07. Termination of Employment Contracts

Grounds for Termination

In the Czech Republic, an employee can be dismissed based mainly on:

• Agreement
• Notice
• Immediate termination

An Agreement is always the recommended form of termination of employment as it is the safest mechanism for terminating a contract and minimises the risk of possible future court disputes.

A termination notice can only be given by an employer for the following statutory reasons:

a) if the employer or part thereof is being dissolved;

b) if the employer or part thereof is being relocated;

c) if the employee becomes redundant;

d) if the employee may not further perform the current work due to an accident at work, occupational disease or threat of such a disease based on a medical report;

e) if the employee is deprived of his/her medical fitness in the long term given his/her state of health based on a medical report;

f) if the employee fails to fulfil the prerequisites stipulated by the legal regulations for the performance of the agreed work or if the employee fails to fulfil the requirements on proper performance of this work without the employer’s fault;

g) if the employee breached his/her work duties – depending on the intensity, the employee may be immediately terminated for an extremely serious breach of duties. For less serious breaches, the employee must be given warning letters (at least two in the past six months) pointing out his/her breach and warning the employee about the possible termination of employment;

h) if the employee commits a particularly gross breach of his/her duties during his/her temporary illness (regime of a temporarily sick employee) (e.g., the employee goes on his/her vacation instead of being at home due to illness).

Immediate Termination

Immediate termination is considered an exceptional method of termination of employment and the employee may be terminated immediately (i.e. without the termination period – usually two months) only if:

• the employee has been validly convicted of an intentional criminal offence and sentenced to imprisonment for a term exceeding one year, or if the employee has been validly convicted of an intentional criminal offence committed in the performance of working tasks or in direct relationship to the performance of working tasks and sentenced to imprisonment for a term of at least six months;
• if the employee has breached a duty arising out of the legal regulations applicable to the work performed by the employee in an especially serious manner.

Collective Dismissals

The collective dismissal requirements are triggered in circumstances where the employer intends to terminate:

• 10 employees, for an employer employing from 20 to 100 employees, or
• 10 per cent of the employees, for an employer employing from 101 to 300 employees, or
• 30 employees, for an employer employing more than 300 employees.

The process is as follows:

1. notification to trade unions, or employees’ reps if there is no union at the company, at least 30 days prior to the terminations;
2. first notification to the Regional Labour Office (the “RLO”);
3. consultation with trade unions or other representatives (agreement not required);
4. second notification to the RLO – report of the consultation process and final number of employees to be terminated;
5. distribution of termination notices/concluding of agreements with affected employees.

The terminated employees are entitled to statutory severance payment. After pay out of the last salary and the severance payment, the termination of employment can be considered complete.

Individual Dismissals

The details of the process depend on the reason for termination. However, in general, should the employee be unilaterally terminated, the employer must have a statutory reason to do so and also relevant evidence (e.g. medical report, warning letters, written notice of his/her poor performance, employer’s decision on cancelling the job position, etc.).

The employer must notify and consult about the termination (by a termination notice and/or immediate termination) with any trade union (no consent is required). The time frame for such notification/consultation depends on the agreement with the particular trade union. Only in the case of the termination of a member of a body of the trade union must prior consent to terminate be obtained (and eventually can be replaced by the consent of the court if the trade union refuses to give such consent).

Is Severance Pay Required?

The calculation of termination (severance) pay depends on the reason for termination, duration of the employment and average earnings of the particular employee in the last calendar quarter.

In case the employee is terminated due to organisational reasons, i.e.:

1. if the employer or part thereof is being dissolved;
2. if the employer or part thereof is being relocated;
3. if the employee becomes redundant;

the employee is entitled to severance payment in the amount of:

• one month’s average earnings, if the employment did not last more than one year,
• two times the employee’s monthly average earnings, if the employment lasted more than one year but less than two years,
• three times the employee’s monthly average earnings, if the employment lasted more than two years.

In case the employee is given a termination notice because he/she may not further perform the current work due to an accident at work, occupational disease or threat of such a disease, he/she is entitled to severance payment in the amount of 12 times his/her average earnings.

If a termination agreement is concluded for the above stated reasons, the severance payment must be provided in the same amount.

Separation Agreements

If the employer and employee agree on the termination, the employment relationship will terminate on the agreed date. An agreement on the termination of an employment relationship must be in writing and each contracting party must receive one copy of the agreement.

Is a Separation Agreement required or considered best practice?

Yes, as the matter of delivering the termination notice is currently difficult and may cause many problems to employers, agreement is the most recommended method of termination.

What are the standard provisions of a Separation Agreement?

• description of employment (date of employment agreement conclusion, job position, etc.);
• date, when the employment will terminate;
• provision on return of the employer’s property (mobile phone, laptop, car, keys, cards, documents, etc.);
• garden leave if applicable;
• severance payment if required by law or if concluded between employer and employee.

Does the age ofthe employee make a difference?

Generally, under Czech law, there is no difference, but the question of possible discrimination based on age has to be considered.

Are there Additional Provisions to Consider?

When the employer prefers the employee to not perform any work after the notice/agreement of termination, garden leave as an obstacle to work on the employer’s side can be concluded or determined.

Remedies for Employee Seeking to Challenge Wrongful Termination

 Nullity of termination of an employment relationship by notice, by immediate dismissal or resignation, by notice during the trial period or by agreement may be claimed both by the employer and the employee before the competent court within two months of the date when the employment relationship in question ought to have come to an end as a result of such termination.

If the court decides that the termination is not valid, the employee may have the right to salary compensation of the period when he/she did not perform work while he/she could perform work, because the employment was not validly terminated. The court may also grant the employee the costs of court proceedings.

Whistleblower Laws

The Whistleblower Protection Act came into effect in the Czech Republic in August 2023. Employers of more than 50 employees are now obliged to establish an internal reporting system, the form of which the law remains silent on. This means that employers may choose how to ensure the receipt, assessment, and resolution of reports by their employees and other persons (e.g., job applicants). The law also provides for a number of protections for whistleblowers, including confidentiality of their identity, protection against retaliation, and many others.