Just under two years ago, Act No. 171/2023 Coll., on whistleblower protection (the “WPA”), came into effect, through which the legislator (belatedly) transposed the Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law.
Introduction
Since its adoption, the WPA has been amended once, with the amendment extending the list of obligated entities – a new obligation to establish an internal reporting system has been introduced for entities offering crypto assets. However, the amendment did not have an impact on the general public.
Almost two years of experience have brought a number of valuable insights – what were they? We are going to focus on the selection of a suitable designated person.
Ministry of Justice
The Ministry of Justice (the “Ministry”), as the authority supervising compliance with the obligations laid down in this legislation, provides, in accordance with its obligations under Section 14(b) WPA, in addition to its supervisory activities, methodological, advisory, and other professional assistance in the area of whistleblower protection, and has published several documents containing essential methodological guidelines to facilitate the proper implementation of the internal reporting system by obligated entities and designated persons.
These documents are (i) Methodology for the application of the WPA (available here in Czech) and the more recent (ii) Handbook for designated persons under the WPA (available here in Czech).
In addition to these documents, the Ministry has also published the Annual Report on the Activities of the Ministry of Justice in the Area of Whistleblower Protection in 2024 (available here in Czech).
Obligation to establish an internal reporting system
To begin with, we would like to note that the obligation to establish an internal reporting system applies to entities listed in Section 8 of the WPA, i.e. (in simplified terms):
- contracting authorities under the law governing public procurement;
- specified public authorities;
- employers who employ at least 50 employees as of January 1 of the relevant year; and
- the residual category of employers who either (a) are subject to supervision under the Capital Market Act, or (b) are subject to supervision under the Investment Companies and Investment Funds Act, or (c) are tied agents authorized to mediate consumer credit for housing under the Consumer Credit Act, (d) an insurance company or reinsurance company, (e) a person authorized to mediate insurance or reinsurance under the Act governing the distribution of insurance and reinsurance, (f) an institution based in the Czech Republic under the Act governing the activities of employee pension insurance institutions, or (g) the aforementioned person publicly offering cryptoassets;
- obligated entities under the AML Act.
How to choose the right person?
One of the cornerstones of a well-functioning internal reporting system is the careful selection of the designated person to ensure the operation of the internal reporting system in accordance with the WPA.
This role can only be performed by a natural person who is of legal age, has a clean criminal record under the WPA, and is fully legally competent.
However, the selection of a suitable person does not end with the candidate for the role of designated person meeting the legal requirements. The obligated entity should also consider other qualifications and personal characteristics to ensure that the person can effectively fulfill the purpose of the internal reporting system.
A basic and entirely legitimate recommendation is that this role should be held by an impartial, reliable, and trustworthy person who, in the eyes of the reporting persons, reinforces trust in the internal reporting system. If the choice of the designated person discourages potential whistleblowers from reporting, the internal reporting system becomes a mere formality to fulfill a legal obligation and loses its real benefit for the company as an obligated entity and for society as a whole.
Another qualification requirement for determining a suitable designated person is their ability to critically evaluate and analyze the legal facts contained in a report, i.e., to assess with reasonable certainty whether the information in the report indicates that a violation of legal regulations has occurred. Of course, it is not for the designated person to make a final decision on whether or not a breach has occurred, but at least a basic understanding of the regulations is a prerequisite for the proper performance of the role.
Each obligated entity should therefore first consider whether these requirements can be met by filling the position with an employee or other person “in-house” or by an external service provider. Each option has its pros and cons.
“In-house” designated person
An undeniable advantage of filling the position of designated person with an employee or other person “in-house” is (presumed) deeper knowledge of the circumstances of the obligated entity, which, at least in theory, will contribute to more efficient and faster handling of reports, where, depending on the reported unlawful conduct, it is often crucial for the prevention of further unlawful conduct and the remedy of an undesirable situation that the report be assessed quickly.
A disadvantage of this arrangement is the risk of weakening the perceived credibility and impartiality of the designated person, even though they are bound by law to maintain confidentiality with regard to information obtained in the performance of their duties.
External designated person
An alternative is to designate a person who is not employed by the obligated entity, such as a lawyer. In this case, the risk of a conflict of interest on the part of the designated person is reduced, thereby increasing trust in the internal reporting system itself.
The disadvantage is, of course, the lack of in-depth knowledge of the functioning of the obligated entity, as a result of which the designated person may require greater cooperation from the obligated entity and its employees in order to properly process the report (while maintaining the confidentiality of the whistleblower’s identity, of course).
Multiple designated persons?
In accordance with the WPA, the obligated entity may designate more than one designated person. The plurality of designated persons is highly recommended.
The WPA sets relatively short deadlines for reviewing and handling reports – the designated person must notify the whistleblower of the receipt of a (complete) report no later than 7 days after its receipt, except in cases where the whistleblower expressly requests not to be notified or where notification of receipt would reveal the whistleblower’s identity. The whistleblower must be given the opportunity to make the report orally within 14 days at the latest, if they so request. Within 30 days, or within the extended deadline, the designated person must assess the merits of the report and inform the reporting person of the results of the assessment.
This means that designating only one person could really disrupt the internal reporting system, because the deadlines are quite tight. It is not unexpected that the designated person will not be able to meet these deadlines, especially considering that the Labor Code stipulates that one part of an employee’s vacation should be taken in a single block of two weeks.
Another undeniable advantage of appointing several designated persons, i.e., substitutability, is that this measure can further strengthen the whistleblower’s trust in the reporting system, as they can turn to another person who is competent to handle the report in the event of suspicion of bias on the part of the designated person.
As a side note, we would add that it may also be a helpful step towards whistleblowers if the obligated entity designated both a man and a woman as designated persons, for cases where the whistleblower would feel more comfortable making a report or providing additional cooperation to a designated person of the same gender.
If more than one person is designated, it is advisable that the extent of their responsibilities for fulfilling their duties be agreed upon.
Conclusion
Although the WPA does not impose extensive qualification requirements on the designated person, their appropriate selection is fundamental to the proper functioning of the internal reporting system.
Before appointing a designated person, the obligated entities should consider not only the legal requirements, but also the requirements for the character of this person, their knowledge and skills, and, last but not least, their good reputation.
In order to strengthen confidence in the internal reporting system and to overcome potential procedural obstacles, the obligated entity should consider appointing more than one designated person, either at least two external designated persons or at least one “in-house” and one external designated person.
If you have any questions on this topic or other issues related to whistleblower protection, please do not hesitate to contact us.
Mgr. Jakub Málek, managing partner – malek@plegal.cz
Mgr. Kateřina Vyšínová, junior lawyer – vysinova@plegal.cz
24. 7. 2025