The Czech Ministry of Labour and Social Affairs (the "MLSA") recently submitted a new proposal for interdepartmental comment, that will modify the current Labour Code1. The latest proposal to reduce the use of "agency employees" was (fortunately) cancelled for now2. According to the MLSA, this new proposal aims to eliminate several problematic aspects caused by the application of the current Labour Code, and to ensure the compliance of Czech legislation with the decisions of the European Court of Justice.
This article summarises the most important modifications that the MSLA is proposing.
Details of the proposed modifications
(i) Definition of managing executives (in Czech: vrcholoví zaměstnanci)
In accordance with Directive No. 2003/88/EC of the European Parliament and of the Council of 4 November 2003, on certain aspects of the organisation of working time, the MSLA proposes to add a definition of managing executives into the Labour Code. Although this idea is undoubtedly positive, we believe that the proposed definition itself is not appropriate. Among other things, the managing executives shall be measured by their average earnings. Employees will be considered managing executives only if the remuneration is agreed in their employment contract and is higher than CZK 100,000 per month.
Despite the positive aspects of this idea, the limiting amount is, however, too high, especially for employment outside Prague. Moreover, under the proposed definition, the employee's remuneration shall be agreed on between the contractual parties in the employment contract, meaning that it cannot be unilaterally determined by the employer within a wage assessment. Such a condition is unfounded and limits the powers of the employer. Finally, it is unclear whether the status of the managing executive may vary with time, ie, based on their average earnings determined for the period of a calendar quarter. For these reasons, we believe that the definition of managing executives is not accurate and should be altered.
(ii) Modifications regarding trade unions, transfer to different work, working hours and annual leave, and protection of employer's property
The MLSA proposes to modify several provisions on trade unions, transfer to different work, working hours and annual leave, and protection of employer's property. In our opinion, all these proposals are unnecessary. The current wording of this provision is appropriate and works well in practice. In case the proposed modifications regarding annual leave are approved, the employers will have to replace existing systems, which also means additional costs on their side. We therefore highly recommend keeping the existing provisions and avoiding pointless changes that bring nothing but higher costs for the employer.
(iii) Home office
We believe that the existing provisions on home office do not reflect the needs of both parties within the employment relationship. However, the proposed modification is incomplete and in our view certain aspects are simply inappropriate. Based on the proposal, employers will be encumbered by duties that they do not even have towards employees who work at the employer's workplace (for instance information duties regarding usage of technical and software equipment). On the other hand, we believe that it is crucial to establish that the employer is not responsible for the employee's workplace in case of home office, something that the proposal ignores.
(iv) Automatic transfer of employees
It is widely known that the Czech legal provisions on automatic transfer of employees do not completely reflect European legislation and decisions of the European Court of Justice. In accordance with the current Czech provisions, automatic transfer occurs in any case where the activities or tasks (or a part thereof) of an employer are transferred to another employer, that is also in case of a change of supplier, etc. The rights and obligations under an employment relationship may be transferred only in cases stipulated by the legal provisions. Our laws are therefore very strict.
The MLSA proposes modifications in order to comply with European legislation and decisions of the European Court of Justice. However, these modifications are not entirely suitable. For some reason, the MLSA does not adopt the exact wording of the respective Directive (which would be completely appropriate) and introduces five new conditions regarding automatic transfer, ie:
- identical or similar performance of the activity in question (before and after the transfer);
- the activity does not rest exclusively in delivery of goods;
- the activity is performed by an organised group of employees;
- the activity is not of a short-term/one-off nature; and
- a property (connected to the activity in question) must be transferred as well.
For comparison, the Directive defines the transfer as "a transfer of an economic entity which retains its identity, meaning an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary." According to decisions of the European Court of Justice, the following conditions shall be considered in case of automatic transfer of employees:
- the kind of transferred business;
- transfer of tangible goods and their value;
- transfer of intangibles and their value;
- takeover of the majority of employees;
- takeover of customers;
- interruption of a business activity and its length.
The differences between the MLSA proposal on the one hand and the EU Directive and the decisions of the European Court of Justice on the other are obvious. The MLSA effort is evidently positive, but the final proposal does not correspond to the existing needs and legal certainty. Therefore the final proposal shall be re-evaluated one more time. We also recommend considering the possibility of legally stipulating the option of contractual transfer of employees.
The MLSA's ideas and efforts are a step in the right direction, but the final proposal is incomplete, unclear and in some cases unnecessary. In most cases it replaces systems that work well in practice, which also means additional costs on the side of employers. We therefore recommend reconsidering the modifications and limiting them only to the most important (and currently problematic) fields, being:
- home office;
- transfer of employees (including the option of contractual transfer of employees); and
- payment of wages in foreign currency.