Whistleblowing

Do you need to keep whistleblowing under control and protect your company from risks? At ARROWS Law Firm, we provide comprehensive legal services that will ensure your legal certainty and help you effectively resolve any situation related to the Whistleblower Protection Act. With our extensive experience, from preparing internal guidelines to representing you during inspections, we will turn your legal obligations into a strategic advantage. Find out exactly how we can help you.

(photo: Vendula Růžková, specialist in whistleblower protection law, ARROWS law firm)

Whistleblowing: More than just bureaucracy – Your early warning system

The term whistleblowing aptly captures the essence of the matter: reporting illegal conduct within an organization. However, it is not just another administrative burden. A properly set up whistleblower protection system is a key tool for risk management and protecting your company from within.

A functional whistleblowing system is the most effective way to detect fraud, corruption, or unethical behavior that could cost your company millions and damage its reputation. Studies repeatedly confirm that most fraud is detected through internal reports from employees, not external audits.

Employee trust in the internal system is absolutely essential. If your people do not believe that their reports will be handled discreetly and securely, they will turn to external channels or, in the worst case, the media. This means you lose control of the situation and face a public crisis.

At ARROWS, we will help you set up a system that your employees will trust, allowing you to keep sensitive matters within the company.

Investing in a high-quality reporting system is an investment in a healthy corporate culture. It promotes openness, increases employee loyalty, and sends a clear signal to business partners and customers that your company operates ethically and transparently. The lawyers at ARROWS deal with these issues on a daily basis and will help you turn them into a competitive advantage.

Does whistleblower protection apply to your company? Key obligations at a glance

Act No. 171/2023 Coll., on whistleblower protection, which implements the relevant EU directive into Czech law, sets out clear obligations for a wide range of entities. The deadlines for implementing the system have already passed, so now is the time to check whether your solution is fully compliant with the law.

Who must implement an internal reporting system (IRS)?

The obligation applies to a wide range of employers and institutions. If you fall into one of the following categories, you must have an internal reporting system (IRS) in place and operational:

• All employers with 50 or more employees (the number is always assessed as of January 1 of the calendar year).
• Public contractors, with the exception of municipalities with fewer than 10,000 inhabitants.
• Selected entities regardless of the number of employees, in particular those operating in the financial sector or subject to obligations under the Anti-Money Laundering Act (AML).

Who can you contact?

What exactly does the law require?

The law not only stipulates the obligation to "have" a system, but also defines its specific parameters. Our team at ARROWS will ensure that your system meets all legal requirements and is a real benefit to you. The key terms and requirements you need to know are:

• Internal reporting system (IRS): This is not just an email inbox. It must be a set of procedures and secure communication channels that allow reports to be made in writing, verbally, and, at the request of the reporting person, in person. The system must guarantee complete confidentiality.
• Competent person: Each obligated entity must appoint a specific, impartial, and trained individual who is responsible for receiving, assessing, and resolving reports. This person is personally responsible for their actions and faces significant penalties.
• Whistleblower protection: The law strictly prohibits any retaliatory measures against whistleblowers and other protected persons (e.g., colleagues or family members). These include, for example, dismissal, reduction in salary, transfer to another job, or any other disadvantage.

Personal liability and the risk of high fines for the relevant person is one of the biggest pitfalls of the law. Internal employees may be reluctant to take on this role without proper support. At ARROWS, we offer a solution: either we will professionally train your designated person and provide them with ongoing legal support, or we can perform the role of external designated person for you and thus fully assume the associated risks.

What risks are you taking? Financial penalties, reputational damage, and personal liability

Ignoring or inconsistently fulfilling whistleblowing obligations poses a serious risk to companies and their management. These are not just theoretical threats; inspections and sanctions are real and can be very painful.

(photo: ARROWS law firm team)

The most obvious risk is direct financial penalties. Companies that fail to implement a functional VOS, protect the identity of whistleblowers, or take retaliatory measures face fines of up to CZK 1,000,000. However, the law also provides for personal liability – the person responsible for the misconduct may be fined up to CZK 100,000.

The indirect consequences, however, can be much more serious. Litigation with an employee who feels aggrieved by retaliatory measures is costly and time-consuming. Moreover, the burden of proof lies with the employer, who must prove that the adverse measure was not related to the report.

The ARROWS team has extensive experience in representing clients in labor disputes and can help you prevent such situations.

The greatest damage is often not financial, but reputational. A report of internal misconduct that leaks to the public can irreparably damage the trust of customers, investors, and your own employees. Restoring your reputation is then much more expensive than any fine.

Key legislative risks and solutions

The following table summarizes the most common mistakes and shows how ARROWS specialists can help you avoid them.

Risk to Address	Potential Issues and Penalties	How ARROWS Helps
Missing or non-functional internal whistleblowing system (WBS).	Company fine up to CZK 1,000,000. Increased risk of external reporting and loss of control.	We conduct an audit, design, and implement a tailored WBS for your company.
No designated competent and properly trained "authorized person".	Company fine up to CZK 1,000,000. Personal fine for the authorized person up to CZK 100,000.	We provide expert training with certification or take on the role of an external authorized person.
Breach of confidentiality and whistleblower identity protection.	Company fine up to CZK 1,000,000. Loss of trust in the system, reputational damage.	We prepare internal policies and processes to ensure maximum protection of sensitive data.
Retaliation against the whistleblower.	Company fine up to CZK 1,000,000. Legal dispute over non-material damages.	We provide legal advice and representation for both prevention and dispute resolution.
Failure to meet statutory deadlines for communication with the whistleblower.	Personal fine for the authorized person up to CZK 100,000. Risk of external reporting by the whistleblower.	We set up processes and provide legal support to ensure timely and proper handling of each report.
Improper assessment of the report’s legitimacy.	Personal fine for the authorized person up to CZK 100,000. Overlooking serious unlawful conduct.	We draft legal opinions on reports and assist with internal investigations.
Knowingly false report submitted by an employee.	Damage to the company’s and individuals’ reputation. Costs of unnecessary investigation.	We advise on how to defend against such reports and potentially recover damages (the whistleblower may be fined CZK 50,000).

Challenges for international companies: Why is a group solution not enough?

Companies that are part of international groups often mistakenly believe that adopting their parent company's global whistleblowing platform is sufficient. However, this is a dangerous trap. The Czech whistleblower protection law is stricter than the European directive in many respects, and general group solutions often fail to meet local requirements.

The differences are fundamental. The Czech regulation has a broader scope – it protects not only whistleblowers of EU law violations, but also acts that constitute criminal offenses or misdemeanors punishable by a fine of over CZK 100,000. A global system that focuses only on EU law may therefore be completely inadequate.

Furthermore, Czech law imposes specific procedural obligations, such as the requirement to allow personal submission of reports upon request, which may not be standard in foreign systems. Another key issue is the prohibition on sharing the relevant person within a group of companies for most companies.

Your Czech branch must have its own locally responsible person; it is not enough to rely on a manager at the foreign headquarters.

At ARROWS, we deal with legal issues with an international element on a daily basis. Thanks to our ARROWS International network, which has been built up over more than ten years and covers over 70 countries around the world, we are able to perfectly combine the requirements of your group with the pitfalls of Czech legislation.

We ensure that your local solution is fully compliant with the law while respecting global corporate policy.

Risks for international companies and group solutions