Whistleblowing can be defined as the option to report wrongful or unethical behavior within a company without the whistleblower facing retaliation, i.e. any sanction such as bullying at the workplace, reduction of wage or other bonus, or loss of the job as such.
The Czech Republic has so far lacked – and still lacks for private entities – a comprehensive regulation of this institute. This will probably change later this year with the adoption of a new law on the protection of whistleblowers by which Directive of the European Parliament and Council (EU) no. 2019/1937 dated October 23, 2019, on the protection of persons reporting infringement of the EU laws will be implemented in the Czech system of law. According to the requirements of the Directive, the draft law should have been adopted by December 17, 2021, which unfortunately failed. It is expected, however, that the draft bill will be heard again and adopted in the course of this year.
As there was general agreement during the approval of the bill, it may be assumed that the bill will be discussed in a very similar wording. There may be a change in the number of employees upon which it is necessary to introduce an internal reporting system. While according to the Directive, an internal reporting system should be introduced in businesses with more than 50 employees, the Czech bill is making this rule more strict and requires the introduction of an internal reporting system in business with more than 25 employees.
With effect of this bill, business entities will be obliged to implement a so-called internal reporting system. This is a set of procedures and tools for receiving reports, handling them, protecting the identity of reporting persons and other persons, and protecting the information stated in the report and communication with the reporting person.
Who will be obliged to introduce an internal reporting system?
- A large part of all employers (it is currently being considered whether the threshold will remain on 50 employees as required by the Directive, or reduced to 25 as stated in the preceding draft bill);
- public contracting authorities pursuant to the Public Procurement Act, with the exception of municipalities with less than 5,000 inhabitants, unless it is a municipality with extended powers;
- other obligated persons listed by law, in particular business operating in the field of providing and intermediating consumer loans, investment companies and funds, insurance and reinsurance brokers and insurance and reinsurance companies.
What obligations will be imposed upon these entities?
In addition to the obligation to introduce an internal reporting system, it will be necessary:
- to provide whistleblowers with protection against retaliation;
- to designate a person in charge of receiving and investigating individual reports;
- to comply with the deadlines for receipt and assessment of individual reports;
- to keep records of received reports and file them for 5 years following the date of receipt thereof.
When is it required to introduce an internal reporting system?
The deadline by which obligated entities are required to introduce an internal reporting system will be stipulated by law. However, it is not out of the question to introduce it before the law requires. Why would that be?
First of all, it should be borne in mind that a properly introduced internal reporting system serves not only to reporting persons but also to employers. Thanks to the internal reporting system, potential internal issues of your company can be identified more quickly. It also offers an efficient tool to address them. Companies with a properly set up internal reporting system have up to a half less negative mentions in the media, their employees and other associates are more satisfied and feel that they are really being listened to.
The timely preparation of your internal reporting system will also ensure that your company will avoid heavy sanctions for non-compliance or errors in its operation. The draft law on the protection of whistleblowers reckoned with only a very short deadline for the introduction of the internal reporting system. Therefore, many companies are implementing it right now in order to make sure that they are ready in time. We therefore recommend that you do not postpone the preparation of your internal reporting system until the very adoption of the respective law.
How can we help?
We are cooperating with the “Don’t Let It Be“ platform, which deals with the management of internal reporting systems. Along with the platform, we can provide you with an easy and fast solution for the implementation of a tailor-made system as well as the subsequent system administration.
Do you already have the management of your internal reporting system provided by another supplier? That’s fine! Even in such a case, we will be happy to assess for you whether your system is in compliance with the proposed legislation.
Do not hesitate to contact us via e-mail or call us. We will be happy to explain your obligations arising from the draft bill and guide you through the entire process of setting up your internal reporting system exactly to suit your company’s needs.