Since 1 January 2013, an amendment to the Labour Code has come into force. The primary impetus to amend the Labour Code was a

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1 PRAGUE BRNO OSTRAVA BRATISLAVA Czech-Slovak Law Firm with International Approach LEGAL NEWS J A N U A RY Amendtment to the Labour Code Since 1 January 2013, an amendment to the Labour Code has come into force. The primary impetus to amend the Labour Code was a change of the governing party and a related different view on how to settle employment relationships. However, certain changes have resulted from the need to harmonize Slovak labour legislation with European Union requirements, irrespective of the political situation. The new Labour Code encompasses in particular: Stricter conditions for the employment of sole proprietors; Specific conditions for the monitoring of employees; Shorter fixed-term employment; A possibility of extending the notice periods; An increased financial penalty for employees if they do not continue working with the employer during the notice period; The employer s obligation to discuss the termination of employment with employees representatives; Higher severance pay; Higher salary compensation for invalid termination of employment; Changes in the procedure of permitting the employee s competitive activity; Breaks for rest and meals, without work being interrupted by the employee,are included in the working time; A new benefit for the employee compensation for loss of time; A possibility of agreeing with the employee on overtime work only in exceptional cases; The employee s right to specify, under certain conditions, the drawing dawn of vacation time also without the employer s consent; Less flexible agreements on work performed outside employment; A weakened position of a works council and of an employees trustee; More favourable conditions for time-off for employees representatives for the performance of their activities. The largest law firm in the Czech Republic Ranked by clients as the best law firm in the Czech Republic Czech law firm of the year (2012) No. 1 legal advisor according to the number of M&A deals in the Czech Republic and Eastern Europe No. 1 among Czech law firms (2012) (2011)

2 Employment-Based Work The new Labour Code has tightened up the definition of employment-based work to such an extent that the parties will find it more difficult to circumvent the law. The original ten features of employment-based work have been reduced to the following six most important ones: The relationship between the employer as superior and the employee as subordinate; Work must be performed by the employee personally; Work must be performed upon the employer s instructions; Work must be performed on behalf of the employer; Work must be performed during the working time specified by the employer; and Work must be performed for a salary or remuneration. If certain work has the features of employment-based work, it may only be performed in an employment relationship. Monitoring of Employees The privacy of employees is inviolable and the employer may only violate it at a workplace or common premises of the employer within the limits stipulated by the law under the following conditions: In the event of serious reasons, relating to the special nature of the employer s activities, e.g. recording by a video camera on the premises of a store to protect goods from theft; Based on the prior discussion on monitoring with employees representatives and informing employees on the scope, method, and duration of monitoring; In one of the manners specified below: (i) monitoring (e.g. a video camera), (ii) recording of telephone conversations from business mobile phones, or (iii) monitoring of business electronic mail. Letter consignments addressed to the employee as a private person may not be monitored by the employer. Fixed-Term Employment The fixed-term employment is shortened from three years to a maximum of two years. The fixed-term employment may be renewed or extended for an additional two years, no more than two times. Termination of Employment The notice periods are set at a minimum, which enables the parties to agree on longer notice periods in employment contracts, work rules or collective agreements. The financial compensation the employee must pay to the employer for not staying with the employer during the notice period may reach up to a multiple of the employee s average monthly salary and the duration of the notice period. The employer may claim the financial compensation only if it agreed to the same with the employee in the employment contract. The previously one reason for the termination of employment by notice, containing the two situations (i) dissolution of the employer/part of the employer, and (ii) relocation of the employer/ part of the employer is now divided into two new separate facts. This division has created a partially different procedure for the termination of employment by notice in the case of the relocation of the employer/part of the employer: the employer may serve the termination notice to the employee only if the employee disagrees with the relocation of the place of the performance of work and if a prohibition on the termination of employment by notice applies except for the specified exemptions. In the case of termination by notice for the unsatisfactory performance of work tasks, a period during which the employer may serve the termination notice on the employee has been extended from two months to six months. This period basically means that if the employee has not started performing his/her work tasks duly within a time period specified by the employer, the employer is entitled to serve the termination notice to the employee within six months of the day when it advised the employee of the unsatisfactory performance of his/her work tasks. For the purpose of mass layoffs, an employer s branch registered in the Commercial Register will be assessed separately. When assessing whether or not the termination of the employment of the branch s employees constitutes mass layoffs, the total number of the employees of the branch and not of the entire employer is taken into account. Involvement of Employees Representatives in Termination of Employment Involvement of employees representatives in the termination of employment by the employer is again defined in the new Labour Code. The employer must discuss (i) the termination of employment by notice, or (ii) the immediate termination of employment with employees representatives. Employees representatives must discuss (i) the termination of employment by notice within seven business days, and (ii) the immediate termination of employment within two business days of the delivery date of the employer s written request. If discussions are not held within the specified periods, such discussions will be considered to have been held. The validity of the termination of employment by notice/immediate termination of employment is conditional on the prior discussions on such termination. That means that if the employer breaches its obligation to discuss the termination, the termination of employment by notice or immediate termination of employment is invalid.

3 Severance Pay Under the previous Labour Code, the employee was entitled by law to severance pay only if his/her employment was terminated by agreement for organisational reasons or health reasons on the part of the employee. The severance pay amount was determined according to the duration of the notice period, and ranged from once up to three times the average monthly salary of the employee. Under the new Labour Code, the employee is also entitled by law to severance pay if his/her employment is terminated by notice for organisational reasons or health reasons on the part of the employee. The minimum severance pay amount is calculated according to the duration of employment and ranges from once up to five times the average monthly salary of the employee. Salary Compensation in Invalid Termination of Employment If a court rules that the employment was terminated by the employer invalidly, the employer must pay the employee salary compensation. If the salary compensation was to be paid for a period of more than 12 months, the employee is entitled to salary compensation for a minimum of 12 months and a maximum of 36 months. Employee s Competitive Activities The employee may perform competitive activities only upon the employer s prior written consent. If the employer fails to give its position within 15 days of the delivery of the employee s request, the consent is considered as granted. The employer may revoke its consent in writing for serious reasons. The reasons must be specified in such a written revocation notice. Working Time Under the new Labour Code, the 56-hour weekly working time may no longer be agreed upon with the executive employees of the first and second management level. If employees representatives function at the employer, the employer may only introduce the flexible working time in the collective agreement or upon agreement with employees representatives. A break for rest and meals, without work being interrupted by the employee, is included in the working time. This provision applies to cases where the employee cannot interrupt the performance of work, for example in flow production. The new Labour Code has extended night work by one hour, i.e., night work is work performed from 10:00 PM to 6:00 AM. The schedule of working time has been merged with the flexible schedule of working time to create a new schedule of working time. The schedule of working time may only be introduced by such an employer at which employees representatives function. The settlement period, during which the difference between the stipulated weekly working time and the time actually worked is settled, is not more than 30 months. In any case, the average working time of the employee may not however exceed 48 hours in the period of a maximum of 12 months. Compensation for Loss of Time The employee is entitled to a new benefit financial compensation or substitute time-off with salary compensation in the amount of his/ her average salary for the time of a business trip outside the scope of a work shift, provided it is not over-time work or standby work. The employee does not become entitled to compensation for loss of time directly by operation of law. The employee is entitled to such a benefit only if this is provided for in the collective agreement or if the employer has agreed on this with employees representatives, or based on an employer s decision if no employees representatives function at the employer. Over-Time Work The previous Labour Code did not address the conditions under which the employee and the employer could agree upon overtime work. Under the new Labour Code, over-time work may only be agreed upon in the event of a temporary or urgent need for work, or public interest. The maximum limit of over-time work for executive employees of the first and second management level has been reduced from 550 hours per year to 400 hours per year. The period during which the employer must provide the employee with substitute time-off for over-time work has been shortened from twelve to four calendar months following the month in which over-time work was performed. The employer and the employee may also agree to different conditions. Vacation Time If the employer does not specify vacation time by 30 June of the following calendar year, the employee himself/herself may specify his/her vacation time. However, the employee must notify the employer that they are drawing down vacation time at least 30 days in advance. Agreements on Work Performed outside Employment The regulation of agreements on work performed outside employment has brought about the following changes: The provisions regulating working time and minimum salary apply. The employer may not order, or agree with, the employee s performance of standby work or over-time work. The employer excuses the employee s absence from work for the time during which the employee should have performed work as instructed by the employer. Agreements on temporary jobs for students may only be entered

4 into with high school students and university students studying on a daily basis, who have not reached the age of 26 years. The above changes along with the changes in the contribution system negatively affect the so-far benefits of agreements on work performed outside employment, which have represented a more flexible and cost-effective alternative to employment. Employees Representatives The Labour Code requires, for several cases, cooperation between the employer and employees representatives, either in the form of agreement or discussions. If no employees representatives function at the employer, the employer may act individually. However, the employer may not act individually if the law stipulates that agreement with employees representatives cannot be substituted with an employer s decision. The employer may not even circumvent that provision by a possible agreement with the employee, i.e., the employer may not act at all. If a trade union organisation, a works council or an employee trustee function alongside each other at the employer, the trade union organisation is entitled to (i) collective bargaining, (ii) participate in decision-making, (iii) perform control activity, and (iv) information; and the works council and the employee trustee are only entitled to (i) participate in negotiations, and (ii) information. The new Labour Code has abolished the possibility of agreeing to in the collective agreement less favourable conditions than those stipulated by the law. The new Labour Code has also abolished the possibility of an agreement with the works council or the employee trustee on working and salary conditions New Conditions for the Provision of Time-Off for Employees Representatives The employer will provide employees representatives time-off for their activities with salary compensation and for the agreed period. If no agreement between the employer and employees representatives is reached, the employer will provide employees representatives time-off of 15 minutes per month for each employee employed with the employer. If more employees representatives function at the employer, they will distribute among themselves the time upon agreement, or the arbitrator will decide on the distribution of such time. The conditions under which the financial compensation for unused time-off is to be provided will be stipulated in the collective agreement or the agreement with employees representatives. Marianna Čarská, Senior Associate Vanda Dobrovolná, Associate

5 PRAGUE BRNO OSTRAVA BRATISLAVA Czech-Slovak Law Firm with International Approach LEGAL NEWS J A N U A RY Amendtment to the Labour Code Havel, Holásek & Partners, attorneys-at-law, based in Prague, with offices in Brno, Ostrava, and Bratislava and with 21 partners, more than 140 lawyers, and a total staff of more than 400 employees, including 130 employees of the cooperating collection agency Cash Collectors, is the largest Czech-Slovak law firm. The firm currently provides services to approximately 700 clients, more than 30 of which have been ranked as Czech Top 100 companies; approximately 80 rank among the Fortune 500. Havel, Holásek & Partners is the most successful Czech law firm in the Law Firm of the Year awards according to the results of all five years with regard to the number of nominations and titles. This year, the firm was awarded the prestigious Who s Who Legal Award and was ranked the best law firm in the Czech Republic of the year 2011, and was also ranked the No. 1 local law firm in the overall ratings published by Practical Law Company. Furthermore, Havel, Holásek & Partners was awarded an ILO Client Choice Award 2010 by International Law Office (ILO), which named it the best-rated law firm by clients in the Czech Republic. Our lawyers are regularly cited as leading or recommended specialists by renowned international rating publications, such as PLC Cross-border, European Legal 500, Chambers Global Guide, European Legal Experts, Global Law Experts, and IFLR 1000, all of which have cited Havel, Holásek & Partners as one of the best law firms for transactions carried out in the Czech Republic in the areas of mergers and acquisitions, corporate and commercial law, banking and finance, capital markets, insolvency and restructuring, real estate and construction law, labour law and dispute resolution. Týn 1049/3, Prague 1 Tel.: Fax: Hilleho 1843/ Brno Tel.: Fax: Poděbradova 2738/ Ostrava Tel.: Fax: Apollo Business Center II, Block H Mlynské Nivy Bratislava Slovak Republic Tel.: Fax: For more information please contact directly Peter Šuba, peter.suba@havelholasek.sk, or Vanda Dobrovolná, vanda.dobrovolna@havelholasek.sk, Slovak Legal News is prepared by the law firm Havel, Holásek & Partners on an irregular basis, in the context of the latest legal developments. Slovak Legal News produces up-to-date information on law in the Slovak Republic, Czech Republic and the European Union. The purpose of Slovak Legal News is to provide fast, yet erudite analysis of major legislative changes or other events of immediate importance for Slovak and international entrepreneurs carrying on business in the Slovak Republic, as well as for their partners abroad. Notwithstanding the attention and care exerted in the preparation of this document, the law firm Havel, Holásek & Partners recommends seeking detailed legal advice, or exhaustive legal analysis, prior to making any decisions based on the information contained herein Havel, Holásek & Partners s.r.o. All rights reserved.