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Article:

Legal advice: how to deal with the COVID-19 situation

18 March 2020

Jiří Šmatlák |

1 June 2020, 16:00 (will be continuously updated)

DEUTSCHE VERSION ZUM HERUNTERLADEN Stand zum 1. Juni 2020, 16:00 (wird durchlaufend aktualisiert)

download pdf 1 June 2020, 16:00 (will be continuously updated)

Through our cooperating law firm Šmatlák Legal s.r.o. we bring you basic legal recommendations for employers affected by the emergency and events related to the occurrence of coronavirus in the Czech Republic.

In connection with the emergency situation declared throughout the Czech Republic on 12 March 2020 due to health threats in connection with the outbreak of coronavirus SARS CoV-2 causing the COVID-19 disease, we have prepared a recommendation for employers affected by this state of emergency and events related to the outbreak of coronavirus in the Czech Republic and who have been forced to close their establishments (partially or fully).

In this document, we focus on employers who were forced to suspend or partially limit their operations, in connection with some of the current regulations issued by the Government of the Czech Republic. We do not comment on situations where employees have been quarantined. In such a case, the employee is entitled to wage compensation of 60% of the average earnings for the first 14 days of quarantine and from the 15th day will receive sickness benefit from the sickness insurance system.

If the establishment is closed, employees will usually be entitled to 100% wage compensation. For this reason, we recommend that you consider taking the following steps:

1. Programme „Antivirus“

The Ministry of Labour and Social Affairs programme “Antivirus” adoption had some very positive reactions. After its modification was adopted by the government on 31 March 2020, the programme will target the so-called kurzarbeit, i.e. financial aid to the employers by state. According to the latest information from the Ministry of Labour and Social Affairs, the programme consists of two modes (five modes before modification, now merged into two), which complement the methods discussed in Parts 2-4 of this publication, namely;

Mode A, which compensates the quarantine order of employees and the inability to assign work to employees due to government emergency measures. This is the case of employers who are ordered to close operations based on government emergency measures in connection with the occurrence of COVID-19.

In the case of quarantine order, compensation of wages will be paid to employees in the amount of 60% of the average assessment base.

In the case of an order to close operation, compensation of wages will be paid to the employee in the amount of 100%.

The employer will receive a contribution equal to 80% of the paid wage compensation, including social security and health insurance payments to the maximum of 39 000 CZK.

Mode B, which compensates the related economic difficulties, i.e.:

  1. the inability to assign work to employees due to quarantine order or leave in the form of nursing a family member occurring to a significant proportion of employees. Significant proportion is defined as 30% of employees of companies, establishments or other organizational part according to the employer's operational situation;
  2. restrictions on the availability of inputs (raw materials, products, services) necessary for the employer's activity as a result of quarantine measures (or generally production failures) at his suppliers, including abroad;
  3. reduction in demand for employer's services, products and other products as a result of quarantine measures at the employer's point of sale, including abroad.

In the case of Mode B, section 1, the compensation of wages will be paid to the employee in the amount of 100 %.

In the case of Mode B, section 2, the compensation of wages will be paid to the employee in the amount of 80 %.

In the case of Mode B, section 3, the compensation of wages will be paid to the employee in the amount of 60 %.

In all Mode B cases, the employer will receive a contribution equal to 60% of the paid wage compensation, including social security and health insurance payments to the maximum of 29 000 CZK.

CURRENTLY: The Chamber of Deputies will discuss the introduction of Mode C of the programme at its next session, which consists of the waiver of social security and health insurance payments paid by some employers, by the state. We inform you about this in article on the financial support of the state in connection with the coronavirus COVID-19: https://www.bdo.cz/cs-cz/publikace/aktualni-publikace/financni-podpora-statu-v-souvislosti-s-koronavirem-covid-19.

As for the programme implementation, employers will be able to apply for aid after the reporting period, i.e. apply in April for the loss that occurred in March, in May for loss in April etc. “Antivirus” will began working on 6 April 2020 and some employers have already been compensated for the loss that occurred in March. Applications for any contributions are possible to do only on-line and will be processed by Úřad práce ČR (Labour Office).

It is necessary to meet these conditionson the day of submitting the application in order to be eligible for any contributions:

i. the employer strictly follows the Labour Code;

iii. the employee cannot be on notice nor be given a notice of termination;

iii. the employer is in the business sphere, the employment relationship must be based on an employment contract and the employees have to participate in sickness and pension insurance;

iv. the employer must pay the wage compensation and social security and health insurance payments.

On 2 April 2020, the Ministry of Labour and Social Affairs published a manual for employers (the "manual") relating to the programme, which sheds light on certain aspects concerning, in particular, administration. The manual is available here: https://antivirus.mpsv.cz/. However, the Ministry points out that it is only of an informative nature and is continuously updated, which, however, happens without any notice, even though there are no other reliable sources of information.

The manual clarifies some already known information, and also provides some new information:

  • Eligibility period: from 12 March 2020 to 31 May 2020, whereas for Mode B, an extension until 31 August 2020 was approved, based on the Government Resolution of 25 May 2020, No. 581. 
  • The Labour Office began receiving applications on 6 April 2020. However, the Ministry is requesting leniency due to the expected overpressure.
  • The contribution is awarded only for employees who are still employed at the time the employer submits the application and have not been dismissed or terminated at the time of the application submission, except for serious and particularly gross breaches on the part of the employee. (Sec. 52 g) and h) of Labour Code).
  • The contribution is awarded only for employees whose work is based on an Employment Contract.
  • Under Mode B: Related economic difficulties, when assessing the eligibility of the contribution, the employer will not be required to prove the facts connecting the emergence of a specific obstacle in working with the epidemiological situation, both in the Czech Republic and abroad. The reason is the assumption that the damage arises both on the part of the employee who cannot do the work and receive a wage for it in the usual amount, and for the employer for whom the work is not done. Their interest is therefore to avoid a situation where it is necessary to enter the programme, which, according to the Ministry of Labour and Social Affairs, minimizes the space for intentional manipulation.
  • ATTENTION: Under "Antivirus", the contribution cannot be provided to an employee who is also the executive if the employment contract was signed by the same natural person on the part of both the employer and the employee. Therefore, if the executive-employee has signed his / her employment contract both on the part of the employer and on the part of the employee, it will not be possible to receive the contribution from the Antivirus programme for this person - the Labour Office will reject such an application.
  • ATTENTION: Compensation under “Antivirus” is not compatible with the Compensation bonus for small and family companies (limited liability companies – s.r.o. in Czech) in the same calendar month. We informed you about the Compensation bonus here: https://www.bdo.cz/cs-cz/publikace/aktualni-publikace/kompenzacni-bonus-pro-mala-a-rodinna-s-r-o
  • ATTENTION: Compensation under Mode B and Mode C of “Antivirus” will not likely be compatible, either.

Programme administration:

The administration process can be divided into: 1) submission of an application, 2) conclusion of an agreement with the Labour Office, 3) accounting of paid wage compensations and 4) provision of a contribution.         

Ad 1) With the application, the applicant shall submit a document proving the establishment of an account to which the Labour Office will send funds and a document proving which person represents the employer (authorized person) or a power of attorney in the case contractual representation.

An indication of the subject of business or activity that was affected (ordered closure or restriction of operation), including the relevant legal provisions (government emergency measures) is a part of the billing application form for Mode A.

Ad 2) The agreement is generated automatically after filling in the application and is sent to the Labour Office at the same time as the application. The agreement is considered concluded if it is signed by the Labour Office and sent back to the applicant electronically.

Ad 3) The employer shall make financial statements and close attendance records for the relevant calendar month, pay the wage compensation to the employees in due time and pay social and health insurance contributions.

Then, the employer submits the statement of paid wage compensations, including mandatory contributions, which will contain a list of employees and their birth numbers or registration numbers of insured persons (if they do not possess a birth number) via a web application.

Ad 4) The contribution shall be paid by the Labour Office to the account provided by the employer.

Supervision:

During the implementation of the Antivirus Programme and especially after its completion, emphasis will be placed on supervision and inspection activities by the relevant authorities, such as the State Labour Inspection Authority.

The Authority will focus in particular on:

  • Employment Contracts,
  • internal regulations or agreements with unions governing obstacles to work entitling the employer to pay reduced wage compensation,
  • quarantine orders to employees, obstacles to work due to childcare (see chapter 3),
  • payslips and attendance records proving the occurrence of an obstacle to work and the payment of appropriate wage compensation,
  • statements of account proving the payment of compensation of wages to employees and the payment of social and health insurance contributions,
  • in the event of idle time (Section 207 a) of the Labour Code) or partial unemployment (Section 209 of the Labor Code), the employer shall also document any pro proving termination of sales, reduction of sales, traffic restrictions, etc., ie documenting the fact that an obstacle to work actually occurred to the employer.

Nevertheless, we believe that some of the programme modes require employer activity in the form of;

i. initiatives to apply for leave in the form of nursing a family member for at least 30% of employees (in the case of Mode B, section 1);

ii. adoption of an internal regulation specifying which employees will fall under the partial unemployment scheme (in the case of Mode B, section 3). Therefore, a model internal regulation on the introduction of a partial unemployment scheme, which will still need to be tailored to the needs of individual clients, is attached at the end of this Memorandum. Please note, however, that an internal regulation may be issued only if there is no trade union at the Client's company.

Next, we recommend carefully document all circumstances that have affected supply or demand negatively so that the respective aid application procedure is positive and without undue delay.

2. Suggest taking holiday or compensatory time off

Employers can order their employees to take holiday leave. However, according to the Labour Code, the employer is obliged to notify the employee of the specified period of leave in writing and at least 14 days in advance, unless a shorter period has been agreed. It is therefore not possible to order holiday from day-to-day without the employee's consent.

If an employee has worked overtime or on a public holiday in the previous period, the employer may consider granting the employee compensatory time off under Sections 114 (3) and 115 (1) of the Labour Code during the period when it cannot allocate work to the employee.

By doing so, the employer will make sure that employees already take holiday or compensatory time off now and as a result will not be able to take holiday or compensatory time off later in the year when the situation may have already stabilised and the employer will need these employees.

3. Temporarily transfer employees to another job

If the employer cannot allocate the type of work that the employee has agreed in the employment contract, the employer may agree with the employee on temporary assignment to another job. For example, this may be cleaning the premises or taking inventory, which may not be the company's core business, but could prove beneficial in the future when operations are resumed.

The employer may transfer employees, even without their consent, to a job other than that agreed for the necessary period of time, if this is necessary to avert an extraordinary event. We believe that the current situation may be regarded as being extraordinary.

4. Recommend employees to take leave in order to care for a family member

Employers are obliged to excuse the absence of an employee who is caring for a child under the age of 10 or another household member. This constitutes one of the important personal obstacles to work on the part of the employee, based on which the employer is obliged to excuse the employee's absence. At the same time, employees are entitled to a care benefit.

Under Section 39 of the Sickness Insurance Act, employees are entitled to the care benefit among others when:

  1. providing care for a child under the age of 10 if he or she is ill, injured or if a school or other similar facility has been closed due to an unforeseen event;
  2. providing care to another member of the employee's household whose medical condition due to illness or injury necessarily requires the provision of care by another natural person, and that person also lives with the employee in the household.

The advantage in this case is that the employer does not provide the employee with wages or compensation, as this benefit, called the "care benefit", is paid by the state. Thanks to adoption of the of the Act on Certain Social Security Adjustments in Connection with the Emergency Measures of the 2020 Epidemic, the duration of care benefit was extended to the entire period of the closure of schools and school facilities, even retroactively (from March 11, 2020), due to the government emergency measures. The Act also applies to employees with children under 13 years of age. The full text of the Act can be found here: https://www.psp.cz/sqw/sbirka.sqw?cz=133&r=2020.

On 21 April 2020, the Chamber of Deputies approved an amendment to the above-mentioned Act, which sets the amount of care benefit for a calendar day from 1 April 2020 to 30 June 2020 at 80% of the daily assessment base. During the period of validity of the emergency measures, the right to nursing allowance will now also apply to part-time workers.

It is necessary to apply to receive the care benefit. Information and the relevant application forms can be found here: https://www.cssz.cz/-/doporuceny-postup-pro-podani-zadosti-o-osetrovne-pri-peci-o-dite-do-10-let-z-duvodu-uzavreni-skolskeho-detskeho-zarizeni-skoly-

5. If possible, issue an internal regulation on the introduction of a partial unemployment scheme

If the establishment closes and the employer cannot allocate work to the employees, this is another obstacle on the part of the employer and, according to the Ministry of Labour and Social Affairs, employees are entitled to 100% of their average earnings. However, according to our analysis, this conclusion is ambiguous and there is no consensus in professional circles either.

In our opinion, some employers clearly have the right to introduce the so-called partial unemployment regime pursuant to Section 209 (2) of the Labour Code. This consists in the temporary reduction of employees' wage compensation wage compensation wage compensation to at least 60% of their average earnings by employers in the business sector, in agreement with the trade union organization (or by means of an internal regulation if they do not have a trade union organization).

This approach might be used by employers that are affected by the current government regulations in such a way that the demand for the products or services they offer as a result of the closure of their customers' premises is reduced. These can be, for example, food suppliers for school canteens or restaurants, suppliers of clothing, footwear or furniture for shops, suppliers of car parts within the automotive industry, etc.

Employers are not limited in who will be covered by the partial unemployment scheme if they apply it in accordance with the principles of non-discrimination and equal treatment. It is therefore appropriate for the employer to duly justify the choice of which employees will be affected by partial unemployment.

In the annex to this document you will find a model internal regulation on the of introduction of a partial unemployment scheme, which we have taken the liberty of preparing for you. At this point, however, we must point out that this is just a basic template that needs to be adapted to specific needs.

6. Try to explain the seriousness of the situation to the employees and agree on a solution with them

For other employers in the business environment, an agreement with employees on a temporary wage reduction in the form of an amendment to an employment contract may be the last resort. However, there must be written consensus, which can be difficult for employers with a high number of employees.

If in accordance with the employee's interests, it is possible to agree on the taking of unpaid leave. Again, however, this is subject to the agreement of both parties.

CONCLUSION

Employers are in an unprecedented situation, as the Czech Republic has never experienced events of a similar nature at any point in its history. For this reason, the Labour Code does not in principle foresee such situations as we are now witnessing. Opinions on certain key provisions of the Labour Code and other relevant regulations and their interpretation will certainly continue to evolve.

Rest assured that we are monitoring developments closely and are evaluating the information in order to provide you with reliable legal services.

 

Main contact person:

JUDr. Jiří Šmatlák
Attorney at Law
E-mail: [email protected]
Tel: +420 602 812 565

Mgr. Lukáš Regec
Attorney at Law
E-mail: [email protected]
Tel: +420 602 738 680

 

Model internal regulation – employer directive on the introduction of a partial unemployment scheme

The company [●]

ID No.: [●]

with its registered office at [●]

registered in the Commercial Register maintained by [●] Court in [●], File [●]

represented by [●], [Executive Director / Chairman of the Board of Directors]

(the "Employer"),

in response to events related to the outbreak of coronavirus in the Czech Republic (known as SARS CoV-2) and the associated negative economic consequences, issues the following:

EMPLOYER DIRECTIVE ON THE INTRODUCTION OF A PARTIAL UNEMPLOYMENT SCHEME

in order to maintain the existence of the employer or to achieve a positive or at least balanced economic result, with an emphasis on the use of existing employees and on limiting the reduction in the number of employees depending on the company's economic results and other factors that affect the demand for goods or services. This directive was adopted [by decision of the Executive Director / at a meeting of the Board of Directors] of the Employer on [●].

This directive is issued as an internal regulation of the Employer pursuant to Section 209 (2) of Act No. 262/2006 Coll., Labour Code, as amended (the "Labour Code"), in accordance with Section 305 of the Labour Code.

This directive shall be binding on the Employer and all its employees ("employees").

Legal framework for the application of the partial unemployment scheme:

  1. Pursuant to Section 209 (1) of the Labour Code, this constitutes another obstacle to work on the part of the employer, inter alia, if the employer cannot allocate work to the employee within the weekly working hours due to temporary restrictions on the sale of its products or demand for its services ("partial unemployment"). Section 209 (2) further provides that if, in the cases referred to in paragraph 1, the agreement between the employer and the trade union adjusts the amount of wage compensation granted to the employee, the wage compensation must be at least 60% of the average earnings; if there is no trade union at the employer, the agreement may be replaced by an internal regulation.
  2. There is no trade union with the Employer and therefore the Employer's statutory body is entitled to decide on partial unemployment and the use of this scheme.

Range of employees covered by the partial unemployment scheme:

  1. The Employer is not limited in terms of which of the employees will fall under the partial unemployment scheme.
  2. The partial unemployment scheme can be applied, for example, by profession, job classification, locality of the establishment, type of establishment or goods whose sale had to be limited, etc.
  3. The employer undertakes to apply the partial unemployment scheme in accordance with the principles of non-discrimination and equal treatment.

Decision to introduce partial unemployment:

  1. The Employer hereby stipulates that establishments, employees or professions designated by the Employer's statutory body hereinafter will cease to come to work and that each employee concerned will receive 60% of their average earnings for the period in question (“Partial Unemployment”):

           [●]

           [●]

[Note: It is possible to choose different methods or combinations thereof, for example, to determine that this decision concerns:
all employees of the establishment at a particular location, and/or
all employees in a particular position (profession); it is necessary to use terminology of employment contracts or other internal rules for the designed positions so that it is undisputed which employees are affected by the decision and/or 
individual employees in cases where the decision concerns only them; the justification is crucial, given the principles of equal treatment and non-discrimination, see further note.]

Working hours for the aforementioned establishments, employees or professions are determined for the period of Partial Unemployment as follows: [●], due to [●].

[Note: It is essential to specify the reason why the partial unemployment scheme is introduced in this way (why working hours were reduced in this way) for a specific group of employees, especially if the decision concerns only a few individual employees.]

Final provisions:

  1. All employees must be familiar with this directive. This directive is publicly available to all employees.
    Note: E.g. available for consultation with their manager or at the Employer's registered office.]
  2. The employer and all employees are responsible for compliance with this directive.
  3. This directive comes into effect from the date of its issue until [●].
    Note: Generally, an internal rule is issued for a fixed time, one year at minimum. An internal rule concerning renumeration, as this one, can be issued for a shorter period of time.]

 

On _________________

_____________________                     

On behalf of [●]                                                          

[●], [Executive Director / Chairman of the Board of Directors]