Whistleblowing laws in Switzerland, what’s the current situation and what should companies consider?
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No current law protecting whistleblowers
Currently there is no law in Switzerland protecting whistleblowers from dismissal by their employer. Between 2003 and 2020, several efforts to clarify the law around the topic of whistleblowing were rejected by either the Federal Council (Bundesrat) or National Council (Nationalrat).
The measures that whistleblowers in Switzerland may consider taking to report a suspected irregularity, and the circumstances in which they may report directly to the authorities or the media, have been established by case law in the Swiss courts on the basis of the existing legal provisions in labor law, criminal law and data protection law.
This means that the Swiss courts continue to rule on each case separately, without any clear legislation to guide their decision-making. Pressure continues, however, for Switzerland to improve its whistleblowing law. Most recently from the OECD which initially recommended in 2011 that Switzerland adopt protections for private sector whistleblowers and which in July 2022 has issued a statement that if Switzerland does not take concrete steps toward implementing whistleblower protections, the OECD will commence preparations for a High-Level Mission to Switzerland in December 2022.1
Why Swiss companies should act now and should not wait for the enactment of a Swiss whistleblower legislation
A well-functioning whistleblowing hotline may prevent substantial fraud related losses
- According to the latest Report to the Nations from the ACFE, (i) tips from employees remain by far the most common way for organisations to detect fraud, (ii) organisations with hotlines detect frauds more quickly than those without hotlines by an average of six months, and (iii) fraud losses were two times higher at organisations without hotlines. Furthermore, the recently published Whistleblowing Report 2021 found out that, although the Swiss companies that participated in the survey were less frequently affected by misconduct than companies in other countries, the proportion of financial damages of CHF 100’000 or more is highest in Switzerland from among the countries that participated in the survey.
- In reality, we often see that although an organization has sophisticated controls in place, fraud and misconduct issues are more often brought to light by whistleblowers instead of by the controls. Therefore, having a clear reporting path allowing early reporting before there is significant financial or reputational damage done might be imperative to ensure the health of the organization’s business. Companies are well advised to take the view that fraud is likely to happen sooner or later. Or as the old adage says, better safe than sorry.
A whistleblowing system may be required under the EU Whistleblower Directive
- EU member states continue to work on the implementation of the EU’s Whistleblower Directive into national laws. Of the Swiss companies surveyed that are impacted by the EU Whistleblower Directive, only a small minority (<6%) are prepared to be fully compliant with the Directive, according to the recently released Whistleblowing Report 2021. The reason for this level of unpreparedness / delay is unclear, as the EU Whistleblower Directive sets out clear minimum key requirements and although there may be small deviations in the legislation passed in each Member State, such deviations will be minor (e.g., whether or not follow-up is required for anonymous reports) and should not hinder current preparations.
- Swiss companies that may not have a requirement under the EU Whistleblower Directive but with ties abroad, in particular into the European Union, might find it beneficial to implement a whistleblowing hotline in conjunction with the implementation of such systems by their subsidiaries or headquarters. However, since group-wide hotlines may not be longer permissible under the revised EU directive (Art. 8[6]), this will pose a challenge to multinationals and may encourage some companies to do away with existing centralized whistleblowing systems leaving some Swiss companies, who rely on the centralized systems of their corporate groups, to find their own solution.
What companies need to consider now
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Who should read this article?
Corporate executives, Board members and General Counsels are responsible for responding to suspected fraud in their organisation. Since such events do not occur every day it is essential to have a playbook and checklists on hand so as to be ready to respond effectively and prevent an uncontrolled escalation of the matter into a veritable corporate crisis. For further insights on what to do when fraud occurs, we refer to our article “Responding to fraud: doing nothing is not an option”.
