Latest developments on whistleblower protection in the Nordics

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Anders Etgen Reitz
IUNO, Copenhagen, Stockholm, Oslo
aer@iuno.law

Kirsten Astrup
IUNO, Copenhagen, Stockholm, Oslo
ka@iuno.law

Sofie Aurora Braut Bache
IUNO, Copenhagen, Stockholm, Oslo
sabb@iuno.law

Franziska Brüggemann
IUNO, Copenhagen, Stockholm, Oslo
fran@iuno.law

Despite substantial improvements in the recent years, there is still considerable room for improvement in the level of protection for whistleblowers in the Nordics. More often than not, whistleblowers still end up being victimised for reporting on the wrongdoings of others. For example, where an employee faces retaliation for reporting, it will ultimately be for the courts to decide whether he or she will be sanctioned, based on an overall assessment of a series of elements (freedom of speech, good faith, public interest, etc).

With the recent adoption of Directive 2019/1937 on the protection of persons who report breaches of Union law, an important step towards the introduction of appropriate minimum safeguards for whistleblowers has been made. This will directly impact individuals reporting in Denmark and Sweden, as well as across the European Union. More specifically, these new EU-wide standards will introduce obligations for companies and public authorities to create reporting channels. They will also introduce a wide scope of material protection with respect to the number of profiles covered, obligations to the introduction of support measures, feedback obligations and more. Like other Member States, Denmark and Sweden must transpose the new rules into their national legislation by 17 December 2021, at the latest. Similarly in Norway, amendments to the Norwegian Working Environment Act were introduced on 1 January 2020. These have strengthened the right of employees to report on censurable conditions.

Better Level of Protection for Whistleblowers

The new EU Council Directive will aim to better protect, but also to encourage reporting of breaches of certain areas of EU law. Among other areas, the list includes:

• reporting on breaches of EU law on financial services;
• product and transport safety;
• public procurement;
• public health; and
• environmental protection.

Because the EU Council Directive introduces minimum safeguards, Member States may elect to increase this list in connection with transposing the new rules into national legislation.

Currently, only ten EU Member States offer comprehensive legal protection for whistleblowers, of which Sweden is listed as the only country in the Nordic region. While Norway has also made efforts to offer more comprehensive protection, the level of protection offered in Denmark still remains partial and sector-specific. 

Despite the exposure of money laundering at Danske Bank in 2018 by an employee, and related discussions to strengthen the protection of whistleblowers, the legal framework in Denmark remains sector specific. Statutory protection only exists for employees in the Financial Supervisory Authority, the Social Supervisory Authorities and for certain regulatory authorities, pursuant to legislation on offshore safety and the Marine Environment Protection Act. However, for such statutory protection, only general rules on confidentiality, freedom of speech and personal data protection apply. In practice, it is therefore considered difficult to remain anonymous as a whistleblower in Denmark. During the course of investigations or legal proceedings, wrongdoers often discover who reported the breach based on context or the nature of the allegations.

Until 2017, whistleblowers were offered the same partial level of protection as under the current legal framework in Denmark. However, following the introduction of new legislation providing specific protection against retaliation for all employees who choose to report on serious miscarriages, the level of protection became comprehensive. Among other issues, the new framework ensures that an employer who retaliates against an employee is liable for damages. While the new framework has significantly enhanced the level of protection available, it has been criticised for being weak and has, in principle, not been applied by the Swedish Courts since it became effective. The new EU Council Directive is therefore expected to fill in the current gaps illustratively, by requiring that the whistleblower’s identity remain protected and the establishment of more appropriate reporting channels.

Just as in Sweden, amendments were also introduced under Norwegian law in 2017, with a view to enhancing the protection of whistleblowers. Pursuant to the new legal framework, employees are offered comprehensive protection when reporting on censurable conditions within their company. These protections include the possibility to report anonymously and an entitlement to confidentiality when notifying the Norwegian authorities. As in Sweden, the rules prohibit employers from retaliating against their employees. Additional amendments were introduced on 1 January 2020, whereafter clarification on what qualifies as censurable conditions was provided, together with stricter obligations for companies to act when notified. When considered necessary, the new rules also require companies to establish appropriate measures to protect whistleblowers from retaliation.

Duty of loyalty in the Nordics

A major principle in employment relationships in Denmark, Norway and Sweden remains 'duty of loyalty' towards the employer, whereby employees must refrain from harming the employer’s interests and must not disclose confidential information. Consequently, if an employee becomes aware of the wrongdoings of a colleague, his or her duty would be to report such information directly to the employer. If the employee instead elects to share the information directly with the media or a third party, this would constitute a breach of the employee’s obligations and justify his or her termination or, in severe cases, even liability for damages. Furthermore, this duty of loyalty may even (in some cases) prevent employees from addressing issues directly to upper management; he or she must instead seek to resolve the information with a direct supervisor. The legal framework in the Nordics therefore currently entails a clear conflict between duty of loyalty and whistleblower protection.

Under the new EU Council Directive this issue is expressly addressed, as it acknowledges that specific legal protection is required for those who report on information obtained through work-related activities, due to the risk of breaching the duty of loyalty. The underlying reason is that contrary to information submitted by ordinary complainants or bystanders, employees are in a special position of economic vulnerability. Due to this imbalance of power, special protection is necessary. Pursuant to the new minimum safeguards, protection against retaliation aims to prevent whistleblowers from being terminated, demoted or intimidated, both through negative performance assessments or failure to prolong the temporary contract. The prohibition covers whistleblowers as well as facilitators, colleagues and relatives, thereby significantly strengthening the level of protection in Denmark and Sweden, which must offer such individuals access to comprehensive and independent information, legal aid during procedures and more, free of charge. A similar prohibition exists under Norwegian law which, however, does not offer access to legal aid or information, unlike the new EU rules. Once the new EU-wide rules have been transposed into Danish and Swedish law – and potentially also Norwegian law – employees must no longer be obstructed from reporting because of their duty of loyalty, as the EU Council Directive equally prevents any kind of civil, criminal, administrative or employment-related liability. The only requirement is that the reporting individual had reasonable grounds to believe that reporting or public disclosure was necessary to reveal the breach.

It is worth noting that only a few Danish cases have dealt specifically with reporting illegal activities.

There is one case^[1] in which the Danish Supreme Court considered an employee's right to inform third parties of company-related information. The facts are as follows: an employee, during a private meeting with his bank, informed the clerk of the financial difficulties the company he worked for was facing. Even though this information had been requested by the bank, the Court found that it constituted a violation of the employee's duty of loyalty.

While the case evidently offered little guidance on the assessment of whistleblowing protection in Denmark, it established some form of precedent that emphasised the importance of the duty of loyalty.

Another, less recent case^[2] demonstrates just how an employee might legitimately report illegal activities to third parties. Kaj Christiansen, an employee of a toy factory, became aware of certain tax violations committed by the company (tax evasion). Having confirmed the fraud, he dealt with the problem internally by addressing the issue with the employer, who ultimately decided not to react. The employee therefore proceeded to alert the authorities of these illegal activities and he was, as a result, immediately fired. In its decision, the Court declared that the dismissal was unjustified.

Accordingly, the protection of an employee's right to report illegal activities currently truly relies on whether his or her intentions were to harm the company. In the latter case, the employee was considered to have acted in good faith because he addressed the issue with his employer first, before going to the authorities. It is worth noting that he would not have been entitled to start a public debate, which could have drawn unwanted attention to the company and demonstrated harmful intent. Sweden, which shares many legal traditions with Denmark, has several cases that deal with public denunciation by employees.

In a case judged by the Swedish Labour Court,^[3] a Scandinavian Airlines (SAS) flight engineer publicly revealed, by means of a magazine article, confidential information about staff-related issues and criticised the allegedly insufficient attention given to flight safety. The article also contained information which, according to the collective agreement, was not to be disclosed to third parties. For these reasons, the flight engineer was found to have breached his duty of confidentiality. The Labour Court affirmed that, since the article was capable of causing damage to SAS, the employee had seriously breached his duty of loyalty, and therefore, SAS had the right to dismiss him immediately. Finally, it emphasised the fact that the employer had the right to report the incident to the authorities.

In another case before the Swedish Labour Court,^[4] a night clerk and receptionist, working at a hotel, contacted the license department of the Swedish Agency of Entailed Estates (Länsstyrelsen) to report serious violations allegedly committed by the hotel management (eg, the selling of spirits after hours, tax fraud, etc). Even though the judges recognised that an employee should report misconduct to the authorities, it made it equally clear that such whistleblowing could also constitute a breach of the employee's duty of loyalty. According to the Court, special weight should be given to the question of whether or not the employee had approached the management first. In this case, the night clerk and receptionist had not. As a result, the judges decided that the report caused damage and inconvenience to the employer and justified the dismissal.

What is interesting in these two cases is that the Labour Court did not necessarily condemn the employee for appealing to a third party, but rather because he did so in such a manner that explicitly demonstrated disruptive intentions. In other words, if it is proven that an employee reveals confidential information to a third party for the purpose of bringing positive change to the company, judges are generally far more inclined to accept whistleblowing. That is precisely why Swedish judges suggest that employees raise criticism to the company's management first, before presenting it to the relevant third party: for probationary reasons. In such situations, it is easier to presume that the employee’s intent was bona fide.

In Norway, a jurisdiction with shared legal traditions, the courts have taken a more favourable approach (from an employee standpoint) to the issue, compared with the Swedish Labour Court.

In a case decided by the Oslo District Court^[5] (Oslo Tingsrett), Siemens Business Services was found liable for the unjustified termination of an employee. The employee had reported an incident of improper accounting procedures approved by local management to the group management. After being terminated, he reported the issue to a newspaper. The Court applied a two-step test to determine whether the employee was protected against whistleblower retaliation. First, the Court considered whether reporting was justified, based on an evaluation of the true nature of the allegation. Second, the Court considered whether the employee had a justified reason to react. The Court found that, since the immediate management had violated internal procedures, the employee had a right to report the incident to the group management and, since he had reason to believe that the company would remove evidence, he had good reason to go to the press. The employee was awarded damages of NOK 750,000 and an additional NOK 750,000 in compensation for tort.

Contrary to the Swedish Labour Court, the Oslo District Court did not consider whether the employee should have gone to the authorities before going to the media. Instead of considering the employee's intentions, the Court emphasised whether the employee had good reason to report the incident. Comparing these decisions to Danish case law, it must be expected that the Danish courts, like the Swedish Labour Court, would consider the intention to harm the company as an important part of the test in whistleblower cases.

In another more recent case decided by Borgarting High Court (Borgarting Lagmannsrett),^[6] an employee notified the department manager of breaches of regulation relating to radiation and transportation of dangerous goods and lack of safety measures. The department manager did not agree and started to harass, bully and threaten the employee with dismissal. The employee notified the Chief Executive Officer of the breach of regulations and the department manager’s behaviour. An internal investigation was performed and the employee was further informed that he would not be considered for a position he had previously been promised. Finally, the breaches were reported to national authorities.

The Court applied a two-step test to determine whether the employee had reported the incidents and done so in the proper manner. First, the Court assessed whether there were censurable conditions, based on the nature of the report. Second, the Court assessed whether the employee did report the incidents and whether this had been done in a proper manner. The Court found that there had been breaches of restrictions and safety measures, which the employee had a right and a duty to report. This was confirmed both by internal and governmental inspections. An employee is always entitled to notify internally and to the authorities, but there are some restrictions when reporting to the media. In this case, the Court found that the employee had acted in the correct manner.

Conclusion

Recent legislative initiatives will cover both the public and private sectors and are expected to increase the level of protection for whistleblowers significantly within the Nordics, particularly in Denmark, where the level of protection was not considered as comprehensive as that provided under Swedish and Norwegian law. However, although Denmark and Sweden overall support the aims of the EU Council Directive, it has also emphasised its conflict with the structure and significance of the labour market, where working conditions are traditionally defined by collective agreements. For Norway, it remains unclear whether the EU Council Directive will also be transposed into Norwegian law and the question is currently being processed by the Ministry of Labour and Social Affairs.

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