Whistleblowing

ARROWS lawyers know that in today's dynamic business environment, transparency and ethical conduct are not only a moral imperative but also a key factor for long-term success and sustainability. Whistleblowing, or whistleblower protection, is becoming an integral part of modern corporate culture and effective risk management. It is no longer just a matter of complying with legal obligations, but a strategic investment in the trust, reputation, and stability of your company.

(on the photo Vendula Růžková, specialist in whistleblower protection law, ARROWS)

Whistleblowing refers to the process whereby an employee or other person reports potential illegal, unethical, or wrongful conduct within an organization. This can range from financial fraud and corruption to threats to health, safety, or the environment.

The aim is to uncover and remedy problems before they cause widespread damage. This mechanism is essential for the early detection and resolution of internal issues, enabling companies to maintain control of the situation and prevent escalation that could lead to significant financial losses or damage to their reputation.

Whistleblower protection is critically important, as whistleblowers often fear retaliation such as dismissal, transfer, reduction in salary, or other disadvantages. The Whistleblower Protection Act, which is based on EU Directive 2019/1937, aims to eliminate these concerns and provide whistleblowers with robust protection.

For companies, this means not only legal compliance, but also strengthening internal integrity and preventing internal fraud. The implementation of an effective whistleblowing system thus moves companies from merely complying with legislative requirements to actively building a transparent and ethical corporate culture that attracts and retains talented employees and strengthens the trust of business partners and investors.

Nowadays, the role of legal advice in the field of whistleblowing has expanded significantly. It is no longer just about providing legal advice, but about actively participating in the creation and management of a comprehensive compliance infrastructure. Thanks to our partner companies, we provide comprehensive services under one roof.

This ensures that all aspects of whistleblowing—from legal advice and IT system setup to tax implications—are handled in a coordinated and efficient manner, without unnecessary chaos and wasted time. This integrated approach allows companies to obtain a comprehensive solution that covers all necessary areas and minimizes administrative burdens.

Who can you contact?

What ARROWS law firm most frequently does for companies in the area of whistleblowing

ARROWS law firm has experience in the fact that an effective whistleblowing system is tailored to the needs of each company and takes into account its specific characteristics. Our lawyers routinely handle complex matters related to whistleblower protection for our clients to keep your business safe and compliant with the law. Providing these services is crucial for companies, as it allows them to turn a potential legal burden into a tool for strengthening internal integrity and preventing risks.

The most common services we provide to our clients cover the entire spectrum of needs, from preventive measures to reactive solutions to situations that arise. This comprehensive approach ensures that companies are prepared for all aspects of whistleblower protection and can focus on their core business activities.

Comprehensive setup of an internal reporting system (VOS)

We design and implement internal reporting systems that meet all legal requirements. This includes setting up secure and confidential channels for reporting, whether in writing, verbally, by telephone, or via online platforms. We ensure that the system also allows anonymous reporting if the client so requests. The correct setup of these channels is essential for building trust among whistleblowers and ensuring that important information reaches those who can address it.

Creation and revision of internal guidelines and regulations

We prepare and update all necessary internal documentation, including codes of ethics, whistleblowing rules, and guidelines for the protection of whistleblowers, to ensure compliance with Czech law and EU directives. High-quality internal regulations are the foundation for a transparent and comprehensible system that minimizes legal risks.

(in the photo: the ARROWS law firm team)

Employee and management training

We provide training for your employees and managers to raise awareness of whistleblowing, its importance, and the correct procedures for reporting and handling reports. Effective training is essential for building a culture of openness and a proactive approach to detecting misconduct.

Internal investigation and resolution of reports

Our lawyers conduct thorough internal investigations based on reports received, assess their merits, and propose appropriate corrective measures. We ensure that deadlines are met and the identity of the whistleblower is protected. Quick and discreet resolution of internal issues prevents their escalation and possible leakage to the public, protecting the company's reputation.

Representing clients in disputes and before authorities

In the event of disputes, inspections by the Ministry of Justice or other public authorities, we provide comprehensive legal representation and defense. We help companies seek compensation for damages in the event of knowingly false reports. This reactive aspect of our services is essential for protecting the rights and interests of the company in the event of legal complications.

IT solutions and data security

We work with trusted partners to provide robust and secure IT solutions for reporting channels, including encrypted communication and personal data protection. We use modern technologies, including artificial intelligence, for more efficient data analysis and processing. A secure IT infrastructure is the foundation of a trustworthy system that protects sensitive information and the identity of whistleblowers.

The 5 most common problems that ARROWS lawyers solve for clients in this area

ARROWS lawyers solve everyday challenges related to whistleblowing for clients, which can threaten the stability and reputation of your company. We understand that you don't want to deal with legal complications that distract you from your core business. These issues are often intertwined, where legal failures can result in financial losses and reputational damage, underscoring the need for a comprehensive solution.

The following table summarizes the key risks and penalties associated with non-compliance with whistleblower protection laws that can have far-reaching implications for your business.

Type of Violation	Potential Sanctions/Consequences
Failure to implement the internal reporting system (VOS)	Fine of up to CZK 1,000,000 for the company
Enabling retaliatory measures	Fine of up to CZK 1,000,000 for the company; Compensation for non-pecuniary damage to the whistleblower
Knowingly false report	Fine of up to CZK 50,000 for the whistleblower
Unaddressed unlawful conduct	Loss of trust and reputational risk; Risk of criminal liability for the legal entity

1. High fines and penalties for non-compliance with the law

The Whistleblower Protection Act sets out clear obligations for mandatory entities (companies with 50 or more employees), the violation of which may result in significant fines.

Failure to implement an internal reporting system, ensure the confidentiality of the whistleblower's identity, or prevent retaliation may result in fines of up to CZK 1 million for companies. Individuals who knowingly make false reports may be fined up to CZK 50,000. These financial penalties represent a significant risk to a company's budget and can undermine its stability.

ARROWS lawyers routinely set up systems to help our clients avoid these financial penalties and give them peace of mind that they are in compliance with the law. This proactive approach to compliance is key to protecting financial interests and ensuring the smooth running of a business.

Who can you contact?

2. Loss of trust and reputational risk

Unresolved or poorly handled internal issues that become public knowledge can cause a huge loss of trust among customers, partners, and employees. Negative publicity and reputational risk can have long-term impacts on your brand value and business relationships. In the digital age, information spreads quickly, and damage to your reputation can have much more serious and lasting consequences than financial penalties alone.

ARROWS Law Firm has experience showing that a transparent and effective whistleblowing system strengthens corporate culture, increases employee trust, and protects your company's reputation by enabling discreet and timely problem solving. This helps you maintain control over the narrative and prevent media crises.

3. Chaos and escalation of internal problems

Without clearly defined processes for receiving and resolving reports, chaos can ensue. Internal problems can spread unchecked, escalate, and lead to serious disputes within the company that disrupt productivity and morale. Inadequate structure and unclear responsibilities lead to delays, frustration, and a sense of powerlessness among employees, which further undermines trust in management.

ARROWS lawyers routinely address this issue in practice by setting up structured and comprehensible processes that ensure that every report is properly assessed and resolved within the statutory deadlines. This prevents escalation and maintains calm within your company, enabling management to respond effectively and maintain control.

4. Loss of time and wasted costs

Improvised whistleblowing solutions, insufficient legal knowledge, or procedural errors lead to a huge loss of time and wasted financial resources. Internal teams that are not specialists in this area can become overburdened and distracted from their core tasks. Attempting to resolve complex legal and compliance issues without the appropriate expertise often proves costly in the form of repeated mistakes and inefficient processes.

ARROWS Law Firm has experience in outsourcing this agenda to a specialized law firm such as ARROWS, which will save you valuable time and ensure a cost-effective solution. Our experience in providing long-term services to our clients, including more than 150 joint-stock companies and 250 limited liability companies, allows us to offer optimized and proven procedures. This minimizes the hidden costs associated with internal administration and maximizes efficiency.

Who can you contact?

5. Risk of criminal liability of legal entities

Serious illegal acts such as corruption, fraud, or environmental violations can lead to criminal liability for legal entities. An effective reporting system serves as an early warning mechanism that can help a company identify and remedy illegal acts in a timely manner, thereby avoiding criminal prosecution. The absence of such a system or its ineffectiveness may be an aggravating factor in the event of an investigation.

We help companies set up internal processes that are tax- and time-efficient while minimizing the risk of criminal liability. A proactive approach to compliance and timely resolution of internal issues are key to protecting company management and assets.

Whistleblowing in practice

ARROWS lawyers know that understanding the theoretical basics is one thing, but the real value is revealed in practice. That is why we provide you with detailed insight into how whistleblowing manifests itself in a real business environment and how our lawyers help you deal with these situations effectively. The complexity of legal regulations and their application in different jurisdictions requires in-depth expertise and adaptability.

Legal obligations and practical challenges for your company

The Czech Whistleblower Protection Act (Act No. 171/2023 Coll.) is a direct transposition of European Directive (EU) 2019/1937, which aims to strengthen the protection of persons reporting breaches of Union law. The Czech Republic was one of the last EU countries to approve this legislation, under threat of heavy fines from the EU. This fact underscores the importance and urgency of implementing these systems.

Who is required to implement the system?

The obligation to implement an internal reporting system (VOS) applies to employers who employ at least 50 employees as of January 1 of the calendar year. This includes employees under employment contracts and agreements concluded outside of employment. Companies with 250 or more employees were required to implement the system by August 1, 2023. Smaller and medium-sized companies (with 50 to 249 employees) had until December 15, 2023.

(The premises of our law firm, where we provide legal services to our clients.)

What can be reported?

Reports concern information about possible illegal conduct that constitutes a criminal offense, an offense with a maximum fine of at least CZK 100,000, a violation of the Whistleblower Protection Act itself, or other legal regulations or EU regulations in areas such as public procurement, financial services, personal data protection, the environment, public health, money laundering, and more.

Practical challenges in implementation

The implementation of whistleblowing systems brings a number of practical challenges, especially for small and medium-sized enterprises (SMEs), which often lack the resources and infrastructure of large corporations.

Limited resources

Small and medium-sized enterprises often do not have dedicated compliance and legal departments, which makes it difficult to set up sophisticated whistleblowing mechanisms. Implementing secure reporting channels, training employees, and ensuring adequate follow-up investigations requires investments that many SMEs cannot afford.

Ensuring confidentiality and anonymity

In smaller organizations where employees and management know each other personally, maintaining the anonymity of whistleblowers is more difficult. The risk of exposure may discourage potential whistleblowers from coming forward.

Cultural resistance

Some owners and managers may perceive whistleblowing as a threat rather than protection, thereby hindering the development of a culture of openness and transparency. Overcoming this resistance and creating an environment where reporting is seen as a positive contribution is a long-term process.

Complexity of mechanisms

Reporting processes can be unclear and complicated for employees, discouraging them from using them. Without clear, visually accessible guidelines, employees may feel uncertain about how to proceed, and their concerns will remain unaddressed.

How effective is your reporting system in protecting your business?

A well-designed and functional whistleblowing system is much more than just a legal obligation. It is a powerful tool for proactive risk management that brings tangible benefits to your company. A properly implemented system not only protects against sanctions, but also actively contributes to strengthening corporate culture and trust.

Secure reporting channels

The law requires companies to enable reports to be made in writing (including a physical mailbox or online platform) or verbally (by telephone or in person). It is essential to ensure the confidentiality and protection of the whistleblower's personal data. The relevant person reviews reports in a manner that ensures the complete anonymity of the whistleblower.

ARROWS lawyers routinely address this issue in practice by implementing technical and organizational measures that guarantee the security and confidentiality of the entire process, including encrypted electronic communication and secure physical documents. This emphasis on security and confidentiality is essential to encourage employees to report and to minimize the risk of sensitive information being leaked.

The role of the “relevant person” – the heart of the system

The relevant person is key to the impartial and confidential assessment of reports. They must be of integrity and bound by confidentiality. Their duties include notifying the reporter of the receipt of the report within 7 days and of the results of the assessment within 30 days (with the possibility of extending this to 90 days in complex cases).

Protection of whistleblowers against retaliation

The law expressly prohibits any retaliation against whistleblowers, such as dismissal, demotion, reduction in salary, or transfer to a lower position. The burden of proof in any dispute lies with the obligated entity. This protection also applies to persons close to the whistleblower or those who assisted them in making the report.

ARROWS Law Firm has experience in understanding that effective whistleblower protection is the foundation for building trust and a “speak-up” culture within a company. When employees feel safe, they are more willing to report problems internally, allowing the company to address them discreetly and effectively, rather than having the information become public.

Benefits for your organization

An effective whistleblowing system brings a number of benefits that go beyond mere compliance with the law.

• Early identification of problems: The system acts as an early warning mechanism that allows fraud, corruption, or other malpractices to be detected before they escalate and cause extensive damage or loss of trust. This allows the company to respond proactively and minimize negative impacts.
• Prevention of financial loss and reputational damage: Early resolution of internal issues prevents information from leaking to the public and minimizes the risk of fines and reputational damage. Discreet handling of internal matters protects the company from public scandal and maintains its good reputation.
• Strengthening corporate culture and employee motivation: A proactive approach to whistleblowing signals a commitment to ethics and transparency, which strengthens employee trust, increases satisfaction and loyalty. This contributes to a better working environment, reduces turnover, and creates a culture where employees feel safe and are willing to report issues, which is invaluable for the long-term success of the company.

Why ARROWS: Your reliable partner for whistleblowing

The lawyers at ARROWS know that choosing the right legal partner for such a sensitive area as whistleblowing is crucial. Our law firm is a modern company that prides itself not only on its extensive experience, but also on its proactive approach and commitment to your peace of mind and trust. Our goal is to provide a comprehensive solution that eliminates the chaos and wasted time associated with compliance, allowing you to focus on your business.

Comprehensive expertise under one roof

With a team of more than 60 lawyers and tax advisors in the Czech Republic and thanks to our partner firms, we offer comprehensive legal and tax services. This means that we handle all aspects of your whistleblowing system efficiently and in a coordinated manner. This integrated approach ensures that clients do not have to seek solutions from multiple entities, saving time and minimizing the risk of misunderstandings.

Who can you turn to?

Experience that counts

With over 15 years of experience in the market and an extensive portfolio of clients, including hundreds of joint-stock companies and limited liability companies, we have deep insight into the needs of entrepreneurs.

Our ARROWS lawyers regularly deal with these issues in practice and deliver proven solutions. This wealth of experience enables us to anticipate potential problems and propose proactive strategies that protect your business.

Global reach with local understanding

Thanks to our ten-year-old ARROWS International network, we are able to provide legal services outside the Czech Republic and effectively coordinate international projects. Our international experience ensures that your business complies with global standards while taking into account the specifics of local legal systems. This is crucial for companies with international operations that need a uniform and reliable compliance framework.

Innovation for your efficiency

We are a modern firm that is not afraid to use the latest technologies, including artificial intelligence, to streamline legal processes. The use of AI, for example in document analysis or pattern identification in notifications, allows us to work faster, more accurately and at a lower cost to you. This translates directly into savings in your time and money, which is crucial for busy managers and investors.

Personal approach and partnership

We understand that legal matters can be complex. That's why we always assign you a specific lawyer who will guide you through the entire process and ensure that you always receive clear and practical information, not pompous wording.

Don't let risks jeopardize your business. Contact ARROWS lawyers for a no-obligation consultation and find out how we can protect your business, strengthen your reputation, and give you peace of mind in compliance with the law.

The future of transparent business with ARROWS

In today's world, where transparency and accountability are under scrutiny, an effective whistleblowing system is a fundamental pillar for any successful company. It's not just about complying with the law, but about building a strong, ethical, and resilient organization that values the trust of its employees and partners. Proactively investing in a robust whistleblowing system is an investment in the long-term stability and reputation of your company.

ARROWS Law Firm is your reliable partner on this journey. With our in-depth expertise, international reach, modern technologies, and proactive approach, we will help you not only meet all your legal obligations but also turn whistleblowing into a strategic advantage. Our comprehensive services are designed to give you the assurance that your business is safe and compliant with the highest ethical and legal standards.

Don't leave anything to chance. Contact us today to find out how we can help your company thrive in a transparent and secure environment.

Don't want to deal with this problem on your own? More than 2,000 clients trust ARROWS Law Firm, and we have been named Law Firm of the Year 2024. Take a look at our references HERE, and we will be honored to help you solve your problem. The inquiry is free of charge.