Major Changes of the Labour Code Effective From 1 January 2012

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Major Changes of the Labour Code Effective From 1 January 2012

By Adéla Krbcová, Peterka & Partners


An impatiently awaited amendment to the Labour Code (“Amendment”) was adopted by the Parliament of the Czech Republic and it was signed by the President on 16 November 2011. The Amendment will almost certainly take effect on 1 January 2012.


This article summarises the major changes to be introduced by the Amendment.  Regulations on the employment term, trial and notice periods, working hours and overtime, leave, and agreements on work performance have all been amended and temporary assignment is reintroduced.  The changes also affect non-competition clauses and the transfer of rights and duties arising under employment contracts. We do not present an exhaustive summary of the changes, but concentrate only on elements of the Amendment which we consider the most important with regard to their impact on employment relations.  




The initial passages of the Labour Code will introduce rules on its application and interpretation. The basic principles of the amended Labour Code will be: (i) special statutory protection of employee, (ii) satisfactory and safe conditions for work, (iii) fair remuneration for employees, (iv) due work performance by employees in compliance with the employer’s legitimate interests, and (v) equal treatment of employees and the prohibition of discrimination.




Under the Amendment a trial period of up to six months can be agreed with so-called managerial employees entitled to determine and assign tasks and give instructions to their subordinates and to organise and control their work.


The trial period of a maximum three months, applicable to other employees, remains unchanged. New, a trial period longer than half of the agreed term of employment may not be agreed. The trial period may be agreed on the day when the employee commences employment at the latest, and may not be additionally extended. It may only be extended by day-long obstacles at work, or by leave.




Under the Amendment, employment for a definite period concluded between the same contracting parties may not exceed three years.  From the day when the first employment for a definite period is concluded, this employment term may be repeated twice. Extended employment will be considered repeatedly concluded employment.


Previous employment for a definite period will no longer be taken into account three years after the end of the last employment for a definite period (currently six months). The Amendment repeals the major exceptions when the limited term of employment for a definite period did not apply.


A burning issue will undoubtedly be the repealed exception concerning the so-called “replacement” of employees on maternity or parental leave within the term of employment for a definite period.




Under the current legislation employees may be temporarily assigned to other employers only by employment agencies. Under the Amendment, any employer may temporarily relocate their employees to another employer upon agreement. An agreement on the temporary assignment of employees to another employer may be concluded with employees no earlier than six months after the day when their employment arises.


For the period of the temporary assignment, the employer which employees have been temporarily assigned to will assign work to those employees, but their wages will be paid by the employer who assigned them. 


Except for payroll and travel costs, temporary assignment will be free of charge.  




A new ground for serving a notice of termination will be available to employers, namely the substantial gross violation of duties by a temporarily incapacitated employee. This violation will be based on a breach of the medical regime by the employee, namely the duty to remain at the place of residence and to comply with the schedule and extent of permitted leave under the Act on health insurance.  


The subjective period during which an employer will be entitled to serve a notice of termination will basically be only one month from the day when the employer learns of the breach of the regime. Simultaneously, salary compensation for an employee to whom the notice of termination will be served on this ground may not be reduced or withheld.  Job seekers whose employment is terminated on this ground will not be entitled to unemployment benefit.


Generally, the minimum two-month notice period remains unchanged, except for a notice of termination served by an employee in connection with the transfer of the rights and duties arising under employment.  In this case employment terminates no later than on the day preceding the day when the transfer takes effect. The legislation does not stipulate the deadline by which the notice of termination must be delivered by the employee to the original employer, which may have a negative impact on many business transactions connected with the transfer of employees.   


The Amendment will reintroduce the court’s so-called right to moderate damages in cases of invalidly terminated employment when the total period for which an employee is entitled to wage compensation exceeds six months. The court will have the right to reasonably reduce the compensation.  


6.         SEVERANCE 


Instead of unified severance (a minimum of a multiple of three times the average salaries) different amounts of severance will be introduced based on the following rules. Upon terminating employment that lasted less than one year, employees will be entitled to severance corresponding to a minimum of their average monthly earnings. If employment lasts at least one year but less than two, employees will be entitled to severance corresponding to a minimum of double their average earnings. If employment lasts at least two years, employees will be entitled to severance corresponding to a minimum of triple their average earnings.




Under the Amendment, the hours for which agreements on work performance may be concluded will be increased from 150 to 300 hours in a calendar year. 


Simultaneously, an amendment to the Acts on health insurance and on sickness benefits introduces a duty to pay contributions to health insurance and social security for persons employed under agreements for work performance if their attributable monthly income exceeds CZK 10,000. This duty arises in months in which this attributable income is credited.  


The duty to pay contributions to health insurance and social security applies even if an employee performs work for the same employer in a calendar month based on several agreements on work performance, if the total monthly income under the agreements exceeds CZK 10,000.


8.         WORKING HOURS


The Amendment specifies the definition of the even and uneven schedule of working hours. When working hours are scheduled evenly, employers schedule the weekly, or shorter, working hours in individual weeks and employees work the same number of hours each week.


When working hours are scheduled unevenly, employers do not schedule the weekly working hours evenly over individual weeks, but the average weekly working hours may not exceed the scheduled weekly working hours for a maximum of 26 consecutive weeks (52 weeks may be agreed in collective agreements).


The unified maximum shift under both schedules is now 12 hours.


Furthermore, the flexible schedule of working hours will be more specified and the related settlement period may be up to 26 consecutive weeks (52 weeks may be agreed in collective agreements).


If the account of working hours applies, under certain circumstances, a maximum of 120 hours of work performed overtime in the account of working hours in a settlement period not exceeding 52 consecutive weeks may be carried over to working hours in the following settlement period. This may be agreed only in collective agreements. In such case the recurring wage may not be lower than 85 percent of the employee’s average earnings.




For overtime, employees are entitled to a salary and a bonus of a minimum of 25 percent of their average earnings (or time off). Under the Amendment the salary agreed between employers and not only managerial employees, but also all other employees may include overtime. Overtime reflected in the agreed salary may not exceed 150 hours in a calendar year.  Managerial employees may record, on average, 416 hours of overtime work in a calendar year.


For work at night and at weekends, employees will be further entitled to a wage and a bonus of a minimum of 10 percent of their average earnings.  New, another minimum bonus and the manner of determining it may also be agreed.  


10.       PAID LEAVE


The extent of paid leave remains unchanged, that is, a minimum of four weeks in one calendar year. But the rules for taking it will change. It is emphasised that employers are obliged to determine the periods for taking leave so that employees use their entire leave to which they are entitled in the calendar year in which they have this right.


If the employer fails to determine the time for taking leave by 30 June of the following calendar year, employees themselves will be entitled to determine the period for taking leave. The employer must be notified by employees of the planned leave in writing a minimum of 14 days in advance. If employees do not take leave in the following calendar year due to certain obstacles at work on their part, the employer will be obliged to order employees to take leave after the obstacles cease to exist.


The Amendment repeals the provisions concerning employees’ entitlement to wage or salary compensation for untaken leave in excess of four weeks, if employees cannot take it by the end of the following calendar year. Employees will be entitled to salary compensation for the entire untaken leave only if their employment is terminated.  




A competition clause prohibiting employees from performing gainful activities which are equal to the employer’s business activities or which would be competitive to them, for a maximum of one year after terminating employment, may further be agreed. The monetary compensation which the employer will be obliged to pay the employee for each month in which this obligation fulfilled will be reduced to half of the employee’s average monthly earnings (currently, the compensation corresponds to a minimum of one month’s average earnings for each month in which the prohibition exists).  




In cases of the so-called automatic transfer of employees to another employer a minimum time-limit of 30 days before the day when rights and duties are transferred is introduced for fulfilling the information and negotiation duty in relation to employees’ representatives. If the employer’s current employees have no representative (such as trade unions), they will be, similarly to current legislation, informed directly, but the former and receiving employers will no longer be obliged to also discuss the transfer with them.  


Employees who do not want to be transferred to the new employer will be entitled to terminate employment by serving a termination notice, and to a shorter notice period or no notice period, as stated in Section 5 above.  Employees who will be transferred to the new employer and terminate their employment by serving a notice of termination, or upon agreement within two months of the effect of the transfer, will be entitled to apply to the court seeking a judgment that their employment would have been terminated due to substantially worsened working conditions. If the court accepts the application, their employment will be considered terminated on organisational grounds and the employees will be entitled to severance.


The Amendment also expressly states that the receiving employer is obliged not to amend the employees’ rights and working conditions under collective agreements for a maximum of one year.




The Amendment states that in employment relations the provisions of the Labour Code have priority. If they cannot be applied because they do not regulate a certain matter, then the provisions of the Civil Code apply in the manner corresponding to the basic principles of employment law.  However, certain institutes of civil law will be expressly excluded (such as the right of retention or the assignment of a receivable). 




The Amendment also comprehensively regulates the problems relating to invalid legal acts based on the voidable nature of legal acts with regard to defects in their content. In exhaustive cases the Amendment anticipates absolute nullity (such as impossibility of performance, conflicts with good manners or an act by means of which employees waive their rights in advance).


With respect to defects in legal acts concerning their form, failure to observe the form of unilateral acts will result in their absolute nullity.  If the form of bilateral acts is not observed, the parties may rectify the relevant defect. The invalidity of acts under which employment arises or is amended due to defects in their form may be sought only if performance has not yet begun.


Furthermore, the party which caused the defect may not seek invalidity. Invalidity may not be to an employee’s detriment if it was not caused exclusively by them. If damage arises due to invalidity, liability is regulated directly by the Labour Code. 

Monday, December 5, 2011
Labor & Employment