Czech Republic

    1.1 In what circumstances does the employee transfer law apply?

    ‘Transfer’ is defined in the Czech Republic quite widely. Employee transfer law applies when an employer transfers its ‘tasks’ or ‘activities’ (or part of them) to another employer.

    The employer's tasks or activities are defined as the tasks and activities connected with production or service provision or similar activities.

    Thus, a transfer may occur when the production, service provision or similar activity is taken over by another entity. One criterion for assessing this is whether the transferee can continue the current business activity. In order for there to be a transfer, it is not necessary for the transferee to acquire assets.

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    Author: Randl Partners

    Date: October 2016

    1.2 Does the employee transfer law apply to (a) a sale of a business or (b) outsourcing?

    (a) Sale of a business

    The employee transfer law applies in the following cases:

    • mergers;
    • transfer of all assets to a sole shareholder;
    • where a company ceases to exist as a result of division;
    • sale of the whole or part of the business;
    • a transferee continuing to trade after the death of the transferor; and
    • lease of the business or part of it.

     

    In the case of sale of assets, whether the transfer law applies depends on whether it is considered the sale of a business unit or part of one. For example, if only old equipment or unused premises are sold, the transfer law will not apply.

    The transfer law does not apply to share sales.

    (b) Outsourcing

    As outsourcing is the transfer of an activity, employee transfer law should apply.  

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    Author: Randl Partners

    Date: October 2016

    1.3 In outline, what are the implications of the employee transfer law?

    If the transfer law applies:

    • Employees assigned to the undertaking transfer from the transferor to the transferee on their pre-transfer terms of employment.
    • The trade unions will be transferred if at least three transferred employees are members.
    • The rights and obligations contained in collective agreements transfer to the transferee for as long as the agreement is in force, or until the end of the following calendar year at a maximum.
    • The transferor and transferee are required to provide information on the transfer to employee representatives (if any) and, to consult them.
    • If employees have claims relating to employment with the transferor (e.g. for pay, for personal injury or for discrimination) the transferee becomes liable in place of the transferor.
    • If an employee is dismissed for a reason connected to the transfer the dismissal is unfair and the employee may claim this before the court within two months after the dismissal.
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    Author: Randl Partners

    Date: October 2016

    2.1 Who transfers?

    The transfer rules provide protection to all employees employed by the transferor. It only applies to persons employed by the transferor and not to secondees such as agency workers.

    Employees whose employment terminated before the transfer are not subject to the transfer but if they have challenged the validity of the termination in court, they will be transferred on the basis that, at the time of the transfer, it was unclear whether their employment persisted.

    If only some tasks and activities are transferred, the transfer applies only to employees affected by it, i.e. those who work within the transferred activity or task (business unit). It can be difficult to assess whether particular employees should be considered as working within the transferred activity. Factors to consider will be the organisational structure, job description and what the employee does in practice, including the time he or she works within the transferred activity.

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    Author: Randl Partners

    Date: October 2016

    2.2 Can employees object to transferring?

    An employee can refuse to be transferred by giving notice of termination at any time before the transfer and the employment will terminate no later than the last day before the transfer. The employee can also claim severance pay if he or she gives notice of termination or makes an agreement on termination of employment within two months after the transfer and proves that the working conditions have significantly worsened as a result of it.

    An employee may also object that the transfer was invalid or, conversely, that he or she was not transferred but should have been.

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    Author: Randl Partners

    Date: October 2016

    2.3 What happens to terms of employment contracts?

    The transferee, as the new employer, assumes all existing rights and obligations arising from the employment relationship. All rights and obligations arising from both individual and collective agreements must be transferred to the transferee.

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    Author: Randl Partners

    Date: October 2016

    2.4 What about other employee benefits?

    Since employees' rights on transfer are interpreted broadly, the transferee must take over any benefits arising from the employees’ relationship with the transferor (e.g. including profit shares or share options, if applicable). If it is not possible for the transferee to provide such benefits, the transferee should try to offer the employees equivalent benefits.

    Past employment with the transferor counts as continuous employment with the transferee for the purposes of benefits connected with length of service.

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    Author: Randl Partners

    Date: October 2016

    2.5 What happens to pension rights?

    There are no rules on occupational retirement schemes at present in the Czech Republic. Because they are expensive for employers, such schemes are rare in the Czech Republic. However, if such a scheme exists at the transferor, all rights and duties connected with it would transfer.

    In addition to the basic state pension, voluntary membership of a supplementary pension scheme with state contributions is available to employees. Employers may provide their employees who are members of this supplementary pension scheme with a contribution (similar to a benefit), which is tax-deductible. The right to the contribution must be provided in the employment contract, collective agreement and/or internal regulations of the employer – and it will therefore be subject to the employee transfer rules.

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    Author: Randl Partners

    Date: October 2016

    2.6 What liabilities transfer?

    The transferee assumes all of the transferor’s employment liabilities, but Czech case law provides that the transferee does not assume obligations arising from public law (such as tax obligations).

    As it is not possible to transfer the criminal liability of natural person, personal criminal liability does not transfer but criminal liability relating to a legal entity will transfer to legal successors if the whole legal entity transfers. However, it should be noted that criminal liability in relation to legal entities is a new area in Czech law and has therefore not yet arisen very often in practice.

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    Author: Randl Partners

    Date: October 2016

    2.7 Do collective agreements transfer?

    All rights and obligations arising from the employment relationship (including under a collective agreement) transfer automatically from the transferor to the transferee at the time of the transfer, and are enforceable until the collective agreement expires or the end of the calendar year after the year of the transfer, whichever is the sooner.

    Collective agreements may not be unilaterally changed by the transferee. Both contracting parties must agree to any change.

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    Author: Randl Partners

    Date: October 2016

    2.8 How does the transferee obtain information on transferring employees?

    There are no special rules about how the transferee obtains information about transferred employees. This will depend on the agreement between the transferor and the transferee.

    In any event, it may not be possible for the transferor to know with any certainty which of its employees will transfer, as they have a right to give notice of termination up to the last day before the transfer.

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    Author: Randl Partners

    Date: October 2016

    3.1 Can employers make changes to employment contracts?

    Terms and conditions of employment contained in the employment agreement may not be unilaterally changed by the transferee as a result of the transfer. Employment contracts are subject to the transfer of rights and obligations arising from the employment relationship and can only be changed with the prior consent of the employee. Nothing prevents the transferee from proposing changes to the employment contracts with the transferred employees, but without employees’ consent those changes will not be valid or effective. Moreover, there is no case law known to us that would consider an employee's consent to changes in his or her employment contract to be as a result of the transfer.

    Under Czech law employees performing the same (or similar) work must receive the same (or similar) salary. In many cases, following the transfer the transferred employees will have different wage entitlements than other employees of the transferee. However this is not considered unequal treatment because it is not the result of a decision of the employer but of the operation of law. Nevertheless, the transferee should try to harmonise employees’ salaries by agreement with them.

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    Author: Randl Partners

    Date: October 2016

    3.2 When can employers safely dismiss employees before or after a transfer?

    Employees may not be dismissed by reason of the transfer, but this does not prevent the transferor or transferee from dismissing the employee for other reasons (e.g. organisational reasons, health reasons, and disciplinary reasons). If a transferee wants to make any kind of organisational changes other than those based on the transfer itself it may do so, but all the legal requirements set out in the Labour Code must be met (including the observance of a notice period and the provision of severance pay).

    A transfer of employees is not one of the grounds for dismissal, but organisational changes can be, for example a change in the technical equipment used by the employer, an increase in productivity or a change to the activities of the employer.

    If an employee considers a dismissal invalid the employee can inform the employer in writing that he or she insists on being further employed and the employment will continue to exist. An employee may also claim a termination of employment by notice was invalid. The court may declare the notice void and that the employment relationship will continue to exist. The employer must compensate the employee for any lost wages during the trial, but the court may moderate the amount.

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    Author: Randl Partners

    Date: October 2016

    4.1 Who must employers consult?

    The employers must (i) inform and (ii) consult, with the employee representatives (primarily trade unions) at the latest within 30 days before the transfer takes effect.

    If no employee representatives exist at either the transferor's or transferee's business, the transferor and transferee must fulfil the information duties towards all individual employees affected by the transfer by informing each employee directly. This must be done at the latest within 30 days before the transfer

    Note that it is not possible to appoint some representatives purely for purpose of the information and consultation processes.

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    Author: Randl Partners

    Date: October 2016

    4.2	What information must they provide?

    Employers (both the transferor and the transferee) must inform the employee representatives or affected employees that the transfer will take place and this must cover the following issues:

    • the date or proposed day of transfer;
    • reasons for the transfer;
    • legal, economic and social implications of the transfer with respect to employees;
    • measures envisaged which would affect the employees.
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    Author: Randl Partners

    Date: October 2016

    4.3	What does consultation involve?

    The employers must arrange a consultation in all cases (whether or not the measures will affect the employees) and this must take place at an appropriate time at least 30 days before the transfer. The employer must meet with the employee representatives with the aim of reaching mutual consent. However, there are no consequences if no consent is reached. In the course of consultation, the employee representatives are entitled to express their views on the information supplied about the transfer and to be provided with a reasoned answer to the views they have expressed.

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    Author: Randl Partners

    Date: October 2016

    4.4	How long does consultation last?

    There is no specified duration for the consultation. In practice, employee representatives will be given the details of the transfer and invited to a meeting to discuss their views. They must be informed of the meeting in sufficient time to allow them to prepare.

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    Author: Randl Partners

    Date: October 2016

    4.5	What happens if an employer fails properly to inform or consult?

    If the transferor and/or the transferee fail to inform and consult the employee representatives, the transfer remains valid and effective, but the employer (the transferor or transferee as appropriate) can be fined up to CZK 200,000 (approximately EUR 8,000) by the Labour Inspection. According to case law, the employee representatives can claim compensation for harm suffered. There is no general entitlement to compensation for employees for breaches of the information and consultation duties, but if the employee suffers harm because of a breach of these obligations, both the transferor and transferee are jointly and severally compensate him or her.

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    Author: Randl Partners

    Date: October 2016

    5.1	Identify up to three issues in this country of which employers should be aware?

    Czech law considers the transfer of any activity or task, either in whole or in part, as a transfer, which seems to be wider than the protection given to employees under EU law. Under Czech law problems arise in identifying which tasks and activities have transferred, as this can cover a broad spectrum of situations.  

    Another issue is the right of the employee to give notice of termination in connection with the transfer. The employment then ceases to exist at the latest on the last day before transfer. There is nothing to stop employees giving notice just hours before and so the transferee cannot be sure in advance how many employees will transfer.

    Further, the employee can be entitled to severance pay (if sanctioned by the court) if he or she serves notice of termination for significant worsening of working conditions during the first two months after the transfer.

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    Author: Randl Partners

    Date: October 2016

    5.2	Would the employee transfer law apply on a cross-border transfer into or out of this country?

    Czech law recognises the relocation of the employer as grounds for termination. Therefore, if certain activities are physically relocated from the Czech Republic grounds for termination would arise. If this relocation occurs the affected employees could then be served notice of termination with a notice period of at least two months and a severance payment.

    Czech law has no rules on the applicability of Czech law to cross-border transfers, either into or out of the Czech Republic. We believe that if the transfer were from the Czech Republic to a location abroad, Czech rules would apply (provided that the transferred employees are employed under Czech law). Conversely, for transfers to the Czech Republic, foreign law would apply.

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    Author: Randl Partners

    Date: October 2016

    6.1	What are the main national laws protecting employees upon transfers of businesses?

    The Acquired Rights Directive 77/187/EEC as amended by Directive 98/50/EC has been implemented by the Labour Code (Act No. 262/2006 Coll.).

    The fines which can be imposed for failure to comply with the information and consultation duties are included in the Act on Labour Inspection (Act No. 251/2005 Coll.).

     

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    Author: Randl Partners

    Date: October 2016

     

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