Since 2020, employers and employees in the Czech Republic, as well as elsewhere, have been preoccupied with issues relating to COVID-19, not least the employees’ testing, quarantines, or vaccination. It is without question that the pandemic has left its footprint on the Czech labor market and provided an impetus to many current trends. Looking beyond the pandemic, this article will focus on the development of the Czech employment market in a post-COVID-19 world and the role that Czech employment law will play in it.
The employment market in the Czech Republic is battling a lack of people to fill in vacancies, increasing production costs, and the need to be competitive. Employees ask for flexibility and freedom to work from where and when they want. Employers understand that to succeed in the current as well as the future business environment they will have to be flexible. However, instead of shaping the relevant decisions based on their business needs, employers are forced to restrict flexible work arrangements, due to legal and tax reasons, or to create solutions that entail risks of sanctions from the state authorities.
Flexible Work Arrangements and Current Legislation
The employment relationship and the protection which employees enjoy under the Czech Labor Code seem to be failing to respond to the needs of the fast-developing employment market. Accelerated by the pandemic, the phenomenon of the gig economy produced several jobs which are a hybrid between employment and a freelancer relationship. This is quite apparent in the delivery services where couriers, claiming to be self-employed individuals, often work for only one client and under its directions, driving the client’s company cars dressed in the company colors. For the flexibility and financial benefits of the freelancer relationship, mutations of this arrangement are being used in more and more sectors nowadays. Unfortunately, under Czech law, such arrangements bear the risk of high employment and tax sanctions, if classified as an employment relationship.
The companies using freelancers, rather than hiring them as employees, try to mitigate the risks by engaging them indirectly, via third-party service providers. However, from the perspective of Czech law, the arrangement can be qualified as the supply of workforce without a work agency permit (i.e., a concealed work agency scheme). While state authorities in some CEE countries are turning a blind eye, the Czech labor inspector has recently been empowered to impose a fine of up to CZK 10 million (approximately EUR 385,000) for a concealed work agency scheme, not only on the supplier but on the user of the workforce as well.
Another example is work-from-home which, due to the COVID-19 pandemic, has been a frequently discussed topic leading some legislators, for example in Slovakia, to amend the provisions on teleworking to reflect the current needs and trends of the market. In the Czech Republic, in the absence of specific regulation, employers usually adopted their own work-from-home internal policies, with the uncertainty of their potential legal, tax, and social security implications.
The Labor Code and Hopes for the Future
There have been several attempts to modernize the Czech Labor Code over the past years. In 2016, a proposed work from home regulation, being part of a more extensive draft amendment of the Labor Code, did not make it through the legislative process in the Chamber of Deputies before their mandates expired. Another attempt with the same goal was made in summer 2021 but was rejected by the government – which considered the proposed work from home regulation in part as problematic, unclear, or unnecessary – rather than suggesting workable amendments. As such, our Labor Code still lacks a sensible regulation that would both enable people to work from places other than employers’ premises and not burden employers with increased liability and costs.
A change may come with the new government which promises to increase the flexibility of the Labor Code. The public will want to make the new government keep its word and new initiatives, emerging from employment market specialists and practitioners, will hopefully lead to changes to the Labor Code – providing for a functional set of rules and rights for employers and employees that will govern the performance of work from anywhere in the Czech Republic, including from home, as well as other flexible work arrangements. With any luck, the initiatives will convince the government and Czech legislation will soon catch up with the realities of the employment market.
By Veronika Kinclova, Head of Employment, Clifford Chance
This Article was originally published in Issue 8.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.