Whistleblower Protection Act: who does it oblige?

Who is a whistleblower or whistleblower

A whistleblower, also called a whistleblower, is an individual or group of people who expose illegal, unethical or harmful activities that are happening in their company. Whistleblowers often play a key role in exposing corruption, human rights abuses, environmental damage, financial misconduct and other illegal activities. Their protection and support are therefore important to ensure accountability, transparency and legal certainty in society.

A well-known whistleblower is, for example, Heffrey Wigand, who was involved in the development of Brown & Williamson cigarettes. He blew the whistle on dangerous practices in the development of cigarettes that involved mixing tobacco with harmful substances to enhance the effects of nicotine.

Why the law was passed

TheWhistleblower Protection Act was created as a result of the obligation to implement the EU Directive, which required Member States to amend their legislation to allow for the protection of whistleblowers. The directive was issued in 2019 and states were obliged to implement it by December 2021. However, in our country the law itself came into force with a delay until 1 August 2023.

The introduction of whistleblower protection rules was important for many reasons:

• Protecting democratic principles and the rule of law: the Whistleblower Protection Act contributes to strengthening democratic principles and the rule of law by allowing people to blow the whistle on illegal activities in the private sector without fear of reprisals or reprisals.
• Fighting corruption and illegality: the Whistleblower Protection Act is a key tool in the fight against corruption, fraud, abuse of power and other illegal activities. It can help whistleblowers to expose hidden wrongdoing that would otherwise remain hidden.
• Promoting transparency and integrity: The introduction of the law promotes a culture of transparency and integrity in the private sector. Reporting illegal activities and breaches of ethical standards contributes to the prevention and detection of problem areas that can threaten both the public interest and the very functioning of companies.
• Protection of human rights and freedoms: The Whistleblower Protection Act protects the rights of whistleblowers to freedom of expression and informed decision-making. It provides them with the space and protection to report serious wrongdoing to a designated body without fear of reprisal, discrimination or legal persecution.

What can be reported

It is possible to report an unlawful act committed or to be committed by a person (natural or legal) for whom the whistleblower performs or performs work or other similar activity, or with whom he is or has been in contact in connection with the performance of work or other similar activity.

For the purposes of this Act, work or other similar activity means:

• dependent work performed in a basic employment relationship,
• service,
• self-employment,
• the exercise of rights associated with participation in a legal person,
• exercise of the functions of a member of a body of a legal person,
• performance of tasks within the scope of the activities of the legal person, in its interest, on its behalf or on its account,
• administration of a trust fund,
• volunteer activities,
• professional practice or internship,
• the exercise of rights and obligations under a contract for the provision of supplies, services, works or other similar services, or
• applying for a job.

The notification may then relate to an activity which:

1. has the characteristics of a criminal offence, or
2. has the characteristics of an offence for which the law provides for a fine of at least CZK 100 000, or
3. violates the Whistleblower Protection Act or any other legislation or regulation of the European Union in the area
   • financial services, statutory audit and other assurance services, financial products and financial markets,
   • corporate income tax,
   • prevention of money laundering and terrorist financing,
   • consumer protection,
   • compliance with product requirements, including product safety,
   • transport, transport and road safety,
   • environmental protection,
   • food and feed safety and animal health,
   • radiation protection and nuclear safety,
   • competition, public auctions and public procurement,
   • protection of internal order and security, life and health,
   • protection of personal data, privacy and security of electronic communications networks and information systems,
   • the protection of the financial interests of the European Union, or
   • the functioning of the internal market, including the protection of competition and State aid under European Union law.

Who has obligations under the Whistleblower Protection Act

The Act sets out the so-called obliged entities that are obliged to receive notifications and comply with the whistleblower protection rules. These include:

• A public contracting authority, except for a municipality with less than 10,000 inhabitants.
• Employers employing at least 50 employees as of January 1 of a given year.
• Public authorities operating in the field of corporate income tax administration or administration of the levy for breach of budgetary discipline.
• A public authority exercising powers and a person carrying out activities in the civil aviation, maritime transport or offshore oil and gas sectors.
• Employers carrying on a capital market business or providing consumer credit. In addition, investment firms or funds, central counterparty or trade repository and insurance or reinsurance companies and intermediaries.

What the obliged entities must ensure

Establish an internal notification system

Obliged entities must establish an internal reporting system. They may outsource this to a third party or share it with other obliged entities. The notifier must be able to submit the notification in writing or orally.

The law sets out the mandatory information that the notifier must provide about itself. Specifically, this includes the name, surname and date of birth or other information that will ensure the identification of the whistleblower (e.g. assigned identification number).

Upon receipt of the notification, a period of 30 days (or a maximum of 90 days in the case of a complex issue) shall run for the notifier to receive written notification of the results of the assessment of his notification. If the notification is found to be substantiated, the obligated entity (e.g., the employer) must correct or prevent the violation.

In addition to the internal whistleblowing system, whistleblowers can also use the so-called external whistleblowing system, which is administered by the Ministry of Justice.

Appoint the appropriate person

Obliged entities must also designate a competent person to receive and assess notifications submitted through the internal notification system. He or she is also responsible for proposing measures to remed y the infringement following a notification. It must also comply with the instructions of the obliged entity, but only if they do not jeopardise or interfere with the performance of its activities.

In any event, it shall act impartially and shall maintain confidentiality of the facts of which it has become aware in the exercise of its activities under this Act, even after the exercise of those activities has ceased.

Measures of reprisal

An important part of the Whistleblower Protection Act is the prohibition on retaliation. That is, measures that an obliged entity could take against a whistleblower or other person concerned (e.g., a person close to the whistleblower or a person who assisted the whistleblower) to cause harm to the whistleblower for making a report. Examples of such retaliatory measures can be found in the Act. These may include:

• termination of employment or non-renewal of employment for a fixed term,
• dismissal from service, out-of-service assignment or termination of service,
• the termination of a legal relationship based on an agreement on the performance of work or an agreement on work activity,
• removal from the post of senior staff member or from the post of superior,
• the imposition of a disciplinary measure or a disciplinary penalty,
• reduction of salary, wages or remuneration or failure to grant a personal allowance,
• transfer or reassignment to another job or post,
• a service appraisal or performance review,
• failure to allow professional development,
• change of working or service hours,
• requiring a medical report or an occupational health examination,
• resignation or withdrawal from the contract, or
• interference with the right to protection of personality.

Penalties for non-compliance with the Whistleblower Protection Act

• Penalties for individuals: it is an offence if a person makes a report even if they know it is not true. This is punishable by a fine of up to 50,000 crowns.
• Penalties for relevant persons: relevant persons may be guilty of an offence in relation to the failure or misconduct of their duties. They may be fined up to a maximum of CZK 100 000.
• Penalties for obliged entities: Obliged entities are liable to penalties in connection with failure to comply with their obligations under the Whistleblower Protection Act. They may be guilty of an offence with a fine of up to CZK 100,000.

Summary

The Whistleblower Protection Act represents an important step towards strengthening democratic principles, transparency and the rule of law in the Czech Republic. Its entry into force on 1 August 2023 ensures the protection of persons who blow the whistle on illegal or unethical conduct, thereby contributing to the detection of corruption and other wrongdoing. Mandatory entities, including contracting authorities and employers with more than 50 employees, must implement internal whistleblowing systems and ensure that whistleblowers are protected from retaliation. The law also provides for strict penalties for violations, which is intended to prevent abuse of whistleblowing rights and obligations.