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New legislation for the protection of whistleblowers and its impact on companies in the Czech Republic

At the end of this year, a new Act on the Protection of Whistleblowers is set to come into force (based on the "Whistleblowers Protection Bill"), which will impose a host of new obligations on about 25,000 employers and public contracting authorities in the Czech Republic, such as the establishment of an internal reporting system, or the public announcement of reporting channels which allow for the submission of information through an online platform. The Whistleblowers Protection Bill is based on Directive (EU) 2019/1937 of the European Parliament and the Council of 23 October 2019 (the "Directive"); obliged entities will have to conform to their new statutory obligations by 31 March 2022.

 

1. Obliged entities

The primary target of the new obligations are employers with a staff of at least 25 employees in the past calendar quarter, as well as (with minor exceptions) all public contracting authorities.

 

2. Reports, and protection of those who bring them

Whistleblowers’ reports contain information on a potential breach of national laws or EU law in certain areas such as the prevention of money laundering, financial services, or the protection of privacy of which the whistleblower learned in connection with their work or other, similar activities. "Other, similar activities"are understood to include, among other things, employment, an independent gainful occupation (as a self-employed person), exercising the rights associated with ownership participation in a legal entity, acting as the member of an elected body of a legal entity, the management of a trust, or the exercise of rights or discharge of obligations under a contract on the provision of supplies, services, construction work, or similar performances.

We need to note that such reports need not necessarily arise within the context of an employment relationship but may also occur within the context of supplier-customer relations.

The protection of whistleblowers is very far-reaching indeed: as long as the person who brings a report has reason to believe that doing so is necessary for bringing unlawful actions to light, their report will not be considered a breach of the banking secret, or of a contractual duty to secrecy or of the duty to secrecy underthe Tax Code or other laws, with the exception of the rules of professional secrecy which apply to notaries, attorneys, etc.

 

3. Responsibilities of the obliged entities

Obliged entities must see to it that neither the whistleblower nor anyone close to them, their colleagues, companies under their control, etc. will face any retaliation for their decision to report wrongdoing. A broad range of actions qualifies as retaliatory measures in this sense, such as the termination of employment, a pay cut, withholding career development options, changing the whistleblower’s working hours, or (in the case of a supplier-customer relationship) the rescission of a contract for supplies. If an obliged entity takes any such retaliatory action in connection with an incoming report, then the person affected by it may seek redress and compensation, and the actions of the obliged entity may become the subject of a procedure on an administrative offense under the Whistleblowers Protection Bill.

Under the Whistleblowers Protection Bill, obliged entities must put into place an internal reporting system (alongside other measures) by 31 March 2022, or else face the risk of a fine of up to CZK 1 million or 5% of their net turnover.

 

4. Late adoption of national legislation

Even if the Whistleblowers Protection Bill is not written into law during the transposition period (i.e., by December 2021), those provisions of the Directive with sufficient specificity will become directly applicable. With this in mind, the authors of this Client Alert recommend that obliged entities take the measures outlined above in any case, whether or not the Whistleblowers Protection Bill comes into force "in time".

The above summary should be understood as a brief overview of the Whistleblowers Protection Act.

 

Click here to download the PDF 'New legislation for the protection of whistleblowers and its impact on companies in the Czech Republic' in Czech

 

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