In June 2020, the Whistleblower Protection Act of Japan (Act No. 122 of 2004) (the “Act”) was amended for the first time in 14 years. This amendment to the Act (the “Amended Act”) came into force on June 1, 2022.
Basically, the Act was enacted to protect workers, employees and officers of companies/organizations who “whistleblow” (the “Whistleblowers”) from being treated detrimentally (such as dismissal) due to their whistleblowing, although certain requirements for protection have to be met.
The Act prior to the amendment consisted mainly of provisions that restrict the misconducts of business operators (i.e., companies/organizations; the same applies hereinafter), such as prohibiting the detrimental treatment of Whistleblowers by business operators. The Amended Act requires the active involvement of business operators, for example, it obliges them to establish the Whistleblowing System (defined in the following section 1). It also provides for administrative disposition, criminal penalties (fines) and administrative penalties (non-criminal fines) to be imposed for any violation concerning whistleblowing; which means that the Amended Act has a significant impact on corporate practices.
The Amended Act is deemed to apply to business operators in Japan only1 , and not to those outside Japan. However, in the case where you have any subsidiaries in Japan, certain provisions of the 1 Please refer to page 50 of the exhibit “Public comments on the ‘(Draft) Guideline for Business Operators to Take Appropriate and Effective Measures Amended Act, as described in the following sections 2 and 3, apply to them. In addition, as described in the following section 1, certain provisions of the Amended Act oblige your subsidiaries in Japan to establish the Whistleblowing System and designate Personnel to respond to whistleblowing reports (defined in the following section 1) depending on how many employees they hire.
The key points to be noted under the Amended Act are as follows:
1. Designation of the Personnel and establishment of the Whistleblowing System to correct violations/misconducts
Under the Amended Act, business operators are required to designate Personnel as a contact point for Whistleblowers to reach out to and to take necessary measures to establish a system that properly responds to any whistleblowing report (the “Whistleblowing System”) in order to facilitate business operators to correct their own violations/misconducts as well as to facilitate Whistleblowers to whistleblow in a secure manner. These requirements are strictly mandatory for business operators who usually hire more than 300 workers, but are not strictly mandatory for those who usually hire fewer than 300 workers although they must make their best efforts to meet these requirements.
(1) Designation of the Personnel
Under the Amended Act, business operators are required to designate personnel who will be in charge of “responding to whistleblowing reports” and “receiving information that may identify Whistleblowers” (the “Personnel”), so as to ensure confidentiality, and for Whistleblowers to use the Whistleblowing System in a secure manner. Business operators are also required to designate Personnel using a clear and specific method (Article 11 (1) of the Amended Act).
(2) Examples of the Whistleblowing System to be established
The Whistleblowing System to be established and other measures to be taken by business operators have been detailed in the guideline.2 The examples are described below:
(i) Establishment of contact point
In order to quickly and smoothly obtain information on reportable facts, business operators are required to establish a contact point(s) to which any whistleblowing report may reach, not only from limited divisions of a company/organization, but also from various divisions “cross-divisionally” (i.e., from any and all divisions or equivalent, independently of each other). Business operators may place such contact point(s) within and/or outside their premises, for example, they may place such contact point(s) within their parent companies or subcontractors.
(ii) Implementation of investigation and disposition
Business operators are required to conduct an investigation when they receive any whistleblowing report, except in the case where there is a justifiable reason not to do so. 2 For further details, please refer to the “Guideline for Business Operators to Take Appropriate and Effective Measures Pursuant to the Provisions of Article 11 (1) and (2) of the (amended) Whistleblower Protection Act” (Cabinet Office Notification No.118 of 2021) (https://www.caa.go.jp/policies/policy/consumer_syste m/whisleblower_protection_system/overview/assets/ov erview_210820_0001.pdf) If such investigation reveals any violation of laws/regulations or any other misconducts, business operators are required to promptly take corrective and preventive measures, and where necessary, take additional appropriate measures such as internal disciplinary action against those who have committed such violations/misconducts.
(iii) Measures to prevent disadvantageous treatment
Business operators are required to educate all of their workers, employees and officers that whistleblowing reports are for the sake of their own companies/organizations, and therefore any detrimental treatment against any Whistleblower is prohibited. In the event that the working environment has deteriorated due to any detrimental treatment such as actual harassment against any Whistleblower, business operators are required to take proper measures to improve such working environment, by remedying and rectifying such detrimental treatment, and by reassigning the employee or officer concerned.
(3) Ensuring effectiveness
To ensure the effectiveness of obligations imposed on business operators as described in the preceding paragraphs (1) and (2), the Amended Act provides for administrative measures (advice/guidance, recommendations, and the public disclosure of the names of business operators if they fail to comply with recommendations) which any business operator failing to perform its obligations shall become subject to (Articles 15 and 16 of the Amended Act). In addition, the person in charge of an internal investigation into whistleblowing is obliged to keep any information that may identify Whistleblowers as confidential, and imposes a criminal penalty upon breach of such confidentiality obligation (Articles 12 and 21 of the Amended Act).
2. Relaxation of requirements for protection of Whistleblowers who whistleblow to administrative organs or news media
To protect Whistleblowers, the Act has nullified the dismissal of Whistleblowers by business operators on the grounds of their whistleblowing, providing for certain whistleblowing cases/conditions where such dismissal is to be void (Article 3 of the Act). For the purpose of enhancing the protection, the Amended Act provides for additional whistleblowing cases/conditions where such dismissal is to be void, especially whistleblowing to administrative organs or news media.
Specifically, according to the Act prior to the amendment, one of the requirements for the protection of Whistleblowers who whistleblow to administrative organs was the existence of “reasonable grounds” for believing that a reportable fact exists. However, given the fact that it is not easy for ordinary workers without legal knowledge to determine and prove the existence of “reasonable grounds”, the Amended Act provides for additional conditions. It now provides that if there are reasonable grounds for believing that a reportable fact exists, and if a Whistleblower “considers” that such reportable fact surely exists and submits a document describing certain matters including his/her name, address and specific reason why he/she “considers” that such reportable fact exists, such dismissal will be void (Article 3 (2) of the Amended Act).
In addition, according to the Act prior to the amendment, the requirements for the protection of Whistleblowers who whistleblow to news media included the existence of specific conditions prescribed by the Act (such as the existence of “reasonable grounds” for believing that a reportable fact exists, the existence of reasonable grounds for believing that a Whistleblower will be treated detrimentally if he/she whistleblows to any company/organization or administrative organ). The Amended Act provides for the following additional conditions: (i) the existence of reasonable grounds for believing that the company/organization will divulge information that may identify a Whistleblower; and (ii) the existence of reasonable grounds for believing that any individual property will be significantly damaged (Article 3 (3) of the Amended Act).
3. Amendments to enhance protection of the Whistleblowers
(1) Expansion of scope of the Whistleblowers to be protected
Under the Act prior to the amendment, the scope of Whistleblowers to be protected was limited to current workers and dispatch workers of companies/organizations. Under the Amended Act however, Whistleblowers who are retirees (even though one (1) year has not yet passed since their retirement) or who assume positions of officers (including but not limited to directors, executive officers and auditors) have also become subject to protection (Article 2 (1) of the Amended Act). This is because there were cases where officers and even retirees were treated detrimentally due to their past whistleblowing, which prompted the expansion of the scope to legally protect these people as well.
(2) Expansion of scope of whistleblowing reports subject to protection
Under the Act prior to the amendment, the scope of reportable facts relating to whistleblowing subject to protection was limited only to criminal acts that were subject to criminal penalty. Under the Amended Act however, in order to widely facilitate Whistleblowers to whistleblow on any misconducts to be socially criticized, whistleblowing on misconducts that are subject to administrative (non-criminal) penalties have also become subject to protection (Article 2 (3) (i) of the Amended Act).
(3) Further enhancement of protection
Under the Act prior to the amendment, Whistleblowers were protected by prohibiting the detrimental treatment (such as dismissal) of them due to their whistleblowing. In order to further enhance the protection, the Amended Act clearly stipulates that it prohibits any claim for damages incurred by whistleblowing (Article 7 of the Amended Act). In addition, it now prohibits any detrimental treatment against officers since they have also become subject to the protection (Article 5 (3) of the Amended Act), as well as for the Whistleblowers’ right to claim damages in the event of dismissal due to their whistleblowing (Article 6 of the Amended Act).
