(Czech Supreme Court Judgment No. 21 Cdo 2687/2014 of 25 June 2015)

The Supreme Court dealt with the question of the validity of an employment contract between a legal entity and a member of its statutory body. This was a member of the Board of Directors of a cooperative who had also entered into an employment contract with the cooperative to perform the work of a “public communications manager”. This work included “activities of an administrative nature, documentation activities, archival document searches for the filing of lawsuits, document preparation for the filing of lawsuits and computer network administration, etc.”

Both the first instance court and the appellate court agreed with the member of the cooperative when they deemed as proven that such employment contract is not incurably void because the member of the cooperative performed activities based on the employment contract, which by their nature and character cannot be classified as activities in the remit of the statutory body. The work performed under the employment contract was thus designated by the courts as “work of an ancillary, secondary, technical and administrative nature required for the day-to-day running of such a large cooperative.”

Nor did the fact that the position was identified as that of “manager” in the employment contract or the fact that the duration of the employment contract was tied to the duration of the function of the Board of Directors member convince the courts otherwise.

The Supreme Court came out against the above interpretation. Firstly, it referred to settled case law in the matter of the inseparability of the activity of a statutory body who is also an employee and stressed  there is no legal violation where members of a statutory body of a legal entity perform certain activities based on an employment contract executed with that legal entity. Notwithstanding, the content of the employment relationship between a member of a statutory body and a legal entity may not include performance of activities in the remit of the statutory body.

The Supreme Court did express the view, however, that the activities that were the subject of the given employment contract between the member of the cooperative’s statutory body and the cooperative could not be separated from management of the activities of the cooperative and decision- making on its affairs. According to the Supreme Court, no organizational or management activities may be carried out without control, administrative and similar acts (serving as a member of the Board of Directors included); thus, the Supreme Court did not consider the other activities specified in the employment contract as separable from the management of the cooperative’s activities and decision- making on its affairs. Moreover, the contiguousness of employment contract duration with execution of the cooperative Board of Directors member’s function by the claimant led the Supreme Court (in contrast to the first instance and appellate courts) to find the foregoing activities inseparable from performance of the function of a Board of Directors member of the cooperative.

The Supreme Court thus found the above mentioned employment agreement to be invalid, vacated the decisions of both courts and returned the matter to the first instance court for further proceedings.

The member of the cooperative’s Board of Directives lodged a constitutional complaint against this judgment. However, the Czech Constitutional Court rejected the complaint, ruling it had failed to meet the condition of substantial infringement of the complainant’s own interests.