07
Thu, Nov
41 New Articles

Czech Republic: The Contractor's Liability for the Wage Claims of its Subcontractors in the Construction Industry

Czech Republic: The Contractor's Liability for the Wage Claims of its Subcontractors in the Construction Industry

Czech Republic
Tools
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

On 1 January 2024, an amendment to the Labour Code came into force that introduces final liability of the construction contractor for wage claims filed by third parties against its subcontractors. This includes wage claims from any employment agencies, up to the amount of the statutory minimum wage for each employee engaged in activities for the subcontractor.

The amendment is intended to remedy the incomplete implementation of EU regulations. However, this liability applies not only to the contractor but also to subcontractors, who are jointly and severally liable for the wage claims of employees. If a subcontractor's employee is not paid their wages, salary or remuneration under the agreement, the employee may, within three months of the due date of the wages, salary or remuneration, call upon the guarantor (the supplier and/or other subcontractors) to satisfy their wage claims up to the amount of the minimum wage.

If an employee who has been adversely impacted in this way makes a claim against the guarantor, the latter will be obliged to pay the claim within 10 days and to inform the employer for whom the employee carried out work. However, the guarantor will be obliged to make deductions and contributions to health and social insurance and the state employment policy, and to pay income tax advances or income tax on the wage claims being satisfied, in addition to the employee's wage claim. In view of the amount of information required for the correct calculation and disbursement of these payments, the employee is obliged to provide the guarantor with the necessary information with the request for payment.

Moreover, in addition to the expected particulars and the information on the debt, the employee's request must also contain the information necessary for the calculation of the advance payment of income tax or income tax on the wage claims to be satisfied. It must also contain the identification of the health insurer in whose favour the corresponding payment is made.

The construction contractor may avoid liability for wage claims if, before commencing performance, it secures confirmation from its subcontractors not older than three months of their non-payment of social security contributions and penalties and contributions to state employment policy and public health insurance. It must also secure confirmation that the subcontractor has not been fined more than CZK 100,000 for violating labour law regulations in the two months preceding the commencement of contractual performance.

Prior to commencing the performance of construction contracts, contractors should ideally inspect their subcontractors or request the aforementioned confirmations from them. Where appropriate, they should also require contractual security by means of appropriate subcontractor declarations and warranties, contractual penalties and their possible security. Conversely, the employer's liability for the wage claims of employees posted in the Czech Republic pursuant to Section 319(3) of the Labour Code as in force until 31 December 2023 has been abolished.

By Katerina Leheckova and Pavel Bederka, Attorneys at Law, Schoenherr Attorneys at Law

 

Czech Republic Knowledge Partner

PRK Partners, one of the leading Central European law firms, has been helping clients achieve their business objectives almost 30 years. Our team of lawyers, based in our Prague, Ostrava, and Bratislava offices, has a unique knowledge of Czech and Slovak law and of the business environment. Our lawyers studied at top law schools in the United States, United Kingdom, Switzerland and elsewhere. They also have experience working for leading international and domestic law firms in a number of jurisdictions. We speak your language, too. Our legal team is fluent in more than 15 languages, including all the key languages of the region.

PRK Partners has one of the most experienced legal teams on the market. We are consistently rated as one of the leading law firms in the region. We have received many significant honours and awards for our work. We represent the interests of international clients operating in the Czech Republic in an efficient way, combining local knowledge with an understanding of their global requirements in a business-friendly approach. We are one of the largest law firms in the Czech Republic and Slovakia. Our specialised teams of lawyers and tax advisors advise major global corporations as well as local companies. We provide comprehensive legal advice drawing on our profound knowledge of local law and markets.

Our legal advice delivers tangible results – as proven by our strong track record. We are the only Czech member firm of Lex Mundi, the world's leading network of independent law firms. As one of the leading law firms in the region, we have received many national and international awards, in some cases several years in a row. Honours include the Chambers Europe Award for Excellence, The Lawyer and Czech and Slovak Law Firm of the Year. Thanks to our close cooperation with leading international law firms and strong local players, we can serve clients in multiple jurisdictions around the globe. Our strong network means that we can meet your needs, wherever you do business.

PRK Partners has been repeatedly voted among the most socially responsible firms in the category of small and mid-sized firms and was awarded the bronze certificate at the annual TOP Responsible Firm of the Year Awards.

Our work is not only “business”: we have participated on a longstanding basis in a wide variety of pro bono projects and supported our partners from the non-profit sector (Kaplicky Centre Endowment Fund, Tereza Maxová Foundation, Czech Donors Forum, etc.).

Firm's website: www.prkpartners.com

Our Latest Issue