Expected changes in the Czech Labour Law and Social Security Law

We’ve prepared a summary of the most important changes to the Czech Labour and Social Security law. The changes will affect the Czech Labour Code, regulation of employment agencies, protection of employees in case of an employer’s insolvency and protection of whistleblowers.

 

Amendment to the Labour Code ¹

The directive of the European Parliament and of the Council (EU) 2019/1158 on work-life balance and directive 2019/1152 on transparent and predictable working conditions will change Act no. 262/2006 Coll., Labour Code in 2023. Some changes will probably go beyond the directives.

The amendment shortens the time limit for the obligation to inform employees in writing about the rights and obligations regarding the employment relationship if the employment contract does not contain them within seven days of the employment relationship starting. There’s a new obligation to inform employees about the duration and conditions of the probationary period, notice periods and the procedure for invalid termination of employment.

Secondly, a major change concerns the regulation of agreements held outside the employment relationship, ie agreements to perform work ( dohoda o provedení práce ) and agreements to perform an activity ( dohoda o pracovní činnosti ). The main aim of the new regulation is to ensure better social protection for employees in these arrangements. These types of agreement are used more frequently and they’re often the employee’s only source of income. Employees working under these agreements will be entitled to paid leave and overtime pay. And the employer will be obliged to set the work schedule at least three days in advance. Employees working under these agreements will be entitled to meal and rest breaks like regular employees, extra pay for night work and on-call duty. They will also now be covered by all provisions on obstacles to work. The employer will have to justify termination if the employee asks for it.

Paid leave entitlement will accrue after the employee has worked at least four times the weekly working hours and the relationship has been continuous for at least 28 calendar days. The weekly working time is set at 20 hours per week. A register of agreements should be introduced to prevent chaining. A related change is that, after a certain period of work, the employee should be given the option to enter into a standard employment relationship.

Employees caring for a child under the age of nine and pregnant employees will be able to apply to work remotely (home office). Employees who, for the most part, are long-term carers of a person who’s considered by special regulations to be dependent on the assistance of another natural person will also be able to apply to work remotely. Rejecting a request will have to be justified in writing by the employer.

In connection with home working, the costs of home working will be covered at a minimum flat rate of CZK2.80 per hour (EUR0.12). These costs relate only to energy, water and waste. Other costs are paid in full. Employers can of course also use the option of paying the actual costs in full for energy, water, and waste, but with a view to simplifying the process it can be expected that the lump sum will be applied more often. The amendment also foresees the introduction of a so-called telework agreement, which must be in writing.

The amendment makes it easier to deliver digital contracts and other documents. An employment contract, and an agreement on the performance of work or an agreement on work activity, can be concluded electronically, ie by email or by data-box. It will also be possible to deliver all documents electronically with the employee's consent. The electronic delivery will apply on the 15th day after submission unless receipt is confirmed by the employee earlier.

One of the latest significant changes is the obligation to submit a written request for parental leave at least 30 days in advance, indicating the planned duration. This obligation applies not only to male employees, but also to female employees who move from maternity leave to parental leave.

The Amendment should be soon discussed by the government and then forwarded to the Chamber of Deputies.

The adoption of this amendment can be expected in the course of 2023, with some changes proposed to take effect from 1 January 2024. The Amendment is still at the early stage of the legislation process and there might be material changes.

 

Regulation of employment agencies ²

The Ministry of Labour and Social Affairs of the Czech Republic has submitted an amendment to Act No. 435/2004 Coll., on Employment, as amended, and other related acts for comment. It introduces changes to the field of agency employment and changes to the definition of illegal work to make the ban easier to enforce. The comment procedure of the Amendment is complete. The Amendment should be submitted to the government for consideration.

Thanks to this amendment, employees of employment agencies should receive the same protection provided to employees in the event of the employer’s insolvency under the Act no. 118/2000 Coll., on Employee Protection in the Event of Employer Insolvency (Employee Protection Act). Currently, the protection afforded to employment agency employees in the event of the bankruptcy of an employment agency is incomparably less than the protection afforded under the Employee Protection Act. An employee protected under the Employee Protection Act will be paid for unpaid wages sooner, as the insurance company’s payment to the agency worker is contingent on the employment agency declaring bankruptcy. Under the Employee Protection Act, the commencement of insolvency proceedings or the declaration of a moratorium before the commencement of insolvency proceedings is sufficient. The agency worker will usually receive the insurance benefit several months late because of the different legal regulations.

There’s a difference between insurance premiums being paid as a net payment, while the payment of wage claims is subject to deductions and levies similar to wages. The amendment also addresses the problem of the inappropriateness of the insurance principle, since the amount of the insurance benefit depends on the number of employees on temporary assignment.

The amendment repeals the provision of Section 58a of the Employment Act which stipulates the obligation of employment agencies to arrange insurance. The amendment is also intended to repeal the provision of Section 2 (5) of the Employment Protection Act, which excluded the application of this Act to employees of employment agencies, putting them on an equal footing. This legislative amendment will bring the treatment of wage claims of employees and agency workers under the Employee Protection Act.

In relation to further regulation of agency employment, the mandatory cash deposit related to the holders of a work mediation licence will increase from CZK500,000 to CZK1 million.

The other significant change is the redefinition of illegal work. It responds to the established case law of the courts, which, without any legal basis, requires the labour inspection authorities to prove the consistency of work indicated as illegal.

The amendment is intended to clarify the characteristics of activity identified as illegal work. "Work performed in a relationship of superiority of the employer and subordination of the employee, on behalf of the employer, on the instructions of the employer and performed by the employee personally for the employer, while being performed outside the employment relationship, is to be considered as illegal work; only the fulfilment of these characteristics is decisive for concluding whether it is illegal work, and the duration of the work is irrelevant. The same shall not apply to the performance of work fulfilling the characteristics referred to in the first sentence, the performance of which outside the employment relationship is permitted by special legislation.” Consistency of work is ruled out, which improves the enforceability of the prohibition on illegal work.

 

Protection of employees in case of employer’s insolvency ³

Last year, the Ministry of Labour and Social Affairs submitted a draft of the amendment Act No. 118/2000 Coll., on the Protection of Employees in the Event of Employer Insolvency. It tightens the conditions for filing and processing requests for satisfaction of wage claims owed by employees whose employer has become insolvent.

The proposal also covers the satisfaction of claims by employees of international employers if they become insolvent in another EU Member State. The law will also apply to employees of employment agencies, who were previously excluded from the scope of the law. For these employees, the amendment reinforces the legal certainty that the period relevant for the application of wage claims is, based on the notification of the proceedings in relevant country, similar to the decision of the courts at home. In both cases, the time limit for filing wage claims with the Labour Office of the Czech Republic, which is 5 months and 15 days, is based on this date. The Amendment also regulates basic definitions that are important to the application of the Act, such as covered employee, wage claims, and insolvent employer.

In addition, the conditions for deduction or reimbursement of paid wage claims are clarified, if the compensation is already obtained from the Labour Office. In the case of insolvency of the employer, according to the law, an employee who was a member of the employer's statutory body or had a decisive influence on the employer's activity and at the same time had at least 25% ownership interest in the employer, will lose the right to wages.

This Amendment has already been approved by the Chamber of Deputies and will be discussed in the Senate in April 2023.

 

Whistleblower Protection⁴

The Government's Draft of Act on Whistleblower Protection, which is a draft transposing the directive of the European Parliament and of the Council (EU) 2019/1937 on the protection of whistleblowers, is currently in the Chamber of Deputies. The aim of the proposed Act is to protect a wide range of people who carry out their work in the private and public sectors, if they report an unlawful act they become aware of in connection with their occupation. The proposed measures are intended not only to protect whistleblowers but also to prevent wrongdoing in general.

In the context of labour law, the most important change is the obligation for employers to set up an internal reporting system. Employers that have to set up an internal reporting system include:

• employers with 50 or more employees (unless it is an obliged person under the Act on Certain Measures against the Legalization of Proceeds of Crime and Terrorist Financing); and
• employers that meet one of the other specific conditions regarding its activities under the Draft (eg it’s a tied agent authorised to arrange consumer housing credit or an insurance or reinsurance company).

Reporting via the internal reporting system will only be possible for staff/employees and volunteers or trainees. Notification can be made verbally or in writing, and, with the consent of the whistleblower, via audio recording. In the original proposal, anonymous notification was included, but this has been abandoned. It will be necessary to identify the whistleblower at least by name, surname and date of birth, or other personal data that can identify the whistleblower.

Following the submission of a report, the competent person is obliged to assess the validity of the report and inform the whistleblower in writing of the results of the assessment within 30 days from the date of receipt of the report. This period may be extended by 30 days for important reasons.

The Draft provides redefinition of the report, or the scope of topics of report that are subject to protection. The report must contain information about a possible illegal act that has:

• occurred or is about to occur in relation to a person for whom the whistleblower, even if indirectly, has performed or is performing work or other similar activity; or
• in relation to a person with whom the whistleblower has been or is in contact in connection with the performance of work or other similar activity; and
• which has the characteristics of a criminal offence, violates the Whistleblower Protection Act, violates another legal regulation or a regulation of the EU in certain areas (eg tax, financial services, economic difficulties).

The original draft also included reporting offences for which the law sets a fine rate of at least CZK200,000. But this proposal was not approved by the government.

The Draft is currently being discussed in the Chamber of Deputies and we expect it to be adopted later this year.

 

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¹ The Draft of the Amendment
² The Draft of the Amendment
³ The Draft of the Amendment
⁴ The Draft of the Act