On 1 December 2023, without much fuss, a government amendment to several laws was approved – in particular the Employment Act, as well as the Labour Code, the Act on the Protection of Employees in the Event of Employer Insolvency and the Labour Inspection Act, most of which will bring many changes in the area of employment, labour inspection controls and the conditions and rules of agency employment with effect from 1 January 2024 (hereinafter as the “Amendment”).
To the Amendement
The final wording of the Amendment has significantly expanded from the original government proposal, in particular by a somewhat controversial change to the definition of illegal work and amendments to the Labour Code and related regulations changing the employer’s liability for subcontractor wage claims.
In the following article, we would like to present the most important changes that the Amendment will bring and to which you as an employer need to respond in a timely and appropriate manner, namely in the areas of the definition of illegal work, agency employment, labour inspection and labour authorities or employer’s liability for wage claims of subcontractors.
Changing the definition of illegal work
Despite the expectations of the professional public and the course of the legislative process in the Chamber of Deputies, the final text approved by the Senate included a somewhat controversial change – a change in the definition of illegal work. It was originally omitted from the government’s proposal during the inter-ministerial procedure, but it was included in the approved text of the Amendment.
Until now, the criteria for assessing illegal work, i.e., the assessment of dependent work performed by a natural person outside the employment relationship, have completely copied the parameters of dependent work as set out in the Labour Code and relevant case law. It was the case law, namely the judgment of the Supreme Administrative Court No. 6 Ads 46/2013-35, dated 13 February 2014, which established another feature of dependent work beyond the scope of the Labour Code, namely consistency.
The Amendment changes the aforementioned – now the duration of the performance of such work is not relevant for the assessment of whether it is illegal work (see the amended wording of Section 5(e) of the Employment Act).
Since the consistency of work performance has been more or less the main stumbling block of the inspections carried out by the State Labour Inspection Office, the impact on practice, or rather on the course and results of these inspections, will certainly be significant.
Agency employment
The regulation of agency employment, which was the primary target of the Amendment, has undergone a number of changes, which, according to the explanatory memorandum of the Amendment, are intended to make the operation of employment agencies more efficient and to increase the protection of agency workers[1].
There are several important changes in the newly adopted measures in the area of job placement. Firstly, the deposit for employment intermediaries is increased from the original CZK 500,000 to a new CZK 1 million. These measures aim to strengthen the accountability and stability of employment agencies[2].
The second key point is the modification of the process of proving the professional competence required to obtain a permit. According to the Amendment, professional competence means the continuous personal performance of activities in the field of employment intermediation or in the field for which employment intermediation is to be authorised by a natural person for at least 20 hours per week. A natural person is obliged to obtain professional competence within the 10 years immediately preceding the application for a job mediation permit[3].
This change aims to ensure a higher quality of service and professionalism of employment intermediaries.
Another novelty is the introduction of new conditions for the granting of permits. Firstly, the applicant must not have received a final fine for the selected offences in the last three years. There is also a new emphasis on the applicant being debt-free. The condition of being debt-free applies already at the time of application and for the entire duration of the employment permit. These conditions are intended to prevent possible financial irregularities and to increase the reliability of employment agencies[4] .
The conditions for withdrawing the licence to operate an agency employment service have also been specified. Reasons for revocation include brokering illegal work, repeated failure to cooperate with the labour inspection authorities or failure to assign any employee for two years. These measures aim to protect the rights of workers and increase the accountability of employment agencies[5] .
Last but not least, there is a shift in the agenda of issuing and refusing employment agency licences. This power is transferred from the Directorate General of the Labour Office to the Ministry of Labour and Social Affairs.
In addition to the above measures, the information that employment agencies are obliged to communicate regularly to the Ministry of Labour and Social Affairs is also being expanded. There is a new obligation for employment agencies to regularly provide data on the number of employees assigned to each entity and sector in which the work is carried out[6] .
There are also changes in the way employers fulfil their information obligations when employing workers from abroad. Now this obligation will be fulfilled by delivering information only to the data box of the Ministry of Labour and Social Affairs[7]. Currently, employers can fulfil this obligation through forms published on the website of the Ministry of Labour and Social Affairs or the Labour Office, both in printed and electronic form (the link to the electronic form can be found here). Once sent, this information is then manually processed and entered into the system, which, however, represents a significant inefficiency in the procedure. The new approach, which allows information to be delivered directly to the Ministry of Labour and Social Affairs data box, is designed to streamline and speed up the entire process of fulfilling the information obligation, eliminating manual processing and simplifying the procedure.
Labour inspection
In order to make controls by the Labour Inspection Office more effective, the penalties for illegal employment, disguised employment mediation and facilitating disguised employment mediation have been tightened, where a penalty of a ban on activity for up to 2 years can be imposed[8].
Furthermore, the maximum possible fine for failure to provide the necessary data from the inspected person (failure to provide information from a natural person who performs or ensures an activity which is the subject of the inspected person’s activity and for offences in the area of cooperation between the employer and the body acting for the employee according to the relevant provisions of the Labour Code[9]) The labour inspection authority will now be entitled to impose a fine of up to CZK 1 million[10].
Labour offices
In addition to the previous changes, the Amendment also establishes new rules for regional branches of the Labour Office. According to these new provisions, the regional branch of the Labour Office will be entitled to remove any notified vacancy from the vacancy register if a period of 6 months has elapsed since the date of its notification by the employer without it being filled. Alternatively, a vacancy may be removed if the employer fails to provide the necessary cooperation to fill it.
This measure aims to keep up-to-date and relevant information in the vacancy register, which will help to better respond to current labour market needs. By limiting the length of time a job can remain vacant, the efficiency of the process of filling positions is increased and more flexible adaptation to changes in the labour market is facilitated[11].
Liability for wage claims of a subcontractor in the construction industry
The amendment introduces a new regulation of the contractor’s liability for wage claims of the subcontractor’s employees up to the minimum wage (according to § 324a an. of the Labour Code).
The contractor will thus be responsible for the wages, salaries and remuneration of the subcontractor’s employees to the extent that they have participated in the contractual performance for the contractor. This liability shall extend up to the minimum wage. For the purposes of these provisions, a contractor is deemed to be a construction contractor under Section 14d of the Construction Act who, when carrying out construction, alteration or maintenance of a completed construction or when removing a construction, provides performance through a subcontractor.
An employment agency which has temporarily assigned its employees to the contractor as a user to carry out activities is also considered as a subcontractor.
The implementation of this regulation corresponds to the Posting of Workers Directive, specifically Article 12 of the Directive[12] (herein after as the “Directive”). According to Directive, member states are obliged to take measures to ensure that, in the context of a subcontracting chain, the posted worker can be held liable for certain services provided by the recipient of the service (the contractor) instead of the employer (the subcontractor) who directly provides the service. In this way, the Directive emphasises that liability for unpaid wages, salary or remuneration under the agreement rests not only with the employer but also with the recipient of the service, particularly in the construction sector.
The amendment extends the original provision of Article 12 of the Directive, which has already been transposed into Section 319(3) of the Labour Code. This provision is deleted, and its regulation is extended not only to posted employees who may have had problems exercising their rights in the host state, but also to employees in the home state under Article 324a of the Labour Code.
Subcontractor liability is also enshrined in the Act on the Protection of Employees in the Event of Employer Insolvency and the Labour Inspection Act. This legislation aims to increase the legal protection of employees in subcontracting chains and prevent non-payment of wage claims, which contributes to better regulation and supervision of these labour relations.
Conclusion
The Amendment brought significant changes in the area of employment and job placement. The key points are a modified definition of illegal work, new rules for agency employment and stricter sanctions in the area of labour inspection. The most significant is the change in the definition of illegal work, where the duration of work is now not relevant.
Agency employment has also been subject to detailed changes, including an increase in the security deposit for employment agents and new conditions for granting a permit.
The Amendment also addresses the area of liability for wage claims of subcontractors, whereby the liability of the contractor is extended up to the amount of the minimum wage. This Amendment is in line with the Posting of Workers Directive and aims to strengthen the legal protection of employees in subcontracting chains.
In conclusion, the Amendment introduces comprehensive measures aimed at improving the efficiency and functioning of the labour market and increasing the protection of assigned employees. Only practice will tell whether this will be the case.
If you have any questions about agency employment or employment law in general, please do not hesitate to contact us! Our employment law team consisting of Jakub Málek, Jan Ptáčník, Kateřina Lansdorfová, Radim Šulc and Ráchel Kouklíková are at your disposal.
[1] It should be noted that the planned amendment to §307b and §307c of the Labour Code, which was intended to stipulate that the temporary assignment of an employee to work for the same user could not exceed three years in a period of five consecutive years, thereby preventing an unregulated chain of temporary assignments without security for agency workers, was eventually deleted altogether.
[2] 60b(1) of the Employment Act
[3] § 60 (8) of the Employment Act
[4] § Section 60(13) and (14) of the Employment Act
[5] § 63 of the Employment Act
[6] § 59 of the Employment Act
[7] § 87 and § 88 of the Employment Act
[8] § Section 139(4) and (5) of the Labour Inspection Act
[9] § 9a(2) and § 22a(2) of the Labour Inspection Act
[10] until now, the maximum fine was CZK 200,000
[11]§ Section 37(1) and (2) of the Employment Act
[12] Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services
Rachel Kouklíková, legal assistant – kouklikova@plegal.cz
Mgr. Jakub Málek, managing partner – malek@plegal.cz
18. 12. 2023