New obligation? Setting up an internal whistleblowing system

On 24 July 2023, the so-called Complaints Act came into force, which covers a wide range of employers, so we have gathered the most important questions and details about the so-called whistleblowing system.

The new law repealed the ‘old’ law, which was Act CLXV of 2013 on Complaints and Public Interest Disclosures. The new Complaints Act was necessary to comply with the obligations under the relevant EU Directive. Our summary does not go into the details of the handling of complaints and notifications of public interest by public and local authorities but focuses specifically on the private sector.

First of all, two important definitions need to be clarified. One is the complaint.

A complaint is a request for an individual’s rights or interests to be redressed, which is not subject to any other procedure, in particular judicial or administrative.

The other is the public interest notification.

A public interest notification draws attention to a situation the remedying or removal of which is in the interest of the community or society as a whole.

In addition, an introduction to three concepts will help to understand the wide range of subjects affected by the Complaints Act.

  • Employment relationship: any legal relationship in which an employee performs an activity for and under the control of an employer for consideration or performs self-employment.
  • Employer: a person who employs a natural person under an employment relationship.
  • Employed person: a natural person who, for and under the control of an employer, carries out an activity for remuneration or self-employment within the framework of an employment relationship.
Having clarified the three definitions above, what employers are subject to the obligation to set up an internal whistleblowing system?

It is important to underline that an employer may set up an internal whistleblowing system even if there is no such obligation under the Complaints Act. However, an employer who employs at least 50 employees under an employment relationship is required to establish an internal whistleblowing system.

The Complaints Act lists the employers who are required to establish an internal whistleblowing system, regardless of the number of employees. Among these, employers that fall under Article 1(1) and (1a) of Act LIII of 2017 on Prevention and Combating of Money Laundering and Terrorist Financing, such as:

  • financial service provider,
  • a fiduciary asset manager,
  • registered office service provider,
  • auditors; accounting (accountants), tax consultants, certified tax consultants, tax advisors acting on the basis of a mandate or under a contractor’s relationship.
When should the system be set up?

By 24 July 2023, the system had to be set up for companies with 250 or more employees, as well as for those who are obliged to set up the system regardless of the number of employees. And those employing between 50 and 249 employees must set up the system from 17 December 2023.

What can be registered in the scheme?

Information on illegal or suspected illegal acts or omissions, or other forms of abuse, can be reported to the internal whistleblowing system.

Who can make a whistleblowing report?

The following (examples) can report to the internal whistleblowing system

  1. a) employed by the employer,
  2. b) an employed person whose employment relationship with the employer has been terminated,

(c) a person who wishes to establish an employment relationship with the employer and in respect of whom the procedure for the establishment of such a relationship has been started,

(d) a self-employed person if he has a contractual relationship with the employer etc.

How to make a notification?

The notification can be made in writing or verbally. A verbal notification may be made by telephone or other voice messaging system, or in person.

What happens after a written notification?

Within 7 days of receiving a written whistleblowing report, the operator of the internal whistleblowing system will send an acknowledgement of the report to the whistleblower. The acknowledgement will include general information to the whistleblower on the procedural and data handling rules under the Complaints Act.

The system operator will investigate the allegations in the notification as soon as circumstances permit, but no later than 30 days from the date of receipt of the notification.

During the investigation of the notification, the system operator shall maintain contact with the whistleblower and may request the whistleblower to complete or clarify the notification, to clarify the facts and to provide additional information.

What protects the whistleblower?

The internal whistleblowing system can be operated by a dedicated, independent person or department within the employer, but a whistleblower protection lawyer or other external organisation can be contracted to operate the internal whistleblowing system.

The Complaints Act describes what constitutes an adverse action, such as:

  • which are taken as a result of the lawful making of a complaint and
  • which are taken in connection with the legal relationship or connection as defined above, is unlawful even if it would otherwise be lawful.