Whistleblower Protection Act and Trade Secrets Act? Are not mutually exclusive

Imagine one of your employees is raising invoices in agreement with customers for personal enrichment. Only one employee notices this. However, she would have to disclose certain documents related to orders and customers – i.e., so-called trade secrets, to make a valid report to an internal or external reporting office. How can the tension between a report in the sense of the HinSchG (Whistleblower Protection Act) and the protection of trade secrets be resolved?

Trade secrets are of particular importance to companies. Trade secrets are information subject to confidentiality, protected by appropriate confidentiality measures, and also have economic value for the company. Therefore, price lists, documents related to the company’s calculation, price offers, the content of contracts, and sales figures are examples of trade secrets. They are protected by the Act on the Protection of Trade Secrets (GeschGehG).

How are trade secrets protected by the GeschGehG?

Protection against unlawful acquisition, use, and disclosure
Civil law claims for damages
Court actions

This means that employees may be liable for damages if they unjustifiably disclose information containing trade secrets. According to § 3 para. 2 GeschGehG, a trade secret may be obtained, used, or disclosed if this is permitted by law, on the basis of a law, or by legal transaction. The new § 6 HinSchG regulates exactly this relationship to the Act on the Protection of Trade Secrets. Because if a person giving a hint is protected by the HinSchG, the disclosure of a trade secret is justified and the person giving the hint is not liable for damages (cf. also § 5 no. 2 GeschGehG). The motive of the person giving the hint is irrelevant here.

Which trade secrets can be disclosed by the person giving the hint?
To enjoy protection under the Whistleblower Protection Act, guidelines must be observed regarding the disclosure and transmission of trade secrets. Generally, the report must contain a trade secret suitable for uncovering a violation in the substantive scope of the law – for example, criminal offenses. The person giving the hint must pay attention to this. The legislator formulates it as follows: The person giving the hint must have sufficient reason to believe that the disclosure of the content of the information is necessary to uncover a violation. Regarding the necessity of the report, it depends on the extent to which the disclosure of the secret is necessary and not solely on whether the disclosure is necessary at all. The same applies to professional obligations of secrecy.

What requirements does an internal reporting office have to meet when using or disclosing a trade secret?
According to § 6 para. 4 HinSchG, reporting offices may only use or disclose trade secrets to the extent necessary for taking follow-up measures. This provision establishes an independent confidentiality obligation for persons responsible for an internal reporting office.

How can companies protect their trade secrets despite the HinSchG?
Companies with a size of 250 and more permanent employees must implement the Whistleblower Protection Act and an internal reporting service within four weeks from July 2, 2023.
Companies with a size of 50 to 249 employees must implement an internal reporting channel by the end of the year at the latest. Whistleblowers must have the opportunity to report misconduct. However, under the provisions of the HinSchG, persons giving hints have the option of submitting a hint to either an internal or external reporting office.

If the person giving the hint decides to report externally to an authority specified by the HinSchG, trade secrets do not become public but do reach a group of people outside the company. This is likely to regularly contradict the interests of entrepreneurs.
Employers are therefore well advised to create incentives for the persons giving hints to turn to the respective internal reporting office before making a report to an external reporting office. For this purpose, they should provide their employees with clear and easily accessible information about the use of the internal reporting procedure.
Trade secrets can thus be protected through a trustworthy and independent reporting service. The obligation of confidentiality particularly protects the information concerning trade secrets. Which persons or organizational units in the company operate the internal reporting office depends on the respective organizational structure, size, and type of activities carried out. The basic prerequisite, however, is that these persons can work independently. The involvement of a third party is also recommended here. Because providers, like eagle lsp for example, offer a full service here. We are a legal service provider and therefore technically well equipped. The employed lawyers are subject to professional confidentiality. Therefore, not only personal data but also trade secrets are particularly subject to confidentiality.

Our experience with the internal reporting service
Based on our previous experience in the area of the reporting service, we know that companies in particular benefit from the confidential and independent reporting offices, as the company management can become aware of possible misconduct in the company as quickly as possible and can counteract it effectively. In particular, we protect your trade secrets.

Background to the HinSchG
The Whistleblower Protection Act is the implementation of the EU Whistleblower Directive of December 16, 2019. The directive’s goal is to protect whistleblowers from reprisals after reporting misconduct. The uncovering of misconduct should thus be promoted to combat corruption and other abuses within the EU, for example.
Since the publication of the draft law on April 13, 2022, the Whistleblower Protection Act has been widely discussed by different political actors and associations. The Bundestag passed the “better protection of persons giving hints” on December 16, 2022. On April 13, 2023, the Bundesrat was supposed to approve the law, but it refused its consent. As a result of the dispute between the two legislative organs, the mediation committee was called, which found a compromise on the Whistleblower Protection Act on May 9, 2023. The Law for the Protection of Whistleblowers was then passed by the Bundestag and Bundesrat following the mediation committee and entered into force on July 1.

You have not yet implemented an internal reporting service? Then we should talk!