Case law
16 February 2018

Discriminatory severance pay

According to the Supreme Court, a collective bargaining agreement’s provision making the payment of severance pay above the statutory amount conditional upon an employee not yet being entitled to old-age pension is contrary to law.

Iva Baranová
Linda Kolaříková

The defendant (a company) undertook in its collective bargaining agreement to pay severance pay equalling 14 average monthly earnings to its employees whose employment had been terminated for organisational reasons, who had worked with the company for more than 30 years, and were not yet entitled to old-age pension. The case before the Supreme Court involved an employee who because of not meeting the last one of the described conditions was only paid out severance pay in the statutory amount of trice his average monthly earnings. 

Both lower degree courts dismissed the plaintiff’s lawsuit seeking severance pay equal to the amount awarded by the collective bargaining agreement (despite being entitled to the old-age pensions). However, in decision No. 21 Cdo 5763/2015, the Supreme Court ruled that the condition of not being entitled to old-age pension in the collective bargaining agreement is unlawful; specifically, it is in breach of the anti-discriminatory rules.

The Supreme Court argued that such discriminatory conduct is not justifiable and that the unequal treatment of employees cannot be considered proportional. In its opinion, old-age pension (or another financial security, for instance the employee’s own property), should have no effect on the severance pay, which is a one-off compensation for the loss of employment by no fault of the employee. The court also concluded that severance pay provided above the statutory limit may be seen as a kind of a reward for the years of work of employees who, over the time of their employment, contributed to the employer’s good financial results. Denying such benefit to long-term employees solely on the grounds that they are already entitled to old-age pension goes against this purpose.

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