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The Neglected State of Whistleblower Laws in Canada

Truly robust whistleblower legislation in Canada is essential to preserving the integrity of our capital markets. As is too often the case, the United States has again out shone Canada in implementing legislation which protects employees of private and public corporations.

Since the adoption of the first whistleblower protection laws in the Civil Service Reform Act of 1978, Congress has expanded such protections for federal and certain private-sector employees through numerous federal statutes including the False Claims Act, Whistleblower Protection Act, Sarbanes-Oxley Act, FDA Food Safety Modernization Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Most U.S. states have now have parallel legislation designed to protect public employees and several states have extended such protection to private employees. In turn, U.S. courts have further developed a public policy exception to extend protection to whistleblowers from the private sector. The SEC in the U.S. has had whistleblower programs in place since 2010 and paid out in excess of US $50 million. Further, the SEC offers leniency to whistleblowers who are involved in the improper activities they uncovered.

On the other hand, Canada's whistleblower protection legislation lags significantly behind the U.S. In fact, Canada's only freestanding federal whistleblower legislation, the Public Servants Disclosure Protection Act (PSDPA) was adopted in 2007 and provides protection to public service employees. Only six provinces have legislation which provides protection to civil servant whistleblowers.

Section 425.1 of the Criminal Code provides further limited protection to employees in that employers are prohibited from retaliating or threatening to take action against employees who provide information to law enforcement officials. This provision only protects employees who report to law enforcement officials. In the absence of legislation aimed at the private sector, whistleblowers are left wide open for retaliation and termination of their employment.

Canadian courts have done little to protect whistleblowers. In Fraser v. P.S.S.R.B. 1985, the Supreme Court observed that "the public interest in both the actual and apparent impartiality of the public service dictates a general requirement of loyalty on the part of the public servant to the Government of Canada, as opposed to the political party in power." In other words, through this decision the SCC endorsed a view that the interest in the actual and apparent impartiality of the public service justified an increased duty of loyalty on the part of public servants. Further, the Federal Court of Appeal, in Anderson v IMTT-Quebec Inc. 2013, emphasized that in order for employees to uphold their duty of loyalty and fidelity to the employer, they must exhaust all internal whistleblowing mechanisms before going public. Practically speaking, most employees would be unwilling to report their employer's misconduct to their immediate superior, thus, the actual quality of this protection as interpreted by the courts is questionable.

In terms of compensation for whistleblowers, the Canada Revenue Agency is the only Canadian organization that has provisions to reward whistleblowers although thus far, no payment has been made under this program.

Last month, the OSC published a proposed whistleblower program, which contemplates offering up to 15% (subject to a $5 million cap) of the total monetary sanctions or settlement the OSC can recover as a result of whistleblower information. While this development sounds promising, the proposed program suffers from structural shortcomings. Notably, the program does not guarantee confidentiality but rather states that it will use 'all reasonable efforts' to keep the identity of a whistleblower confidential subject to two exceptions that appear rather broad. Second, the proposed program does not offer any leniency for the culpable whistleblower's role in the misconduct.

Source:

· Slaw, "The State of Whistleblowing in Canada" Yosie Saint-Cyr, accessed on November 13, 2015

· Canadian Labour and Employment Law, "State of Whistleblowing Legislation in Canada" Adrian Ishak, accessed on November 13, 2015

· "Whistleblower Protections Under Federal Law: An Overview" Jon O. Shimabukuro and L. Paige Whitaker, accessed on November 13, 2015

· "OSC raises whistleblower payout cap to $5 million as reward for helping ferret out wrongdoing" Drew Hasselback and Barbara Shecter, accessed on November 13, 2015

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