Our office has previously advised you that legislation will be introduced to protect persons who report breaches of Union law (whistleblowers). After several unsuccessful governmental and parliamentary initiatives, the European Union gave the final impetus to the creation of this legislation by adopting Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law.
The Directive foresees the adoption of the relevant national legislation by 17 December 2021.
However, Czech whistleblowing legislation has not yet been adopted. The bill is currently discussed in the Chamber of Deputies. Given the remaining number of sittings of the Chamber before the general elections and the Chamber´s full agenda, it is not likely that the law will be passed by the current Parliament.
The present situation has two possible solutions.
– either the current government bill will be adopted in an accelerated procedure immediately after the new Parliament is formed and will be promulgated immediately before its effective date, i.e. 17 December 2021;
– or (and this is probably the less desirable option) the EU Directive will become directly applicable as of 17 December 2021 until the date on which the relevant transposing legislation is adopted (probably the current Whistleblower Protection Bill with partial amendments); this option could, among other things, lead to the application of EU sanctions against the Czech Republic.
There is no doubt, however, that this issue will need to be given adequate attention in the coming months and especially in the first half of next year. This is because of the possible private and, in particular, public law consequences (sanctions for non-compliance with whistleblower protection obligations) – see below.
The present update highlights the main points of the draft legislation in question and the risks involved.
1. What is the whistleblower protection about and what is its purpose?
Whistleblower protection legislation has a relatively long tradition in some countries, such as the United States. In Europe (the EU and the Council of Europe), a number of decisions (in particular from the European Court of Human Rights) have been handed down in recent years describing the conditions for protected whistleblowing.
The aim of the legislation is to prevent undesirable situations (unlawful conduct) in a number of areas – the purpose is usually to protect public funds, prevent bribery, protect the environment, etc. The means to achieve this objective is to protect whistleblowers who raise suspicions of unwanted conduct.
The purpose of the legislation is to protect persons who, in the public interest, notify government authorities or the public of a reasonable suspicion of unlawful conduct of (usually) their employer, including protection against retaliation by those against whom the report was made, such as managers. The protection includes, for example, a prohibition to dismiss the whistleblower or reduce their pay, etc.
In addition to protection, some countries also introduce incentives such as monetary rewards when a report is proven true or a reported offender convicted.
Both the European Directive and the forthcoming Czech Whistleblower Protection Act are based on the same principles (with the exception of incentives).
2. Who is to be protected under the draft legislation?
The forthcoming Whistleblower Protection Act goes beyond the Directive by broadly defining protected whistleblowing. It is intended to cover the reporting of information about possible:
a) minor offences;
b) criminal offences;
c) breaches of Czech or EU law in specific areas such as consumer protection, environmental protection, protection of internal order and security, protection of life and health, protection of personal data, functioning of the internal market, etc.
The range of protected whistleblowers is also broadly defined. A protected whistleblower may be an employee, as well as, for example, a person performing a function in a company (member of the statutory body, proxy, etc.), or a partner in the company, a subcontractor of the company (self-employed person) or a person performing voluntary activities. A protected whistleblower may also be a person aspiring to one of these positions.
No protection is afforded to those who knowingly make a false report.
In addition to the whistleblowers themselves, protection should also be provided to persons close to the whistleblower, or to persons who assisted the whistleblower in making the report, or to legal persons in which the whistleblower is a shareholder or performs a function (statutory representative, member of the supervisory board, etc.), or is a controlling or controlled person, etc.
3. What should the whistleblower be protected from?
The obligation to provide protection from retaliation is imposed on the person for whom the whistleblower works or carries out other activities (see above).
Retaliation within the meaning of the Act includes any action triggered by the whistleblowing that is capable of causing harm to the whistleblower, such as transfer to another job, termination of employment, removal from a managerial position, reduction in pay, change in working hours, non-renewal of a fixed-term contract, withdrawal from a contract, and discrimination, etc.
4. What obligations arise from the new draft legislation?
In addition to the key obligation to protect honest whistleblowers from retaliation, the draft law proposes to impose a number of additional obligations in accordance with the Directive.
In particular, the following obligations need to be highlighted:
a. Obligation to introduce a system of internal and external reporting – This involves setting up a process for filing reports within the employer, i.e. the legal entity (internal reporting system) by designating an e-mail address, telephone number and the competent person (see below), and advising on the possibility to approach the Ministry of Justice, whose newly established department will be responsible for the whistleblower protection agenda (external reporting system). In addition to using the internal and external reporting systems, the whistleblower should be able, under the conditions laid down by law, to make a public announcement, i.e. to address his or her suspicions directly to the public, e.g. through the media.
The draft bill lists all persons who will be required to implement the internal reporting system. Each employer who employs at least 25 employees (regardless whether FT or PT and the type of employment) will be obliged to do so.
b. Obligation to appoint a competent person – Persons obliged to establish the internal reporting system („obliged entities“) will also be required to appoint the competent person. This person should be a person of integrity within the meaning of the law, who is independent, who will discreetly handle the reports received and, on their basis, make recommendations to the obliged entity to prevent the any illegal conduct and to remedy the undesirable situation (remedial measures). Such a person should be given sufficient time (at least 0.2 FTE is envisaged) to perform the tasks and adequate material and other support.
Given the nature of the competent person´s tasks, in particular the initial review of the relevance of the report (whether there is potentially a minor offence or criminal offence or another type of illegal conduct at hand), the competent person needs to have adequate professional skills.
c. Other obligations – Other obligations of the obliged entity include, for example, the obligation to enable, i.e. not to obstruct, the submission of reports, the obligation to ensure the confidentiality of reports and records thereof (only the obliged person should be able to see the reports), the obligation to archive records of reports, the obligation to take appropriate measures to remedy the situation outlined in the report, etc.
5. What risks are there in case of failure to meet the obligations and afford protection?
The adverse consequences of failure to comply with the obligations under whistleblower protection legislation can be essentially twofold.
In private law, there may be an obligation to compensate the protected whistleblower or another person protected under the law for material and non-material damage (see above).
In addition, liability for an offence may arise. The draft envisages minor offences in relation to both the obliged entities and the competent person.
It needs to be noted that, once the law is adopted, the introduction and proper implementation of the reporting system will be one of the prerequisites for exculpation from liability for minor offence or criminal offences on the part of the legal person; the legal entity will not be held liable if it proves that it has done everything that could have been reasonably required of it to prevent the commission of the offence.
The present bill of the Whistleblower Protection Act is not drafted to perfection which is to be expected. In a number of respects, it relies on the addressee of the obligations being cognizant of the case law of the European Court of Human Rights on whistleblower protection and establishing and implementing a whistleblowing system with that in mind. This further blurs an already abstract and opaque legislation, in particular for someone who has not yet encountered whistleblowing.
In addition, one has to keep in mind that the whistleblowing system must be set up, implemented and enforced in accordance with the data protection rules (GDPR).
Our office relies on extensive past experience with legal issues surrounding whistleblowing. During the past 10 years, our colleague, Jakub Morávek, has published a number of articles and co-authored several publications on the topic of whistleblowing. He is a member of an expert advisory group that has been consulted on the draft legislation.
We stand ready to provide you with full support and assistance to prepare for the new whistleblower protection legislation, including:
– Providing details of the forthcoming legislation;
– Training of relevant staff and the competent persons;
– Drafting and implementing internal rules governing the reporting process;
– Assistance in the handling of reports;
– Performing the tasks of a competent person.
Author: doc. JUDr. Jakub Morávek, Ph.D.