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Whistleblowing – why adress the obligations arising from an untransposed directive already today?

On 23 October 2019, the Directive on the protection of whistleblowers (the "Directive") was adopted by the European Parliament and the Council of the European Union. The Directive introduces rules to protect whistleblowers (i.e. those, who report violations) from the negative consequences they could face as a result of reporting workplace misconduct. Protection should therefore be provided to the whistleblower against, among other, workplace bullying by management, termination and so on.

Although this Directive has not been implemented in the Czech legal system yet, you should certainly keep your eyes on it, as individuals can already claim their rights under this Directive from the state.

Under the Directive, a whistleblower is defined as someone who reports a violation of regulations and draws attention to illegal or unethical practices taking place in their workplace. According to the Directive, the list of persons who can report such violations is quite broad – employees as well as self-employed persons, shareholders, volunteers or interns can all be in the position of whistleblowers pursuant to the Directive. Furthermore, even whistleblowers whose employment has ended or is yet to begin are protected under the Directive.

Generally, the Directive anticipates three ways through which the whistleblowers may notify the violations. Firstly, they should be able to notify them internally through the so-called internal notification systems; under the Directive, all companies with 50 or more employees are required to set up such systém. Another possibility is to notify the violations externally via the Ministry of Justice portal. In case no appropriate action is taken in response to either of the first two methods, the whistleblower may disclose the breach directly to the public, for example through social media.

Why should entrepreneurs also pay attention to the Directive?

Although the Directive has not yet been transposed into Czech law, it deserves attention already, above all in relation to the possibility (and future obligation) to establish the internal notification system.

Such a system constitutes of a set of certain procedures and tools to be used to receive and handle notifications. For the time being, only public institutions, which are directly covered by the Directive as of 17 December 2021, are obliged to set this system up. Although private employers do not yet have this obligation, their employees can already notify violations via the Ministry of Justice, which has established an external reporting channel for this purpose. Whistleblowers (not only) from the private sector can make a report of a violation on this website via a secured form. These notifications will then be dealt with by the so-called competent persons, who should provide feedback to the whistleblower, adopt necessary measures and, where appropriate, forward the information contained in the notification to the competent authorities for further investigation.

It is therefore definitely more convenient for private companies to introduce a notification system as soon as possible, so that they are the first to receive notifications on potential violations and have the opportunity to remedy any misconduct without the need for interventions from public authorities, and at the same time to prevent similar situations. In addition, both the Directive and the related draft law provide for relatively significant penalties for breaches of the whistleblower protection rules; for some offences, the obliged entity could be fined up to CZK 1 million or 5% of the net turnover achieved in the last completed accounting period.

Who and what areas of law does the Directive apply to?

As far as the scope of the Directive is concerned, the rules on whistleblower protection apply firstly to public legal entities and secondly to private companies with at least 50 employees. However, the draft Czech Whistleblower Protection Act, the adoption process of which was interrupted at the end of the previous parliamentary term, has halved this threshold, so it is possible that companies with as few as 25 employees will be required to set up internal whistleblowing systems in the future.

The Directive also contains a list of specific areas to which the protection of violation notification shall apply, which include, among other, violations in the public procurement procedure and consumer protection.

We will continue to monitor the process of adopting the draft bill and will keep you informed of any changes.

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