Conflicting interests: when employees are legally obligated to whistleblow

by HCA25 Jun 2012

Handling workplace misconduct can be an uphill battle; survey findings show just six in 10 workers would report witnessing an incident of misconduct*. Employees can be confused about whether they should report, particularly if the misconduct involves a fellow employee or a manager.

According to the Employment Law Practical Handbook, “If the employee is in a position where his/her personal interests (or those of others) may conflict with the duties of loyalty, honesty, confidentiality and mutual trust owed to the employer, then the employee must [report] the relevant facts and circumstances.”

It is important to communicate these expectations to employees, and if an employee knowingly participates in workplace behaviours which present a conflict of interest there can be serious legal repercussions. In practical terms, failing to report one’s own misconduct may result in a variety of sanctions being imposed—from a simple reprimand, all the way through to a summary dismissal. It is important that employees are aware of potential consequences. Joydeep Hor, managing principal of People + Culture Strategies, said employers must be “explicitly clear” on which consequences may result from particular behaviours.

Obligations are often less clear when it comes to the witnessing behaviours of a fellow workmate. Employees are not generally required to report the misconduct of other employees—unless it is required under the employee’s contract. However, in some employment relationships, this duty may be implied such as if the reporting employee is in a managerial position.

This was recently upheld in the case of Hodgson v Amcor Ltd; Amcor Ltd &Ors v Barnes &Ors [2012] VSC 94. Jim Hodgson was employed by Amcor as general group manager and was subsequently made redundant—however, Amcor then indicated at a later date that he had been terminated as a result of his involvement with illegal activity and was therefore not obligated to pay monies owed to Hodgson.

The court ruled (in part) that because Hodgson’s superiors had been aware of his activities and not reported it, they did not have a basis to claim that his employment was terminated for this reason. While Hodgson was found to have breached his duty to his employer, he was still awarded almost $1m in severance pay.

Even so, State and Federal law override company policy. Concealing criminal offences can have far-reaching consequences for all of those involved. At the extreme end of the spectrum, individuals who fail to report criminal employee misconduct may find themselves in breach of their state’s Crimes Act and liable for prosecution.

Horsaid it is important for employers to consider the whistleblowing infrastructure within their organisation, so employees can raise issues of misconduct without fear of repercussions.

If such an infrastructure does not exist, then employees should consider firstly whether they can encourage the perpetrator of the misconduct to confess. “If that is not realistic then employees should be very clear of their facts and understand whether they have an obligation to notify anyone; act in accordance with those obligations and if in doubt approach the relevant member of management,” Hor added.

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