New law provides whistle-blowers 'limited' protection: expert
Claudia TheophilusPublished: Jan 13, 2005 11:36 AM | Updated: Jan 29, 2008 6:21 PM
Legal provisions which protect staff who inform on illegitimate practices within a company currently only cover top management officials and are not extended to ordinary staff down the line.
And it only covers top management officials in public-listed corporations, not ordinary staff.
Legal provisions which protect staff who inform on illegitimate practices within a company currently only cover top management officials and are not extended to ordinary staff down the line.
Lim Heng Seng, a partner with Kuala Lumpur law firm Lee Hishammuddin, said while recent amendments to the Securities Industries (Amendment) Act 2003 provided 'limited but essential' protection for whistle-blowers, they were only applicable to upper management staff.
Citing Sections 99E and F of the 2003 Act, he revealed that the new provisions only applied to key officers in public-listed corporations.
"This is the first legislative initiative which deals with whistle-blowing activities in Malaysia," he said in his paper 'Whistleblowers or Ethical Informers: confidentiality and accountability in the workplace'.
The paper was presented at an employment law and contracts conference in Kuala Lumpur attended mainly by legal practitioners. The two-day conference ended today.
Lim said whistle-blowing includes disclosure on financial mismanagement, unethical practices, violations of laws, rules, regulations and codes of practice or ethical standards, information on corrupt practices, and abuses of power. The exposing of dangerous situations to the public, co-workers and environment are also included.
Section 99F grants legal immunity to chief executives, financial controllers, internal auditors and company secretaries for reporting such activities to the relevant authorities such as the Securities Commission and Bursa Malaysia (Malaysian Stock Exchange).
Non-reportable matters
According to Lim's paper, protected disclosures include breach or non-performance of any requirement or provision of the securities laws, breach of any rules of a stock exchange or any matter that could materially affect the financial position of a listed company.
A whistle-blower is afforded protection if he or she reports to the Securities Commission or Bursa Malaysia in the course of his or her duties on violations such as false trading, market rigging, misleading statements and insider trading.
"These are all unlawful acts, explained in the legislation in great detail," he said in the paper.
The employer, Lim said, is prohibited from removing, discriminating, demoting, suspending or interfering with the tenure or livelihood of the protected officials who lodge a report.
However, Lim noted that there were areas not covered under the 2003 Act, namely whistle-blowing by ordinary staff of non-reportable matters in non-listed companies and by those employed under common law or industrial law.
In facing the dilemma of these workplaces, he said staff may turn a blind eye to malpractices or else try to raise the matter internally, failing which they might attempt to expose the matter anonymously.
He said alternatively, they may try to openly disclose the wrongdoings and risk the full force of their employer's disapproval.
Employees dismissed
Under common law, he said, an employee has a duty of good faith and fidelity or loyalty towards his or her employer throughout the duration of the employment contract.
Lim said only carefully-drafted employment contracts expressly detail the residual post-employment duty of confidentiality pertaining to trade secrets.
He said claims are already emerging arising out of ethical informing or whistle-blowing where employees have been dismissed for unauthorised disclosure of confidential information.
"These employees can seek a remedy under the Industrial Relations Act 1967 (IRA) claiming that his dismissal was without just cause or excuse," he said in the paper noting that, '... an employee who raises matters of wrongdoings may be victimised, harassed or subjected to other forms of unfair labour practices.
"This might give rise to a claim of constructive dismissal under the IRA."
However, said Lim, case law has advanced the cause of social justice in that a company's right to terminate an employee under its employment contract is now subjected to certain principles.
Protected disclosures
In the UK, for example, he said the Public Interest Disclosure Act 1998 (Pida) protected employees who made disclosures to an Employment Tribunal regarding certain types of information known as 'qualifying disclosures'.
These include internal disclosures to employers or regulatory authorities, the media, non-governmental organisations, a member of parliament or to a government minister.
He said the key factor in whistle-blowing based on the Pida, was the disclosure of wrongdoings in good faith.
Lim also said that express or implied terms on confidentiality which preclude a protected disclosure were void under the UK law.
"An employee dismissed for making a protected disclosure is regarded as unfairly dismissed. The employee will not be subjected to any detriment for making such a disclosure," stated his paper.
Lim Heng Seng, a partner with Kuala Lumpur law firm Lee Hishammuddin, said while recent amendments to the Securities Industries (Amendment) Act 2003 provided 'limited but essential' protection for whistle-blowers, they were only applicable to upper management staff.
Citing Sections 99E and F of the 2003 Act, he revealed that the new provisions only applied to key officers in public-listed corporations.
"This is the first legislative initiative which deals with whistle-blowing activities in Malaysia," he said in his paper 'Whistleblowers or Ethical Informers: confidentiality and accountability in the workplace'.
The paper was presented at an employment law and contracts conference in Kuala Lumpur attended mainly by legal practitioners. The two-day conference ended today.
Lim said whistle-blowing includes disclosure on financial mismanagement, unethical practices, violations of laws, rules, regulations and codes of practice or ethical standards, information on corrupt practices, and abuses of power. The exposing of dangerous situations to the public, co-workers and environment are also included.
Section 99F grants legal immunity to chief executives, financial controllers, internal auditors and company secretaries for reporting such activities to the relevant authorities such as the Securities Commission and Bursa Malaysia (Malaysian Stock Exchange).
Non-reportable matters
According to Lim's paper, protected disclosures include breach or non-performance of any requirement or provision of the securities laws, breach of any rules of a stock exchange or any matter that could materially affect the financial position of a listed company.
A whistle-blower is afforded protection if he or she reports to the Securities Commission or Bursa Malaysia in the course of his or her duties on violations such as false trading, market rigging, misleading statements and insider trading.
"These are all unlawful acts, explained in the legislation in great detail," he said in the paper.
The employer, Lim said, is prohibited from removing, discriminating, demoting, suspending or interfering with the tenure or livelihood of the protected officials who lodge a report.
However, Lim noted that there were areas not covered under the 2003 Act, namely whistle-blowing by ordinary staff of non-reportable matters in non-listed companies and by those employed under common law or industrial law.
In facing the dilemma of these workplaces, he said staff may turn a blind eye to malpractices or else try to raise the matter internally, failing which they might attempt to expose the matter anonymously.
He said alternatively, they may try to openly disclose the wrongdoings and risk the full force of their employer's disapproval.
Employees dismissed
Under common law, he said, an employee has a duty of good faith and fidelity or loyalty towards his or her employer throughout the duration of the employment contract.
Lim said only carefully-drafted employment contracts expressly detail the residual post-employment duty of confidentiality pertaining to trade secrets.
He said claims are already emerging arising out of ethical informing or whistle-blowing where employees have been dismissed for unauthorised disclosure of confidential information.
"These employees can seek a remedy under the Industrial Relations Act 1967 (IRA) claiming that his dismissal was without just cause or excuse," he said in the paper noting that, '... an employee who raises matters of wrongdoings may be victimised, harassed or subjected to other forms of unfair labour practices.
"This might give rise to a claim of constructive dismissal under the IRA."
However, said Lim, case law has advanced the cause of social justice in that a company's right to terminate an employee under its employment contract is now subjected to certain principles.
Protected disclosures
In the UK, for example, he said the Public Interest Disclosure Act 1998 (Pida) protected employees who made disclosures to an Employment Tribunal regarding certain types of information known as 'qualifying disclosures'.
These include internal disclosures to employers or regulatory authorities, the media, non-governmental organisations, a member of parliament or to a government minister.
He said the key factor in whistle-blowing based on the Pida, was the disclosure of wrongdoings in good faith.
Lim also said that express or implied terms on confidentiality which preclude a protected disclosure were void under the UK law.
"An employee dismissed for making a protected disclosure is regarded as unfairly dismissed. The employee will not be subjected to any detriment for making such a disclosure," stated his paper.
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