Experts welcome Croatia's new Whistleblower act, but warn of flaws

Croatia

On 1 July 2019, Croatia received its first whistleblower protection act, the Law on the Protection of Persons reporting Irregularities, after its passage in parliament in February.

A whistleblower is the common name for people reporting work-related irregularities with employers. Until recently, whistleblower protection in Croatia had not been regulated unequivocally and completely. Instead, it received fractional regulation under a number of different laws, most notably the Labour Code, Criminal Code and Law on Public Servants.

International events, however, changed this. After the 2013 Snowden case made systematic and purposeful whistleblower protection a hot topic globally, Croatian lawmakers began to address the legislative measures surrounding whistleblowers.

The law was drafted and passed much faster than expected, given that the EU directive governing the protection of whistleblowers had not yet been published in the Official Journal, nor has it been published at the moment of writing of this article. When the EU directive enters into force, if its wording differs significantly from Croatia's recently enacted law, the legislation will have to be amended.

But the law may need to be amended anyway. Unfortunately, the law, as it now stands, is full of ambiguities and poor logic and is certain to bring more doubt and insecurity into this already confused area.

In passing this law, Croatia is now one of 12 EU members (next to Hungary, Ireland, Malta, the Netherlands, Romania, Slovakia, France, Sweden, Italy, the UK and Belgium) to have specific whistleblower legislation.

Other countries, despite possible long traditions for human and labour rights, do not yet have such laws. In Germany, for example, civil society organisations are monitoring developments at the EU level, awaiting a directive before beginning the process of implementing national legislation.

On this occasion, however, Croatia decided to take the initiative. After a public hearing during which many useful suggestions and remarks appear to have been ignored, the law was passed.

One perceived problem with the legislation is its definition of an employer. Croatia has opted for comprehensive access and protection to cover persons performing both public and private sector jobs. This focus is present in the whistleblower legislation of the EU countries listed above, with the exception of Romania and Belgium, which restricted protection to public sector employees only.

It is unclear whether the law obliges all employers or only those who employ at least 50 persons, and whether this number includes only employees or also workers under service or student contracts. According to our understanding of the law's clumsy definition, the act applies to employers private firms or public bodies with staffs of 50 or more. These employers have an obligation to establish internal reporting channels (the law also offers opportunities for external reporting and public disclosure), and a similar system exists in the Netherlands, Slovakia and France.

What are internal reporting channels and what are the obligations of employers with more than 50 workers? The answer, in short, is a system that allows employees and other persons performing individual jobs to report irregularities directly to the employer.

To this end, employers must adopt a general act to regulate the internal reporting procedure (this can be within the scope of  an Employment By-Law) and designate a competent person and a deputy for following up on the reports. These individuals will be empowered to receive whistleblower notifications, protect the whistleblower from harmful action and take steps to eliminate and stop all harmful action and its consequences.

This sounds simple, but employers are in potential trouble if no employees accept the appointment as a competent person since workers cannot be forced into this appointment. If this position is not filled, an employer is subject to misdemeanour liability. In addition, a competent person can be nominated by twenty percent of the employees. The same percentage of employees can revoke this official, although the law does not foresee revocation of a competent person if appointed directly by the employer.

All of this poses the question: if an employer, for example, terminates an employment contract with a competent person, can it then revoke his appointment? So far, there is no clear answer.

The law specifies what a competent person must do after he receives a report. The procedure includes examining the report, taking action to protect the reporting person and forwarding the report to the competent authorities if it is not resolved with the employer.

The employer cannot influence or attempt to influence the competent person or his deputy in this process.

Many agree it would be more logical if the law did not prescribe misdemeanour liability for employers who, "from the moment of receiving the report, do not examine the report of irregularities and take no action within their competence necessary to protect the reporting person". The problem with this clause is obvious. If an employer is not allowed to interfere with the actions of a competent person, how can he be held liable for any irregularities in such actions?

There is a particular issue the law does not specifically answer related to large international groups and companies, which often have an elaborate reporting system (e.g. whistleblower hotlines) for receiving and solving reports of suspected corruption and unfair treatment. But even if such systems offer whistleblowers more protection than Croatian law, Croatian and foreign employers must still establish additional internal reporting channels as specified by the act. (Note that it is unclear whether employees can continue to use the original reporting systems of the international group or company).

There are also external reporting channels (e.g. an ombudsman), which the whistleblower can use if any of the following situations occur: he faces an imminent threat to his life, health and safety; there is the potential for large-scale damage or destruction of evidence; there is no possibility of internal reporting; the reporting person no longer performs work with the employer in question; or irregularities and concerns exist regarding the internal reporting process.

There is also the possibility to report directly to “authorities authorised to act on the content of the report under a separate law”, but the law remains unclear who those authorities are: the State Attorney’s Office of the Republic of Croatia, the State Inspectorate or someone else.

Finally, the law allows for public disclosure: the reporting of irregularities to the public. A particularly interesting provision in the law states that a whistleblower may "exceptionally, without first reporting an irregularity with the employer or to the competent authority, publicly disclose information if there is an imminent threat to life, health, safety or large-scale damage or destruction of evidence."

The whistleblower can appear directly to the public if the threat is grave enough. The prerequisites for public disclosure, however, are identical to the prerequisites for external reporting, which means that whistleblowers are in fact free to choose whether to report to an external source or appeal directly to the media.

Such an arrangement is potentially dangerous because it creates an avenue for dissatisfied or former employees to bring false reports in the media. Whistleblowers are obliged by law to act in good faith and not abuse this process, but this prohibition would be small consolation to an employer whose reputation is falsely impugned in public. In these cases, damages can be filed in court against a malicious whistleblower, but given the problems with such proceedings (in particular the duration), this course does not represent a proper legal solution.

Public disclosure should instead be a "last resort" principle, so that it is likely to occur only in cases where the irregularity was unsuccessfully reported internally or when an immensely powerful person is linked to the irregularity. (Note that Sweden, France, Belgium and Malta do not protect whistleblowers who report irregularities to the media or the public).

This aspect of the Croatian law directly contradicts a long-standing practice of the European Court of Human Rights, which recognizes the protection of  whistleblowers who conducted public disclosures only when no other effective and discreet ways remained to remedy the alleged misdeeds detected. (Note that this position was also reiterated by a court in the well-known cases Balenović v. Croatia and Marunić v. Croatia).

What protection does the law provide whistleblowers? In addition to specifying the ways to file reports, the law gives whistleblowers judicial protection, protection of identity and confidentiality and the right to seek damages in court.

The court or another authority conducting the proceedings will inform them of their rights while protecting their identity and the report's source of the information. But does this mean that the public will be excluded from these proceedings? The law is silent about this, but public exclusion from such proceedings appears to be the only conclusion, although this is contrary to the Code of Civil Procedure, which allows public exclusion only in exceptional cases, and is likely a violation of the Constitution.

The law also prescribes specific lawsuits for protecting whistleblowers, offers the possibility of imposing temporary measures, and places the burden of proving that the whistleblower has not been treated unfairly on the employer.

Although the law came into force on 1 July 2019, employers were given a transitional period of six months to adopt internal reporting channels and nine months to appoint competent people and deputies to oversee the reporting process in each company.

It is unclear, however, what reporting channels will be used while employers take advantage of this transition period, although it is assumed that whistleblowers will use their legal option of external reporting and public disclosure.

The above criticisms and caveats notwithstanding, we welcome the fact that this law was enacted and that awareness exists in Croatia of the importance and necessity of protecting people who report corruption and other misconduct. We would, however, like to see this protection enshrined in a stronger legislative package that might correct some of the irregularities present in the existing version of the law.