German peculiarities: Works council has a say in whistleblower systems

As of December 17, 2021, the EU Whistleblower Directive must be implemented in national law. Although the Directive defines the general requirements for whistleblowing systems, implementation may differ from one Member State to another.

So far, not all member states have completed transposition. Recently, Poland submitted a draft law that went even further than the EU requirements. There is to be up to three years' imprisonment for the managing director if the company has not installed a whistleblowing system that complies with the requirements.

In Germany, legislators are still lagging. National implementation must comply with the German legal situation, which differs from other member states. For example, about the involvement of works councils.

Current legal situation

Not all companies in Germany have a works council. In companies where there is a works council, employees already have the right to lodge complaints with the works council in accordance with Section 84 of the Works Constitution Act (BetrVG).

§ Section 84 (3) BetrVG also provides for a prohibition of discrimination.

In addition, there is a general prohibition of discrimination pursuant to Section 612a of the German Civil Code (BGB), which already sets limits for the employer. The purpose of this prohibition is to protect employees' freedom of will. Thus, they should be able to exercise their rights without fearing reprisals from the employer.

That already sounds pretty like the EU Whistleblower Directive. So why have a new law and whistleblower systems at all if you can go the works council route?

What will change?

Although the German legal situation pursues a similar goal as the EU Whistleblower Directive, it differs significantly in its formulation.

On the one hand, the EU Directive stipulates complete anonymity. In most cases, reporting to the works council cannot guarantee this. In addition, current case law assesses the admissibility of whistleblowing by weighing the employer's interest in secrecy against the employee's legitimate interest in disclosing a potential grievance.

The problem here is that it is very difficult for whistleblowers to assess whether their report is legally permissible or not and whether they enjoy protection of the law due to the case-by-case case law.

On the other hand, the Federal Labour Court (BAG) interprets the prohibition of discrimination, which follows from Section 612a of the German Civil Code, broadly and vaguely.

For example, according to the BAG, a relatively large number of measures fall under the prohibition of discrimination. However, the court must then decide on the actual admissibility of these measures in each individual case. In other words, there are no clear guidelines so far.

With the new EU directive, on the other hand, standardized procedures will come into force, both in terms of reporting and processing.

Involve works council

German case law is therefore very vague about whistleblower protection. That is why the planned Whistleblower Protection Act is intended to improve legal certainty.

Nevertheless, employers will probably have to involve the works council when introducing a new whistleblower system or modifying existing ones. The legal basis for this is Section 87 (1) No. 1 BetrVG if the whistleblower system specifies reporting obligations.

In addition, the works council has a right of co-determination under Section 87 (1) No. 6 BetrVG if technical equipment is introduced or used whose purpose is to monitor the behaviour or performance of employees. Depending on the interpretation, whistleblower systems could also fall under this definition.

Regardless of the final case law, employers should therefore be prepared to work with the works council on whistleblowing. It therefore makes sense to involve works councils now when setting up such a system.