Czech Republic: Key changes in the new Labour Code

On 1 January 2007, new Labour Code (Act No. 262/2006 Coll.) came into effect in the Czech Republic.

This new legislation substantially changed the Czech employment regulatory framework and brought in particular following significant changes:

• All employment contracts must be made in writing (no exemptions).

• An employment relationship may only be established by a contract. Under the old regulation, in some cases, the employment relationship in a private sector could have been established by an appointment. This is not possible anymore.

• Certain changes regarding the recall of managerial employees were introduced. Now a managerial employee may be recalled exclusively by the statutory body of the employer (if the employer is a legal person) or directly by the employer (if the employer is a natural person), but only if parties mutually agreed this possibility in advance in writing.

• The probation period must be prolonged for each day on which the employee did not perform his/her work due to obstacles to work or employer’s side. Furthermore, from 1 January 2008, during the probation period, the employer will not be entitled to terminate the employment relationship within the first 14 days of the employee’s incapacity to work (due to sickness, injury etc.).

• The regular place of work should be agreed in an employment contract (for the purpose of reimbursement of travel expenses on business trips, journeys outside the employee’s regular place of work etc).

• Employers will have to provide time off in lieu of overtime work or pay at least time and a quarter (125% total) of the salary for any overtime work. This means change of previous rule where employers can stipulate in contracts that an employee’s salary already includes up to 150 hours’ overtime a year.

• An employee who works on a day that is a public holiday is either entitled to take a day off with a compensation of 100% of his average daily salary or – in the case of mutual agreement with the employer – to receive a supplement in the amount of at least 100% of his average daily salary.

• For work at night and work on Saturday and Sunday the employee is entitled to receive a supplement of at least 10% of his average daily salary for each night, Saturday or Sunday worked.

• For work in an arduous environment the employee is entitled to receive a supplement of at least 10% of his average salary.

• An employer may only instruct his employee to go on a business trip only if it has been agreed with the employee.

• Employers will have to pay salary at the normal rate for any time employees spend at their workplace when they are available for work but not actually required to work. From 1 January 2007, this is considered as standard working time. Standby time (which can be paid at a rate considerably below the normal pay rate) will only consist of time when employees are not at their place of work but are available on call to start work.

• The notice period for termination of the employment contract is 2 months for both the employer and the employee. This period can be extended (but not shortened) by mutual agreement of the parties, however it must always be the same for both the employer and the employee.

• If an employer gives a notice of termination to an employee because of closing or relocation of the employer’s business or a part of it, or because the employee has become redundant, the employer is obliged to pay severance pay to the employee in the amount of 3 times his/her monthly average salary.

• In the case of idle time or interruption of work caused by unfavourable weather conditions, the employer may transfer an employee to a different area of work only with his consent.

• The working time of employees under 18 (16 under the old employment regulation) must not exceed 30 hours a week and, cumulatively, 6 hours a day.

• The new law introduces a completely new health & safety obligations on construction sites.

• Employers will be able to monitor their employees’ private phone calls, faxes and emails carried out in the workplace using the employer’s equipment, if there is a serious cause for doing so.

• The liability of the employer for employees’ personal belongings which are not usually brought to work by employees (e.g. higher amounts of cash, jewellery and other valuables), is limited to CZK 10,000.

Above we list only the most important changes affecting employment relationships after 1 January 2007. Since many of these changes have a significant impact on the wording of employment contracts used by employers after 1 January 2007 we would recommend that these contracts, together with internal employment regulations, are reviewed and amended accordingly. If you require any assistance with this, we will be more than happy to help.