A traditional selection of Czech TOP 10 case law in 2022, which should not escape your attention.
1) Is it possible to compensate for overtime by providing paid time off in subsequent months?
The employer entered into an agreement with the employees to compensate them for overtime by providing compensatory time off during the following 26 weeks, with the understanding that overtime pay would be paid not with the pay for the month in which the overtime work was performed, but only with the pay for the month in which the employees took compensatory time off. The Labour Inspectorate considered such a common practice as a violation of the obligation under Section 141(1) of the Labour Code (i.e. to pay the wages by the end of the following month at the latest), which according to traditional interpretations cannot be deviated from, and imposed a fine on the employer.
The assessment of the legitimacy of the fine ended up at the Supreme Administrative Court, which confirmed the annulment of the fine, as it concluded, with reference to the case law of the Supreme Court, that Section 141(1) of the Labour Code could be derogated from and that it was therefore possible to negotiate such an agreement on the late payment of wages.
Although this is a landmark decision for the assessment of the admissibility of various overtime accounts and similar methods of compensating overtime work, we recommend, where appropriate, to proceed strictly along its lines, i.e. to compensate overtime by taking „paid“ compensatory time off only on the basis of an appropriate agreement with employees and within a maximum 26-week compensation period.
(According to the judgment of the Supreme Administrative Court of 25 August 2022, No. 6 Ads 138/2022-37)
2) When can you be liable for a work-related injury to your contractor (self-employed)?
In this case, the installer was performing work on a stacker overhaul as a subcontractor, during which he was injured. Although he was technically working without any contractual relationship with the customer company, he sought compensation as if he had suffered an employee’s injury. He claimed that his relationship with the c was in fact an employment relationship, since he had carried out the work personally, for remuneration, at the company’s workplace, together with the company’s employees, and within the weekly working hours fixed for him by the company. The company also provided him with the necessary facilities (a changing room) and work equipment, transported him to the workplace and trained him in occupational health and safety. Furthermore, the activities of the fitter were carried out under the company’s authority (the company’s employees imposed work tasks on the fitter), on behalf of the company, on its premises and at its expense and responsibility.
Both the district and regional courts agreed with the installer and considered the above described relationship as a so-called de facto employment relationship, and this conclusion was confirmed by the Supreme Court. According to the Supreme Court, it is not important what the parties call their relationship. Rather, what is important is what was actually manifested and how the relationship actually works. In other words, if the relationship between the two entities fulfils the characteristics of dependent work (mentioned above), it will be an employment relationship regardless of their will.
The performance of dependent work outside the employment relationship has, of course, major consequences in terms of sanctions for illegal work (the so-called “shvarcsystem”), employment protection, taxes, social and health insurance, but also, as in this case, when an accident occurs at work – the employer will be obliged to compensate for the injury as if it were his employee. Unfortunately for the employer, however, there is no statutory insurance in such cases, so the money will come out of their pocket. It is not only for this reason that maximum attention must be paid to the correct set-up of relationships with your suppliers/self-employed persons.
(According to the judgment of the Supreme Court of the Czech Republic, Case No. 21 Cdo 3061/2020, dated 19 May 2022)
3) Beware of the use of disguised employment agencies
The Supreme Administrative Court upheld a fine imposed by the Labour Inspectorate on a contractor who provided services to the client on the basis of a work contract. However, the Labour Inspectorate assessed the contractual relationship in such a way that, although the contract was described as a contract for work, it was in fact the assignment of labour (hiring of employees) to the client, without the contractor having an employment agency licence.
The contractor’s employees worked in shifts on machines belonging to the client and processed material owned by the client. In making its decision, the Supreme Administrative Court took into account, first of all, that both the client’s and the contractor’s employees worked in the same way at the client’s workplace, and the contractor’s employees were effectively subordinate to the client’s employees (who assigned work and gave them instructions). Moreover, the contractor had previously held an employment agency licence and subsequently lost it, but the manner of cooperation between the client and the contractor did not change.
In this context, we would like to point out that from 2021 onwards, a fine of up to CZK 10 million may be imposed not only for the disguised agency, but also directly for its customer, i.e. the “recipient of the services”.
(According to the decision of the Supreme Administrative Court, Case No. 4 Ads 349/2021, dated 29 March 2022)
4) Is it possible to conclude a termination agreement by e-mail?
In this case, the courts dealt with a situation where the employee was first given notice of termination of employment due to an organizational change. Subsequently, however, the employer, concerned about the validity of such termination, entered into a termination agreement with the employee as part of a settlement agreement, whereby the employer and the employee agreed on more favourable terms (for the employee) for the termination of the employment relationship. The agreement was first signed by the employer and then a scan of the signed agreement was emailed to the employee. Thereafter, the conclusion of the agreement was also confirmed on behalf of the employee by his legal representative. However, the employer tried to back out of the agreement when it turned out that he had believed the arguments of the employee’s lawyer based on a non-existent case law. The employer argued that the agreement was not properly concluded because it was not delivered to the employee in his own hands in accordance with the provisions of the Labour Code on service, nor were the conditions for service by electronic communication network met.
The Supreme Court sided with the employee, holding that the agreement was validly entered into in this manner. The purpose of the Labour Code’s regulation on service of documents on an employee is to ensure that the document actually reaches the employee. Thus, although the legislation links the absence of such a legal act to a breach of the rules on the service of documents, this does not mean that a bilateral legal act could not arise in another way provided for by law, that is to say, on the basis of a legal act governed by the Civil Code.
However, it is questionable how the courts would rule if an employer sought to protect itself through an informal agreement with an employee. We are concerned that in such a case the result could be the opposite and therefore recommend waiting for the forthcoming amendment to the Labour Code, which should finally alliw in practice the electronic conclusion of agreements also in the field of labour law.
(According to the judgment of the Supreme Court of the Czech Republic, Case No. 21 Cdo 2061/2021, dated 27 April 2022)
5) Paying a premium only to a certain category of employees
In this case, the former head of the personnel department claim in the courts the payment of a special monthly premium based on length of work experience for the last three years of her employment. According to the employer’s internal regulations, only employees in blue-collar occupations were entitled to that premium , which the plaintiff considered to be a breach of the principle of equal treatment of employees.
In this case, the Supreme Court upheld the lower courts’ rejections, concluding that the length of work experience criterion therefore served only to distinguish between employees in the same category and not to unduly favour them over other groups of employees, including the plaintiff. The plaintiff of that criterion thus pursued a legitimate aim and, having regard to its rationale, cannot be regarded as -disproportionate in relation to other groups of employees.
Not only may the way in which wage is negotiated, set or determined differ between different groups of employees of the same employer, but different criteria (conditions) may also be applied to ensure that the work they do takes account of the statutory pay considerations. If an employer imposes a condition on a certain group of employees, it is obliged to apply that condition equally to them, having regard to the principle of equal treatment.
(According to the judgment of the Supreme Court of the Czech Republic, Case No. 21 Cdo 627/2021, dated 18 January 2022)
6) What claims may an employee excerice for bossing
The employee demanded an apology and financial compensation for non-financial damage from her former employer for the behaviour of her supervisor, who, according to her, violated the principle of equal treatment of employees by reproaching her for the slightest violation and applying disproportionate sanctions, disregarding her health condition and inciting other employees to do the same. The employee was convinced that she was the victim of “bossing”.
The Supreme Court considered the legal assessment of “bossing”, which is not regulated by the Czech laws. The Court held that if the unwanted conduct is related to one of the discriminatory grounds, it may fulfil the elements of harassment within the meaning of the Anti-Discrimination Act. In the absence of one of the discriminatory grounds, such conduct may be considered a breach of the employer’s duty to ensure equal treatment of all employees.
In the event of unequal treatment, the employee may pursue claims under the Anti-Discrimination Act, including a claim for appropriate monetary compensation. This reasonable compensation has both a satisfactory function, i.e. compensation for the injured employee, and a preventive function, and its amount is at the discretion of the court. In the present case, the employee initially claimed 7 million CZK. She was eventually awarded 100 thousands CZK.
(According to the judgment of the Supreme Court of the Czech Republic, Case No. 21 Cdo 3858/2020, dated 30 November 2021)
7) Dissatisfaction with job performance as a reason for redundancy?
The employer was not satisfied with the employee’s performance (Sales Director) and decided to make an organizational change, which consisted of both expanding the employee’s existing position and delegating some tasks to the newly hired employee. After a few months, the employer made another organisational change, abolishing the position of the original employee on the grounds that the newly recruited employee was able to perform his tasks, and thus terminated the redundant employee for organisational reasons.
Both the first instance court and the Court of Appeal did not uphold the employee’s claim that the dismissal was invalid as they found the organisational change to be legitimate. It was only the Supreme Court that held that a strict distinction should be made between dismissal for redundancy and dismissal for unsatisfactory performance, in which case it was held that the true reason for dismissal was unsatisfactory performance. The employer cannot address (even justified) unsatisfactory performance with subsequent organisational changes. If an employee, through no fault of the employer, achieves unsatisfactory work results, the employer may terminate the employment relationship with the employee by giving notice only if all the conditions laid down in the Labour Code are met, i.e. prior written notice of the possibility of termination and the failure of the employee to remedy the deficiencies in his work within a reasonable time.
This ruling confirms a recent trend in the Supreme Court jurisprudence that problematizes reliance on purposeful redundancy as a solution to various cases of employer dissatisfaction because of the employee’s character or work performance.
(According to the judgment of the Supreme Court of the Czech Republic, Case No. 21 Cdo 3710/2020, dated 27 May 2022)
8) Avoid of threats and pressure when concluding a termination agreement
In this case, the former employee pleaded the invalidity of a termination agreement which he had signed under psychological pressure in detention, where he was visited by the secretary and the HR officer of the defendant employer. The latter informed the employee that if he did not immediately sign the termination agreement, which the employer later described in court as a “gentleman’s agreement”, he would be dismissed for visiting pornographic websites at work. If the employee signed the agreement, the employer guaranteed that no one (not even the employee’s partner) would know the real reason for the termination.
While the lower courts agreed with the employee that the agreement concluded under duress was invalid because the employer had threatened the employee with an interference with his personal rights (the right to honour, dignity, respectability and privacy), they also held that the invalidity was relative and that the employee had invoked it late. The employee found a defence only before the Constitutional Court, which considered this interpretation of the lower courts to be too formalistic and the application of the statute of limitations objection to be contrary to good morals.
In this context, we recommend paying increased attention to appropriate communication regarding the termination of an employee’s employment, including in light of the increasingly widespread practice of covert recording by employees, where such recording will be often admitted by the courts as a legitimate tool to protect the employee as the weaker party to the employment relationship.
(According to the ruling of the Constitutional Court, Case No. II.ÚS 2883/21, dated 19 April 2022)
9) Dismissal for assault on employer’s property, including pretending to work
Courts continue to assess very strictly any direct or indirect attack on an employer’s property, regardless of the amount of damage, as the two cases below demonstrate.
In the first case, the employee went to the post office during working hours (at least 16 minutes before his shift ended) to take care of personal business and did not mark his departure from work. This gave the employee an undue advantage (wages) at the expense of his employer. In addition, he used this time to post a package of prison pajamas at the post office, which he sent to the deputy mayor of the municipality, a member of his employer. The employer terminated the employee for this reason for serious breach of work discipline (according to the judgment of the Supreme Court of the Czech Republic, Case No. 21 Cdo 424/2021, dated 20 May 2022).
In the second case, the employee appropriated (registered in his own name) the revenue of CZK 64 generated by another employee and the employer immediately terminated the employment relationship with him for this reason. In the court proceedings, the employee defended himself and argued that this was a minimal amount and thus did not constitute a particularly gross breach of the employee’s duties (according to the judgment of the Supreme Court of the Czech Republic, Case No. 21 Cdo 1906/2021, dated 18 January 2022).
In both cases, the Supreme Court reaffirmed that an attack on the employer’s property (even if indirect, including pretending to perform work) constitutes, in terms of intensity, an act for which the employment relationship with the employee may be terminated (also) by immediate termination pursuant to the provisions of Section 55(b) of the Labour Code; it is not a priori relevant what values (to what extent) were threatened or affected by the attack.
10) An unpaid leave agreement cannot be concluded when there are obstacles on the employer’s side
The employer entered into an unpaid leave agreement with the employee on the grounds that he was unable to work due to the Covid-19 pandemic, and thus there was an impediment to work on the employer’s part. In the present case, the Supreme Court therefore addressed the question of whether and, if so, under what conditions the granting of leave without pay or salary compensation may be the subject of an agreement between the employee and the employer.
The court stated that the Labour Code regulates both situations where an employee cannot perform work due to specified obstacles at work and the employer is therefore obliged to excuse his absence, and situations where the employer cannot assign work to an employee due to obstacles on his side, both of which are objective facts. However, the law does not prevent the employee and the employer from agreeing on unpaid leave if there are other obstacles on the employee’s side not covered by the law.
However, if an employee is prevented from working by an obstacle to work on the part of the employer for which he is entitled to wage or salary compensation under the law, the employee cannot exempt the employer from the obligation to pay such wage or salary compensation, even by concluding an agreement on granting unpaid leave at the employee’s request. Such an agreement shall not be taken into account at all and the employee may not waive his entitlement to wage compensation or otherwise.
(According to the judgment of the Supreme Court of the Czech Republic, Case No. 21 Cdo 496/2022, dated 23 August 2022)
By Radek Matous, Partner, Eversheds Sutherland