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Legal Newsletter November 2021

On the obligation to set up new internal systems for employees

In Directive 2019/1937, the European Parliament focuses on the protection of people (the so called whistleblowers) who choose to report a breach of their rights in their employment relationship. The terms of the Directive are currently being incorporated into a separate Whistleblower Protection Act which is in the Parliamentary process and can be expected to be adopted shortly.

The aim of the Directive and also of the Whistleblower Protection Act, is to establish mechanisms that enable employees to report violations of their rights or obligations, safely and without fear of sanctions from employers, other employees, or other entities. The law should therefore set out the conditions under which employees can make notifications, how these notifications will be assessed and how protection will be provided to employees who make them.

The law will also penalize unlawful conduct directed at employees who choose to come forward and remedy the unlawful conditions that result.

All employers with more than 25 employees and contracting authorities under the Public Procurement Act will be required to establish internal systems enabling notification and set forth procedures for notification. Employers will be given until 31 March 2022 to comply with this obligation. In addition, they will have to designate a person who will be responsible in particular for receiving and dealing with notifications submitted by employees, ensuring always that only authorised persons are aware of notifications, keeping a register of notifications submitted and archiving them, informing the notifier of the progress and results of proceeding following to the notification, and protecting the notifier from possible retaliation.

The law therefore imposed a new administrative obligation on employers the performance of which, however, can be entrusted to third parties provided that employers maintain necessary control over the related process.


Recovery of damages from subsidiaries for the parent company's misconduct

If you are harmed by a legal entity that infringes EU competition law, you don't necessarily have to seek a compensation from that particular company. You can also seek compensation from its subsidiary under certain conditions.

First, you will have to show that the companies in question, together with the parent company, formed a single economic unit or 'enterprise' within the meaning of the Treaty on the Functioning of the European Union (TFEU) at the time of the infringement. TFEU provides that an injured party has the right to claim damages against an enterprise which is meant here to include not only individual companies, but rather an economic unit which may consist of an unlimited number of such companies. The concept of enterprise is therefore much broader compared to what it is commonly understood in the Czech legal and business environment.

In addition, however, there must be demonstrable economic, legal and organisational linkage between the subsidiary and the parent company, and there must also be a link between economic activities of the subsidiary from which the injured party will seek to recover and the unlawful conduct of its parent company.

The defendant subsidiary must then be afforded all the means of exercising its rights of defence in the proceedings before the national court. In particular, it must be given the opportunity to deny its relationship with the parent company. It cannot, however, deny the unlawful conduct of the parent company which has already been established.

Given that it is now common for parent companies within holding groups to be legal entities without any significant assets from which injured parties’ claims could be satisfied in the event of a competition infringement, and that a subsidiary could (subject to other conditions) be sued in the state in which an injured party operates, this interpretation is potentially very useful in many situations.


Electronic submissions on behalf of a legal entity

As digitalisation increasingly permeates the functioning of business entities, both in their relationships with each other and towards administrative authorities, fewer and fewer actions need to be carried out using paper. However, public administration is not as flexible, and its inability to deal properly with electronic filings can catch users off guard.

Submissions on behalf of a legal entity can already be made routinely via data box that has been specifically set up for that entity. Surprisingly, however, the authorities often have problems accepting submissions made, for example, by the managing director of a company via the managing director's data box. The fact that authorities sometimes insist that electronic submissions can only be made via the company's data box cannot be called an overly formalistic approach, but only gross ignorance of the law.

There is no doubt that the managing director or another member of the company's statutory body is authorised to act for the company. If he or she affixes his or her signature, for example, to a physical petition to change the entry in the Commercial Register and subsequently files it with the Registry Court, no one will dispute the admissibility of the filing. How surprised this managing director may be if he attempts for the same act via his data box. In doing so, the data box identifies him as an authorised person with at least the same certainty as a signature on paper.

The Supreme Court took a logical position in this regard and ruled that a submission made from a data box of person who is authorised to represent a company and which also shows that it is made on behalf of the company is valid. According to the Supreme Court, therefore, there is nothing preventing an individual authorised to act on behalf of a company from making an electronic submission from his or her data box instead of the company data box.

The same applies to submissions that must be accompanied by an electronic signature. Such a submission can be validly made both by means of the company electronic signature and by means of the electronic signature of the person authorised to act for the company.