Whistleblower Protection in Czech Law from the Employer's Perspective
On 1 August 2023 became effective z Act No. 171/2023 Coll., the Whistleblower Protection Act (hereinafter referred to as "the Whistleblower Protection Act") and related Act No. 172/2023 Coll., an Act amending certain acts in connection with the enactment of the Whistleblower Protection Act.
The Parliament of the Czech Republic transposed these laws on the basis of Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of whistleblowers (hereinafter referred to as "EU Directive"). The new regulation brings to the Czech legislation a comprehensive regulation of so-called whistleblowing, i.e. protection of persons who report unethical or illegal conduct within the employer's organisation. The regulation is intended both to enable the reporting of unlawful conduct by obliged entities and to provide protection for whistleblowers against so-called retaliatory measures.
Obliged entity
Who are affected by the obligations under the Whistleblower Protection Act? According to Section 8(1), the following entities are affected:
- public contracting authorities (according to the law regulating public contracts) except for municipalities with less than 10 000 residents
- each employer employing at least 50 employees on 1 January of the relevant calendar year
- public authorities exercising jurisdiction in the field of administration of corporate income tax or administration of the levy for breach of budgetary discipline
- other selected public authorities
- persons authorised to provide or arrange consumer credit
- other specified employers regardless of the number of employees - e.g. in the fields of insurance, capital markets, banking, investment funds, etc.
The Whistleblowers
Who can report such violations through the notification system? Natural persons who report a violation that has already occurred or is about to occur to an obliged entity with which the whistleblower performs or has performed work or other similar activity or with which the whistleblower has been in contact in connection with the performance of work or other similar activity. For the purposes of the Whistleblower Protection Act under Section 2(3), work means dependent work performed in a basic employment relationship, service, self-employment, but also, for example, volunteering or internships.
Read more about whistleblowers' rights in our article „Zákon o ochraně oznamovatelů z pohledu zaměstnance“.
Illegal behaviour
An illegal behaviour which, according to Section 2(1) of the Whistleblower Protection Act, is to be reported is an act which meets one of the following characteristics:
- has the characteristics of a criminal offence
- has the characteristics of an offence for which a fine of at least CZK 100,000 can be imposed
- violates the Whistleblower Protection Act
- violates another legal regulation or a regulation of the European Union
Internal whistleblowing system
According to Section 8(1) of the Whistleblower Protection Act, obliged entities must establish an internal whistleblowing system through which whistleblowers will be able to report violations in a secure and confidential manner, orally or in writing. At the request of the whistleblower, the obliged person must also receive the notification in person within a reasonable time. The most common form of notification system can be in the form of a software solution. The obliged entity may delegate the management of the internal system to a third party, but this does not relieve the obliged entity of its responsibility.
An alternative to the internal notification system is the external notification system operated by the Ministry of Justice (https://oznamovatel.justice.cz/), which gives whistleblowers two options on who to report to. Obliged entities may be motivated by the existence of an external notification system to create an effective internal system whereby notifications are dealt with internally.
Designation of the competent person
In order to ensure the functioning of the internal security system, a competent person is designated to be in charge of the whistleblowing agenda. Pursuant to Section 10(1) of the Whistleblower Protection Act, a competent person may only be a natural person of clean criminal record, of legal age and with full legal capacity. This person receives and assesses the validity of the notification, proposes corrective measures to the obliged entity, informs the notifier of the receipt of the notification and of the outcome of the investigation and of the measures planned or taken, all impartially and in confidence.
Instructions to competent persons
In accordance with Section 9(2)(c) of the Whistleblower Protection Act, the obliged entity must properly inform the competent person of his/her rights and obligations, and a record of this shall be made. Similarly, training and familiarisation of employees with the internal whistleblowing system is recommended to improve the functioning and credibility of the whistleblowing system. Although this is not training in the sense of certified professional or professional competence, it is the Ministry's role to provide such training as part of methodological and technical assistance. The training of the competent persons will also involve costs on the part of the obliged entities.
Publication of specified information in a manner allowing remote access
Pursuant to Section 9(2)(b) of the Whistleblower Protection Act, the obliged entity must publish, in a manner that allows remote access, information on how the whistleblowing system is to be used, identify the competent person, their telephone number and address for delivery.
Prohibition of retaliatory measures
One of the main reasons for the regulation is to protect whistleblowers from retaliation, which is defined as an act or omission in connection with the whistleblower's work or other similar activity that is triggered by the making of a notification and that may cause harm to the whistleblower. Section 4 of the Whistleblower Protection Act also contains a non-exhaustive list of such prohibited measures, such as termination of employment, reduction of pay, removal from a managerial position, change of working hours or disciplinary action. Furthermore, no other persons shall be subjected to reprisals, specifically:
- persons close to the whistleblower
- persons who provided assistance in identifying the information contained in the notification
- persons who are employees or colleagues of the whistleblower
- persons controlled by whistleblower
- persons for which the whistleblower performs work or other similar activity
- the legal entity of which the whistleblower is a member, controlling person or in which the whistleblower has an interest
- a trust of which the whistleblower is a settlor or trustee
If retaliation has occurred and non-pecuniary damage has been caused to a person who is protected by the Whistleblower Protection Act, he or she is entitled to reasonable compensation under Section 5 of the Whistleblower Protection Act.
Right to appropriate compensation
Right to appropriate compensation is the private law liability of the originator of a retaliatory measure for harm, which should be interpreted broadly as a dissuasive and appropriate sanction in accordance with the requirements of the EU Directive. Pursuant to Section 4(4) of the Whistleblower Protection Act, the person for whom the whistleblower performs work or other similar activity, as well as the originator of the retaliatory measure, shall be liable for the retaliation to which the whistleblower has been subjected. The whistleblower may also claim compensation for non-pecuniary damage from the person who caused the retaliatory measure. This procedure is not affected by the fact that the legal person for whom the whistleblower performs work or other similar activity is not liable for the offence, since it has made every effort that could be required to prevent the offence The amount of appropriate monetary compensation will always depend on the circumstances of the individual case and will be finally determined by the competent court.
Offences by employers
Employers may commit several offences in connection with Section 23 et seq. of the Whistleblower Protection Act with a maximum fine of up to CZK 1,000,000, in particular if the obliged entity retaliates against the whistleblower. Furthermore, failure to perform any of the obligations set out in the Whistleblower Protection Act, such as failure to appoint a competent person, to punish such person for the proper performance of his/her activities, to establish an internal whistleblowing system, to ensure that appropriate remedial measures are taken or to implement such measures, is punishable.
Effectiveness of the Act
According to Section 30, the Whistleblower Protection Act is effective as of August 1, 2023, but according to Section 29, obligated persons who employ 50 to 249 employees as of August 1, 2023, have been granted an extension by the legislature and are therefore required to implement an internal whistleblower system only as of December 15, 2023.
For more information, contact us at:
JUDr. Mojmír Ježek, Ph.D.
ECOVIS ježek, advokátní kancelář s.r.o.
Betlémské nám. 6
110 00 Praha 1
e-mail: mojmir.jezek@ecovislegal.cz
www.ecovislegal.cz
About ECOVIS ježek advokátní kancelář s.r.o.
The Czech law office in Prague ECOVIS ježek practices mainly in the area of Czech commercial law, Czech real estate law, representation at Czech courts, administrative bodies and arbitration courts, as well as Czech finance and banking law, and provides full-fledged advice in all areas, making it a suitable alternative for clients of international law offices. The international dimension of the Czech legal services provided is ensured through past experience and through co-operation with leading legal offices in most European countries, the US, and other jurisdictions. The Czech lawyers of the ECOVIS ježek team have many years of experience from leading international law offices and tax companies, in providing legal advice to multinational corporations, large Czech companies, but also to medium-sized companies and individual clients. For more information, go to www.ecovislegal.cz/en.
