What is whistleblowing?
Whistleblowing is a term generally referring to situations in which a current or former employee brings to the attention of an institution or body authorized to investigate or take action illegitimate, unethical or illegal practices in the workplace.
Act No. 171/2023 Coll., on the protection of whistleblowers, which was adopted due to the Czech Republic’s obligation to implement the European Union Directive on the protection of persons who report infringements of EU law (the “Act“), entered into force on 1 August 2023.
The purpose of the Act is mainly to introduce general legal protection for whistleblowers and to impose an obligation on certain employers (the so-called obliged entities) to create conditions and an appropriate system to protect the rights of whistleblowers.
What whistleblowers are protected by the law?
According to the new law, a whistleblower is a person who performs work or other similar activity for an employer (e.g. externally as a self-employed person) and submits a notification containing information about a possible illegal act that has the characteristics of a criminal offence or misdemeanour, for which a fine of at least CZK 100,000 is threatened, or a violation of legal regulations in specified areas (e.g. tax obligations, consumer protection, environmental protection, etc.).
The main aspect of the legal protection of the whistleblower is the prohibition of the employer from imposing so-called retaliatory measures on the whistleblower in connection with the notification. Retaliation is conduct that will in some way worsen the position of the whistleblower. This includes, for example, termination or non-renewal of employment, reduction in pay or transfer to another position.
Not only the whistleblower, but also a person close to the whistleblower or a person who has provided assistance to the whistleblower in connection with the submission of the report, is protected from retaliation.
On the other hand, a whistleblower who knowingly misrepresents facts in a report is not protected.
What to prepare for?
The above obligations apply to all employers regardless of the number of employees. However, the law defines in Section 8 a list of mandatory entities that must establish an internal whistleblowing system to protect whistleblowers.
In addition to certain public authorities, the obliged entities include:
- any employer who employed an average of at least 50 employees on 1 January of the relevant calendar year, unless it is an obliged person under the Act on Certain Measures against the Legalization of Proceeds from Crime and Terrorist Financing (“AML Act“);
- a public contracting authority according to the law regulating public procurement, except for a municipality with less than 10,000 inhabitants
- a person authorised to grant or arrange consumer credit; and
- other specified employers (irrespective of the number of employees) active in capital market business, insurance, investment companies, investment funds, banking and others.
- Simultaneously with the adoption of the Act, an amendment to the AML Act was adopted. The obligation to establish an internal reporting system will also apply to obliged persons under the AML Act (regardless of the number of employees), although the Act does not include them among obliged entities.
The basic obligations of the obliged entities include in particular:
- implement an internal notification system;
- identify the so-called competent person who will be responsible for the fulfilment of obligations by the obliged entities;
- allow whistleblowers to submit notifications through the internal notification system.
Employers with at least 250 employees are obliged to set up an internal notification system as soon as the law comes into force, i.e. from 1 August 2023. Employers with more than 50 but less than 250 employees have until 15 December 2023.
Internal notification system
The obliged entity is obliged to put in place a mechanism to allow whistleblowers to make reports, both in written and oral form. Only the relevant person may have access to information relating to the whistleblowing. The whistleblowing system includes a statutory procedure for the competent person to follow after a whistleblower has made a report, which includes, for example, the obligation to notify the whistleblower in writing within 7 days, to assess the validity of the report and, where appropriate, to take appropriate measures to remedy or prevent the unlawful situation. The identity of the notifier must be apparent from the notification; the Act does not impose an obligation on the obliged entities to deal with anonymous notifications.
Competent person
The competent person is a natural person designated by the obliged entity, who must be of legal age, legal capacity and good character. This person receives and assesses the reasonableness of the notification submitted through the internal notification system, proposes corrective measures to the obliged entity and performs other duties under the Act (has the obligation to maintain confidentiality, to act impartially, etc.)
What are the penalties?
Failure to comply with the obligations under the Act will be qualified as an offence for which a fine may be imposed. Penalties may be imposed not only on the obliged entity, but also on the person directly concerned or on anyone who in any way prevents the whistleblower from making a report.
The obliged entity is liable to a fine of CZK 400,000 for breach of obligations (failure to disclose obligatory information or failure to take corrective action within the specified time), or up to CZK 1,000,000 for other offences (e.g. the whistleblower was subjected to retaliatory measures).
This article is for informational purposes only and does not constitute legal advice or guidance for any particular case.
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