the Public Service and Labour Relations Statute law (good faith and reasonable grounds requirements in 28.16(1)(b), (4) and (7)).

Section 36 amendments -- civil remedies for employees

Section 36 of the Competition Act, as currently worded, provides a civil remedy for persons who have suffered damage as a result of another person's anti-competitive conduct. Bill C-266 would amend s. 36 to allow employees to sue under this section if reprisals are taken against them, and would authorize the court to order the employer to remedy or reverse any action taken by the employer, or to pay punitive damages to the employee.

This proposed civil remedies provision is an interesting one. Unlike Ontario's Environmental Protection Act, Occupational Health and Safety Act and Public Service and Labour Relations Statute Law, Bill C-266 authorizes the courts to provide the remedy, rather than an arbitral board or labour adjudicator. As a result of this, employees and employers may lose the advantage of an arbitral board's expertise on unjust dismissal matters. On the other hand, however, courts are more likely to award employees large damages awards, especially if the statute provides for punitive damages.

Advantages and Disadvantages

Advantages

1. The legislative model provides express, clear statutory protection for employees who blow the whistle. Currently, employees who are fired or disciplined for disclosing corporate wrongdoing can grieve to an arbitral board (if they are unionised), complain to an adjudicator (if they are covered by legislation such as the Canada Labour Code) or sue for wrongful dismissal. But many employees may be unaware of these remedies, and, therefore, reluctant to bring forward complaints. By amending the Competition Act to protect whistleblowing employees, Parliament will send a clear message to employees that they will be protected if they blow the whistle.

2. It can allow for reinstatement and punitive damages, not just compensatory damages. Although unionised employees or those governed by statutes like the Canada Labour Code can be reinstated by an arbitral tribunal or adjudicator, the courts are very reluctant to order reinstatement in a case of wrongful dismissal. An amendment, such as Bill C-266, would ensure that employees who are fired for merely complying with the Competition Act could be reinstated. In addition, it would allow courts to award employees punitive damages, and is therefore likely to be taken seriously by employers.

3. It could create a criminal offence for employers who take reprisals against an employee who blows the whistle. Currently, employees can seek reinstatement or compensation from their employer. But employers are not guilty of an offence if they fire an employee for disclosing information to the Director. The creation of a criminal offence with the possibility of severe penalties would provide a very serious deterrent to corporations which consider taking disciplinary action against a whistleblowing employee.

4. It encourages employees to report wrongdoing to the appropriate authorities, rather than to the media. The whistleblowing cases that have arisen before arbitral tribunals in Canada have generally involved employees who disclose information to the public or the media, rather than those who notify law enforcement authorities. In general, it is more appropriate for employees to complain to enforcement authorities, so that steps can be taken quickly to deal with the matter and so that corporate reputations are not unfairly tarnished through possible exaggeration by the media. Because most whistleblowing legislation protects only employees who report disclosures to the authorities, it helps to encourage employees to make responsible reports, rather than sensationalist media disclosures.

5. If drafted to protect internal whistleblowing, legislation would encourage employees to raise complaints within firms before disclosing them to the Director or the media. As discussed above, internal whistleblowing programs can often be more effective than external ones. Statutory amendments could be drafted to protect employees who raise complaints within the company. In addition, the legislation could require that the reporting first be internal, before the employee makes any report to the Director. The danger with the second approach is that many employees may be uncomfortable raising such issues within the company, unless it has a secure, confidential internal disclosure program. The first approach -- protecting the employees when they complain either internally or externally -- would offer employees a more effective choice as to which route to take.

6. Some Canadian commentators have emphasized the need for adopting whistleblowing legislation. Although they have called for broad whistleblowing legislation, their comments can be applied equally to statute-specific protections. For example, Myers and Matthews Lemieux, supra, argue at pp. 219-220:

Given the importance of this issue to the protection of the public interests, and the fact that it is unlikely to become an issue that is easily dealt with at the bargaining table, Canadian legislators should show leadership by enacting appropriate legislation. Since the common law does not provide for reinstatement of an employee in appropriate cases, the legislature must establish a tribunal not only to administer the provisions of the legislation, but also with wide remedial powers to provide damages for loss of income as well as reinstatement of employment and "make whole" remedies. ... A model Canadian statute must cover all employees in both the private and public sectors as well as any persons employed by the Crown and its agencies. While business is likely to argue that this is further unwarranted intrusion into the free enterprise system, it must be remembered that the whistleblower is usually acting in the public interest. As a result, such an employee should not have to totally risk his or her economic security without any protection from the state. Generally speaking, the broader the scope of coverage, the greater the protection for the individual employee.

This legislation should also address the type of acts of an employer which will be forbidden. It is the writers' view that any retaliatory conduct by an employer that is linked to the whistleblower's actions should be proscribed. Consequently, all disciplinary actions including discharge should be disallowed. In addition, the legislation should be broad enough to prohibit certain types of action which an employer may characterize as being non-disciplinary in order to avoid the legislation.

As well, the legislation must address the type of employee conduct that will be protected. Consistent with the purpose of the legislation, legislators must ensure that the legislation is not drafted so narrowly that only disclosure of extreme violations of federal and provincial laws will result in protection for the whistleblower. Therefore, it is suggested that an appropriate whistleblower's statute would allow employees to report not only illegal actions, but also actions which would be characterized as being unethical, immoral, etc. For example, it might not be illegal for a company to emit chemicals into the air or a water supply in certain concentrations. However, it would be unethical for a company to dump such chemicals in two different batches in order to lower the concentration to a level within the acceptable limit so as to defeat the purpose of health and safety or environmental protection legislation. Surely, there is a public interest in knowing about these circumstances which warrants protection of the whistleblower.

There are several difficult issues which would have to be addressed in relation to this portion of the legislation. First, when and in what circumstances must an employee exhaust all internal avenues before blowing the whistle, i.e., bringing the matter to the public's attention? Second, to whom should the information be disclosed? Although the statute must be broad enough to protect a wide range of employee action from employer retaliation, it is also reasonable to include in such a statute a denial of statutory protection if an employee knowingly makes a false accusation or otherwise acts in bad faith.

Kenneth P. Swan, in his book "Whistleblowing Employee Loyalty and the Right to Criticize: An Arbitrator's Viewpoint, also makes the case for legislative action. He states at p. 191:

Properly designed, statutory provisions relating to whistleblowers can assist in defining the kinds of disclosure that ought to be protected in the public interest, and can provide procedures for channelling the concerns of prospective whistleblowers so as to avoid the intolerable cost of the release of sensitive information in an honest but mistaken cause. Some aspects of this approach will obviously be specific to the public sector, while others may have application across a broader spectrum of employment. Once the interests to be protected are identified, it becomes easier to design a structure which protects the interests of the concerned employee, the affected employer, and the public at large.

and at p. 198 concludes, in part, as follows:

In my submission, the current employment law on the subject of whistleblowing is so far too amorphous to provide adequate protection either for well-meaning whistleblowers, or for sensitive information in the hands of governments. The paucity of reported cases, and the requirement that all determinations be made after the fact of disclosure, heighten the hazards of failing to come to grips with the issues of public policy involved.

A carefully drafted statutory protection for whistleblowers could ensure that information about alleged wrongdoing reaches the appropriate authorities, including eventually the legislature and the public, while minimizing the damage possible from precipitous release of sensitive information, and providing some source of advice and assistance for employees who are uncertain or may be mistaken about the wrongdoing they think they have encountered. Given the potentially beneficial outcome of the exercise of drafting statutory whistleblower protection, attention to this matter is long overdue. Our federal and provincial governments should act quickly to address these vital issues for the public service, the broader public sector, and for private employment.

Disadvantages

1. Employees who notify the Director about their employer's alleged anti-competitive conduct are already protected under statute and common law. As discussed above, unionised employees can grieve to arbitral boards, employees governed by the Canada Labour Code, or similar statutes, can seek remedies before adjudicators, and other employees can sue for wrongful dismissal. In addition, employees can also make use of the 1-800 complaints hotline, and are protected under various confidentiality provisions. Although new statutory provisions may allow for higher damages to be obtained, or, as Swan suggests, may provide more certainty for whistleblowers, they arguably add little to the protections already available.

2. Although legislation may specifically authorize courts to order reinstatement, that is unlikely to be an appropriate remedy for whistleblowing employees. As Kenneth Swan, supra, has said at p. 193:

Often, there is clear evidence that the relationship of trust implicit in employment has been completely poisoned. No matter whose fault that poisoning may be, the continuance of the relationship may simply be impossible ... it is instructive that a significant number of the whistleblowers who have been at least partly vindicated by subsequent adjudicative proceedings no longer work for the employer whose conduct they criticized.

3. As discussed above, the American experience suggests that specific legislative protections for whistleblowers have not been particularly effective, particularly if employees can already rely on common law remedies.

4. The public interest in whistleblowing in the competition law context may not be as strong as in an area such as the environment or occupational health and safety, where the life and health of the public is at stake. The enforcement of competition law brings important benefits to consumers and to the economy in general. But violations of competition law do not impinge on the health and safety of Canadians in the same way as, for example, a toxic chemical spill or a dangerous workplace. Because of these differences, there may be less need to adopt special statutory whistleblower protections in the competition area than in other areas.

5. As is always the case with policy implementation, it will take longer and be more difficult to enact a legislative amendment than to adopt a whistleblower protection policy through non-legislative means.

B. The Non-Legislative Model

A second possibility is to adopt a non-legislative package of policies and initiatives which would educate employees about the protections they already have, and encourage employers to adopt internal compliance programs. The elements of this kind of model, many of which are, to some extent, already in place might include:

• an immunity program for corporations that report evidence of wrongdoing before the Director has begun an investigation, or early in an investigation; if corporations know they have to be "first in the door" to be granted amnesty, they will be more likely to establish disclosure programs to encourage employees to report wrongdoing;
• 
  reduction in sentencing for corporations that have internal compliance programs, which would have to include an internal disclosure program for employees;
  
• where a corporation has fired or disciplined an employee who has disclosed evidence of a violation, that fact would be considered as an aggravating factor by the Director or the Attorney General of Canada in deciding how to proceed against a corporation, and in making submissions on sentencing; and
  
• an "education" initiative to inform employees and other members of the public about the complaints hotline, the confidentiality provisions (including the police informer privilege), and the statutory and common law protections for employees who have been disciplined for blowing the whistle.

Advantages and Disadvantages

Advantages

1. The non-legislative approach builds upon what is already available. It does not require new legislation, so would avoid the procedural difficulties involved in enacting a legislative amendment. In fact, it does not even require new policies. What is required instead is an education program to inform employees and employers about the need to disclose information, the ways in which confidential disclosure can be achieved, the protections available to employees against reprisals, and the incentives for employers to establish internal disclosure programs.

2. This approach avoids unnecessary duplication or inconsistent remedies. It relies on existing provisions protecting the confidentiality and employment rights of whistleblowing employees.

3. It relies primarily on internal disclosure, which American studies suggest is the most effective way to encourage employees to disclose information.

4. This approach, particularly the combination of compliance and immunity programs, has been used successfully by the Antitrust Division of the U.S. Department of Justice.

Disadvantages

1. The non-legislative approach offers little new incentive for employees who would rather not disclose wrongdoing to their employers. Even if they are assured that they can grieve to get their job back, or sue for wrongful dismissal, many employees -- perhaps most -- will still be reluctant to risk disclosing evidence of wrongdoing without specific new statutory protections or a criminal prohibition.

2. This approach will only encourage companies to adopt internal disclosure programs; it will not require them to do so. Even with the incentives of amnesty or reduced sentences, it is unlikely that the majority of companies, especially small and medium-sized businesses, will commit the time and expense involved to put an effective compliance program into place.

3. Because this approach relies on internal disclosure, it may allow serious Competition Act offences to remain hidden forever. To use an example discussed earlier in the study, an employee may disclose evidence to his or her superiors that certain employees or departments within the organization have engaged in bid-rigging. The corporation may take steps to remedy the problem and the matter will end there. But if a serious violation of the Act has occurred and innocent third parties have been injured as a result of these activities, there is a strong argument that investigation and prosecution should occur.

4. The non-legislative approach may not be viewed as strong or effective enough to respond to the concerns of consumers and Members of Parliament about retail gasoline pricing.

CONCLUSION

Although there is much to be said in favour of legislation in the manner contemplated by Bill C-266, and as enacted in various statutes in the United States and Canada, I am not satisfied that such legislation would really provide a significant benefit to the Competition Bureau or would encourage whistleblowers to co-operate with the Bureau more than they do so now.

I have set forth the main advantages of a legislative approach, but I note that, to date, such legislation appears to have had little impact in any of the jurisdictions which have resorted to it.

I favour a continuation of the non-legislative model which I have set forth earlier in this Study. As I have noted this builds upon what is already available.

What is required is, I think, an education initiative to inform employees and employers alike about the public duty, in appropriate cases, to disclose information, to inform employees and other members of the public about the existing hot line, the confidentiality provisions now in place, and the statutory and common law protections for employees who have been disciplined for blowing the whistle.

The education initiative should also stress to employers the importance of the immunity and the internal complaints programs, both of which have been used with particular success by the Antitrust Division of the U.S. Department of Justice.

This approach is, I think, more likely to have a favourable response.

All of which is respectfully submitted.

Yours very truly,

Charles L. Dubin