Czech Republic: Labour Law Highlights in first quarter of 2018
Czech Supreme Court on what constitutes damages in employment relationships
An employee who did not follow a prescribed work procedure damaged one of the employer’s machines. The employer had the machine repaired by its other employees specifically assigned to machine repairs and maintenance within the business. Subsequently, the employer claimed compensation for damage from the employee in the form of the costs of the repair, including the salary of the employees who repaired the machine.
Czech labour law limits damages that may be claimed from employees to 4.5 times their average monthly earnings unless the damage is caused intentionally or while the employee is intoxicated. The damages claimed for the broken machine were within this statutory limit.
The employee filed a lawsuit against the employer claiming incorrect calculation of damages. In the employee’s opinion, the employer’s costs in the form of the salary of the other employees who repaired the machine should not be considered part of the damages. The case gradually proceeded to the Czech Supreme Court, which affirmed the employee’s views.
The Czech Supreme Court held that the employer was only entitled to reimbursement of such costs which would otherwise not have been incurred if there had been no damage, i.e. no broken machine in the case at hand. Since the employer asked its current employees to repair the machine, no such additional costs were incurred. The situation would have been different if these employees had needed to work overtime to repair the machine in time or if the employer had needed to engage external contractors or hire new employees to do the repairs - all of these would have been additional costs resulting in (or increasing) the damage to the employer.
An employer is entitled to compensation for damage caused by its employees within the statutory limits. However, the employer may claim only damage that would not have arisen if the actual damaging act had not taken place. These could be various costs for new machine parts, costs of hired contractors to perform the repair or overtime work or work at night by the company’s own employees who were asked to repair the machine. The mere fact that the employer’s employees could have been engaged elsewhere is not sufficient for considering their salary part of the damages. The employer would have, for instance, needed to document that, due to the fact that the repairing employees could not be assigned elsewhere as planned, other work was not done in time, resulting in a contractual penalty.
Employers should think twice before engaging a new hire for an indefinite term to only (temporarily) replace an employee on maternity leave
Employers often face challenges in how to structure their workforce when employees leave for maternity and parental leave, bearing in mind their statutory obligation to save the workplace for when the employee returns from the leave. As a matter of Czech law, an employee is entitled to maternity/parental leave of up to three years.
Czech labour law gives employers an option to engage a new hire as a temporary replacement for the duration of the particular employee’s maternity/parental leave without a requirement to state an exact "from-to" time period. The only limitation is a maximum duration of three years, which may be prolonged (a maximum of) twice. Nevertheless, such a position is of course not very appealing to potential new hires due to its insecurity. For this reason, employers tend to (sometimes after an initial one-year limited term) hire the employee for an indefinite term despite the position actually being only as a temporary replacement.
As a result, once the employees return from their leave, they are often dismissed on the grounds of their redundancy since there are now two employees for only one position.
The Czech Supreme Court has repeatedly held that these are not valid redundancy reasons and that the employer may not use these as a solution for its incorrect workforce structuring. An employee becomes redundant if, on the basis of organisational change, the employee’s original work is (fully or partially) no longer needed by the employer.
In the case at hand, the employee’s position of HR Vice President was eliminated and replaced with a position entitled HR and Property Administration Vice President, for which a new employee was hired. The employer claimed that merging the two positions was necessary to align the local company structure with the group structure and that the new position significantly differs from the original one. On the basis of this organisational change, the employee was dismissed after her return from parental leave on the redundancy grounds.
The Czech Supreme Court held that the employee did not become redundant due to the organisational change but due to the fact that there was another employee employed for an indefinite term in that position. This was supported by the fact that the original tasks remained the same (and new ones were added) and were performed by a new employee. Thus, the employer could not claim that such work was no longer needed.
Wrongful dismissal lawsuits are by far the most frequent employee lawsuits in the Czech Republic, with one of the main reasons for dismissal being the employee’s redundancy.