In a recent decision, the Czech Supreme Court concluded that the variety of socioeconomic conditions across the various regions of the Czech Republic must not have any bearing on employers’ pay scales. The application and interpretation of Czech Labor Law are relatively settled disciplines, but a recent Supreme Court decision has now caused some uproar. Judgment 21 Cdo 3955/2018 of 20 July 2020 concerns the issue of fair compensation and has solid chances of becoming a regular nightmare for quite a few employers.
The case at hand concerned a claim brought by a driver against his employer. The employee was unwilling to accept that his colleagues in Prague are drawing a higher salary for what is essentially the same work and argued that the employer’s approach amounted to a violation of the principles of equal treatment and fair compensation.
The dispute eventually ended up before the Czech Supreme Court, which was primarily interested in whether the comparative criteria of compensation (such as the complexity of a given job, the level of responsibility or exertion associated with it, the burden of difficult working conditions, or the employee’s performance and expected work results) may also include external influences, such as the local socioeconomic conditions and the related higher or lower cost of living in the place in which the employee carries out work for the employer under the employment agreement. The court conceded that the socioeconomic conditions and the cost of living are not the same across the Czech Republic, but concluded that these external influences are not material enough to be of relevance in terms of the principle of equal compensation within the meaning of Sec. 110 of the Labor Code.
In so doing, the Supreme Court sent a strong message to all employers that the (basic) salary for the same work at the same employer should be the same everywhere.
If your company employs people in various regions across Czechia and you want to go sure that your arrangements with employees are fully compliant, we will gladly review your contracts and other documents and provide you with recommendations as to what changes could or should be made.
Supreme Court judgment 21 Cdo 3955/2018 of 20 July 2020
Czech Labor Code (Act No. 262/2006 Coll.)
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16th December 2020
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23rd February 2021