New whistleblowing bill heads to the Parliament

29. 11. 2022

Author: Lívia Djukić

Co-author: Kateřina Nešpůrková

On Wednesday 23 November, the Czech Government approved a new whistleblower protection bill implementing Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law (the “Whistleblowing Directive”). The original bill debated in the previous Parliament but failed to be passed prior to the autumn elections last year, has since undergone a number of modifications. We bring you an up-to-date overview of the most significant provisions of the approved bill.

10 things you should know about the approved bill:

1. Obliged entities (public institutions and a number of private companies) will be required to put in place reporting channels and internal processes (“Internal Reporting System”) to enable employees, business partners, and third parties to report illegal or unethical conduct within the organisation or harm to the public interest.
2. The new obligations will affect all employers with over 50 employees – the number of employees as of 1 January of the relevant year will be decisive.
3. Internal Reporting Systems must enable both oral and written reporting, including personal reporting.
4. Obliged entities are required to appoint an individual (the “Whistleblowing Officer”) who will be responsible for receiving and following up on reports, communicating with the whistleblowers while meeting statutory deadlines, and keeping statutory reporting records, subject to a fine of up to CZK 100,000 in the event they make a mistake. Whistleblowing Officer services may be outsourced.
5. Obliged entities may expressly exclude receiving reports from whistleblowers who do not perform work or similar activities for them (i.e., business partners and third parties).
6. Each report must contain data on the whistleblower (including date of birth), which are presumed to be correct. Anonymous whistleblowers will only be granted protection once their identity has been revealed. Protection is not available to whistleblowers who knowingly report false information.
7. The identity of whistleblowers must be consistently protected, and obliged entities must ensure that no retaliation is taken against the whistleblowers (dismissal from work, reduction in pay, transfer to another type of work, etc.).
8. Misconduct by obliged entities will be sanctioned with a fine of up to CZK 1 million.
9. Other persons who obstruct whistleblowers from filing reports or expose whistleblowers to retaliation may also be punished by a fine of up to CZK 1 million. A fine may thus be imposed, for example, on a supervisor or colleague of the whistleblower, or on the employer of the whistleblower who filed a report with the employer’s business partner.
10. A person exposed to retaliation may claim compensation for non-pecuniary damage against the obliged entities, with the burden of proof in any dispute lying on the obliged entity.

Large Czech companies cannot share an Internal Reporting System within a group.

A number of global and major national companies have already implemented centralised group-wide whistleblowing systems and hoped that this global solution would also be sufficient in the Czech Republic after the implementation of the Whistleblowing Directive. However, the European Commission has unambiguously rejected this interpretation and the approved Czech bill complies with this interpretation.

The act only allows employers with up to 249 employees to share or use another company’s Internal Reporting System. However, even in this case, each company has its own responsibility for meeting all legal obligations. All other Czech companies with over 249 employees must establish their own reporting channels and their own investigation capacities to deal with reports. This applies to all larger companies with more than 249 employees, regardless of whether or not they are part of a group. We therefore recommend consulting in advance any shared reporting within a group with experts who will verify that Czech internal reporting system requirements laid down by law have been met.

When will the act come into effect?

The approved bill stipulates that the act will come into effect on “the first day of the second calendar month following the date of its promulgation”. The specific date will therefore depend on the speed of the legislative procedure in the Parliament.

Is it necessary to wait for the final wording of the act before introducing a whistleblowing system?

The bill has been gradually reduced to meet the minimum requirements laid down by the Whistleblowing Directive, and therefore we do not expect any significant changes at the next stage of the legislative process. A number of our clients have already implemented a whistleblowing system. What was their motivation?

1. The public reporting channel run by the Ministry of Justice has already been put in place and can be used by any whistleblower who has no other (corporate) alternative (https://oznamovatel.justice.cz/chci-podat-oznameni/). In these cases, companies should provide the whistleblower with the level of protection that directly implies from the Whistleblowing Directive.
2. In the public sector, the direct effects of the EU Whistleblowing Directive have already taken place and many entities are already required to establish their Internal Reporting Systems directly on the basis of the Whistleblowing Directive, even though there is no implementing act in place yet.
3. More and more public authorities perceive whistleblowing as an essential part of effective detection of unlawful conduct and take its existence into account when dealing with possible irregularities, when deciding on the liability of the organisation and the level of possible sanctions.
4. Implementing a whistleblowing solution is an opportunity to get an early warning about violations of codes of ethics or other internal regulations. Many of our clients extend whistleblowing systems beyond the obligations laid down by law. If you already have or are planning to put in place a corporate compliance programme, you can already connect it to a unified system for detecting unfair conduct that will meet the whistleblowing parameters in line with the existing legislative standards.
5. Standard implementation of a whistleblowing solution takes several weeks – it is necessary to set up the appropriate technology and related processes, and to train staff that receive and review the reports. It is also essential to train potential whistleblowers, who need to understand what the ethics hotline established in their organisation is designed or is not designed for.
6. The implementation of the whistleblowing solution in compliance with the draft law will not be feasible without updating websites and creating or modifying internal compliance documents, especially GDPR documentation. We therefore recommend that you start addressing the whistleblowing issues well in advance.

If you need more information about our whistleblowing solution, we recommend you visit www.fairwhistle.cz. In the past year, we have implemented and now administer ethics hotlines and act as the Whistleblowing Officers for a number of our clients. We can thus pass on our extensive practical experience to you. We will keep following the Czech legislative process for you and keep you updated on whatever is relevant to your business.