3rd September 2021

What new obligations arise for employers from the new Czech Act on the Protection of Whistleblowers?

The government’s bill for a Whistleblower Protection Act (the "Act") is about to be given its second reading in the Chamber of Deputies. The Act serves to implement 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 "Directive") by 17 December 2021.

With respect to the obligation to establish an internal reporting channel under Article 8(3) of the Directive, a longer transposition deadline is given: 17 December 2023. The aim of the Directive is to enable workers in both the private and public sector to safely make reports under the compulsory mechanisms established, and subsequently to ensure that they are protected from possible retaliation by employers or other entities.

The legal system of the Czech Republic lacks any coherent whistleblower protection, except in the area of service relationships or in the regulated (banking) sector. The issue of whistleblowing is also peripherally touched upon by regulations in the field of labor law, criminal law or administrative law. The purpose of the Act is to establish the conditions for the submission and assessment of reports and the conditions for providing protection to persons who have submitted reports, in accordance with the Directive. In addition to sanctioning unlawful conduct and correcting unlawful conditions, the Act also aims to raise awareness of the issue of whistleblowing and improve the current unflattering image of whistleblowers in the eyes of the public.

The Act introduces an obligation to establish internal reporting systems and procedures for reporting and evaluation of the reasonableness of reports for selected employers. The definition includes all employers employing more than 25 employees and all public contracting authorities under the Public Procurement Act (with the exception of municipalities with up to 5,000 inhabitants other than so-called municipalities with extended competencies). It also includes employers engaged in civil aviation, marine transport, oil and gas, consumer credit, capital market business, investment companies or investment fund activities, and the insurance or reinsurance industry. Under the Act, these employers will have to implement an internal reporting system by 31 March 2022. These employers will also be obliged, among other things, to designate a "competent person" who will be responsible for receiving and dealing with whistleblowers’ reports to ensure that only the competent person is aware of the whistleblowing, to inform the whistleblower about the process and results of the evaluation of the legitimacy of their report, to keep records and archives of all submitted reports, to protect the whistleblower from any retaliation, to inform the competent authorities about the measures taken regarding whistleblowing and about the actions taken within the process for notifying the competent authorities, and to ensure that all data processing complies with the GDPR.

Private-sector employers with fewer than 249 employees will be able to share an internal reporting system. The law explicitly provides for the possibility for obligated entities to outsource the management of the internal reporting system to a third party, whereby this person may manage the internal reporting system for more than one entity. However, this does not relieve the obliged entity of its responsibility for compliance with the conditions for the establishment and operation of the internal report system set out in the Act. Violation of the obligations arising from the Act is punishable by a fine of up to 1 million CZK or 5% of the net turnover achieved in the last accounting period.

While the law will bring new obligations and associated costs for employers, internal whistleblowing mechanisms can ultimately save organizations significant amounts of money. Employers should evaluate their existing whistleblowing mechanisms and adapt them to the new requirements of the forthcoming Act. The question is whether parliament will manage to pass the Act before the general elections this fall. However, certain parts of the Directive could be effective even without a domestic law.

If you need advice on the new whistleblowing legislation, do not hesitate to contact our law firm.

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; explanatory memorandum related to the bill for an Act on the Protection of Whistleblowers


Source: bnt attorneys-at-law 

Members of the American Chamber of Commerce in the Czech Republic