THE WHISTBELOWER PROTECTION ACT - A CZECH TAKE ON PROTECTION OF WHISTLEBLOWERS

The long awaited Whistleblower Protection Act (the “Whistleblowing Act”) passed through the Czech legislature[1]. The Whistleblowing Act will become effective from 1 August 2023.

Below we share a summary of the most important obligations introduced by the upcoming legal framework on the protection of whistleblowers.

 

A late adoption of EU whistleblower protection principles

After several unsuccessful attempts to regulate whistleblowing in the Czech Republic, the Whistleblowing Act has been enacted as a measure adopting EU rules on whistleblower protection, previously established by the introduced EU Whistleblowing Directive[2].

While the EU Directive is already in force and effect, the Czech transposition lagged. Under the EU Directive, member states had to implement basic principles of whistleblower protection in their legal systems.

Although the implementation deadline under the EU Directive lapsed on 17 December 2021, the Whistleblowing Act has now been enacted. We advise to prepare for the obligations introduced by the upcoming legal framework.

 

Who are the entities obliged under the Czech Whistleblowing Act and what are their obligations?

The Whistleblowing Act introduces obligations to the following entities:

• An ordering party in public procurement proceedings;
• Employers employing at least 50 employees (except for employers already obliged to implement whistleblowing protection measures under the Czech AML Act[3]);
• Select public authorities and other specific entities designated by law.

 

(the “Obliged entities”)

Obliged entities under the AML Act (e.g. banks, financial institutions, real estate brokers, auditors, notaries or attorneys, provided that the legal conditions are met) have obligations to protect whistleblowers (including the establishment of an internal reporting channel) imposed by the AML Act. Amendment of the AML Act adopted in connection with the adoption of the Whistleblowing Act will also take effect on 1 August 2023.

In summary, the most important obligation of Obliged entities under the newly adopted law is to establish and operate an internal reporting channel through which notifications can be made. Furthermore, it is necessary to designate a so-called authorized person who, in simple terms, will take care of the internal reporting channel, receive notifications and initially assess them. Last but not least, the Obliged entity has an obligation to inform the public externally about the functioning of the internal notification system and the reception of notifications.

 

Who are the protected persons under the Whistleblowing Act?

The Whistleblowing Act primarily protects the whistleblowers, i. e. individuals filing reports of violations. As other individuals may also be at risk of retaliatory measures from filing a report of violation, the Whistleblowing Act extends its protection to individuals assisting in gathering information used in the whistleblowing report, individuals close to the whistleblower, employees and/or work-related associates of the whistleblower, legal persons in which the whistleblower is a shareholder in, and persons for whom the whistleblower performs work or work-related activities for.

Persons protected by the Whistleblowing Act are entitled to compensation if they suffer damages due to retaliatory measures as a result of filing a report of violation.

 

Reporting a violation

The Whistleblowing Act offers whistleblowers two main ways of reporting violations. Whistleblowers may report a violation through the internal reporting channels (i.e. the channels established and operated by the Obliged entities). Subject to exceptions, Obliged entities will have opportunity to share the internal reporting channel or to use the internal reporting channel established by another obliged entity, provided that they also designate a so-called authorized person (please see above).

Alternatively, whistleblowers may report a violation via the external reporting channel established and operated by the Czech Ministry of Justice. A whistleblower may choose to report a violation through both above-mentioned channels simultaneously. However, the above mentioned does not apply in the case of obliged persons under the AML Act, for whom notification via the external notification channel is excluded due to the legal obligation of confidentiality. At the same time, obliged persons under the AML Act will not be entitled to share the internal notification channel (unlike Obliged entities under the Whistleblowing Act) for the same reason.

Under certain circumstances, the Whistleblowing Act grants the whistleblower protection in cases in which the violation report is published, namely as a measure of last resort, i.e. in cases in which internal and external reporting channels fail to process the violation report filed by the whistleblower.

 

The Whistleblowing Act targets employers’ violations that do not need to be necessarily connected to work-related topics

The newly adopted law aims to protect whistleblowers reporting violations:

• that constitute a criminal offence;
• that constitute a misdemeanor publishable by a fine of at least CZK 100,000;
• that constitute a violation to the Whistleblowing Act; or
• that constitute a violation to Czech law or select EU law.

As employees or other persons performing work-related activities for the employer are usually aware of violations on the workplace, the Whistleblowing Act ensures that these individuals are not retaliated against for reporting violations.

Whistleblowers may report breaches of any nature under the Whistleblowing Act. These do not have to be connected to employment or labor law breaches, provided that these violations fulfil the criteria as set forth above.

 

The Whistleblowing Act protects against retaliatory measures by the employer

The Whistleblowing Act defines retaliation as an "act or omission that occurs in relation to the whistleblower's employment or work-related activities, which resulted from reporting a violation, and is able to cause harm to the whistleblower." [4]

The Whistleblowing Act includes examples of retaliatory measures, such as:

• termination of an employment, work or service contract;
• non-renewal of a fixed-term contract;
• termination or withdrawal from a contract;
• moving to impose or imposing disciplinary measures or penalties;
• salary or remuneration reduction, failure to grant personal benefits;
• transfer or reassignment to another job or post;
• career, appraisal, or performance review;
• obstructions in career advancement; or
• changes of working hours.

An Obliged entity using retaliatory measures against persons protected under the Whistleblowing Act may be fined up to CZK 1,000,000. The Obliged entity may also be fined for other violations - the fines depend on the severity of the offence in question and range from up to CZK 400,000 to up to CZK 1,000,000.

 

The Whistleblowing Act protects against knowingly false reports. It also protects against obstructions relating to reporting procedures

The Whistleblowing Act protects against situations of abuse of the possibility to make a violation report – for example, whistleblowing reports that are knowingly false do not enjoy protection under the Whistleblowing Act. Furthermore, individuals filing knowingly false whistleblowing reports may be fined with a fine of up to CZK 50,000.

Various forms of limiting and/or obstructing the rights of whistleblowers by the Obliged entities, namely imposing limitations to the right to report violations, or subsequent hindering of the reporting process, is prohibited and punishable by a range of files – these depend on the severity of the offence in question and range from up to CZK 20,000 to up to CZK 1,000,000.

 

How can the Whistleblowing Act affect you?

It is necessary to determine if you or your organization are an Obliged entity under the Whistleblowing Act. Provided you or your organization are an Obliged entity, it is necessary to establish an internal reporting system.

Obliged entities, which employ more than 50, and less than 250 employees from the effective date of the Whistleblowing Act (i.e. as of August 1, 2023), will be obliged establish an internal reporting system no later than December 15, 2023. The same deadline is then applied in relation to obliged persons under the AML Act.

Obliged entities, which employ more than 250 employees, are required to implement an internal reporting system, as well as implement other necessary measures as early  as the effective date of the Whistleblowing Act (i.e. as of August 1, 2023).

If you would appreciate any assistance from us as the Whistleblower Protection Act comes into force, please do not hesitate to contact us.

 

[1] Act No. 171/2023 Coll., on the protection of whistleblowers

[2] 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

[3] Act No. 253/2008 Coll., on measures against the legalization of the proceeds of crime and the financing of terrorism (Czech AML Act)

[4] Article 4(1) of the Whistleblowing Act