March 2015 - Laws to encourage employees to report wrongdoing at the workplace, and to protect them when they do so, are making their way into the legislative landscape of CEE/SEE countries. While many have enacted provisions protecting whistleblowers in the public sector (such as Romania and Bulgaria), some have gone one step further with the adoption of comprehensive legal frameworks that also apply to the private sector.

This article focuses on three countries that have recently enacted specific whistleblower legislation applicable to both the private and public sectors: Hungary (where rules have been in effect since 1 January 2014); Slovakia (where new rules are in effect from the start of this year); and Serbia (where legislation adopted in November will take effect from 1 June 2015). We also give an overview of some of the fragmented protection offered elsewhere, which still remains the norm throughout much of the region.

Hungary: A legislative framework

The Hungarian Whistleblowing Act (Act 165 of 2013 on complaints and reports of public concern) is in effect since 1 January 2014 and implements, to a great extent, the principles set out in Article 29 Working Party opinion WP117. Companies are not obliged to set up a reporting system, but if they do, they must comply with the provisions of the Whistleblowing Act. The legislation provides a framework, and companies retain some latitude in the design of their internal procedures.

An employer’s reporting system must be based on its internal code of conduct and procedures, which are to be made publicly available. Employees may report conduct they believe is in breach of the employer’s code of conduct. Employers are obliged to investigate such reports, unless they are clearly unfounded or anonymous. The identity of the whistleblower must be kept confidential. Pursuant to the Whistleblowing Act, the handling of reports may be outsourced to an attorney-at-law. The tasks of a “whistleblower protection attorney” include the receipt of reports, communication with and provision of advice to whistleblowers, and forwarding of anonymised claims to the employer for investigation.

Whistleblowers are generally entitled to protection, and all detrimental measures taken against them as a result of filing a report are deemed unlawful. This does not apply if the whistleblower acted in bad faith.

Hungary’s whistleblower legislative framework has been criticised, most notably by Transparency International, as falling short of its objectives.

Slovakia: Protection and reward

In October 2014, further to the Action Plan adopted by the Slovak Government in 2012, the Slovak Parliament adopted the Whistleblowing Act (Act No. 307/2014 Coll. on certain aspects of whistleblowing), which took effect on 1 January 2015. The law provides for the protection of whistleblowers employed in the private or public sectors, as well as incentives to report antisocial behaviour.

Upon request, a whistleblower who has filed a report providing conclusive evidence of serious antisocial behaviour in criminal or administrative proceedings is entitled to the protection of the Labour Supervisory Authority against prospective retaliation by the employer. He/she may also receive free legal aid from the Centre of Legal Aid. Finally, whistleblowers can apply to the Ministry of Interior for a reward (max. EUR 19,000), which is granted if the perpetrators are found guilty in criminal or administrative proceedings.

The Whistleblowing Act obliges companies that employ more than 50 people and any public employer to adopt internal bylaws specifying the internal review procedure of whistleblowing reports and to appoint a person (legal or natural) responsible for receiving and investigating such reports and informing whistleblowers of the investigation’s outcome. Existing companies have until 30 June 2015 to comply with these provisions, failing which they may be liable to a fine of up to EUR 20,000.

Until now, employees have usually been dismissed as a consequence of whistleblowing activity. Under the Whistleblowing Act, employers have to obtain clearance from the Labour Supervisory Authority before terminating or otherwise modifying the employment conditions of an employee who has requested protection. Clearance will be granted only if the employer demonstrates that the termination or change in the conditions of employment are not related to the whistleblowing report.

As the Whistleblowing Act has recently entered into force, its effect remains to be seen. The Fair Play Alliance (a Slovak NGO supervising public administration) states that although the law covers many important issues, its effectiveness will depend on its implementation by public bodies, most of which have yet to demonstrate their commitment to protect whistleblowers.

Serbia: Unclear application

In November 2014 the Serbian Parliament adopted the Law on Protection of Whistleblowers (Act no. 128/2014 on protection of whistleblowers). The law came into force in December 2014 but will be applicable as of June 2015. This is the first comprehensive legislation regulating the protection of whistleblowers in Serbia. A whistleblower can benefit from the protection afforded by the new law if he/she alerts the employer following the prescribed procedure in a timely manner, and if the information revealed is such that a reasonable person would believe in its truthfulness.

The Law on Protection of Whistleblowers contains provisions regulating internal reporting within a company. Employers must appoint a person responsible for receiving whistleblowing reports and implementing the whistleblowing procedure. Once a whistleblower has filed a report, the employer has strict deadlines to follow up on the information and inform the whistleblower of the outcome of the investigation. Companies employing more than 10 people have until 4 December 2015 to adopt internal bylaws setting out the procedure for reporting misconduct.

The Law on Protection of Whistleblowers provides that an employer cannot take detrimental actions against a whistleblower, e.g. he/she cannot be dismissed for filing a report. If an employee is so dismissed, he/she may petition the court to be reinstated in his position and/or obtain compensation.

The new law contains a provision stating that the Justice Ministry should adopt further guidelines by 4 March 2015 that will regulate the procedure of internal reporting within a company in more detail.

Fragmented provisions elsewhere

Most other countries in the CEE/SEE region have fragmented provisions affording limited protection to whistleblowers.

In Bulgaria, whistleblowing in the public sector is regulated by the Administrative Procedure Code, which provides the right to report wrongdoing in cases of abuse of power, corruption, bad management, etc. Similarly, under the Law on Prevention and Detection of Conflict of Interests, anyone who has information about a person holding public office who is in conflict of interests can file a report. Both these statutes provide that no one can be prosecuted on the sole ground that he/she has filed a report. There are other options to report an offence (e.g. Ministry hotlines, Supreme Judicial Council, etc.), but these channels do not provide adequate protection.

In Romania, there is a specific law on the protection of staff of public institutions who report breaches of the law, but no such regulation has been enacted for the private sector. Nevertheless, various laws, particularly the Labour Code, protect employees of private companies who report wrongdoing from retaliatory measures by the employer (e.g. wrongful dismissal). Nevertheless, these provisions do not fully protect employees against all possible abuses.

Similarly in the Czech Republic, the Labour Code and other legislation afford some protection to employees; however, the rights of whistleblowers per se are not protected. In 2013, the government prepared a draft law on the protection of whistleblowers (read our comment), which was discarded after the elections and the change of government later in the year. Recently, the government approved the Governmental Strategy against Corruption for the Years 2015 to 2017, which calls for the implementation of rules to protect whistleblowing activities. The Government is expected to analyse the various options this year.

In Turkey, there is no specific legislation protecting whistleblowers. Some laws, such as the Labour Code, the Criminal Code and the Witness Protection Code, contain provisions affording some general protection. The Regulation on Awards to Be Paid to Whistleblowers in anti-smuggling matters provides for the payment of rewards to encourage reporting.

Criminal liability may encourage the adoption of internal reporting systems

In a growing number of CEE/SEE countries, companies may be held criminally liable for certain offences committed by their directors and/or employees (read our comment on Czech legislation). In some cases, companies may avoid criminal liability or reduce the sanction if they have measures in place to prevent, identify and/or report misconduct in a timely manner. As a result, companies may be motivated to adopt internal reporting systems, even in the absence of specific legislation, as a defence against potential criminal liability.