Complex solution of the notification system - Whistleblowing

JUDr. Jakub Vozáb, PhD. 27.07.2023

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When should an internal notification system be deployed

On August 1, 2023, the Act on the Protection of Whistleblowers will enter into force, according to which every company with 50 or more employees is obliged to implement an internal reporting system that will enable written, oral or personal notification of illegal activity that the whistleblower becomes aware of in connection with the performance of their work .

Employers with at least 50 and at the same time less than 250 employees are required to implement the system by 15 December 2023. Employers with 250 or more employees already have this obligation from 1 August 2023.

Responsibility for the deployment and operation of the internal notification system -------------------------------------------------- -------------

The employer is responsible for the implementation and operation of the notification system. However, in order to fulfill the obligations when processing the submitted notifications within the deadlines set by law, a certain natural person (the so-called „relevant person“) must be authorized, who is then responsible for the fulfillment of their obligations under a fine of up to CZK 100,000, which the Ministry of Justice may impose during an inspection.

Choice of notification system

Most often, the choice of an electronic solution available online will be offered, which will be more impractical in many ways, whether it is about ensuring the confidentiality of the whistleblower's i­dentity and all communication with the „relevant person“ and the related flow of information and documents within the company, as well as about ensuring transparency and documentation fulfillment of the requirements of the law for the prevention of retaliatory measures, etc.

Due to the requirement of the law for the possibility to submit a notification in writing outside of the internal notification system or even orally (an audio recording or a written recording is required that faithfully captures the essence of the oral notification, in the case of an audio recording a written transcript must be subsequently made), in addition to the electronic solution, it is necessary to keep and physical files.

After all, the law requires that the „relevant person“ keep an electronic record of data on submitted notifications (a kind of overview), but at the same time to keep notifications submitted through the internal notification system and documents related to the notification for a period of 5 years from the date of receipt of the notification, when it is no longer discussed in electronic form. It will probably be proposed that the „relevant person“ keep physical files regarding the notifications submitted, where they will keep all notifications, i.e. both submitted electronically and subsequently printed, as well as those submitted in writing or written records or transcripts of audio recordings of notifications submitted orally and, of course, all related documents.

Conditions for performing the function of „relevant person“

Integrity is a basic condition. Furthermore, the law imposes a requirement of impartiality on the „relevant person“ and stipulates the obligation of confidentiality regarding all facts learned while performing the function. From the principle of the matter, the legal regulation thus forces that the function of „relevant person“ is performed by a person with whom there is no risk of a conflict of interests between the employer and the whistleblowers. This will usually be unfulfillable in the case of an internal employee, if the content of his work is not exclusively the performance of the „relevant person“ function. This applies all the more if it were to be a worker in a leadership position or an employee of the personnel department, etc. In addition, the question is what if it is an internal employee who performs the function of „relevant person“ who wants to file a report?

Avoidance of retaliation

The employer must provide whistleblowers with protection from retaliation, which is any negative consequences as a result of reporting.

It is important to mention that whistleblower protection under the law only applies to those who identify themselves. Thus, it will be common for whistleblowers to state their identity in an attempt to ensure protection, and therefore that the „relevant person“ practically always learns the whistleblower's i­dentity. Therefore, it is really important that the function of „relevant person“ for each employer is carried out by a person who is not and cannot potentially be in a conflict of interest between the employer and the employee/whis­tleblower.

At the same time, if the company „allows the whistleblower to be subjected to retaliatory measures“, it is possible to impose a fine of up to 1 million CZK. Thus, mere negligence in setting up the system or inappropriate selection of the „relevant person“ may in certain circumstances lead to the imposition of a fine on the company. In addition, the whistleblower can demand payment of non-material damages from the company for the violation of his rights, where the burden of proof is transferred to the employer.

Registration and archiving obligation of the „relevant person“

Among other things, the relevant person is obliged to keep the notification submitted through the internal notification system and the documents related to the notification for a period of 5 years from the date of receipt of the notification. Of course, so that no one has access to them. At the same time, the question is whether it is possible to secure it within the company, when the possible safe etc. are owned by the employer.

It should be noted that such documentation on the submitted notification, including the investigation of its justification, will usually contain information and documents that are very sensitive for the employer. In this context, it is good to think about whether it is even appropriate for an internal employee to dispose of such documentation. In other words, from the point of view of the employer's in­terests, it is at all appropriate for the „relevant person“ to be an internal employee. His working relationship may end not for good, he may feel wronged, and then there is the question of how he will deal with sensitive documents. A situation where the employer will deal with the „relevant person“ in breach of duty or even termination of the employment relationship can be quite unpleasant for the employer.

Ability to deploy a third party system

The law provides for the possibility of entrusting the management of the internal notification system to another person, or to use a third-party solution usually provided commercially, even in the form of an electronic solution available online. Of course, as mentioned above, a combination of an electronic system with physically kept files will be necessary.

Make whistleblowing part of the company culture

If whistleblowing is already mandatory, why not make it a company advantage and part of company culture. Show that you are not afraid of changes and that you want the company to be better, and that the employees themselves can also contribute to this. Give them the opportunity to become part of the company and support the company's internal notification system.

Recommendation of our law firm

After a thorough evaluation of commercially offered solutions, our office decided to cooperate in the given area with the provider of the electronic internal reporting system Whistleblower Software https://whistleblowersoftware.com/cs.

We offer our clients 2 options:

1. A comprehensive solution for the outsourcing of an internal notification sys­tem

• We will ensure the deployment and operation of the Whistleblower Software system in the company, including the necessary license
• We will ensure the performance of the „relevant person“ function, including the associated responsibility for fulfilling obligations under the law

Advantages:

• A comprehensive solution delivered by a law firm covered by liability under the Advocacy Act
• We are responsible for fulfilling the obligations of the „relevant person“ according to the Whistleblower Protection Act
• Exclusion of conflict of interests of employer and employee/whis­tleblower
• Guarantee of confidentiality of whistleblowers' identity and prevention of retaliatory measures within the company
• Sensitive information and documents will be in the hands of your lawyers, not an internal employee
• Our lawyers are replaceable, it will not happen that the „relevant person“ is on vacation or incapacitated
• outsourcing increases employees' confidence in the impartiality of the system and the absence of the risk of retaliation

Cons:

• Costs of outsourcing services

Service price from 5,000 CZK without VAT/month + license price Administration of submitted notices ad hoc according to work according to the hourly rate agreed with the client. 

2. Legal assistance when implementing Whistleblower Software in a company

• the client has its „relevant person“ responsible for the fulfillment of obligations
• the client has a license agreement directly with the supplier of the electronic system and pays for the license directly to him

Advantages:

• Elimination of service outsourcing costs

Cons:

• The client and the „relevant person“ are responsible for fulfilling the obligations under the Act on the Protection of Whistleblowers
• Risk of fines under the control of the Ministry of Justice
• Sensitive information and documents outside the company's control
• The possibility of abuse of the position of „relevant person“ and the sensitive information and documents available to him
• In the case of the „relevant person“, a conflict of interests between the employer and the whistleblower cannot be completely ruled out

Price of the service: 10,000 CZK without VAT once The price includes the initial implementation including an internal directive. Furthermore, the client pays the price of the license himself.

Key words: whistleblowing system, internal reporting system, relevant person, Act No. 171/2023 Coll., Whistleblower Protection Act

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