Torys in 10: Best practices for implementing anonymous whistleblower tip lines

Our podcast, Torys in 10, features quick, candid conversations with our lawyers on issues affecting your business: critical changes in the law, deal trends, market and industry developments and more.

Hear from Lisa Talbot and Rebecca Wise as they discuss all you need to know about anonymous whistleblower tip lines and the role they can play in your business. The pair delve into whether businesses need a tip line and how to make the best use of one.

A full episode transcript follows.

Lisa Talbot: Hi, I’m Lisa Talbot.

Rebecca Wise: And I’m Rebecca Wise.

LT: Rebecca and I both conduct and advise behind the scenes on workplace investigations and in this podcast, we’re going to discuss anonymous whistleblower tip lines. Do you need one? How do you decide if you need one? How do you make the best use of one? So, Rebecca, why don’t you start things off, can you chat briefly about what tip lines are and how they can be used by companies that you’ve advised?

RW (00:37): Sure. So, typically anonymous tip lines are hosted through third party service providers, although they don’t have to be. Employees, and in some cases third parties, like members of the public will be provided with contact information for the tip line and they can call in complaints to that tip line on an anonymous basis.

When a complaint comes in, the tip line provider will obtain details of the complaint and the identity of the complainant if they’re prepared to provide it, and then they’ll send the complaint to a designated individual at the company. Tip lines can be extremely effective for reporting misconduct. Ernst and Young, in fact, did a study several years ago in which of individuals who reported that they’d be willing to report a coworker’s illegal and an ethical activity, 39% said they would be more likely to make a complaint if they could remain anonymous in doing so. And of those 39%, 57% chose a hotline as their preferred method for reporting fraud. Lisa, how have you counseled companies about developing an internal hotline as opposed to using a third-party service provider?

LT (01:44): Well, those are interesting statistics and I would say they mainly bear out in our practice. So, I would say on balance that many of the clients that we work with do use third party service providers to run their hotline, but they’re not strictly or legally required to do that. Some organizations end up deciding for a number of reasons to develop an internal whistleblowing hotline. So that would be something along the lines where calls by whistleblowers are directed to a designated employee within the organization. Typically, you would see those calls being directed or diverted to someone in the HR or legal office or in an audit function. This reduces overall cost to the organization so you’re not contracting with an external provider in order to run a hotline. But as a general matter there are some downsides and drawbacks to using an internal hotline.

Some of those drawbacks are that employees who wish to remain truly anonymous may be less likely to call a hotline when they know that it is internally hosted and that they may be speaking to someone live even if they’re keeping their identity anonymous they are speaking to someone live who might recognize their voice, for instance. Among other issues, they may fear their identity is or will be discoverable. There are also issues about staffing and internal hotline.  Whereas third party providers usually provide 24/7 hosting services, internal hotlines typically don’t have that capability. And there are also concerns about the appearance of impropriety associated with an internally hosted hotline. For example, if the individual taking the call reports to the person about whom the complaint is about and one wouldn’t know that until you hear the, the details of the complaint.

So, there are some, some tough issues that you might have to navigate through if you are using an internal hotline. On balance our view is that if a company is considering instituting a reporting hotline, a whistleblower line, if the economics make sense for the company that it is best that it’d be externally hosted. But we do get the question quite often coming from organizations of varying sizes and levels of sophistication as to whether an external or internal hotline is best for them. Rebecca, how do you advise clients in making those decisions?

RW (04:08): It’s a good point because it doesn’t make sense for all organizations to be introducing an anonymous tip line. For smaller privately held companies for example—and you made the point earlier Lisa—there’s a cost associated with these whistleblower lines and for these smaller companies it often doesn’t make sense to have the line. The cost sometimes just outweighs the benefit to be gained and there are ways of hosting, as you said, tip lines internally.

But in considering whether or not a tip line makes sense for any particular company, the things that I and we like to think about, I’d say, are the size of the organization—including the number of employees—whether the organization’s publicly listed the history of the organization, including the types of complaints that have been raised in the past and how they were brought to the company’s intention. And there, I would just say that if there is a history of employees being comfortable bringing complaints to the attention of HR or some other function, it may not always be necessary for an anonymous tip line to be instituted. We also look at the culture of the organization and that sort of ties into the last point I made: how comfortable employees have historically been reporting this conduct.

These are just some of the factors we’d consider in assessing whether or not a tip line makes sense for any particular organization. I’d say that if the only reason a company’s considering introducing a tip line is to provide employees with an anonymous reporting mechanism, there are other less expensive ways to achieve this. So just by way of example, we’ve advised employers to just state in their policies that anonymous complaints can be made by sending a letter to any member of the board, to someone in the HR department, without any identifying information. So, you don’t need to have an anonymous tip line in order to facilitate the making of anonymous complaints. There are less expensive ways to do that, if that’s in fact the only thing that you’re concerned about.

But that said, for many larger organizations, there’s an increasing desire to offer a reporting hotline. The thinking is that hotlines, which as we’ve discussed, provide for an anonymous reporting mechanism, may make it more likely that employees will report misconduct. But Lisa, let’s be specific about what types of misconduct should ideally be reported through was a blower hotline, financial misconduct harassment. How do you set limits around that?

LT (06:36): I think as a general matter, it’s better than an organization learn about many forms of misconduct than not learn about it at all so generally we don’t recommend that companies should be formally limiting the nature of complaints that could be made through a tip line. Of course, you want to try to avoid overuse or misuse of the hotline, you know, it shouldn’t be used for complaints about the type of coffee served in the servery for instance.

But one option that we often recommend to companies is to use the same reporting mechanism for various types of misconduct, including harassment, discrimination, financial misconduct, but to impose guidelines behind the scenes as to how how complaints that happen to be received might be rooted within the organization. So, for example, complaints about discrimination and harassment may be routed to the head of HR, unless it is the head of HR who is being complained about, in which case that would be an alternate route, whereas complaints about financial misconduct might be routed to legal or to chair of the board depending on the nature. So you have to be specific about your rooting decision tree. And if a company prefers to have different reporting mechanisms for different types of misconduct, then it’s all about making sure that there’s clarity and messaging. So ensuring that employees know how different complaints should be reported in through what channels. You’ll want in, in those circumstances to ensure that your policies are very clear about how misconduct PR for instance, financial misconduct should be reported and how and to whom sexual harassment for instance should be reported. So that all has to be very clear in your policies if you’re deciding as an organization to run different reporting mechanisms and procedures for different types of discussion.

RW (08:34): So one more thing about messaging that I think is really important to raise here and goes to tying your tip line back to that link between internal investigations and workplace culture and how the two interact, if you are making the decision, your organization’s going to introduce a hotline to take anonymous complaints, take the opportunity to properly launch that program. This piece is often overlooked. Companies will just roll out a whistleblower program, send a new policy to employees and leave it at that. It’s critical to a successful investigations, I’ll call it program, and your organization, critical to the fostering of positive workplace culture that you use the opportunity to launch the program. When you introduce the tip line or relevant policies relating to the tip line to employees, I think it’s important to ensure that the message about the tip line and what its purpose is, is coming from top management and the message itself should focus on why the program is being implemented and what it hopes to achieve. Because setting tone from the top I think is really critical in rolling out the hotline and ensuring its success.

LT (09:42): I agree with that 100% and I think that’s terrific advice.

It looks like we’re out of time, unfortunately. There are lots of other angles that we could talk about here, but we hope to those of you listening that this discussion has been useful to you. We will be doing future podcasts on a number of issues related to internal investigations, workplace investigations, so stay tuned for those. If in the meantime you have any questions about the issues we discussed today or more generally about investigations, then please don’t hesitate to reach out to either one of us and we’d be happy to help. Thanks.

Music: Stratosphere - www.adamvitovsky.com

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