The Czech labour law specialists of the ECOVIS ježek, Czech law firm provide also the national and international clients with specific legal advice on the procedure of collective dismissal (mass layoffs) of Czech employees in the Czech Republic and assist clients in all Czech legal matters when negotiating the collective dismissal of Czech employees with the local Czech labour offices, trade unions, and Czech employees.
1. Collective dismissal (mass layoffs) of employees in the Czech Republic
Under Czech law, an employer who employs at least 20 employees have certain statutory obligations in connection with its organizational changes that affect substantial number of redundant employees within the 30-calendar-day period. Such employer’s obligations apply even before the employment relationship of the first employee is terminated by the employer on the basis of the termination notice.
The rules governing the Czech collective dismissal are included in the Act No. 262/2006 Coll., the Czech Labour Code as amended (the “Czech Labour Code”). The unofficial translation of the relevant provisions forms Annex No. 1 of this memorandum.
2. Collective dismissal of Czech employees
The Czech Labor Code prescribes the following conditions for application of the collective dismissal procedure to be carried out by the Czech employer:
(i) employment contracts are terminated by the employer for organizational reasons; and
(ii) employment contracts are terminated by the employer within the 30-calendar-day period; and
(iii) certain number of employees are dismissed by the employer.
2.1 Organizational reasons
The collective dismissal procedure applies only if the employment is terminated by the Czech employer for one of the below mentioned reasons:
(i) if the employer’s undertaking, or its part, is closed down [Section 52(a) of the Czech Labor Code]; or
(ii) if the employer’s undertaking, or its part, relocates [Section 52(b) of the Czech Labor Code]; or
(iii) if the employees become redundant owing that to the decision of the employer or employer’s competent body on the change the tasks, technical equipment, to reduce number of employees for the purpose of increasing the labor productivity (efficiency) or to introduce other organizational changes (restructuring) [Section 52(c) of the Czech Labor Code].
2.2 30-calendar-day period
The employment contracts of redundant employees must be terminated within the 30-calendar-day period on the basis of the Czech employer’s termination notice. In case at least employment contracts of five employees are terminated within that time period, the number of redundant employees will include (a) employees that were terminated on the basis of the employer’s termination notice as well as (b) employees that were terminated on the basis of an agreement with the employer for the same organizational changes.
2.3 Number of terminated employees
The following threshold of terminated employees must be met for the application of collective dismissal procedure:
(i) at least 10 employees at the employer who employs from 20 to 100 employees;
(ii) at least 10% of employees at the employer who employs from 101 to 300 employees; or
(iii) at least 30 employees at the employer who employs more than 300 employees.
The total number of employees employed by the employer is calculated at the day before the day in which the first termination notice is delivered to the redundant employee.
3. Czech Employer’s obligation
Before the first termination notice is delivered by the employer, the employer must inform the trade union and the employees’ committee in writing at least 30 days in advance, in particular, about:
(i) reasons for collective dismissal,
(ii) number of employees to be made redundant and the jobs affected,
(iii) total number of employees employed by the employer and the job composition,
(iv) time period in which collective dismissals are planned to take place,
(v) criteria proposed for selecting employees to be made redundant,
(vi) severance pay and, if relevant, other rights of the employees being made redundant.
At the same time, the employer must also inform the competent Czech Labor Office about the same and commencement of consultations with the trade union and the employees’ committee (if applicable) in writing. The employer will deliver one copy of that notice to the trade union and the employees’ committee.
After notifying the trade union and the Czech employees’ committee, the employer should consult collective dismissals with them and discuss with them measures that could be taken to reduce negative effects of collective dismissals.
The employer must further provide the competent Czech Labor Office with a written report on its decision on collective dismissals and conclusions of the consultations with the trade union and the employees’ committee. In such report, the final number of employees affected by collective dismissals and their job titles must be set forth. Such report must be delivered to the competent Czech Labor Office at least 30 days before the first employment relationship ceases to exist. If the employer misses the deadline for the report delivery, the 2-month termination notice period will be automatically prolonged, so that the employment relationships of redundant employees will always cease to exist after the lapse of the 30-day period from the delivery of the written report to the competent Czech Labor Office. One copy of the report will be delivered by the employer to the trade union and the employees’ committee.
Each employee being made redundant must be informed about the date of delivery of the report to the competent Czech Labor Office by the Czech employer.
The competent Czech Labor Office is the regional office in the jurisdiction of which the employer’s activities are carried out (usually the location of a factory or offices of the employer).
If neither the trade union nor the employees’ committee is established at the Czech employer, the employer will fulfill the above-mentioned obligations to all the employees affected by collective dismissals.
4. Time frame of collective dismissal in the Czech Republic
Unless otherwise agreed in a collective bargaining agreement or with an individual employee, the collective dismissals can be administered in the following time frame:
(i) internal decision of the employer on the collective dismissal of certain redundant employees [D],
(ii) employer’s notification of the trade union and employee’s committee or all the affected employees (if no employees’ body is established) and the competent regional Czech Labor Office [D + 0],
(iii) delivery of termination notices to employees [D + 30 days];
(iv) consultations with the trade union and the employees’ committee or all the affected employees (if no employees’ body is established) [from D + 0 to 30 days before the first employment relationship ceases to exist];
(v) delivery of a written report on collective dismissals to the competent Czech regional Labor Office [30 days before the first employment relationship ceases to exist];
(vi) termination of employment relationships by the lapse of 2-month notice period [D + 30 days + 2 months].
5. Severance payments to Czech employees
Given the reasons for collective dismissals on the side of the employer, the redundant employees are entitled to the following severance pay (irrespective whether the employment relationship was terminated by notice or by agreement for the same organizational changes):
(i) 1-month average salary if the employment relationship lasted less than a year;
(ii) 2-month average salary if the employment relationship lasted at least 1 year but no more than 2 years;
(iii) 3-month average salary if the employment relationship lasted at least 2 years; or
(iv) the sum of (a) 3-month average salary and (b) the amount calculated according to clauses (i) - (iii) above if the employee’s working hours were scheduled according to the employee’s working hours account at the time of employment termination.
For the calculation of the severance pay, the employment relationship includes also past employment relationship at the same employer provided that no more than 6 months lapsed from the termination of the past employment relationship to the commencement of the current employment relationship.
The Czech employer will pay the severance pay on its usual pay day following the termination of the employment relationship, unless agreed otherwise with the employee.
A collective bargaining agreement or an individual employment contract may stipulate other terms for the right to severance pay.
This information is only informative and does not represent a comprehensive analysis of the issue at hand but merely outlines the current legal framework and contains our opinion on the above-described issues and we are not able to assure that any explanation different from our conclusions herein would not be adopted by the respective civil or arbitration courts in the future.
Should you have any queries or comments on the above, please do not hesitate to contact us.
About ECOVIS ježek advokátní kancelář s.r.o.
The Czech law office in Prague ECOVIS ježek practices mainly in the area of Czech commercial law, Czech real estate law, representation at Czech courts, administrative bodies and arbitration courts, as well as Czech finance and banking law, and provides full-fledged advice in all areas, making it a suitable alternative for clients of international law offices. The international dimension of the Czech legal services provided is ensured through past experience and through co-operation with leading legal offices in most European countries, the US, and other jurisdictions. The Czech lawyers of the ECOVIS ježek team have many years of experience from leading international law offices and tax companies, in providing legal advice to multinational corporations, large Czech companies, but also to medium-sized companies and individual clients. For more information, go to www.ecovislegal.cz/en.
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Czech Labour Code provisions governing collective dismissal
(1) Collective dismissals (in Czech “hromadné propouštění”) means the termination of employment relationships by one employer within a period of 30 calendar days on the basis of notice given for one of the reasons (grounds) laid down in Section 52(a) to (c) to:
(a) ten employees, in the case of an employer employing from 20 to 100 employees;
(b) 10% of employees, in the case of an employer employing from 101 to 300 employees;
(c) 30 employees, in the case of an employer employing more than 300 employees.
Where employment relationships of at last five employees are terminated under the conditions laid down in the first sentence, a total number of employees under (a) to (c) shall also include those employees with whom the employer terminated their employment relationship on the same grounds by agreement.
(2) Before giving notice to individual employees, this shall be reported in writing by the employer to the trade union organization or the works council in time, latest 30 days in advance; the employer shall also provide the information of:
(a) the reasons for collective dismissals;
(b) the number of employees to be made redundant and the jobs affected;
(c) the total number of employees employed by the employer (by the employer's undertaking) and the job composition;
(d) the period within which collective dismissals are planned to take place;
(e) the criteria proposed for selecting employees to be made redundant;
(f) redundancy payment (i.e. severance pay) and, if relevant, other rights of the employees being made redundant.
(3) The purpose of consultations with the trade union organization or the works council is to reach an agreement, in particular with regard to measures aimed at prevention or reduction of collective dismissals, the mitigation of their adverse implications for employees, especially the possibility of their placement in suitable jobs at other employer's places of work (sites).
(4) At the same time the employer shall inform the competent labour office in writing of the measures under Subsections (2) and (3), in particular of the reasons for such measures, a total number of employees, and a number of those employees to be affected by the measures and their job titles, the period within which collective dismissals will take place, the criteria proposed for the selection of employees to be made redundant, and further of the start of consultation with the trade union organization or the works council. One copy of the written information shall be served by the employer on the trade union organization or the works council.
(5) The employer shall provingly deliver to the competent labour office his written report on the decision concerning collective dismissals and on the results of consultation with the trade union organization or the works council. The employer shall state in his report a total number of employees, a number of those employees to be affected by collective dismissals and their job titles. One copy of this written report shall be delivered to the trade union organization or the works council. The trade union organization or the works council has the right to give its independent opinion on the employer's written report and serve it on the competent labour office. Where a bankruptcy order was declared on an employer's property, the employer shall deliver such written report to the competent labour office only at its request.
(6) Where neither trade union organization nor works council has been formed at the employer's undertaking, or where, if it has been formed, it does not operate there, the employer shall fulfil the duties under Subsections (2) to (5) vis-a-vis every employee affected by collective dismissals.
(7) The employer shall inform his employee of the day when his written report under section 63 was delivered to (served on) the labour office.
The employment relationship of an employee who is affected by collective dismissals shall terminate by notice earliest on expiry of 30 consecutive days of the day when the employer's report under Section 62(5) was served on the competent labour office except when the employee states that he does not insist on observance of such time-limit. This shall not apply if a decision on insolvency has been adjudged against the employer (the employer's undertaking).
The provisions of Sections 62 and 63 shall also apply to collective dismissals on which the decision was made by the competent body [Section 52(c)].
nation notice period commences on the first day of the calendar month following the delivery of the termination notice to the employee and expires on the last day of the relevant calendar month.