On 1 January 2012 the Act on Criminal Liability and Prosecution of Legal Entities came into force. Under the new law, which the Czech Republic must enforce because of international treaties and European law, legal entities can be held criminally liable for an exhaustive list of crimes which could result from employers' actions. This includes fraud, non-payment of taxes and environmental damage. Sanctions include penalties as well as a ban on participating in public contracts.
An employer may be criminally liable for acts carried out on its behalf or in its interest, or as a result of its activities. Furthermore the criminal act must be committed by (i) the statutory bodies of legal entities or members of these bodies, (ii) any person exercising management or supervisory activities, (iii) any person exercising a decisive influence over the management of the legal entity (if the activities of such person(s) contributed to the criminal offence of the legal entity), or (iv) an employee during the performance of his/her duties.
Possible Limitation of Employer's Liability
Under this legislation "employee" includes not only employees as defined by the Labour Code but any person cooperating with a company, e.g. on the basis of a trade licence. The important fact is that employers are not responsible for the actions of these persons, provided they have implemented and complied with all precautionary measures that may be reasonably required.
Employers should therefore pay close attention to the measures they adopt to prevent employees from committing illegal acts. We recommend that all management and internal audit activities as well as contractual negotiations and contract documentation are reviewed and regularly monitored. Employers should also set out detailed responsibilities and procedures in the internal regulations (directives, orders, codes, etc.) and regularly check that they comply with existing regulations. All measures should be reasonable taking into account business activities, size and organisational structure of the specific employer.