On 14 December 2023, the President signed a bill amending Act No. 435/2004 Coll., on Employment, as amended, and other related acts. The amendment is thus likely to enter into force as early as 1 January 2024.

One of the significant changes that the expected amendment will bring to the Labour Code is the introduction of mandatory liability of contractors for wage claims of employees of subcontractors in the construction sector. This is a change that was only included in the bill as an amendment and therefore could not have been mentioned in the explanatory memorandum to the bill.

STATUTORY GUARANTORS

The liability obligation will apply exclusively to construction entrepreneurs within the meaning of the Construction Act, i.e. persons authorised under the Trade Licensing Act to perform construction or assembly work.

 In practice, the amendment will affect those construction entrepreneurs, who provide construction activities through subcontractors and their employees.  The law explicitly includes employment agencies that temporarily assign employees to the construction entrepreneur for the performance of construction activities among subcontractors. 

In the case of a contractual chain of several subcontractors, the joint and several guarantors are

• the construction contractor, who is a contractual partner of the subcontractor concerned, and
• the construction entrepreneur at the top of the contracting chain.

INFORMATION OBLIGATION OF THE SUBCONTRACTOR/EMPLOYER

The employer is obliged to inform the employee about the persons of the guarantors, their changes and the conditions for exercising rights against the guarantor before starting work on the contract. This obligation must be fulfilled with respect to existing employees within 1 month from the date of entry into force of the bill, i.e. probably by 1 February 2024.

OBLIGATIONS AND RIGHTS OF THE GUARANTOR

Construction contractors will now be liable for the wage claims (i.e. wages, salaries and remuneration from a performance or employment agreement) of their subcontractors’ employees up to the minimum wage.  The guarantor shall be obliged to satisfy the employee’s wage claims within 10 days of receipt of the employee’s written demand.

Along with the liability for wage claims, the guarantor is also obliged to make all mandatory deductions and levies, including in particular the deduction and payment of advance income tax and health insurance.

Once the amounts have been paid to the individual employees and deductions have been made, the guarantor is obliged to inform the employer/subcontractor and, where applicable, all other guarantors of these amounts.

The guarantor shall be entitled to reimbursement from the subcontractor for the performance it has provided to the employee on its behalf.

WAGE CLAIM BY THE EMPLOYEE

The employee has the right to apply to the guarantor if the employer has not paid the wages, salary or remuneration under the agreement by the end of the payment period. To exercise a wage claim against the guarantor, the employee must deliver a written entreaty to the guarantor containing, among other things, identification of the employee and employer and details of the wage claim:

• the type of work performed;
• the period of time, for which the employee is claiming wages, and the extent of work performed as part of the performance for the guarantor;
• information on the expiry of the payroll entitlement period;
• the requested method of payment, including relevant details (e.g. account number);
• the information needed to calculate the advance income tax payment and the designation of the health insurance company to make the payment.

If the employee fails to call the guarantor within 3 months of the expiration of the wage claim period, his claim against the guarantor shall lapse.

EXEMPTION FROM THE GUARANTEE OBLIGATION

The construction contractor shall not be liable for wage claims if it receives confirmation from the subcontractor at the commencement of the contractual performance that

• the subcontractor has no arrears of social security contributions and penalties, state employment policy contributions and public health insurance not older than 3 months;
• the subcontractor has not been fined more than CZK 100,000 in the previous 12 months for violation of obligations arising from labour law regulations.

In practice, it can be expected that these confirmations will soon become a routine part of the contract negotiations between the construction contractor and its subcontractor. We will be happy to help you prepare a sample confirmation.