Employment Law Changes

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The legislation governing employment law has been amended, with the amendments coming into force on 1 January 2012.  The amendments result in a number of changes; the most important of which are summarised below.

Illegal work – hiring freelancers for dependent work

The definition of illegal work has been fundamentally changed.  The new definition of illegal work includes the performance of dependent work as a freelancer (so called 'svarcsystem' in Czech).  Increased activity by the Labour Inspection Authority can be expected since the amendments impose a penalty for 'employers' of between CZK 250,000 and 10,000,000.  In other words, the amendments specify not only a maximum penalty, which is usual, but also a minimum penalty for such an offence.  In addition, a freelancer may incur a penalty of up to CZK 100,000.  (This has been increased from CZK 10,000.)

Duty to notify

The amendments remove the obligation to report all job vacancies to the Labour Office (although employers may continue to notify the Labour office on a voluntary basis if they wish).  It should be noted that these amendments do not change the position with respect to vacancies to be filled by a non-EU national who requires a work permit to work in the Czech Republic.

Control activities and sanctions

The amendments change the relevant inspection body from the Labour Office to the Labour Inspection Authority.  Furthermore, a new fine up to CZK 10,000,000 is introduced for breach of the duty to provide:

• a written employment contract
• an agreement to perform work
• an agreement to perform a work activity.

Unemployment benefits

Eligibility for unemployment benefit is subject to new restrictions for employees who have terminated a mediated employment (i.e. employment arranged by the Labour Office) in the following circumstances:

• unilaterally by the employee
• by agreement with an employer without serious reason
• if the employment has been terminated by an employer for an especially gross breach of work discipline.

Another significant change is that an employee dismissed for reasons connected to an organisational change is entitled to a non-capped payment (corresponding to 65% of net severance pay) from the Labour Office if the employer fails to pay severance pay.  The employer is then obliged to pay not only the severance pay to the employee, but also the compensatory amount to the Labour Office.

Employment agencies

The amendments make several changes to agency employment (temporary assignments of employees by work agencies).  An important and practical change is a ban on the assignment of non-EU nationals and disabled employees by job agencies.  From 1 January 2012 it will therefore not be possible to hire non-EU nationals through job agencies; instead employers will have to employ such non-EU nationals directly.

For further information or to discuss any of the issues raised, please contact Jaroslav Škubal or Tereza Erényi at +420 221 430 111.