Category: Czech Republic

On 1 July 2024, the long-awaited Act on Collective Civil Proceedings (the Class Actions Act) entered into force, allowing consumers and small entrepreneurs to pursue their claims in court together through a class action.

The Class Actions Act transposes the EU Directive of 25 November 2020 on representative actions for the protection of the collective interests of consumers. The aim of the Act is to ensure that consumers and small entrepreneurs have access to courts, which they might otherwise be unable to afford due to the high costs of legal proceedings.

How does Czech law view class actions?

Class (collective) actions are intended to provide a group of consumers with a tool by which they can effectively combine their claims into a single legal proceeding, resulting in one judgment from the court. Up until recently, if a larger group of consumers was affected by an entrepreneur’s unlawful activity, the courts would hear each case separately. Dishonest entrepreneurs were able to exploit their stronger position, expecting consumers not to pursue claims of lesser financial value. Collective proceedings are designed to streamline court proceedings, reduce costs for both consumers and defendants and provide consistent rulings in cases with similar facts.

Before the new Act was implemented, Czech legislation did not regulate the collective protection of individual rights in collective proceedings. Although certain aspects were addressed in specific laws, there was no comprehensive regulation. Elements of collective protection were present in what was known as the collective protection of rights.¹ This extended the effects of the legal force of a decision in certain cases to individuals other than the parties to the proceedings, provided they had the same claims against the defendant arising from the same act or condition.

What claims will consumers be able to pursue collectively?

Collective proceedings will address disputes between consumers and entrepreneurs regarding the rights or legitimate interests of consumers. These claims must have a similar factual and legal basis, meaning they are either the same or so similar that it is efficient to hear them together. There are no restrictions on the type or nature of the claim. Consumers may seek:

• Payment of a sum of money, provision of other substitutable consideration, repair or replacement of goods, a price reduction or withdrawal from the contract, etc.
• An order for the entrepreneur to refrain from unlawful conduct
• A determination of whether or not there is a legal relationship or right

Only consumers’ claims arising after 24 November 2020 can be pursued in collective proceedings. Regarding ongoing proceedings, individual proceedings that were initiated before 25 June 2023 will be completed under the previous legislation

Who can file a class action and how?

Class actions cannot be brought by the affected consumers themselves. Only nonprofit organizations, with a long history of consumer protection, that are registered with the Ministry of Industry and Trade or European Commission can file class actions. These organizations must also be represented by an associate in the proceedings. In the first instance, the Municipal Court in Prague will have exclusive jurisdiction over collective proceedings in the Czech Republic.

The Class Actions Act follows an opt-in approach; this means consumers must actively register their claims. It defines “consumers” as natural persons acting outside the scope of their business or profession. Additionally, entrepreneurs employing fewer than 10 persons and with an annual turnover or balance sheet total not exceeding CZK 50 million is also considered a consumer in this context.

A class action is admissible if at least 10 consumers register their claims. Additional consumers can join the class action by registering, and they will all be designated as “interested class members’” in the proceedings. The class members themselves are not parties to the proceedings and have only limited rights within them. (For example, they may withdraw their registration, comment on the subject matter or conduct of the proceedings; they have a right to be informed, to object to a proposed settlement, amendment or withdrawal of a class action, or to comment on an appeal).

What is the course of a collective proceedings?

Compared to ordinary civil proceedings, collective proceedings are more complex. They involve two stages:

1. Determining the admissibility of the class action
2. Examining the merits of the case.

Once a group of at least 10 members with similar claims is assembled, a nonprofit organization can assume the role of plaintiff and file the class action.

The filing must meet legal requirements; it must include a statement that it is a class action, with all the prerequisites for class membership; it must also include a detailed description of what the plaintiff is seeking on behalf of the class members and an indication whether the plaintiff is seeking fees. At this stage, the plaintiff is not required to provide the consent (opt-in) of 10 specific individuals. The court is merely considering whether there is a potentially larger class of persons affected by the conduct alleged in the class action.

Consumers may register for the collective proceedings beginning from the filing of the class action until the registration period expires. The court sets the registration period in the resolution on admissibility of the class action, which should last between two to four months from the publication of the resolution in the register of class actions. The registration must be submitted using the prescribed form, available on www.justice.cz². By registering, the consumer becomes an interested class member and thus acquires the procedural rights associated with this status in the collective proceedings. Registration in a class action proceeding prevents a class member from asserting the same right in another legal proceeding.

Once the collective proceedings have commenced, the court will first assess the admissibility of the class action. If it is admitted, the court issues a resolution on the admissibility of the class action. If, on the other hand, the conditions are not met, the collective proceedings must be discontinued, and the individuals will be free to file claims in individual proceedings. Both parties to the proceedings (i.e., the nonprofit representing the class members and the defendant, but not the class members) can appeal the court’s resolution.

Collective proceedings on the merits begin on the date the resolution on admissibility of the class action is published in the register of collective proceedings. With some exceptions, the continuation of the collective proceedings is similar to ordinary civil proceedings, i.e., the court assesses the claims and decides on the class action, after which the parties may appeal.

What costs are associated with participating in collective proceedings?

There are no costs or fees for consumers to join the proceedings, even if the class action is unsuccessful. The costs of a class action are generally covered by the parties to the action—the nonprofit organization as the plaintiff, or the entrepreneur as defendant. However, if the class action is successful, the plaintiff will be entitled to a fee of up to 16 percent of the amount awarded by the court to the consumers or, in the case of non-monetary benefits, a lump-sum fee of up to CZK 2.5 million (approximately €100,000).

Where can the current collective proceedings be found?

The Class Actions Act establishes a register of collective proceedings³ where essential documents from collective proceedings will be published. This register includes a list of individual collective proceedings in which the admissibility of a class action has been decided. The data and documents published in the register are publicly accessible.

1. Section 83 and 159a of Act No. 99/1963 Coll. (Code of Civil Procedure)
2. https://justice.cz/documents/d/hromadne-zaloby/prihlaska_do_hromadneho_rizeni
3. https://hromadnerizeni.justice.cz/rizeni-mezi-podnikateli-a-spotrebiteli/

By Ladislav Smejkal, Co-Managing Partner Prague, and Aneta Krulcova, Associate, Dentons

CEE Attorneys has advised Asker Group on its acquisition of Aspironix. Havel & Partners advised the seller.

Asker Group is a provider of medical products and solutions.

Aspironix is a provider of medical devices and services in Poland, the Czech Republic, and Slovakia.

The CEE Attorneys team was led by Partner Lukas Petr.

The Havel & Partners team included Partner Martin Peckl, Counsel Pavel Ondrak, and Junior Associate Johana Nemeckova.

Editor’s Note: After this article was published, LSW announced that it advised the Asker Healthcare Group as well. The firm’s team included Partners Piotr Szelenbaum and Marcin Huczkowski, Counsel Magda Frackowiak, and Senior Associates Kasia Michalik and Joanna Markowicz-Maciocha.

Clifford Chance has advised KKCG’s IT pillar on the integration of the acquisition debt, following the acquisition of Avenga Group, into the group’s umbrella financing.

KKCG is an investment and innovation group with expertise in lotteries and gaming, energy, technology, and real estate. 

Avenga is an engineering and consulting platform with industry knowledge in pharma, insurance and finance, and advanced manufacturing.

In 2023, Clifford Chance advised KKCG on its acquisition of Avenga (as reported by CEE Legal Matters on December 22, 2023)

According to Clifford Chance, “the deal involved not only the refinancing of the existing loan used for the acquisition of Avenga but also the extension of further new funds to the Group.”

The Clifford Chance team included Prague-based Managing Partner Milos Felgr, Counsel Dominik Vojta, Associate Tomas Kubala, and Junior Lawyers Pavlina Tomeckova and Lukas Ljubovic.

Clifford Chance did not respond to our inquiry on the matter.

Editor’s Note: After this article was published, Dentons announced that it advised the lenders including Ceska Sporitelna, Komercni Banka, Ceskoslovenska Obchodni Banka, and UniCredit Bank Czech Republic and Slovakia. The firm’s team included Prague-based Partner Daniel Hurych, Senior Associate Martin Fiala, and Associate Jan Koristka, Warsaw-based Partner Bartosz Nojek, Senior Associate Mateusz Ciechomski, and Junior Associate Weronika Lakoma, and further team members in Duesseldorf and Luxembourg.

Reportedly, the lenders were also advised by Ganado Advocates on Maltese law, TM & Partners on Swedish law, and Boyanov & Co on Bulgarian law.

White & Case has advised a consortium of lenders consisting of Ceska Sporitelna, a.s., Raiffeisenbank a.s., and UniCredit Bank Czech Republic and Slovakia, a.s. on the up to CZK 150 million and EUR 123 million financing and refinancing of capital expenditures and acquisition costs for C-Energy s.r.o.

The new financing facility will finance the construction of a new waste-to-energy unit in Plana, which shall be fully operational in the first quarter of 2027, among other projects.

C-Energy is an energy producer specializing in generating power from biomass and natural gas. The plant in Plana nad Luznici is, according to White & Case, “a pioneering facility in the Czech Republic, being the first to completely phase out coal combustion by replacing it entirely with waste wood biomass.” C-Energy produces and distributes energy to the Tabor region, and is a leading supplier of ancillary services to the national grid operator. The plant also features the largest battery storage facility in the country, ensuring reliable power supply even during blackouts. 

The White & Case team included Partner Jan Linda and Associate Tadeas Matys.

Dentons has successfully represented an unlawfully sterilized woman in administrative court proceedings against the Ministry of Health of the Czech Republic regarding a denied claim for compensation and subsequent appeal on a pro bono basis.

According to the firm, “between 1966 and 2012, thousands of women – mostly Roma – were pressured by the Czechoslovak and subsequently Czech authorities into signing consent forms for sterilization, often without being informed about what they were signing or the full implications of doing so. This practice was widely condemned by the UN and human rights organizations. In an effort to atone for past injustices, in 2021, the Czech government passed Act No. 297/2021 Coll. to offer compensation to women who had undergone unlawful sterilization.”

In this specific case, following the Ministry of Health’s rejection of the claimant’s compensation claim, Dentons represented the claimant in an administrative action against the ministry’s decision and the subsequent decision of the Minister of Health on the filed appeal. According to the firm, the ministry’s review of the claim resulted in a decision awarding the claimant compensation of CZK 300,000 in accordance with Act No. 297/2021 Coll., on providing a lump sum of money to persons sterilized in violation of the law, with the firm adding that “the landmark judgment of the Municipal Court in Prague is the first in which the courts have substantively addressed the conditions that had to be met under the law in force at the time of the procedure in order for the sterilization to be considered lawful. The Municipal Court in Prague concluded, among other things, that the absence of instructions on the degree of reparability of the sterilization procedure is a ground for granting compensation under Act No. 297/2021 Coll., and the Ministry of Health must consider this legal opinion in future cases.”

The Dentons team included Associates Alzbeta Bohmova and Barbora Katrakova and Junior Associate Aneta Krulcova with the support of Prague pro bono Partner Jiri Tomola.

Clifford Chance has advised Ceskoslovenska Obchodni Banka on financing the acquisition of Solarpark Kamenicna by Enery Development. CMS reportedly advised Enery.

Headquartered in Austria, Enery acquires, develops, builds, and operates renewable energy plants throughout Central and Eastern Europe. According to Clifford Chance, Enery is one of Europe’s largest renewable energy generators. 

The Clifford Chance team was led by Senior Associate Hana Cekalova, under the supervision of Office Managing Partner Milos Felgr, and included Junior Lawyer Ondrej Steco. 

Editor’s Note: After this article was published, CMS confirmed its involvement to CEE Legal Matters. The firm’s team included Partners Lukas Janicek and Petra Mysakova, Senior Associate Michal Samek, Associate Lukas Reichmann, and Lawyer Andrea Haushalterova.

This March, MEPs approved new rules for artificial intelligence (AI), the so-called Artificial Intelligence Act. This was presented by the European Commission in April 2021. It is the world’s first comprehensive AI legislation. The Act aims to improve the functioning of the internal market by setting a single legal framework for the development, launch and use of AI. The AI Act also seeks to reduce the administrative and financial burden on businesses, especially small and medium-sized enterprises.

Main goals

The European Commission has set out four main goals for the regulatory framework:

• to ensure that AI systems to be launched on the market and used within the EU are safe and comply with existing EU legislation on fundamental rights and values,
• to provide legal certainty to facilitate investment and innovation in AI,
• to improve the administration and effective enforcement of existing legislation governing the fundamental rights and security requirements applicable to AI systems; and
• to facilitate the development of a single market for legal, safe and trustworthy AI applications and avoid market fragmentation.

The Act sets out a unified definition of AI, which includes machine learning as well as expert systems and statistical models. The Act defines AI as „software that is developed with one or more of the techniques and approaches listed in Annex I and can, for a given set of human-defined objectives, generate outputs such as content, predictions, recommendations, or decisions influencing the environments they interact with“.

It also harmonises the rules for the development, launch and use of AI systems across the EU, based on a balanced risk-assessment approach..

Levels of risks

The Act follows a risk-assessment approach that distinguishes between the AI used, creating (i) unacceptable risk, (ii) high risk, (iii) limited risk and (iv) minimal risk.

1. Unacceptable risk

AI systems that are a threat to humans are considered an unacceptable risk. This includes, in particular, systems that:

• manipulate people’s opinion, behaviour and decision-making and could result in physical or psychological harm,
• exploit the vulnerability of a particular group of people (e.g. children or mentally disabled people) in order to manipulate their behaviour in such a way as to cause physical or psychological harm,
• divide people based on their social behaviour, and
• performs real-time remote biometric identification in publicly accessible locations.

Such systems will be banned. However, in certain cases they may be exempted.

2. High risk

AI systems that have a negative impact on security or fundamental rights will be considered high risk. These will be divided into two main categories. The first category will be systems that are used in products covered by EU product safety legislation. These include toys, cars, medical devices, lifts or aerospace products.

The second category includes AI systems from eight specific areas that will have to be registered in the EU database, including:

• biometric identification and categorisation of persons,
• management and operation of critical infrastructure,
• education and professional training,
• employment, workforce management and access to self-employment,
• access to and use of essential private and public services and benefits,
• law enforcement,
• migration, asylum and border management, and
• the administration of justice and democratic processes.

High risk AI systems must comply with strict quality rules and disclosure, control and monitoring requirements. The Act deals in detail with these high risk systems. The specific regulatory requirements impact in particular on their providers. Providers will have to, among other things, develop a risk management system throughout the life cycle of the system, perform data management, create technical documentation to demonstrate compliance, create user instructions, implement a quality management system, etc.

However, it is not only the providers, but also others in the “chain”, such as importers, distributors or users of such systems. The role of importers and distributors is primarily to verify that the high risk system complies with the applicable regulations. This means that the importer must verify the conformity of the system by checking its documentation, while the distributor must verify that the system has the CE marking (conformité européenne). The CE marking demonstrates that the product complies with EU safety, health and environmental requirements.

The challenge for users is to use the high risk AI system in accordance with the instructions provided by the provider. In the future, we will certainly not avoid situations where a user, i.e. a company or its customers, will suffer damage as a result of using the system. It will be subject to litigation to prove whether the AI system was used in accordance with or in violation of the rules for its use. Other obligations include, for example, the need for human supervision of the system, monitoring of input data and system operation, and retention of automated records for at least six months.

3. Limited risk

For AI systems with limited risk, meeting minimum transparency requirements will be sufficient under the new regulatory framework. Their users will have to be informed that they are interacting with AI and will have to be able to decide whether or not they want to continue using the system.

This category will mainly include AI systems that generate or manipulate image, audio or video content.

4. Minimal risk

The Act allows for essentially free use of AI with minimal risk. This group includes applications such as video games or spam filters.

GPAI

GPAI stands for “general purpose AI”. It refers to systems such as ChatGPT. These are among the most widely used types of AI by the public today. GPAI can be classified as high-risk AI systems if they can be directly used for at least one purpose that is classified as high-risk. Special rules apply to providers of all GPAI models and they must meet the following requirements: 

• to create technical documentation of the GPAI model and provide it to the AI Office or the locally competent supervisory authority upon request,
• to create documentation for third parties using the GPAI model to build their own AI systems,
• to implement a policy of respecting EU copyright law, specifically the opt-out principle for text and data mining, and
• to make available a summary of the content used to train the GPAI model.

EUROPEAN AI OFFICE

The European Artificial Intelligence Authority (“the Authority”) will be established within the European Commission as part of the Directorate-General for Communications Networks, Content and Technology. The Office forms the foundation for a unified European AI governance system.

In particular, it will play a key role in the implementation of the Act by supporting national administrations. Primarily, it will enforce the rules for GPAI systems, will have powers to require information from AI system providers and will also have the power to impose sanctions for breaches of the Act.

The Office will work with both Member States and the wider expert community through dedicated forums and expert groups. Specifically, the Office will be tasked with supporting the Act and enforcing the rules set out therein, contributing to the application of the Act among Member States, including the establishment of various advisory bodies at EU level, developing tools and methodologies for assessing the capabilities and impact of AI systems, preparing guidelines and directives to support the effective implementation of the Act, etc.

SANCTIONS

The Act also contains significant sanctions for breaches of the rules contained therein, in particular sanctions for breaches of the absolute prohibition on the use of certain AI systems and sanctions for operators for breaches of their obligations.

There are two types of sanctions. They are either fixed penalties or penalties expressed as a percentage of the company’s annual turnover, with the higher option being applied. In the case of operators, a fine of up to EUR 15 million or 3% of annual turnover may be imposed. For breaches of the absolute prohibition, the fine can be up to EUR 35 million or 7% of the company’s annual turnover.

When imposing a fine, it will also take into account:

• the nature, seriousness and duration of the breach,
• whether the subject has been fined in the past for the same offence,
• the size of the entity that committed the breach and its market share.

IMPLEMENTATION

As already indicated above, an AI Office will be established within the Commission to monitor the effective implementation and compliance of GPAI model providers.

The effectiveness of the Act is divided into four main timelines: 

• 6 months to prohibit the use of AI systems posing an unacceptable risk,
• 12 months for rules on GPAI,
• 24 months for rules on high-risk AI systems listed in Annex III, and
• 36 months for rules relating to high-risk AI systems listed in Annex II.

CONCLUSION

Given the growing importance of AI in almost all industries across the society, it is certainly advisable to set some rules for its use. The AI Act is a major step towards the creation of a coherent and harmonised legal framework for AI in the European Union that emphasises safety, transparency and respect for fundamental rights. The question remains how the new regulations will work in practice and what influence they will have on the development of other similar regulations outside the EU.

By Jaroslav Tajbr, Partner, and Jan Cermak, Junior Associate, Eversheds Sutherland

White & Case has advised the Accolade Group on the issuance of CZK 3 billion 8.00% notes due 2029 with Ceska Sporitelna, J&T, and Komercni Banka as the arrangers and joint lead managers.

Accolade Holding is the holding company of the Accolade Group, which is mainly engaged in the investment into development, management, and leasing of industrial real estate for light manufacturing, logistics, and e-commerce. It operates industrial properties in the Czech Republic, Poland, Slovakia, and Spain.

According to White & Case, the notes were issued by Accolade Finco Czech 1 and guaranteed by Accolade Holding. “The issuance represents the first ever green bond issuance by a corporate issuer under Czech law. The funds are to be used to finance or refinance the group’s projects that fall into the ‘Green Buildings’ category. The notes were publicly offered to retail investors and offered to institutional investors. The entire issue was oversubscribed and sold out in two weeks. The notes have been admitted to trading on the Regulated Market of the Prague Stock Exchange.”

The White & Case team included Partner Petr Hudec, Counsel Petr Smerkl, and Associate Jan Vacula.

White & Case did not respond to our inquiry on the matter.

In the Czech Republic, labor law advice has become highly sought after, primarily due to recent legislative amendments and the implementation of whistleblowing and other EU regulations, according to Peterka & Partners Partner and Director for the Czech Republic Adela Krbcova, with the surge in interest driven by the need for transparent and predictable working conditions and work-life balance.

CEELM: What work has been keeping your employment practice busy over the past year?

Krbcova: The employment sector is particularly demanding, especially in the Czech Republic and Central Europe. We constantly deal with new developments at EU and local levels, and as a result, over the past 12 months, we’ve been exceptionally busy. I’d highlight two major events: the significant amendment to the Czech Labor Code and the implementation of the EU whistleblowing rules.

CEELM: Can you walk us through these amendments and how they are reflected in your workload?

Krbcova: We had been working with different versions of the draft for about two years, trying to convince our clients that this particular amendment – driven by the EU directive on transparent and predictable work conditions, work-life balance, and related challenges – was imminent. However, most were concerned and avoided taking action until the very end. In some ways, this turned out to be beneficial, as the draft underwent significant changes during the legislative process. It addressed not only the harmonized EU points but also, for the first time, established general comprehensive rules for teleworking, which became essential during the COVID-19 period. Consequently, as of October 1, 2023, the new regulations were in place, and employers had to adapt their practices and documentation to comply with the new legislation. This required drafting new agreements and updating internal rules, impacting many employers significantly.

Additionally, there have been changes regarding workers employed under so-called “flexi” contracts, which fall outside of standard employment relationships. These workers were already affected by the October changes, but the adjustments have continued, and employers are still grappling with them. Starting in January, these workers are entitled to paid vacation for the first time. This obligation has raised concerns, as it puts “flexi” workers on a similar level to regular employees, requiring employers to manage working schedules and pay for certain obstacles. Many expect that these “flexi” agreements will be abandoned as a result.

Moreover, at the beginning of the year, a significant tax package was introduced in the Czech Republic, also targeting “flexi” workers. This package faced substantial criticism. The implementation of new tax regimes and additional administrative burdens has been partially postponed from this summer to early 2025. Starting from July, these workers have to be registered, and next year, the new tax regime will be applicable.

A potentially underestimated aspect of this amendment is that it finally allows for better management and implementation of the digitalization of employment practices by clarifying the rules on e-signing and e-delivery in employment matters. This was a significant challenge during the COVID-19 period, as many employers wanted to use e-contracts, which we had to explain were quite risky. Now, mutual documents and employee-friendly documents can be easily implemented or executed electronically – via email, some platforms, or internal software systems – provided that employees supply their private email addresses.

There is also the possibility of using electronic means of communication to deliver termination documents, which is a game changer. Previously, delivering unilateral termination documents to Czech employees was challenging due to numerous regulations. Employers could only use e-delivery if the employees had an official electronic signature or an “official data box,” which was difficult to manage and rarely used. New rules allow employers to use simpler electronic means systems, which significantly helps if the legal requirements are met. However, some gaps remain, particularly in how employers can duly prove that all processes were correctly followed.

Overall, these changes impacted all employers, although to varying degrees. It also allowed us to review our clients’ existing documents. For many, it provided an opportunity to conduct audits in the employment sphere and examine their practices from broader and more strategic perspectives.

CEELM: How did you approach the implementation of the new whistleblowing legislation?

Krbcova: Regarding the implementation of whistleblowing legislation, our firm dedicated a special team to this area, creating a subdepartment composed of litigation, compliance, and labor experts. From the very beginning, and even many months ago, we have been offering compliance solutions to help clients adapt to these new requirements. This also has kept us very busy with implementation and training. I would like to emphasize that our firm operates in a total of eight countries, mostly within the EU, and offers integrated solutions while focusing on the local implementation aspects of the directive.

CEELM: What changes or developments do you foresee in your practice and your work over the next 12 months?

Krbcova: The so-called “flexi” amendment to the Labor Code, the draft of which has recently been presented to the public, is expected to address challenges faced by employers, such as difficulties in hiring and retaining staff. This amendment is designed to facilitate movement in the market, though its impact remains to be seen. A key issue under discussion is the inclusion of termination without cause, which was suggested by the National Economic Council of the government. Currently, it is not part of the amendment, but many employers, their associations, and certain politicians would welcome its inclusion as a potential labor market driver, albeit with numerous conditions.

In practical terms, this means employers will need to review their core documents once again. For many, this represents an opportunity to update their internal documents and processes. The focus will be on procedures and compliance, and we should also anticipate additional requirements related to equal and transparent pay and other matters (AI, NIS2, ESG-related) that could be introduced alongside these amendments.

In this context of boosting the labor market, there are several developments in the immigration sector that could help with hiring.

Additionally, I’ve noticed a significant number of client requests recently concerning equal treatment in a broad context. Over the past few months, we’ve received many inquiries about structuring benefit systems or variable pay arrangements to ensure compliance with the principles of equal treatment and non-discrimination. This task involves various procedures, including collective bargaining agreements. We expect this trend to continue.

New regulations governing agreements to complete a job (in Czech: dohoda o provedení práce) came into effect in the Czech Republic on 1 July 2024, with additional provisions set to be implemented on 1 January 2025. These amendments significantly modify the original provisions outlined in the Czech Consolidation Package (Act No. 349/2023 Coll.).

1. What changes were implemented on 1 July 2024?

1.1 Compulsory registration of all employees working under an agreement to complete a job

Until now, employers only had a duty to register employees working under agreements to complete a job if the employee was covered by sickness and pension insurance, i.e. in a given month their income was above CZK 10,000. In that case, a registration with a register of insured persons maintained by the Czech Social Security Administration was necessary.

From July, it’s compulsory for employers to register every employee working under the agreement to complete a job, regardless of their income.

All current employees must be registered by 20 August 2024. For the registration, employers will use forms published by the Czech Social Security Administration on their official website.

1.2 Employers must electronically report income of all employees working under an agreement to complete a job

Following the registration, every month employers must file a report containing a list of employees working under an agreement to complete a job and their income. The reporting can be done via this special form published by the Czech Social Security Administration.

The deadline for reporting for each month is the 20th day of the following month, i.e., the reporting for July 2024 must be completed by 20 August 2024.

2. What will change from 1 January 2025?

The current rule, under which a monthly remuneration below a fixed limit of CZK 10,000 (for each agreement to complete a job) is exempt from social security contributions, will be replaced from 1 January 2025 by a new system. It will be based on a new limit calculated as a percentage of the national average wage. Complex set of rules will apply on employees who work for several employers simultaneously based on multiple agreements to complete a job.

From 2025 the following rules will apply:

(a) Should the employee work for only one employer (regardless of the number of agreements to complete a job entered into), they will be exempt from social security contributions if their monthly remuneration does not exceed a limit of 25% of the national average wage (CZK 10,500 per month in 2024).

(b) Should the employee work for several employers under several agreements to complete a job, they may be exempt from paying social security contributions only regarding the work performed for one of the employers – the one who announced to the Czech Social Security Administration its will to use the newly introduced “regime of notified agreement” (in Czech: režim oznámené dohody). The first employer to make the announcement may use the regime of notified agreement.

The other employers must abide to the following:

• Should the employee earn up to CZK 3,999 per month, they will be exempt from paying social security contributions.
• Should the employee earn CZK 4,000 per month or more, the social security contributions must be paid.

Given the breadth and complexity of the changes, we will gladly answer any of your additional questions.

By Ondrej Benes, Counsel, and Nikola Hnojilova, Associate, Wolf Theiss