Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank the Senator for raising the issue. If I set out our thinking, we can then have a discussion and exchange on these matters.

These three amendments propose to remove the 50-employee threshold for employers performing a public contract with a value of more than €1 million and employers that are companies with an annual turnover of over €1 million. This would mean that any employers in these categories would be obliged to establish formal internal reporting channels and procedures. I am not proposing to accept these amendments.

There was insufficient time since the amendments were received to fully explore how many employers would be captured by these amendments. However, given that the value of public contracts can be calculated in many instances over a four-year period, I expect that they would lead to a significant expansion of the requirement for formal reporting channels and procedures. Before I go into the precise reasons I will not accept the amendments, I want to make it clear that the obligation on some employers to have internal channels and procedures is an administrative requirement separate from the rights of workers to report wrongdoing to their employer.

Section 6(1) of the Protected Disclosures Act provides that a worker is protected if he or she reports a relevant wrongdoing to an employer. This applies irrespective of the size of the organisation for which the worker works and the Bill does not change this. Regardless of whether the employer has a formal reporting channel, all workers, public and private, remain entitled to all of the protections of the legislation.

Workers will also have access to supports such as the Transparency International Ireland speak-up helpline to help them to understand how to make a report. Implementing the requirements as regards internal reporting channels will create a compliance burden for industry. The European Commission’s impact assessment of the directive in 2018 estimated that the initial set-up costs for a typical small to medium enterprise would be €1,374 in the first year with an ongoing annual cost of €1,054 in subsequent years. That was based on estimates made in 2017. With inflation, the true cost is now considerably higher.

Implementing the requirements is not a simple matter of printing down a generic policy document. The directive and the Bill are clear that internal channels must be designed, established and operated in a secure manner that protects the confidentiality of the reporting person and the information they have reported. In practical terms, this will require firms, for example, to appoint and train dedicated staff to operate these channels. It will also require the deployment of dedicated, separate and secure channels such as mailboxes, encrypted emails or web forms, and dedicated phone lines and voice messaging systems. Firms will be required to ensure the designated persons have sufficient resourcing and independence to conduct investigations, maintain confidentiality and access to senior management to effect necessary action in response to reports of wrongdoing. All of these will impose costs on organisations.

A wider imposition of the requirement to have internal channels would be disproportionate, particularly given the impact of the pandemic and Brexit on the SME sector in Ireland as well as the pressures they are facing from high inflation.

The point is that there are real costs involved in placing this obligation on small businesses. It is important to underline the point that it does not mean a protected disclosure cannot be made. There remains an absolute right to make a protected disclosure even if an employee is working for a small employer and the obligations to follow through and so on remain in place.

Because of the issues the Senator has raised, and she has made some very fair points, the Bill provides at section 8 by way of the insertion of a new section 6(6) into the 2014 Act for a regulation-making power to lower or remove the threshold for certain firms or categories of firms, subject to a risk assessment and public consultation. The Senator has made the point that there may well be situations where an employer has a very small number of employees but is strategically important and potentially very high impact. There is the capacity and facility within the Bill as proposed for them to be brought within the reach of the legislation in respect of the need to have internal reporting channels.