Five misconceptions about the new Czech Whistleblower Protection Act

Czech Republic

The legislative process of the Czech Whistleblower Protection Act (the “Act”), which transposes EU Directive 2019/1937 on the protection of persons who report breaches of Union law (the “Directive”), is finally completed. The Act will become effective on 1 August 2023.

The Act will allow individuals (whistleblowers) to draw attention to potentially unlawful conduct at an entity or individual person for which/whom the whistleblower works or with which/whom the whistleblower is in contact in work-related context. The Act introduces a new obligation to establish an internal reporting channel for whistleblowers and designate an impartial person to deal with the reports. This obligation will apply, among others, to employers with at least 50 employees. The Act also allows whistleblowers to make reports via an external reporting channel to the Ministry of Justice and, in the most severe cases, even make the report public.

These rules, deriving from the Directive, have been widely known and discussed in the media; however, there are still many misconceptions regarding the Act that require clarification. Continue reading to learn about the five most common misconceptions.

No. 1: The Act only affects employers with at least 50 employees

Although employers with fewer than 50 employees indeed generally do not have to establish an internal whistleblowing channel (with some exceptions), whisleblowers can still report potential unlawful conduct through the external reporting channel to the Ministry of Justice or, in the most severe cases, make a public disclosure. Therefore, employers with fewer than 50 employees may also want to consider implementing an internal channel through which whisleblowers would be able to raise their concerns to mitigate the risk of external reports of public disclosures.

Moreover, some provisions of the Act, such as the prohibition on retaliation against the whistleblowers, apply to all employers irrespective of the number of employees.

No. 2: The reports can relate to any unlawful or unethical practices at a company

Although whistleblowers can theoretically report any unlawful or unethical practice, to fall within the scope of the Act and to enjoy special treatment and protection, the report must concern conduct that: (i) shows signs of a criminal offence; (ii) shows signs of an administrative offence where the maximum fine is at least CZK 100,000 (approx. EUR 4,250); (iii) breaches the Act; or
(iv) violates EU legal regulations or other legal regulations in areas specified by the Act and the Directive, such as the protection of the environment, consumer protection, product safety, data protection, public tenders, AML, etc.

This means that other reports (typically those related to internal codes of conduct or employee relations such as bullying or bossing) generally do not fall within the scope of the Act and employers do not have to treat such reports in the manner required by the Act.

No. 3: Whistleblowers can make anonymous reports

Contrary to whistleblower legislation in many EU countries, the Czech Act does not require anonymous reports to be dealt with. A report must contain the whistleblower’s name, surname and date of birth or other details allowing the whistleblower to be identified, otherwise the employer can disregard it.

No. 4: If a company already has an ethics hotline, it does not have to bother with the Act

Although employees can use ethics hotlines or similar internal channels that companies already have in place to report issues that fall within the scope of the Act, these channels do not usually ensure that adequate procedural steps follow such reports. Special requirements apply if a report is made within the scope of the Act, such as:

  • a mandatory option to make the report in person within 14 days on the whistleblower’s request;
  • special deadlines for the confirmation of receipt of the report (7 days) and for the assessment and investigation of the reports (30 days, that can be extended);
  • very strict confidentiality requirements;
  • special requirements for keeping records.

Therefore, companies with existing ethics hotlines or similar reporting channels should review them and align them with the new legal requirements, or establish a separate whistleblowing channel.

No. 5: There will be enough time to establish an internal whistleblowing channel

Smaller employers with 50 to 249 employees will have a generous deadline until 15 December 2023 to implement an internal reporting channel. However, the situation is much tighter for employers with at least 250 employees; they will have to have an internal whistleblowing channel immediately on the effective date of the Act, which will be 1 August 2023. 

As the effective date of the Act is approaching quickly, employers should take all necessary steps to ensure compliance as soon as possible. Non-compliance will be punishable by a fine of up to CZK 1,000,000 (approx. EUR 42,000); however, the fine is not the only risk employers may face. In addition, a failure to establish and operate a truly functional internal whistleblowing channel may make it impossible to absolve the company from criminal liability for acts committed by its employees or directors in business-related context, or may lead to whistleblowers making reports of potential violations to the Ministry of Justice, or publicly disclosing their concerns, which may significantly hurt the company’s PR.

If this topic concerns you, do not miss our invitation to a seminar that our employment and compliance professionals will host in September at CMS’s Prague office.