This publication covers the latest legal developments, including significant amendments to the Labour Code and a selection of important Supreme Court decisions.

Major changes to foreign employment from 1 July 2024

On 1 July 2024, an amendment to the Act on Employment came into force. It brings significant changes to the employment of foreigners in the Czech Republic. The changes aim to simplify administrative processes, digitalize procedures and make the Czech labour market more attractive for foreign workers. The most important changes include:

• Free access to the labour market for selected countries
• Citizens from nine selected countries (Australia, Japan, Canada, the Republic of Korea, New Zealand, the UK, the US, Singapore and Israel) will be able to work in the Czech Republic only on the basis of a residence permit, without the need to get a work permit. These employees will only need a non-dual employment card and can change their employment in the Czech Republic as long as the residency permit is valid (they only need to report the change of employer properly).
• Highly skilled workers will still be able to get the classic blue card, which will allow them to move around the EU more easily, settle with their family and merge their social security.
• Employers from the countries concerned can send workers from selected countries to the Czech Republic without having to secure a separate work permit.

• Abolition of the labour market test
  • Because of the low unemployment rate, the labour market test has been abolished, ie it's not necessary to wait 30 days to see if a vacancy can be filled by a local job seeker.
  • If the county's unemployment rate exceeds 7%, the labour market test may be reinstated.

• Digitisation of information cards
  • Employers can fulfil the notification obligation related to foreign employment (ie typically recruitment, changes and termination of employment or secondment of foreigners) electronically via the MLSA website, data mailbox or API.
  • The new MLSA portal, which is supervised by the State Labour Inspectorate, was introduced so employers can fulfil their information obligation.
  • The new mechanism will simplify the work of officials and employers, who will be able to inform authorities about the entry and exit of an employee with a single form.

Amendment to the Labour Code: Minimum wage indexation mechanism

On 1 August 2024, Act No. 230/2024 Coll. came into force, amending the Labour Code and 11 other laws. The amendment introduces a minimum wage indexation mechanism and transposes Directive (EU) 2022/2041 of the European Parliament and of the Council on adequate minimum wages. The most important changes include:

• Minimum wage
  • The monthly minimum wage will be set based on the average gross monthly wage in the national economy for the following calendar year and a coefficient determined so the resulting minimum wage is reasonable, taking into account its purchasing power in relation to the cost of living, the overall level of wages and their distribution, the rate of wage growth, long-term trends and the level of labour productivity. The current plan is to reach a coefficient of 47% by 2029 (currently the coefficient is 42.2%).
• Guaranteed wage
  • The guaranteed wage level has been abolished for the private sector. For the public sector it has been maintained but will now be divided into four bands, with the lowest band equal to the minimum wage and the highest band set at 1.6 times the minimum wage.

• Other changes
  • An allowance for working in a difficult working environment has been introduced The government has issued a regulation determining the definition of the difficult working environment, the amount of the allowance and the conditions for granting it. The allowance will be at least 10% of the minimum wage.
  • The amendment regulates collective bargaining to remove blockages by small trade unions. It also introduces the possibility of providing a state contribution to social partners who conduct negotiations at sectoral level.
  • The employer's obligation to issue a written leave schedule has been cancelled. Employers and employees will now determine the schedule by mutual agreement.
  • From 1 January 2025 it will be possible for employees to schedule their own working time into shifts if agreed with the employer.
  • There are partial modifications to the possibility of setting a 24-hour shift for employees in the healthcare sector and introducing a premium for increased workload for these employees.

Reporting agreements to perform work

Certain provisions of Act No. 349/2023 Coll. amending certain acts in connection with the consolidation of public budgets entered into force on 1 July 2024. It established a new reporting obligation for employers to the relevant social security administration regarding the employment of people performing work on the basis of an agreement to perform work (known as a DPP).

According to the new Section 9a of Act No. 589/1992 Coll. on Social Security Contributions and Contributions to State Employment Policy, employers have to submit required data to the District Social Security Administration. They have to use the prescribed electronic form, submitting the data by the 20th day of the calendar month following the calendar month in which the employee was employed under a DPP. Employers have to comply with the notification obligation for the first time for July 2024, no later than 20 August 2024.

Amendment to the Labour Code: flexiamendment

On 21 August 2024, the government approved an amendment to the Labour Code aimed at increasing the flexibility of employment relations. The proposal has been submitted to the Chamber of Deputies for further consideration. In view of the political sensitivity of the proposal, it may still be substantially amended during further discussion.

We can expect these changes:

• Employees on parental leave will be able to perform the same type of work for the same employer under an agreement on work outside the employment relationship as before taking parental leave. And employees returning from parental leave before the child reaches the age of two will be guaranteed a return to the same position, similar to the situation today with maternity leave.
• The start of the notice period will now be linked to the date the notice is delivered to the other party, leading to a de facto shortening of the notice period. For notice given on the grounds that the employee has breached their duties or failed to meet the employer's legal requirements, the notice period will be reduced to just one month.
• The length of the probationary period can be extended up to a maximum of four months for ordinary employees and up to eight months for managers.
• The number of situations where employers can agree to pay employees' wages in a currency other than the Czech currency will increase. Cashless payment of wages will also be introduced as the primary method of payment.
• Young people aged 14 and over will be able to do some light work during the summer holidays without completing compulsory schooling. However, they are banned from working after 8 pm.
• If the employment relationship is terminated because the employee has become unfit for work as a result of an occupational accident or disease, the employee will now receive special compensation, which will be paid to the employer from statutory insurance (instead of severance pay). For disability caused by overexposure, severance pay will still be provided.
• A number of minor technical or formal adjustments, such as modifying the definition of solitary persons.

The option discussed in the media to terminate the employment relationship by employer's termination without giving any reason is not included in the draft amendment, but this option might still be discussed in the legislative process.

We still expect the amendment to be completed in 2024 and enter into force at the beginning of 2025. The Chamber of Deputies may start debating the amendment at its next session from 10 September 2024. If the legislative process is prolonged, the amendment won't come into force before 1 April 2025.

Residence performance of work of citizens

The proposed amendment to Act No. 65/2022 Coll., on certain measures in connection with the armed conflict on the territory of Ukraine caused by the invasion of Russian Federation troops is due to enter into force on 1 January 2025. The amendment is currently being discussed in the Chamber of Deputies (Chamber of Deputies Document 727).

The aim of the proposal is to extend the residence status of persons granted temporary protection and to introduce special long-term residence in the context of the armed conflict in Ukraine. Residence permits will be issued for up to five years.

People have to fulfil the following conditions to register:

• They must be a foreigner over 18 years of age residing in the territory of the Czech Republic on the basis of temporary protection.
• For spouses living in the same household, joint registration is required.
• They must have a valid travel document, residence in the territory of the Czech Republic on the basis of temporary protection for a continuous period of at least two years.
• They must have paid public health insurance for the same period of time with no arrears of insurance premiums.
• They must have attained a total annual aggregate income in the amount specified by the Government Regulation.

Supreme Court decision – bonuses

The Supreme Court of the Czech Republic recently confirmed the discretionary nature of certain employee bonuses in its decision (Case No. 21 Cdo 2392/2023). The court confirmed that a bonus is not a guaranteed part of the salary, but a reward that may also motivate future performance. It held that the conditions set by the employer, which required employees to be in employment at a certain future date to be eligible for a bonus, were in accordance with the law and did not violate labour law or equal treatment principles.

This decision highlights the legitimacy of employers setting specific conditions for discretionary bonuses and confirms that such bonuses are not an automatic entitlement. The decision highlights the importance of understanding the conditions attached to bonus schemes and reinforces the principle that bonuses aimed at future motivation are legitimate.

Supreme Court decision – timeliness of immediate termination of employment

The Supreme Court of the Czech Republic issued a fundamental decision (Case No. 21 Cdo 1915/2023) concerning an employer who immediately terminated an employee's employment for gross breach of work discipline.

The court stressed that terminating employment must be carried out without undue delay to be valid. If the employer delays in responding, the immediate termination may be considered invalid as the employer was clearly willing to tolerate the employee's continued employment and may be fairly required to address the situation by giving notice of termination (rather than immediate termination). This decision highlights the need for employers to act swiftly and decisively in cases of serious breaches of work discipline to avoid potential legal complications.