In August last year, the Constitutional Court of the Czech Republic rejected the constitutional complaint of Česká pošta, s.p. (hereinafter the “Applicant”) in the case of unequal remuneration of workers in the same work positions in different regions – the dispute arose between the Applicant and its employee working as a driver.
Generally
The above-mentioned dispute was ruled on by the Constitutional Court, Case No. I. ÚS 2820/20 of 31 August 2021 (hereinafter the “Resolution”), following a constitutional complaint filed by the Applicant against the Supreme Court’s decision, Case No. 21 Cdo 3955/2018 of 20 July 2020.
The Constitutional Court ruled in favour of the Applicant’s employee and upheld the decisions of the general courts and made it clear that an employee must be entitled to the same remuneration for the same work regardless of the socio-economic conditions of the place of work.
In this article, we would like to remind you the Resolution’s conclusions and the possible implications for employer’s practices regarding internal remuneration mechanisms.
Brief summary of the case
The subject of the Constitutional Court’s examination was primarily the question of whether it is constitutionally consistent for an employee performing work in Prague on the one hand and an employee performing work in Olomouc on the other hand to be remunerated with different wages, despite the same job position (driver) and the same tariff class regarding the place of work and the specific offer on the labour market.
In his lawsuit against Applicant, the Applicant‘s employee pointed out that his wage in Olomouc was lower than wage of an employee in Prague, who was in the same position and at the same rate level, which he considered to be unequal treatment. The Applicant argued against the lawsuit that the amount of an employee’s salary reflects not only the prerequisites and requirements for the performance of the work, but also the conditions of the individual workplaces, including regional differences in the state of the labour market, the response to supply and demand for employees, the cost of living, etc. The Applicant also defended its action on the grounds that the work of a driver in Prague is more complex, more responsible, and more strenuous.
The Applicant also argued that if the nominal wages of employees in the regions were to be equalized, the real wage of an employee working outside Prague would be higher than the real wage of an employee in Prague. In the Applicant’s view, that would establish an inequality in remuneration and thus directly violate the rights of employees in Prague to fair remuneration.
The Applicant’s arguments were supported by the Chamber of Commerce of the Czech Republic.
The Applicant’s employee as the plaintiff was gradually defended by lower courts, the Supreme Court of the Czech Republic and finally by the Constitutional Court in its Resolution.
Right to fair remuneration
It is necessary to start from the regulation contained in Act No. 262/2006 Coll., the Labour Code, as amended (hereinafter the “Labour Code”) and identify whether the law allows the employer to consider the socio-economic conditions in individual regions when setting the amount of remuneration.
Pursuant to Section 109(4) of the Labour Code, wages and salaries are granted according to the complexity, responsibility and exertion of the work, the difficulty of the working conditions, the performance and the results achieved. At the same time, according to Section 110(1) of the Labour Code, all employer’s employees are entitled to the same wage, salary or remuneration under an agreement for the same work or for work of equal value.
According to Section 110(2) of the Labour Code, equal work means work of the same or comparable complexity, responsibility and exertion, performed under the same or comparable working conditions, with the same or comparable work performance and results. If there is no agreement in any comparative aspect, it is not the same work or work of equal value.
Is it therefore possible to classify the socio-economic conditions of the place of work under one of the comparative criteria contained in Section 110(2) of the Labour Code?
In its Resolution, the Constitutional Court makes it clear that, from the point of view of the principle of equal remuneration under the provisions of Section 110 of the Labour Code, socio-economic conditions and the corresponding level of the costs of meeting the needs of life in the place where the employee performs work for the employer on the basis of an employment contract are not relevant to the assessment of whether the work in a particular case is the same work or work of equal value (they do not constitute a comparative criterion within the meaning of Section 110(2) of the Labour Code).
In other words, the Constitutional Court concluded that the different socio-economic conditions of individual regions cannot be subsumed under working conditions, which are understood to mean only the internal conditions of the workplace.
In the case of remuneration of employees with different wages, considering the different socio-economic conditions of a given region, it cannot be concluded that the principle of equal treatment in remuneration of employees performing comparable work for the same employer is maintained.
Strict legal regulation
The Applicant argued, among other things, that the legislator intended the term “equal pay” to be understood in a broader context as “the same real wage” – in other words, according to the extent to which the employee can meet his or her needs in each place and time, and not as “the same nominal wage” as a more common and simpler comparative criterion.
The Constitutional Court disagreed with this argument and concluded that the statutory regulation is unambiguous in this respect, that the socio-economic conditions of individual regions or the different levels of the necessary cost of living under the statutory regulation are not included in the criteria used to compare the “equal work” of two employees or the “equal pay” of two employees.
According to the Constitutional Court, the legislator did not envisage other aspects concerning the external conditions in which the employer operates, and the employee performs work for the employer, which do not affect the actual performance of work. If the legislator had wanted to do so, it would certainly have expressed this intention in the legislation in force.
In the reasoning of the Resolution, the Constitutional Court itself directly states that it is aware of the view of the matter on the part of business entities and the situation on the labour market, which the Applicant also points out, However, “reflecting the functioning of the labour market and the socio-economic differences between individual regions (and the differences in real wage levels) is primarily the task of the legislator, and not the task of the general courts or the Constitutional Court, which does not have the function of a positive legislator and does not have the task of shaping legislation”.
Although the Constitutional Court does not act as a positive legislator, it has nevertheless indicated in its Resolution that it considers the current regulation leading to the above conclusions to be strict and unreasonable, stating that “if the legislator considers it appropriate that the legislation should not be so strict, but that it should also provide for the possibility of taking into account the socio-economic differences of individual regions and their impact on the development of the labour market (… ), there is nothing to prevent it from adopting such a regulation”.
Even according to the opinion of the Constitutional Court, the employer should be able to react adequately and flexibly to the labour market in each region, but it is necessary that the positive legal regulation in the Labour Code allows it to do so.
As controversial as the above interpretation of the courts may be considered to be, the Constitutional Court has sent a signal to all employees that if they appeal to the general court on the grounds that their colleague in another city receives a higher basic remuneration for the same work, they are likely to succeed with their claim, since such an action by an employer towards its employees may fulfil the characteristics of unequal treatment and is therefore unlawful as such.
Recommendations for employers
Employers with branches, establishments or simply operating in different regions of the Czech Republic are recommended to reflect the conclusions contained in the Constitutional Court´s Resolution in their internal employee remuneration mechanisms.
Employers should respond to the Resolution by adjusting the nominal (basic) wages of their employees in the same positions, regardless of where they work, only considering the complexity, responsibility and exertion of the work and the difficulty of the working conditions. Of course, it is possible to consider the seniority of the employee, i.e., to work with a so-called merit-based remuneration system.
It is worth mentioning, that the actual scope of work is decisive, not the official name of the position, therefore using different names for the same positions in different regions would not be a sufficient solution for employers.
Primarily, the wage policy and negotiation of wages for employees working in the same position should be such that the socio-economic conditions of the place of work, as well as the cost of living of the employee at the place of work, are not taken as a criterion for the variability of the level of such wages.
Employers are, however, free to differentiate between wage and bonus remuneration for employees, considering the objective complexity, responsibility and strenuousness of the work and the difficulty of the working conditions, as well as the performance and results achieved.
Of course, employers must treat employees equally in these criteria, and cannot reflect the socio-economic conditions of the workplace. However, employers can effectively give positive pay evaluations to those employees in the same job who have better job performance and results.
Conclusion
If the employer still wishes to consider the socio-economic aspects of the place of work, this should be done through specific, justified, and justifiable recruitment incentives and regional welfare programmes, but these must be proportionate.
At the same time, there is nothing to do but wait for the legislator to remedy the legislative situation with the necessary and long-awaited amendment to the Labour Code, which would make this legislation fit for the 21st century.
If you were interested in this issue, or if you needed any advice, we are at your disposal.
Mgr. Tomáš Maux, junior lawyer – maux@plegal.cz
Mgr. Jakub Málek, managing partner – malek@plegal.cz
17. 02. 2022