The Whistleblowing Act
At its meeting on 1 February 2021, the government took another step towards the adoption of a law on the protection of whistleblowers (the Whistleblowing Act). The new law is intended to transpose into Czech law Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report violations of Union law. However, there is no time to waste. According to European law, the law must enter into force by 17 December 2021 at the latest!
What are the laws and directives about?
The aim of the Directive is to provide legal protection to persons who report damage to the public interest that they become aware of at work or in connection with it. According to the Directive, harm to the public interest consists in infringing the law in predefined areas in which the institutions of the European Union exercise their competence. These include public procurement, financial services, money laundering and terrorist financing, environmental protection and more.
It should also be possible to report an infringement based on facts indicating that the infringement is yet to be committed. In this context, the law should therefore act as a kind of prevention of undesirable behaviour.
However, I would like to point out here that the principle of whistleblower protection and the possibility to report infringements are not intended for employee complaints against employers or for resolving ordinary disputes between employees.
What are the obligations?
Under the new legislation, organisations will have to establish procedures and secure channels for receiving and investigating reports – a so-called internal reporting system. These procedures must also include measures to protect the identity of whistleblowers. Organisations will also need to designate a person responsible for receiving and investigating reports. The choice of the form of reporting is basically up to the whistleblower himself; the organisation must accept reports in writing or orally or even in person. The whistleblower also has the right to be informed of the findings of the investigation within 30 days of the date of receipt of the report.
We do not think that this law is intended only for multinational corporations or state-owned enterprises. The internal notification system must be set up by companies with at least 25 employees, contracting authorities (except for municipalities with a population of up to 5,000) and companies operating in areas sensitive to Act No. 253/2008 Coll., on Certain Measures against Money Laundering and Terrorist Financing (AML Act), in the field of transport safety, transport and road traffic, environmental protection, veterinary protection and consumer protection. It therefore concerns a large portion of the companies in our country.
It will also be possible to submit the report outside the organisation itself, at the Ministry of Justice. The Ministry will also act as an intermediary between whistleblowers and the competent authorities, which can review the report of illegal activity. For this reason, too, it is in the interest of companies that their internal notification system be credible and simple. Because otherwise the whistleblowers will probably not use it and turn directly to the Ministry, which can turn the matter over to the police.
As the title of the law and the directive itself suggests, the main goal is clearly to enable employees to report infringements while avoiding any direct or indirect retaliation against. This means conduct directly caused by the report, which the whistleblower (in the case of an indirect measure also another person) may consider as an interference with his or her rights or legitimate interests, such as bullying, termination of employment or threat of an action for breach of confidentiality or criminal notification, etc.
Failure to comply with the obligations arising from the law should result in heavy fines - up to CZK 1 million or 5% of net turnover for the last completed accounting period. However, it is also possible to underline the benefits and positive motivation. By meeting the standard, companies will gain an effective means of receiving information about possible risks or even fraud and will be able to respond to them in a timely manner.
Solutions for companies
An effective way to facilitate the receipt of reports and motivate whistleblowers to use the organisation's internal reporting system is an easily accessible and user-friendly internet application that companies can hire an external company to implement and manage.
Such a whistleblowing tool will allow whistleblowers to report issues through a secure form or telephone line. This centralisation will help companies have more control over individual notifications, make it easier to keep deadlines and protect whistleblowers' personal data.
Solutions in the form of an internally secure system will prevent organisations from dealing with their reports directly through government agencies or the media. However, the protection of the whistleblower is still ensured. Today's technologies enable quick and easy implementation of the so-called ethics line, which provides more functions, acts as a place for filing reports, as a helpdesk or communication platform. In our experience, many large companies are already implementing this mechanism.