Running an Internal Whistleblowing Hotline: The 300-Employee Threshold and How to Fix a "Hotline That Doesn't Work"

Hello, I'm Noriaki Asato, Representative Attorney at LegalAgent.

There is something I would like to ask the staff of companies that have set up an internal whistleblowing hotline. How many reports did your hotline receive last fiscal year? It is not unusual for companies to have received zero reports a year, or a few reports that were only minor in nature. When an organization with several hundred employees receives no reports at all, it is closer to the reality to view the hotline as not being used than to conclude that no problems have occurred. Setting up a system and making it work effectively in operation are separate challenges.

The 300-Employee Threshold and the Obligation to Establish a System

Article 11 of the Whistleblower Protection Act requires businesses to designate personnel who handle receiving reports, investigating and taking corrective measures (paragraph 1), and to establish the systems necessary for an appropriate response (paragraph 2). Paragraph 3 of the same Article converts both the designation of personnel under paragraph 1 and the establishment of systems under paragraph 2 into obligations to make efforts for businesses that regularly employ 300 or fewer workers.

This 300-worker standard is determined by including not only full-time employees but also part-time workers and others who are regularly employed. It is important not to conclude that you are at or below 300 based on the number of full-time employees alone, and for the human resources and legal departments to check headcount regularly.

The specific content of the system to be established is set out in the Consumer Affairs Agency's guidelines (Cabinet Office Notice No. 118 of 2021). They provide for mechanisms to receive reports broadly, ensuring the neutrality and fairness of the response work, and preventing leaks of information that could lead to searching for or identifying the whistleblower. Even companies with 300 or fewer workers, for which these are obligations to make efforts, are encouraged to aim for the level set out in the guidelines.

Why Hotlines Fail and How to Design the Entrance and the Exit

Behind a hotline becoming a mere formality there are, broadly speaking, two causes.

The first is a situation in which employees know the hotline exists but feel uneasy because they do not know what happens after they report. If it is unclear who will handle the report, whether they can consult anonymously and whether their supervisor will find out, employees hesitate to use it. The second is a situation in which reports are received but investigations do not progress. If the person in charge holds the role alongside other duties and cannot make time, investigative authority is vague, or there is no set way of communicating the results, the response to reports stalls. Once the impression spreads within the company that "nothing changed even after I spoke up," the hotline stops being used.

To make a hotline work, it is necessary to put in place both an environment that makes reporting easy (the entrance) and a system that reliably moves investigations and corrections forward (the exit). Specifically, it is effective in practice to state the following matters clearly in the rules.

• Means of receiving reports (multiple channels, such as a dedicated form or an external hotline) and whether anonymous reports are accepted
• A target period from receipt to the initial response
• The authority of investigators (interviewing relevant persons and requesting submission of materials)
• How to communicate with the whistleblower during the investigation
• The scope of feedback on investigation results to the whistleblower
• Who decides on corrective measures and the procedure for confirming them after they are carried out

Personnel's Duty of Confidentiality and the Prohibition on Disadvantageous Treatment

"Personnel engaged in responding to whistleblowing" designated under Article 11, paragraph 1 of the Whistleblower Protection Act are subject to a duty of confidentiality under Article 12 of the same Act. They must not, without legitimate grounds, divulge matters learned in the course of their duties that could identify the whistleblower, and a violation is subject to a criminal penalty of a fine of not more than JPY 300,000 under Article 21 of the same Act.

This duty of confidentiality applies without exception once personnel have been designated, even at businesses with 300 or fewer workers. It is necessary to make the personnel themselves aware of the risk of criminal penalties and to clarify the procedures for handling whistleblower information. It is also important to sort out where responsibility lies, including whether officers and HR staff who come into contact with information during an investigation are designated as personnel each time.

Further, Article 5 of the same Act prohibits disadvantageous treatment on the grounds of a report, such as demotion, pay cuts or non-payment of retirement allowances. If measures such as unfair performance evaluations or transfers are found to have been taken as a result of a report, they may violate that Article. It provides peace of mind to have a mechanism for checking, from a separate perspective, that no unfair treatment occurs even in performance reviews conducted some time after the report was handled.

Cases Involving Management and the Use of External Hotlines

A situation that requires particular care in running a hotline is when management, such as the president or officers, is the subject of a report. Where the hotline staff are managers in the human resources or general affairs departments, it is not easy to carry out an investigation independently of the organization's chain of command.

To prepare for such cases, it is effective to establish a direct route to company auditors or outside directors separate from the normal reporting line, and to use an external hotline, such as an outside law firm, alongside the internal one. Introducing an external hotline makes it easier for employees to consult without worrying about internal relationships, and enables a neutral initial response even for problems involving management. However, the external hotline mainly handles receiving reports and organizing the issues, so the division of roles, including how it coordinates with internal fact-finding and corrective measures, needs to be decided in advance in the service agreement.

Preparing for the Amended Act Taking Effect in December 2026

The Act Partially Amending the Whistleblower Protection Act (Act No. 62 of 2025) takes effect on December 1, 2026. The Consumer Affairs Agency published the corresponding amendments to the guidelines on March 31, 2026, and the amended guidelines also apply from December 1.

After the amendment, if a business with more than 300 workers fails to designate personnel, it becomes subject to orders where it does not follow a recommendation by the Consumer Affairs Agency, as well as on-site inspections, and violations of orders or refusals of inspections are punishable by a fine of not more than JPY 300,000. Informing workers and others about the system for responding to whistleblowing is also expressly stated in the provisions as part of the obligation to establish systems. Acts that obstruct reporting, such as requiring an agreement not to report without legitimate grounds, and acts that attempt to identify the whistleblower are also prohibited, and agreements not to report become invalid.

As for disadvantageous treatment, dismissal or disciplinary action within one year after a report is presumed to be on the grounds of the report, and the business bears the burden of proof to rebut that presumption. A person who dismisses or disciplines someone on the grounds of a report faces imprisonment for not more than six months or a fine of not more than JPY 300,000, and corporations face a fine of not more than JPY 30 million. Freelancers engaged under service agreements are also added to those protected.

What to review before the effective date includes the internal whistleblowing rules and internal communication materials, "never disclose anything outside the company" type clauses in pledges signed on joining the company and in non-disclosure agreements, procedures for investigators prohibiting attempts to identify whistleblowers, and hotline information for freelancers. Building the performance review check mentioned above into the procedure for deciding disciplinary action also provides material for explaining the reasons for the action under the presumption provision.

At LegalAgent, beyond drafting and reviewing internal whistleblowing rules, we support the design of investigations after reports are received and the creation of neutral investigation systems for cases involving management. You can consult us about checking your systems in ordinary times through Compliance Support, and about responding to actual reports and investigations through Crisis Management, Misconduct Response and Internal Investigations.

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