Both the general courts and the Constitutional Court of the Czech Republic have repeatedly commented on the issue of the so-called “true concurrence”, which occurs when, in addition to a contract for the performance of an office with a member of a body of a commercial corporation, a contract with an identical subject of activity is also made, but it is made under the Labour Code and its regime.

The original approach of the general courts was to imply that the contract was null and void because an employment contract cannot be negotiated with a type of work that is essentially commercial management. This approach was subsequently reconsidered following the ruling of the Constitutional Court in Case No. I. ÚS 190/15-1 of 13 September 2016, according to which invalidity cannot be inferred without further justification. In the absence of an express prohibition, this constitutes a judicial shaping of the law by the general courts, which, insofar as it is shaped against the private interests of individuals, must be particularly convincingly argued. The general prohibition of “true concurrence” is inadmissible.

This was subsequently confirmed by the Constitutional Court in its ruling No. III. ÚS 410/23 of 17 January 2024 and found that “true concurrence” (or the making of a contract for the performance of a function subordinate to the regulation contained in the Labour Code) is not excluded a priori, however, it is necessary to assess all aspects of the given situation. The limits for entering into a so-called “managerial contract”, i.e. a contract for the performance of a function negotiated under the Labour Code regime, “are set by corporate law and general civil law (i.e. it is not dependent employment and there is a need to respect the balancing and protection mechanisms of corporate law, etc.).”

This ruling followed previous court proceedings in the same case, where the Constitutional Court had already ruled in this particular case and overturned the decisions of the general courts. The defective reasoning of the decisions constituted an interference with the complainant’s fundamental rights. At this point, the Constitutional Court required the general courts to give proper reasons for their conclusion and to summarise the basic principles to be taken into account in the reasoning and assessment of the case. There was therefore no error in the assessment of the merits of the case by the general courts. In this ruling, the Constitutional Court confirmed both the conclusions and the reasoning of the decisions of the general courts, which now took into account the previous ruling of the Constitutional Court in this case.

The Constitutional Court drew attention, inter alia, to the principle of autonomy of will and summarized that although this principle is one of the basic features of the current Civil Code and modern legislation, there are limits to it. In the case of a person’s position as a statutory body, the limits of autonomy of will are set in certain aspects, in particular because of the broad decision-making powers, in order to protect, inter alia, shareholders, members or even creditors of the company. Therefore, conditioning the approval of the contract on the approval of the company’s supreme body is not contrary to the principle of autonomy of the will.

Furthermore, the Constitutional Court also dealt with the assertion that the contract was made in good faith and that it must therefore be respected and its validity inferred. Even this argument did not hold up to the Constitutional Court’s reference to the fact that it is necessary (in such a situation) to follow the legal regulation in force at the time of the legal act and that good faith is weakened here also in view of the fact that the statutory body must act with due care in its position. Entering into a contract of office in contravention of the terms of corporate law is clearly not compliance with this standard.

With this ruling, the Constitutional Court concluded that “true concurrence” is not always necessarily excluded, however, it is necessary to observe all the circumstances of the cases in question and if there is such concurrence, then it is necessary to consider the “Management Contract” as a special supplement to the contract on the performance of the duties of a member of the statutory body. Such a contract may be subject to the Labour Code regime, but with the limits imposed by corporate law and general civil law. A “management contract” (or, as the case may be, an amendment to a contract of office) is therefore, regardless of its nature, subject to the approval of the company’s supreme body in order to become effective.

Apart from the mere possibility of the existence of “true concurrence”, however, the case law remains unresolved as to the effects and consequences of entering into a “management contract”, or even a normal contract of office, which is, however, subject to the Labour Code in relation to the rights and obligations contained therein, i.e. the entitlement to and amount of compensation pay, the notice period or the very possibility of giving notice. If you are interested in a specific regulation of the rights and obligations arising from a contract of office, then this regulation should be precisely and explicitly included in the contract itself with the definition of its limits, but the contract itself should not be subject to the regulation contained in the Labour Code.