CMS Expert Guide to Dismissals

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1. Dismissal of employees

1.1 Reasons for dismissal

An employee may give notice of termination without providing cause. An employer, on the other hand, is only permitted to give notice of termination for one of the reasons explicitly stated in the Labour Code, which are as follows:

  1. organisational reasons – the employer’s enterprise shuts down or relocates, or the employee is made redundant; or
  2. health reasons − the employee no longer has the capacity to carry out his present work in a satisfactory manner; this must be confirmed with a medical certificate issued by the occupational medical services provider or under a ruling of the competent administrative agency having duly reviewed the medical certificate; or
  3. an employee no longer meets the requirements outlined for the work they are carrying out; or
  4. there are reasons for immediate termination of the employment relationship − the employee has committed a gross breach of duty or has been lawfully sentenced to prison for a crime; or
  5. the employee has seriously, or less seriously but repeatedly, breached a statutory duty relating to their work performance; or
  6. the employee breaches their obligation to observe the prescribed regime of an insured person being temporarily unfit for work in the first 14 calendar days of temporary incapacity for work due to sickness in an especially gross manner.

Notice may be given without providing any reason (‘Kündigungsfreiheit’).

Both employer and employee may end the employment relationship without providing reason or cause.

However, a dismissal must not be abusive (wrongful or unlawful dismissal). Subject to certain exceptions, such a notice is unlawful where issued:

  • due to an inherent personal quality of the other party (skin colour, nationality, sexuality); or
  • because the other party exercises a constitutional right; or
  • solely in order to prevent claims under the employment relationship from accruing to the other party; or
  • because the other party asserts claims under the employment relationship in good faith; or
  • because the other party is performing military service or a non-voluntary legal obligation; or
  • because the employee is or is not a member of an employees’ organisation or because he carries out trade union activities in a lawful manner; or
  • while the employee is an elected employee representative on the works council and the employer cannot cite just cause to terminate his employment; or
  • in the context of mass redundancies ordered by the employer if the consultation process is not observed.

In any of the above circumstances, the notice remains valid,  but the party abusively giving notice may be obliged by the court to pay an indemnity of up to six months' salary.

The employer may not terminate the employment relationship during the following periods, and notice given during these periods is void:

  • while the other party is performing Swiss compulsory military service, and during the four weeks preceding and following the service if the service lasts for more than 11 days; or
  • while the employee, through no fault of his own, is (partially) prevented from working due to illness or accident, for up to 30 days in the first year of service, 90 days between the second and fifth years of service, or 180 days thereafter; or
  • during the pregnancy of an employee, and for 16 weeks following the birth.

1.2 Form

Written form is necessary; must be delivered to the other party (both employer and employee may terminate the employment relationship by notice of termination). Under certain circumstances a fiction of delivery applies (e.g. if the employee refuses to accept the notice when it is delivered personally to them or when delivered by a postal worker). Under specific and strict conditions, it is also possible to deliver the termination documents electronically.

There is no specific requirement. Notice of termination may be communicated verbally or by other means. For evidentiary purposes, it is strongly recommended that notice be issued in writing.

1.3 Notice period

The statutory minimum notice period is set at two months, the period starting on the first day of the month after the month in which the notice of termination was delivered. 

It is possible to agree upon a probationary period of a maximum of three months (six months for managerial employees) with no statutory notice period. There is no notice period in cases of immediate termination of the employment relationship (i.e. in particular if an employee has committed a gross breach of duty or has been lawfully sentenced to prison for a crime).

The statutory notice periods include: one month in the first year of service; two months between the second and ninth year of service; and three months thereafter.

The notice period may vary depending on the written individual or collective employment contract. however, the notice period may be reduced to less than one month only by collective employment contract and only for the first year of service. The notice period must be the same for both parties.

The parties may agree on a probationary period of up to three months with a notice period of seven days.

1.4 Involvement of works council

No involvement in termination process except in collective redundancies.

Except for mass dismissals, there is no statutory requirement to involve a works council.

1.5 Involvement of a union

Employer must discuss in advance any notices of termination and any immediate termination of the employment relationship with the trade union. Trade union approval is only required where the employee is a trade union officer. Such approval can be substituted by a court decision if the approval was withheld and the employer cannot be justifiably required to continue employing the trade union officer.

No involvement.

1.6 Approval of state authorities necessary

Approval of the state authorities is not required. The Labour Office need only be notified of a collective redundancy or the dismissal of a disabled person or of an employee who is not a Czech citizen.

Not necessary.

1.7 Collective redundancies

Collective redundancies are defined as dismissals within a 30-day period of:

  1. more than ten employees in an establishment of 20 − 100 employees; or
  2. 10% or more of the employees in an establishment of 101 − 300 employees; or
  3. at least 30 employees in an establishment of 300 or more employees. The total number of employees also includes those employees whose employment relationship was terminated by agreement between the employee and the employer based on the same grounds for which other employees are being dismissed, if at least 5 employees were dismissed by notice of termination.

The employer must inform the works council and trade union (or directly affected employees if there is no works council or trade union) of its intentions at least 30 days prior to giving notice of termination, and must enter into negotiations to reach a compromise or reduce the number of affected employees, etc.

The employer must simultaneously inform the Labour Office in writing:

  1. that it has discussed the collective redundancies and its implications (i.e. the later results of these discussions) with the trade union, works council or affected employees; and
  2. of the actions it has taken in cooperation with the trade union / works council in relation to the collective redundancies; and
  3. of the number, characteristics, professional qualification, etc. of the employees to be made redundant.

The statutory provisions regarding mass dismissals apply where the employer – within a time period of 30 days – gives notice for reasons unrelated to any particular employee and affecting:

  1. at least ten employees at a business normally employing between 21 and 99 employees; or
  2. at least 10% of the employees at a business normally employing between 100 and 300 employees; or
  3. at least 30 employees at a business normally employing more than 300 employees.

The provisions governing mass redundancies do not apply in the event that business operations have ceased by court order or mass redundancies have occurred due to bankruptcy or a composition agreement with assignment of assets.

Prior to giving notice, the employer must consult the employee’s representative body or the employees, and at the same time notify the cantonal labour office in writing of the planned mass dismissal. these bodies have consultation rights only. Neither the employees nor the cantonal office are able to block a mass dismissal.

The employer is obliged to enter into social-plan negotiations if it (i) usually employs at least 250 employees and (ii) intends to terminate at least 30 employees within 30 days for reasons that are unrelated to an individual employee. Notices given over a longer period but based on the same operational decision must be added together.

The employer negotiates:

  • with the employee associations that are party to the collective employment contract if a party to this collective employment contract;
  • with the organisation representing the employees; or
  • directly with the employees if they have no representive organisation.

An arbitral tribunal will establish a social plan by way of an arbitral award if such negotiations fail.

1.8 Summary dismissals

Immediate termination (without notice period) of employment by the employer is possible only if the employee has breached a statutory duty in an especially gross manner or for a lawful conviction of the employee, following the employee intentionally committing a crime which leads to unconditional imprisonment for a duration longer than one year (or six months in the case of crimes committed in connection with exercising their job).

The employer may immediately (with effect upon delivery to the employee) terminate the employment within a period of two months of learning the reason for immediate termination, but not later than one year from the date of occurrence of the respective reason for termination.

An employer cannot dismiss with immediate effect any employee who is pregnant or during the employee's maternity or parental leave.

An immediate termination must be made in writing and be delivered to the employee in accordance with the Labour Code, with the reasons for immediate termination being specified in such a way that prevents confusion with any other reason(s) for termination.

Both the employer and employee may terminate the employment relationship with immediate effect at any time for cause.

The requirements for termination for cause are high. There must be a severe breach of contract and – except for very serious cases (e.g. theft) – a clear warning must be given, which is then ignored by the other party. The notice must be issued within two to three days of the party becoming aware of the serious breach allowing termination for cause.

1.9 Consequences if requirements are not met

Termination may be held invalid by the court and the employment relationship reinstated if the employee files a claim to the court no later than two months after the date of the purported termination of the employment relationship, and the court finds the termination to be invalid.

In case of ordinary dismissals:

  • in case of unfair dismissal, the notice remains valid, but the party abusively giving notice may be obliged by the court to pay an indemnity of up to six months' salary.
  • The employer must not terminate the employment relationship during certain protected periods, as mentioned above under ‘Reasons for dismissal’. any notice given during these periods is void. If any of these circumstances apply after notice has been given, the notice remains valid but is extended accordingly.

Where a termination is made with immediate effect for cause but the requirements are not met (e.g. no serious breach, no or insufficient warning, late notice), the employee is entitled to the salary for the period until his contract expires or would have been ordinarily terminated. In addition, the court may require the employer to pay an indemnity of up to six months' salary.

In a case of mass dismissal, a notice of termination given without or before completion of the consultation process is deemed abusive. The notice of termination remains valid, but the employer is obliged to pay an indemnity to the employee of a sum fixed by the court not exceeding two months' salary.

1.10 Severance pay

Minimum statutory severance pay depends on the reason for dismissal and  /  or the length of employment, and ranges from one average monthly salary for any dismissals for organisational reasons (including collective redundancies) of employees whose employment lasted less than one year, to 12 times the average monthly salary for dismissals for health reasons. The parties may negotiate a larger severance payment, or the payment of severance pay in the case of dismissal for other reasons.

Employees are entitled to a severance payment if they are over 50 years old and with 20 or more years service. If there is no contractual severance payment, an amount equal to between two and eight months' salary will be awarded by the court. However, the employer’s contributions to the employee’s pension fund over the entire period of service may be deducted from the severance payment. As a result, mandatory severance payments are rare.

1.11 Non-competition clauses

A post-contractual non-competition clause may be agreed upon between the employer and the employee and, if agreed, it must be in written form and must not last for more than one year. The agreement may be included in the employment agreement. Monetary compensation from the employer must, as a minimum, equal half the employee’s average monthly salary (i.e. of the wage / salary that the employee had prior to termination of the employment relationship) for each month during which the employee met the obligation not to compete stated in the clause. If the agreement sets out a financial penalty for breach of the clause by the employee, the employee’s obligation not to compete is discharged upon the payment of the penalty sum. The agreement is automatically terminated if the employer fails to pay the monetary compensation to the employee when it falls due. An employer may only withdraw from the non-competition clause during the term of employment. As far as case law is concerned, the withdrawal is only effective if it has been explicitly agreed upon, and such a provision is only enforceable if it contains reasons for the withdrawal, provided, in addition, such reasons are legitimate.

The parties to an employment agreement may agree on post-termination restrictive covenants prohibiting competitive activity by the former employee. Such covenants are subject to a number of requirements and restrictions, including the following:

  1. A post-termination restriction on competition is only valid and enforceable if it is limited to a specific activity, a reasonable geographic area, and a reasonable period of time (i.e. maximum three years, unless there are exceptional reasons for a longer period).
  2. In addition, a non-competition restriction is only enforceable in those cases where the employee has had access to the employer’s customers or to manufacturing or business secrets during the term of the employment, and the use of such knowledge could significantly damage the employer.
  3. The non-competition restriction has to be agreed upon in writing.
  4. The restriction does not apply if the employer terminates the employment relationship without the employee having given him good cause to do so, or if the employee terminates it for good cause attributable to the employer.
  5. Where an employee infringing the restriction is liable to pay a contractual penalty, the employee may exempt himself from the prohibition by paying the penalty. however, he remains liable in damages for any further damage. Only where expressly agreed upon in writing, the employer may insist that the employee continue to observe the non-competition restriction in addition to seeking the agreed contractual penalty and any further damages.

1.12 Miscellaneous

The employer may not give notice of termination during a ‘protection period’ (i.e. where an employee is temporarily unfit for work, a night-shift employee is temporarily unfit to perform night work, an employee is conscripted or released from work to exercise a public office, or during pregnancy, maternity or parental leave), unless the termination is for organisational reasons due to the closure or relocation of the enterprise. There are several exceptions to this rule.

Not applicable.

2. Dismissal of managing directors

In general, the managing director is an employee of the company. In certain situations, and subject to the prohibition of circumventing employment law, the managing director might be a self-employed person who has entered into a service agreement with the company.

The following comments relate to situations whereby the managing director is an employee of the company.

2.1 Reasons for dismissal

In the Czech Republic managing directors are not considered employees, therefore labour law protection does not apply to them. The relationship between the managing director and the company is of a commercial nature, not an employment one. An appointment as managing director (as a statutory body or a member of a statutory body of an entity, i.e. not as an employee) may be revoked without stating any reason.

Notice may be given without providing any reason (‘Kündigungsfreiheit’).

Both the employer and the managing director may end the employment relationship without providing reason or cause.

However, a dismissal must not be abusive (wrongful or unlawful dismissal). Subject to certain exceptions, such a notice is unlawful where issued in particular:

  • due to an inherent personal quality of the other party (skin colour, nationality, sexuality); or
  • because the other party exercises a constitutional right; or
  • solely in order to prevent claims under the employment relationship from accruing to the other party; or
  • because the other party asserts claims under the employment relationship in good faith; or
  • because the other party is performing military service or a non-voluntary legal obligation; or
  • in the context of mass redundancies by the employer if the consultation process is not observed.

In any of the above circumstances, the notice remains valid, but the party abusively giving notice may be obliged by the court to pay an indemnity of up to six months’ salary.

The employer may not terminate the employment relationship during the following periods, and notice given during these periods is void:

  • while the other party is performing Swiss compulsory military service, and during the four weeks preceding and following the service if the service lasts for more than 11 days; or
  • while the managing director, through no fault of his own, is (partially) prevented from working due to illness or accident, for up to 30 days in the first year of service, 90 days in the second to fifth years of service, or 180 days thereafter; or
  • during the pregnancy of a managing director, and for 16 weeks following the birth.

2.2 Form

A valid shareholder resolution at a general meeting is required. There must be a simple majority of shareholders present, unless stated otherwise in the relevant company’s statutory documents. Apart from cases when entities have a sole shareholder, revocation of an appointment as managing director must be on the programme of the invitation to the general meeting. If not, the appointment may only be revoked, if all shareholders are present and agree to change the programme to include the revocation.

There is no specific requirement. Notice of termination may be given verbally or by other means. For evidentiary purposes, it is strongly recommended that any notice be issued in writing.

The provisions set forth by Swiss Company Law must also be taken into account for managing directors. For example, in a company limited by shares (‘Aktiengesellschaft’), the appointment and dismissal of persons entrusted with managing and representing the company is part of the non-transferable and inalienable duties of the board of directors.

2.3 Notice period

Not applicable.

The statutory notice periods include: one month in the first year of service; two months between the second and ninth year of service; and three months thereafter.

The notice period may vary depending on the written individual or collective employment contract. often employers and managing directors agree on longer notice periods in their employment agreements than the default rule foreseen by law. The notice period must be the same for both parties. 

The parties may agree on a probationary period of up to three months with a notice period of seven days.

2.4 Involvement of works council

No involvement.

Except for mass dismissals, there is no statutory requirement to involve a works council.

2.5 Involvement of a union

No involvement.

No involvement.

2.6 Approval of state authorities necessary

Not required.

However, revocation of a managing director from his/her office must be filed in the Commercial Register without undue delay. The appropriate court managing the Commercial Register may review the revocation in order to verify whether the revocation was done in accordance with applicable laws and the relevant entity’s statutory documents.

Not necessary.

2.7 Collective redundancies

Not applicable.

The statutory provisions regarding mass dismissals apply where the employer – within a time period of 30 days – gives notice for reasons unrelated to an individual employee (including a managing director) and affecting (numbers include employees and managing directors):

  1. at least ten employees at a business normally employing between 21 and 99 employees; or
  2. at least 10% of the employees at a business normally employing between 100 and 300 employees; or
  3. at least 30 employees at a business normally employing more than 300 employees.

The provisions governing mass redundancies do not apply in the event business operations have ceased by court order or mass redundancies have occurred due to bankruptcy or a composition agreement with assignment of assets.

Prior to giving notice, the employer must consult the employee’s representative body or the employees, and at the same time notify the cantonal labour office in writing of the planned mass dismissal. These bodies have consultation rights only. Neither the employees nor the cantonal office can block a mass dismissal.

The employer is obliged to enter into social-plan negotiations if it (i) usually employs at least 250 employees (including managing directors) and (ii) intends to terminate at least 30 employees (including managing directors) within 30 days for reasons that are unrelated to an individual employee. Notices given over a longer period but based on the same operational decision must be added together.

The employer negotiates:

  • with the employee associations that are party to the collective employment contract if a party to this collective employment contract;
  • with the organisation representing the employees; or
  • directly with the employees if they have no representative organisation.

An arbitral tribunal will establish a social plan by way of an arbitral award if such negotiations fail.

2.8 Summary dismissals

Not applicable.

Both the employer and the managing director may terminate the employment relationship with immediate effect at any time for cause.

The requirements for a termination for cause are high. There must be a severe breach of contract and – except for very serious cases (e.g. theft) – a clear warning must be given, which is then ignored by the other party. The notice must be issued within two to three days of the party becoming aware of the serious breach allowing termination for cause.

2.9 Consequences if requirements are not met

Invalidity of revocation.

In case of ordinary dismissals:

  • in case of unfair dismissal, the notice remains valid, but the party abusively giving notice may be obliged by the court to pay an indemnity of up to six months salary.
  • The employer must not terminate the employment relationship during certain protected periods, as mentioned above under ‘Reasons for dismissal’. any notice given during these periods is void. If any of these circumstances apply after notice has been given, the notice remains valid but is extended accordingly.

Where a termination is made with immediate effect for cause but the requirements are not met (e.g. no serious breach, no or insufficient warning, late notice), the managing director is entitled to the salary for the period until his contract expires or could have been ordinarily terminated. In addition, the court may require the employer to pay an indemnity of up to six months salary.

In a case of mass dismissal, a notice of termination given without or before completion of the consultation process is deemed abusive. The notice of termination remains valid, but the employer is obliged to pay an indemnity to the managing director of a sum fixed by the court not exceeding two months salary.

2.10 Severance pay

No statutory severance pay.

Managing directors are entitled to a severance payment if they are over 50 years old and with 20 or more years service. If there is no contractual severance payment, an amount equal to between two and eight months salary will be awarded by the court. However, the employer’s contributions to the managing director’s pension fund over the entire period of service may be deducted from the severance payment. As a result, mandatory severance payments are rare.

2.11 Non-competition clauses

May be agreed in a performance agreement usually concluded with a member of a statutory body. The requirements set out in the Labour Code do not apply to managing directors unless explicitly agreed.

The parties to an employment agreement may agree on post-termination restrictive covenants prohibiting competitive activity by the former managing director. Such covenants are subject to a number of requirements and restrictions, including the following.

  1. A post-termination restriction on competition is only valid and enforceable if it is limited to a specific activity, a reasonable geographic area, and a reasonable period of time (i.e. maximum three years, unless there are exceptional reasons for a longer period).
  2. In addition, a non-competition restriction is only enforceable in those cases where the managing director has had access to the employer’s customers or to manufacturing or business secrets during the term of the employment, and the use of such knowledge could significantly damage the employer.
  3. The non-competition restriction has to be agreed upon in writing.
  4. The restriction does not apply if the employer terminates the employment relationship without the managing director having given him any good cause to do so, or if the managing director terminates it for good cause attributable to the employer.
  5. Where a managing director infringing the restriction is liable to pay a contractual penalty, the managing director may exempt himself from the prohibition by paying the penalty. however, he remains liable for any further damage. Only where expressly agreed upon in writing, the employer may insist that the managing director continue to observe the non-competition restriction in addition to seeking the agreed contractual penalty and any further damages.

2.12 Miscellaneous

Managing directors shall not enter into employment contracts with companies, unless the type of work performed under the employment contract is materially different from the role of managing director. Instead, they should conclude an agreement on the performance of the office of the managing director. Such an agreement will not be governed by Czech Labour Code. 

Not applicable.