Silent whistleblowers? Effects of the Whistleblower Protection Act on confidentiality agreements

Since the introduction of the Whistleblower Protection Act, the establishment of reporting channels has been widely discussed. One rule at the end of the new law, which could have a significant impact on confidentiality or non-disclosure agreements, has so far remained largely under the radar. This is the subject of the following blog post.

In addition to the much-publicised obligations, in particular the establishment of reporting channels, the new Whistleblower Protection Act (HinSchG) primarily contains rights for whistleblowers. They now have an explicit right to report certain violations of the law. In the first instance, they should contact the internal reporting offices (Section 7 (1) HinSchG), but they can also directly contact the external reporting offices that have been set up at certain authorities. In particular, offences punishable by criminal or administrative fines may be reported, although the latter are restricted to those which serve to protect life, limb or health or the rights of employees or their representative bodies. In addition, there is a long catalogue of violations of all kinds of special laws listed in Section 2 of the HinSchG.

This right to report such violations is protected, inter alia, by Section 39 of the HinSchG, which provides that "Agreements that restrict the rights of whistleblowers or other persons protected by this Act are invalid".

Agreements that are likely to prohibit the reporting of violations are typically confidentiality agreements, also known as non-disclosure agreements (NDAs). They are often found in employment contracts, collective bargaining agreements or works agreements. However, they are also frequently included in contracts with other companies or persons who do not have an employment relationship with the person who is to benefit from the confidentiality. However, the HinSchG not only protects the employees of a company, but also those persons who may obtain information about breaches in connection with their professional activity or in the run-up to a professional activity (see Section 1 (1) HinSchG). The scope of protection is therefore very broad, so that initially all confidentiality and non-disclosure agreements are likely to be affected.

Such agreements typically require that information obtained during or prior to a contractual relationship be used only for its intended purpose, or generally prohibit such information from being disclosed to third parties. It depends, of course, on the precise structure of the agreement. For example, if the wording of the agreement allows reports to be made to internal bodies, the right to report a breach internally will not be affected, but external reports are likely to be affected. The general restriction on disclosure of information, including internally, therefore inevitably restricts the right under the HinSchG to report breaches that occur during the contractual relationship. Nothing remains of the right to report violations if such an agreement generally prohibits the disclosure of internal information to others.

Section 6(2) HinSchG makes it clear that information which is subject to a contractual obligation of confidentiality may nevertheless be passed on or disclosed to the competent authority under the conditions of the HinSchG. In addition, Section 39 HinSchG allows the entire confidentiality obligation to be annulled.

Non-disclosure agreements that do not take into account the rights arising from the new HinSchG are ineffective pursuant to Section 39 HinSchG and are therefore null and void (Section 134 BGB). In most cases, there will also be no room for reinterpretation or extend-ed contractual interpretation in order to save the remaining content of the agreement. This is because confidentiality agreements are regularly pre-formulated for a large number of contracts (Section 305 (1) BGB). They are therefore subject to the control of the general terms and conditions, which excludes a reduction of the confidentiality agreements in order to preserve their validity (Section 306 (2) BGB). They cannot therefore simply continue to exist with the proviso that the person obliged to maintain confidentiality may disclose everything permitted by the HinSchG, but must keep everything else confidential. On the contrary, the new HinSchG carries the risk that confidentiality agreements which do not take into account the protection of the person making the disclosure will be null and void. This in turn means that the person who has promised confidentiality under such an agreement is no longer bound by it and can theoretically disclose information freely, unless this is prohibited by other provisions (such as Section 4 of the German Trade Secrets Act or Section 201 of the German Criminal Code).

There appears to be no impact on contracts concluded before the new law came into force. As the law does not expressly provide for retroactive effect, it cannot be assumed, also for constitutional reasons, that the legislator intended to apply retroactively to older contracts, so that these should not be affected. However, it should be checked whether future confidenti-ality agreements, or the templates or models on which they are based, take sufficient account of the rights arising from the HinSchG, i.e. whether they comply with the require-ments of Section 6 of the HinSchG. At present, we assume that minor amendments will be sufficient to avoid the threat of Section 39 of the HinSchG and the associated ineffectiveness of the confidentiality agreement as a whole.

Fabian Eckstein