Whistleblower programs gaining ground in Canada’s corporate sector, say researchers

Law360 Canada (March 12, 2024, 11:07 AM EDT) -- They’ve been lionized — and sometimes villainized. But corporate whistleblowers in Canada are gradually gaining greater protection as more companies introduce in-house informant programs to reduce the risk of wrongdoing, say researchers in the field.  
The trend comes despite Canada’s reputation for having some of the weakest whistleblower protections in the world — especially covering the private sector, said Sandy Boucher, a corporate investigator in Toronto with Grant Thornton LLP Advisory Services and a senior fellow with the Whistleblowing Initiatives Steering Committee, part of the Toronto-based Centre for Free Expression.

In Canada’s corporate sector, he said, “We're seeing a gradual awareness that whistleblowers aren't troublemakers. They are the purveyors of very, very valuable, important information. You can save yourself an awful lot of trouble.”

Statistics on the actual number of private-sector whistleblower programs have not been compiled. But Boucher said many larger companies have already implemented them.

“In the private sector, it's my view that we're seeing more activity,” said Boucher. “Most corporations of any size will have a good whistleblower program. If you're publicly traded, one of the national instruments (in securities law) says you have to have a whistleblower system. And if you operate overseas and you come under the Corruption of Foreign Public Officials Act, then you have to have an anti-corruption program — and an anti-corruption program has to have a whistleblower system.”

Pamela Forward, president of the Ottawa-based Whistleblowing Canada Research Society, said evidence points to growing interest and adoption.

Late last year, she said, the Canadian Public Accountability Board (CPAB), the regulator for firms that audit publicly traded Canadian companies, encouraged those auditing firms to review whistleblower reports as part of its auditing standard on fraud. And earlier this month, she noted, the Canadian Academic Accounting Association, which oversees accounting education in Canada, conducted a webinar titled “Whistleblowing and Accounting.”

For some companies, the advent of specific software products has helped facilitate the creation of in-house whistleblower programs. The creator of one of those products, San Francisco-based FaceUp Technology, which sells a whistleblower platform by the same name, says “dozens” of Canadian companies have adopted the technology since it became available in this country in 2021. Chief marketing officer Petr Gadlina declined to specify exactly how many companies are currently using it.

“We can see increasing interest from Canadian companies,” he said in an email. “However, we are seeing even greater growth in demand in the U.S. market, where whistleblowing has much deeper roots.”

Canadian regulators are helping to lead the way with whistleblower programs that incorporate some global best practices, including putting the reverse onus of proof on an organization to prove that they didn't retaliate against a whistleblower.

The Canada Revenue Agency introduced its Offshore Tax Informant Program (OTIP) in 2013, putting in place measures similar to the U.S. Internal Revenue Service (IRS). Between 2013 and 2020, the CRA reported that the program received 808 submissions, leading to 180 audits and more than $62 million in additional federal taxes and penalties.

The Ontario Securities Commission (OSC) was the first Canadian securities regulator to follow suit. In its latest whistleblower reward, the OSC announced late last month a $1.5 million payout to a whistleblower who played a key role in an investigation that helped protect investors from fraud. 

“The whistleblower had access to valuable information regarding early-stage misconduct that was critical to our ability to quickly respond and protect investors from further harm,” OSC director of enforcement Jeff Kehoe said in a Feb. 27 news release.

“Internal whistleblowers can play a critical role in identifying harmful misconduct at an early stage that would be almost impossible to detect without their assistance,” he added. “We will continue to build upon our successes to strengthen this enforcement tool.”

The OSC did not respond to a request for additional comment. But in its own report on the program covering the period from the program’s launch in 2016 to 2022, the regulator stated that it paid more than $9 million in awards to 11 whistleblowers during that time.

The OSC, the British Columbia Securities Commission (BCSC), the Alberta Securities Commission (ASC) and Quebec’s securities regulator, the Autorité des marchés financiers (AMF), are the only other securities regulators in Canada with whistleblower programs. The AMF and the ASC, however, do not offer financial rewards for whistleblower information.

Companies don’t need to provide financial incentives either, says Boucher.  

“A lot of whistleblower experts don't believe that you need to,” he said. “There are many, many — we would argue a significant majority of whistleblowers — who do it because it's the right thing to do.”

While anti-corruption advocates are heartened by Canada’s progress, they argue that whistleblower programs are only as strong as their underlying, legislated protections. And in that realm, Canada falls far short of the United States, the United Kingdom and the European Union, which is now considered the global leader. In 2019, the EU passed the groundbreaking Whistleblower Directive, which governs both the public and private sectors and is considered the gold standard. All 27 EU member countries were required to incorporate the directive into their national laws by December 2021.

Canadian authorities have shown a reluctance to even exercise existing laws. Under s. 425.1 of Canada’s Criminal Code, an employer who retaliates against a whistleblower through demotion, termination or another form of punishment can face a potential prison term of up to five years — but the provision has rarely, if ever, been used.

As part of Canada’s National Action Plan on Open Government, Transparency International Canada has urged the government to create a strong federal legislative framework that enables workers in both the private and public sectors to speak up about wrongdoing, risk or malpractice without fear of reprisal — and to work with the provinces to provide similar frameworks. In 2018, the federal government launched a public consultation on the development of a federal whistleblower protection law that covers private sector wrongdoing, but no concrete action ensued.

The federal government’s own Public Servants Disclosure Protection Act (PSPDA) came into force in 2007 — but a 2021 report by the Washington, D.C.-based Government Accountability Project, a whistleblower advocacy organization, and the London-based International Bar Association, ranked it as one of the worst whistleblower protection laws in the world because it contains none of the 20 best practices that are internationally recognized for such legislation.

That could change. On Jan. 30, members of Parliament unanimously passed Bill C-290, a private member’s bill put forward by Bloc Québecois MP Jean-Denis Garon that would amend the Public Servants Disclosure Protection Act to include eight of the 20 best practices. The bill is currently at second reading in the Senate.

“Whistleblower protection laws are important,” said Forward. “Without them and adequate oversight and leadership regarding their implementation, people will remain silent about what they are witnessing, allowing corruption to grow and the deterioration of our democratic institutions and the rule of law.”

These will remain real risks in Canada, she cautioned, as long as legislated protections covering the public and private sectors continue to fall short of global best practices.  

“Two of the main reasons that wrongdoing is not reported is fear that there will be reprisals and that nothing will get done,” she noted. “In Canada, both occur regularly.”

With the private sector now showing leadership, said Forward, it’s time for legislators to finally blow the whistle on the country’s head-in-the-sand, shoot-the-messenger traditions.

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