Employment termination of top managers has become an issue in the Czech Republic, especially after the new Labour Code entered into force on January 1, 2007. This Commentary, prepared by Tereza Erényi, an attorney with PRK Prochzka / Randl / Kubrhe in Prague, suggests how to employ and terminate top managers and avoid any resulting difficulties under current Czech employment law.
Ms. Erényi writes: Previous labour law regulations provided for automatic appointment of Top Managers. In practice, the appointment was accompanied by a management contract determining, in particular, remuneration and other benefits. Under the previous system, appointed Top Managers could be recalled without a special reason for termination. After the recall, however, the employment did not terminate and a new position had to be offered to the recalled Top Manager. If there was no position like this, or if the employer and the Top Manager could not agree on another position, employment was terminated by reason of redundancy and this applied automatically.
Therefore, under the previous regulation when a Top Managers employment was terminated, employers could, in addition to the normal termination procedure, which applied to all employees, follow the recall procedure and terminate employment of managers by reason of automatic redundancy. This was very important as, otherwise, under Czech law, employment can only be terminated based on mandatory reasons stipulated by the Labour Code. And, particularly with Top Managers, who often do not have any superiors (except for the companys statutory body), employers find it difficult to apply the statutory reasons. This is namely because, without a supervisor, it can become difficult or time consuming to collect sufficient evidence to terminate managers employment and to follow the required termination procedures.
For example, an employer may terminate an employees employment for performance reasons, if the employee fails to meet the conditions stipulated by law for the performance of the agreed work, or, through no fault of the employer, the employee does not meet the requirements (provided by the employer) for the proper performance of such work. If the employee's failure to meet the requirements results in unsatisfactory work, a notice of termination may be served only if, during the previous twelve months, the employer asked the employee, in writing, to eliminate the deficiencies, and the employee failed to do so within a reasonable period of time. In practice, this means that: (1) the employers must always identify the particular unsatisfactory work results; (2) must request the employee, in writing, to eliminate the unsatisfactory work results; and (3) give the employee sufficient time for improvement. In the case of Top Managers this can be problematic, which is why the old recall system was so useful. If an employer were dissatisfied with a particular Top Manager, the Top Manager could simply be recalled without need to apply the termination procedures set out for regular employees. [footnotes omitted]