How government restrictions on business affect employee relations

On 14 March 2020, in response to the coronavirus outbreak, the Czech Government adopted a crisis measure that, with certain exceptions, banned retail sales and the provision of services at restaurants, sports facilities, wellness centres and other establishments. What options are available for employers that are forced to shut down their workplaces or are facing a drop in employee workload as a result of the measure?

Reassignment to a different job

If employers have a different job available for employees, they may agree with them on a temporary change of the agreed type of work, or modify their job descriptions. Reassignment to a different job without employee consent for the necessary period of time is also an option under Section 41(4) of the Labour Code. Such reassignment is allowed “where this is necessary to avert an extraordinary event, natural disaster or other imminent accident, or to mitigate the immediate consequences thereof, for the necessary period of time”. A different job may include the disinfection of the premises, etc.

What if no other work is available for employees?

If employers have no work available for employees for the duration of closure of the business premises, the following options provided by the Labour Code may be considered:

  • Directive to take holidays. However, such a directive must be issued at least 14 days ahead of time unless employees consent to a shorter notification period. The consent may be either general (e.g. expressed in the employment contract) or given for these specific circumstances. Where holidays are taken en masse, the consent of the trade union, if established, must be obtained and the duration of the holidays must not exceed two weeks. The taking of time off in lieu may be ordered as well. Conversely, unpaid leave may not be ordered unless the employee agrees with it.
  • Application of impediments to work on the employer’s part due to a limitation on the sale of products or demand for services, i.e. so-called “partial unemployment” under Section 209 of the Labour Code. In the event of partial unemployment, the employer may pay reduced wage compensation, but not less than 60% of the employee’s average earnings. The employer may not introduce partial unemployment immediately – they must first come to an agreement with the trade union, if established at the employer, or issue and publish an internal regulation on partial unemployment specifying the amount of wage compensation. Subject to the terms of the Employment Act (e.g. a compensation of at least 70 % of average earnings), a contribution may be received during partial unemployment; however, such a contribution is subject to strict formal requirements, i.e. agreement with the Labour Office and prior approval by the government.
  • For establishments shut down completely as a result of the current restrictions, another option is to regard the situation as quarantine under Section 347(4) of the Labour Code. In that case, employees would be entitled to wage compensation as in the case of sickness, i.e. compensation equal to 60% of average earnings for the first 14 days provided by the employer, followed by sickness benefits paid by the social security authority. The respective section of the Labour Code provides that “…quarantine shall also mean isolation and extraordinary measures in the event of an actual or impending epidemic pursuant to the Public Health Protection Act, including a prohibition or restriction of the contact of groups of individuals suspected of infection with other individuals and a prohibition of or duty to perform certain other activities in dealing with an epidemic or a danger of its occurrence, provided that such prohibitions, restrictions or duties prevent an employee from the performance of work”. Although this provision seems to fit the current situation very well, all formal requirements have not been met – the measure was issued in accordance with the Act on the Security of the Czech Republic rather than with the Public Health Protection Act, and it was adopted by the government rather than by the respective public health protection authority. Still, we believe that the application of the provision should not be ruled out – the Labour Code probably did not envisage a situation so serious and extensive that it would warrant the adoption of extraordinary measures by the government rather than by individual regional health protection offices, and that this would be done under the constitutional Act on the Security of the Czech Republic. At this point, however, the option to apply this provision cannot be clearly confirmed – except for municipalities whose isolation was ordered by regional public health protection offices (such as the towns in the Olomouc area).
  • If the lack of work is caused by a supply failure, this constitutes downtime, i.e. an impediment to work on the employer’s part pursuant to Section 207(a) of the Labour Code, which entitles employees to wage compensation equal to 80% of their average earnings.
  • The most expensive option for the employer is the application of other impediments to work on the employer’s part under Section 208 of the Labour Code, which entitle employees to full wage compensation. The application of such an impediment is at the employer’s discretion – for example, employers may resort to it if they decide to shut down their premises for preventive reasons that do not fall under any other category of impediments, and employees are unable to perform their work duties remotely from home.

What is the position of MoLSA?

The Ministry of Labour and Social Affairs (MoLSA) has issued a very sketchy statement on the matter. It says that if a workplace is closed or its operation limited due to the government crisis measure, and as a result, the employer does not assign work to employees, this constitutes a so-called other impediment to work on the employer’s part within the meaning of Section 208 of the Labour Code, for the duration of which employees are entitled to wage compensation equal to 100% of their average earnings.

We believe that although the Labour Code does not address the current situation expressly and unambiguously, the conclusion that employers forced to shut down their premises due to a government decision should pay their employees full wage compensation is extremely unfair to employers and should not hold up. But MoLSA’s opinion is different – at least for the time being. According to the latest information, the ministry should issue another statement on the situation very soon.

We also draw attention to the opinion (held, e.g., by the Association of Small and Medium-Sized Enterprises and Crafts of the Czech Republic) that employers should be classified into two categories. For employers whose premises are closed as a direct result of a particular crisis measure, the impediment defined by Section 208 of the Labour Code and full wage compensation should apply. For other employers (such as those supplying goods or services to the first category of employers), 60% wage compensations – under the partial unemployment regime – can be paid in the event of a drop in sales. However, we find such a classification formalistic and unfair to the first category of employers.

Compensation for losses from the state

In the event of crisis measures adopted in accordance with the Crisis Act, the state should compensate all resulting losses, which could also include the reimbursement of wage costs. Compensation claims, including specific reasons, should be made in writing with the relevant crisis management authority within six months from the time the employer learned about a loss (but no later than within five years since the loss occurred). Currently, it cannot be predicted how the state will address this duty. MoLSA is presently engaged in negations with representatives of employers regarding the extent of compensation for wage costs paid. In any case, we recommend keeping a file of all resulting losses, including any documentation proving the causality between the adopted measures and the occurrence of a loss, and duly claiming them within six months; otherwise the right will expire.

We are continuously monitoring the situation. If you have any questions, feel free to contact us.

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