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New regulation on whistleblowing in the Czech Republic

New regulation on whistleblowing in the Czech Republic

Czech Republic
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In February 2019 the Ministry of Justice of the Czech Republic submitted a bill that aims to provide whistleblowers credible tools to report illegal conduct in the workplace and protect them against potential reprisals. The bill also introduces new duties for many employers.

Who does the new law protect?

The new law should ensure the protection of all employees who have reported illegal conduct in connection with their jobs.

Protection should apply only to whistleblowers who report crimes and offences. According to the bill, protections should not be accorded when reporting ethics code violations or breaches of other purely internal regulations, though obviously employers cannot arbitrarily punish these employees for doing so.

What are the new duties for employers?

Employers that (i) employ more than 50 employees (including part-timers), (ii) have annual turnover or an annual balance sheet total exceeding EUR 10 million, (iii) are a legal entity that is a liable person under the Czech anti-money laundering legislation, or (iv) are contracting authorities under the Public Procurement Act, will now be obliged to set up an internal reporting system. As is clear from the above, the new duties apply to broad groups of employers such as institutional employers, who likely already have their own internal systems (e.g. banks, payment services providers, etc.), but also medium-sized companies (including manufacturing plants, etc.), which likely do not already have internal mechanisms in place. The bill also introduces other measures that increase costs for employers.

The proposed internal reporting system should set the rules for submitting reports and measures for protecting whistleblowers, including rules allowing the identity of the whistleblower to be kept secret or rules related to how reporting is organised, notification of the whistleblower about the course and results of the investigation, and the investigation deadlines.

In addition, employers that will be required to set up an internal reporting system will have to designate the person or persons or, where appropriate, the department authorised to receive and investigate reports. These persons should be sufficiently independent and professional to ensure the confidentiality of internal channels.

The employer will also have to publish the information about the functioning of the internal mechanism, for example on its website or on the intranet, and possibly at physical locations where all employees can enter and become familiar with the internal mechanism.

In accordance with the bill, the employer will have to check every received report and, if appropriate, take necessary action to remedy detected shortcomings. In addition, the employer will be required to keep records of reports for three years from the day of submission.

What will be the alternatives to submitting reports directly to the employer? 

If an employee is unable or unwilling to make a report through the internal reporting system, he or she may report directly to law enforcement authorities and the authorities responsible for conducting offence proceedings. In addition, this system is supplemented by a completely new body – the Whistleblowing Protection Agency. As part of the Ministry of Justice, the Whistleblowing Protection Agency will provide information and advice on whistleblower protection, receive reports and issue confirmation to whistleblowers.

Which actions against employees will be prohibited?  

The bill also provides for a ban on retaliation. In practice, this will mean that if someone submits a report, the employer will not be able to sanction the whistleblower or a person close to the whistleblower, in particular by (i) dismissal, recall or release, transfer to a different job position or unjustified denial of promotion, (ii) reduction of salary or wage, change of working time, change of workplace, or (iii) discrimination or disadvantage.

When will the law come into effect?

If the bill passes the entire legislative process, it should come into effect on 1 January 2021.

Outcome

As many comments to the bill were submitted in the comments procedure, it is unclear what the final result will look like. Even today, however, companies would be well-advised to adopt internal processes for reporting undesirable and illegal conduct in the workplace. Doing so can help the employer detect such conduct sooner and reduce possible financial or reputational damage. As the wise man said, prevention is the best cure.  

By Helena Hangler, Attorney at LawRudolf Bicek Attorney at Law Schoenherr

Czech Republic Knowledge Partner

HAVEL & PARTNERS, attorneys-at-law, with offices in Prague, Brno, Bratislava, Pilsen, Olomouc, and Ostrava, has a team of 220 lawyers, tax advisors and 500 employees in total, is the largest independent law firm in Central Europe.

Our clients include large international companies, leading Czech and Slovak firms, including strategic state-owned companies and public sector authorities, as well as medium-size businesses, individual entrepreneurs, and investors. We advise approximately 100 of the Fortune 500 companies, and almost 50 of the Czech Top 100 companies. HAVEL & PARTNERS currently provides its services to a total of 2,000 clients. We have the most comprehensive international support available to both Czech and Slovak law firms. We provide legal and tax advice in 12 world languages in more than 90 countries around the globe. Up to 70 % of the transactions we deal with involve an international aspect.

HAVEL & PARTNERS was named the best law firm operating in the Czech Republic by the prestigious British rating agencies Chambers and Partners (2020) and Who’s Who Legal (2018, 2019). It is also the most successful law firm, providing the most comprehensive legal services in the Czech Republic and Slovakia, based on the total number of all nominations and awards in all years of the Law Firm of the Year awards. The firm became the absolute winner of this competition four times in the last six years, receiving the main award Domestic Law Firm of the Year in the Czech Republic (2015, 2017, 2018, 2020) and ranking as one of the most recommended law firms in all categories of law. Our company is also a three-time winner of the Law Firm of the Year award for Best Client Services (2015, 2016, 2019). In the field of M&A, HAVEL & PARTNERS is the best law firm in the Czech Republic based on the annual International Advisory Experts awards (2018, 2019). In Slovakia, it also won the prestigious global M&A Today Awards (2013–2018) for Mergers & Acquisitions six times in a row, and repeatedly won first place in the ranking by Lawyer International Legal 100 (2017, 2018). Prestigious international rating agencies EMIS DealWatch and Mergermarket have ranked HAVEL & PARTNERS among the leading law firms by the number of transactions completed in the entire CEE region since 2009. Based on annual awards of the Acquisition International magazine, HAVEL & PARTNERS has become the Law Firm of the Year 2019 in the M&A category in the CEE region.

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