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Wednesday
Mar142018

Vera Cherepanova: Italy expands whistleblower protections to private sector

The Italian regulatory framework on whistleblower protection has been significantly amended with the adoption of a new law that aims to strengthen protection for whistleblowers in the public sector, and add new protections for those in the private sector.

The new law is No 179/2017 of November 30, 2017 (the new Law). It came into effect at the end of 2017.

Italy's law on corruption prevention, incorporating certain provisions on whistleblowing in the public sector, was enacted in 2012. Anti-Corruption Law No 190 (commonly referred to as  the Severino Law) applied exclusively to public sector employees reporting misconduct. The set of rules it introduced didn’t cover employees in the private sector, however, which left a substantial gap in whistleblower protection.

Public sector. The new Law provides that a public employee reporting illegal conduct in the interest of public administration’s integrity shall not be retaliated against due to the report, through any sanctions, dismissal, demotion, transfers to other offices, or other measures having a negative effect on the working conditions.

When faced with a whistleblower's claim for retaliation, it is now the company's burden to prove that the actions taken against the whistleblower were not connected with the act of whistleblowing. If it is established that the employee was dismissed for reasons related to the whistleblower complaint, he or she is entitled to reinstatement, compensation for damage caused, and payment of social security contributions due for the period between the dismissal and reinstatement.

The provisions against retaliation or discriminatory acts have been extended to employees of "public economic entities" and to "private-law employees subject to public scrutiny," as well as to "employees and contractors of companies supplying goods or services to the public administration."

Depending on the nature of the complaint, employees may report a violation either to the internal officer responsible for bribery prevention and transparency, or to the National Anti-Corruption Authority (ANAC), or directly to an accounting authority or the judiciary.

Notably, the new Law reinforces the provisions aimed at protecting the whistleblower’s anonymity. However, in case of a criminal trial, the identity of the whistleblower may be revealed in the manner and timing established by Art. 329 of the Criminal Code.

In terms of sanctions, the ANAC can apply a penalty ranging between €5,000 ($6,200) and €30,000 ($37,000), assessed against those responsible for retaliatory measures imposed on the whistleblower. The penalty for an organization that doesnt' have an internal system for reporting violations, or if the internal officer responsible for bribery prevention and transparency has failed to follow-up on a whistleblower's reports, the penalty will range between €10,000 ($12,000) and €50,000 ($61,500).

Private sector.  Previously, whistleblower protections in the Italian private sector were limited to specific areas, mostly covering finance and banking. Those included the implementation of EU directives (Directive 2013/36/EU, Directive 2015/849/EU, Directive 2016/1034/EU) requiring financial institutions amd insurance companies to adopt specific procedures for reporting violations.

The new Law takes a more general perspective and provides for an important amendment of Legislative Decree No. 231/2001 from June 8, 2001 on the criminal liability of corporations (the Decree).

The new Law requires private companies which have already introduced compliance programs to set up a reporting system for whistleblowers, including:

  • one or more channels allowing employees to internally report illegal conduct or violations, in the interest of the protection of the entity's integrity
  • at least one alternative reporting channel which would guarantee the confidentiality of the whistleblower’s identity, and
  • appropriate measures to protect the whistleblower’s identity and to maintain the confidentiality of information in any context subsequent to reporting, to the extent that anonymity and confidentiality are legally enforceable.

Again, the new Law provides for a prohibition of direct or indirect retaliatory and discriminatory measures against private-sector whistleblowers for reasons connected directly or indirectly to the complaint. 

The new Law puts the burden of proof that those measures were not retaliation for the whislteblower's complaint against the employer.

The new Law also sets out the sanctions against those who violate retaliated against whistleblowers, and against whistleblowers those who make unsubstantiated complaints out of intent or gross negligence.

To show compliance with the provisions of the new Law, private companies will have to demonstrate their compliance program has the following components:

  • function/department responsible for the internal whistleblowing system management and maintenance
  • procedures defining whistleblowers covered by the policy, the contents of whistleblower complaints, protective measures aimed to preserve whistleblower identity, and corresponding sanctions provided for those who violate these measures, and
  • appropriate communication and training on all of the above.

The new Law is undoubtedly an important step toward a more comprehensive whistleblower regime, particularly for the private sector. But will take time to assess its actual impact on reporting statistics.

It's already clear, however, that many companies operating in Italy will have to revisit and update their compliance programs to meet the requirements of the new Law.

_____

Vera Cherepanova, FCCA, CIA, MSc (pictured above), has more than 10 years' experience as a compliance officer. She's currently a self-employed ethics and compliance consultant based in Milan, Italy. She speaks English, French, Italian, and Russian. She can be contacted here.