Agency employment facing significant changes
The Ministry of Labour and Social Affairs has published a draft amendment to the Employment Act and the Labour Code, introducing new conditions for employment agencies and their employees. The amendment aims to increase the protection of agency employees, especially in the event of their employer's insolvency. The amendment also introduces several stricter requirements.
One of the main changes is the abolition of compulsory insurance for employment agencies against bankruptcy. According to the MLSA, the insurance did not serve its purpose as it did not distribute any insurance benefits. After the coronavirus crisis, some insurance companies also refused to enter into such insurance contracts. The amendment proposes that if an employment agency goes bankrupt, the wages of its employees should be paid in the same way as is the case for standard employers: i.e., under the Act on the Protection of Employees in the Event of Insolvency of Employers.
Another fundamental change is the modification of the conditions concerning the period for which the employee is assigned to the user, i.e., the company for which the agency employees actually perform work. Employment agencies and users will have to ensure that the temporary assignment of an employee to work for the same employer does not exceed three years. Any shorter periods for which the employee has been assigned to the user on a temporary basis will count towards this period unless more than three years have elapsed since the last temporary assignment.
The amendment also prohibits the relatively common practice of agencies hiring their employees for a fixed period of time, namely for the period of the temporary assignment to the user. Nowadays, the employment of agency workers may end overnight with the termination of the agency's cooperation with the user, which is what the amendment intends to avoid. Violations of these obligations may result in fines of up to CZK 1 million.
The amendment also tightens the conditions for granting employment agency permits
From now on, the employment agency's expert guarantor can only be someone who gained their experience in the last ten years immediately preceding the date of submission of the application for permit. To be granted a permit, the applicant must be debt-free and in the last three years have not committed an offence for which the permit could be revoked. The mandatory security deposit shall also increase from CZK 500,000 to CZK 750,000.
On the other hand, the new regulation will be more favourable to employment agencies as regards the grounds for a withdrawal of the permit. Under the current wording of the law, the authorities are de facto obliged to revoke a permit for any violation of the Employment Act; under the new law, this will only be an option. The authorities will thus be able to assess whether revocation is appropriate considering the severity of the agency's transgression.
The MLSA proposes that the law come into effect at the beginning of January 2024. By preparing for the changes well in advance, agencies can avoid any possible sanctions or the unexpected rejection of an application for an agency employment permit.