Author: Kateřina Nešpůrková
Co-author: Lívia Djukić

The legislative process by which the Czech Republic implemented the EU Whistleblowing Directive took almost three years. Three bills were drafted and debated by two Chambers of Deputies. A year and a half after the deadline set by the European Union on 17 December 2021, forced by a heavy fine of tens of millions of Czech crowns, the Czech Republic finally completed the legislative process as one of the last EU countries, with only Poland and Estonia left behind.

Although the Whistleblower Protection Act passed by the Chamber of Deputies failed to gain support in the Senate, the President did not hesitate and signed it into law last week. Today, the law has been published in the Collection of Laws of the Czech Republic, so we can say with certainty that it will come into force on 1 August 2023.

BY WHEN ARE YOU REQUIRED TO HAVE AN INTERNAL REPORTING SYSTEM IN PLACE?

As early as 1 August 2023 if you have 250 or more employees. As the Czech legislator did not adopt a deferred effect of sanctions (unlike, for example, the neighbouring Slovakia), the Ministry of Justice can theoretically check from the very first day of the law coming into effect whether you meet all the obligations under the new law.

If you have more than 50 but less than 250 employees, you are required to introduce the internal reporting system by 15 December 2023 at the latest. However, even in this case, we recommend you shouldn’t wait too long to introduce a whistleblowing solution – the public reporting channel operated by the Ministry of Justice is already up and running and can be used by all whistleblowers who have no other (in-house) alternative.

HAVE YOU ALREADY INTRODUCED AN INTERNAL REPORTING SYSTEM?

Again, we recommend that you make sure and check that your ethical line meets all the requirements of the new law. What are the most common mistakes?

• Group reporting systems are not supported by the Czech law and the sharing of an internal reporting system is only allowed for certain entities in compliance with statutory rules. If you only have a group reporting system in place, it will need to be reviewed and adapted to local requirements.

• AML-regulated entities that already had their reporting systems in place under the previous legislation must also adapt their reporting systems to the new law. Although AML obliged entities are not included among the obliged persons under the Whistleblower Protection Act, an auxiliary amendment has been adopted along with the Whistleblower Protection Act, imposing on them the duty to adapt their existing reporting systems to the Whistleblower Protection Act while respecting the specifics of the AML legislation.

WHAT ARE THE DIFFERENCES BETWEEN THE CZECH LAW AND THE REQUIREMENTS OF THE EU DIRECTIVE?

We have informed about the details of the Czech legal regulation in our previous publications. Let us summarise only the most important differences between the Czech law and the EU Whistleblowing Directive.

• Czech whistleblowers can report not only suspected breaches of EU laws in specified areas, but also suspected criminal offences or suspected administrative transgressions for which the perpetrator is liable to a fine of at least CZK 100,000.

• Czech internal reporting systems must be managed by natural persons – not by business units. The Czech law introduces a whistleblowing officerwho, under a penalty of CZK 100,000, is responsible for receiving the reports, for observing the statutory deadlines for communicating with the whistleblower, for protecting the whistleblower’s identity and the facts contained in the report that could thwart the investigation, for conducting the investigation, for keeping records required by law, and for proposing preventive or corrective measures.

• The Czech obliged entities must establish channels that allow the whistleblower to submit reports in writing, orally and, upon request, in person, whereas under the Directive, it is sufficient to establish channels for oral or written reports.

• Whistleblowers who have submitted an anonymous report but whose identity comes to light later are also protected.

WHO FACES SANCTIONS FOR BREAKING THE NEW LAW?

• If the obliged entity fails to introduce an internal reporting system, designate a whistleblowing officer, or allow the whistleblower or other protected persons to be subjected to retaliation, the obliged entity may be fined up to CZK 1 million.
• Under the new law, appointed whistleblowing officers who breach one of their obligations (e.g. failing to protect the whistleblower’s identity or the information contained in the report) will face penalties of up to CZK 100,000.
• In addition, other persons (natural persons or legal entities) may also be punished by fines of up to CZK 1 million for preventing whistleblowers from submitting a report or for exposing whistleblowers to retaliation. A fine may be imposed on, for example, a member of the statutory body, a supervisor or colleague of the whistleblower, or the employer of the whistleblower who has submitted the report with the employer’s business partner.
• A person subjected to retaliation will be able to claim compensation for non-pecuniary loss against the obliged entity, with the burden of proof in a potential lawsuit resting on the obliged entity.

The Ministry of Justice, as the central state administrative authority for the protection of whistleblowers, and the labour inspectorates have divided their powers in respect of monitoring compliance with the whistleblower protection laws.

FAIRWHISTLE: A WHISTLEBLOWING SOLUTION

In cooperation with our sister company FairData Professionals a.s., we help our clients introduce FairWhistle, a comprehensive whistleblowing solution. Our services are always tailored to the client’s needs: we can provide one-off assistance with the implementation or revision of the internal reporting system, including the setup of reporting channels, processes and internal documentation. Our long-term assistance takes up the form of a completely outsourced reporting system as we administer the reporting channels for our clients and act as their whistleblowing officer.

3 REASONS WHY YOU SHOULD CONSIDER OUTSOURCING

• The FairWhistle whistleblowing solution enables the whistleblowing officer to work professionally and independently of the company, so you and your employees can focus on your regular agenda.
• The company provides efficient risk management, with our compliance lawyers having deputies, being available 24/7 and insured. You are not responsible for the performance of the whistleblowing officer.
• An outsourced whistleblowing solution enhances the credibility of the system for the whistleblower, who can be confident that the report will be reviewed by impartial and experienced compliance lawyers with no risk of conflict of interest.

For more information about our whistleblowing solution, please visit www.fairwhistle.cz or contact us directly. We will be happy to share with you our long-term whistleblowing experience and recommendations.