Unpaid Leave: A Risk for Employers?

Factual Background of the Case

The case described occurred during the so-called COVID era, when an employer had almost no work for its employee (a driver). To avoid terminating the employment relationship, they agreed (verbally) to grant unpaid leave (i.e., without wage compensation), during which time the driver could, and did, work for another employer in the interim. Subsequently, however, this employee initiated a lawsuit, claiming that the employer had thus transferred its business risk to him, that the verbal agreement on unpaid leave was therefore invalid, and that the company should retroactively pay him wage compensation.

The Court's Legal Conclusions

The case went all the way to the Supreme Court, which (rather surprisingly) concluded that in this instance, the agreement on unpaid leave could not have been concluded at all, because there were obstacles on the company's side (the company could not assign work to the employee due to the pandemic), and the employee should therefore have been entitled to wage compensation under the Czech Labour Code.

For those interested, key passages are quoted below:

"Although the Labour Code does not explicitly regulate the employer's option to grant an employee (at their request) time off from work when the employee is prevented from working by another (personal) obstacle other than those for which the law requires the employer to excuse the employee's absence from work or to grant the employee time off, the employer may, in accordance with the principle 'what is not forbidden is permitted,' grant the employee time off (without wage or salary compensation, or even with wage or salary compensation) based on an agreement with the employee [...].

However, the situation is different if the employee cannot perform work due to obstacles on the part of the employer (Section 207 et seq. of the Labour Code) and is therefore entitled to wage or salary compensation.

Under the provisions of Section 4a(4) of the Labour Code, if an employee waives a right granted to them by this Act, a collective agreement, or an internal regulation, such a waiver shall be disregarded. In view of the above, it must therefore be concluded that an agreement by which an employee releases the employer from the obligation to provide them with wage or salary compensation for a period in which the employee cannot perform work due to obstacles on the part of the employer, and for which they are entitled to wage or salary compensation for this reason, shall be disregarded.

What to Take Away from This Case

In light of these Supreme Court conclusions, it is strongly recommended that all employers, if they wish to use unpaid leave, always conclude the agreement in writing and explicitly state the reasons for which the agreement is being made, whereby obstacles to work on the company's side cannot be such a reason, as explained above. As with any other legal document, it is also advisable to have the unpaid leave agreement prepared by a corporate lawyer or an external attorney. Our specialists in Czech employment law will be happy to assist you with this.

Are you interested in employment law news for 2025? JUDr. Kořenářová has prepared a webinar for you. 

Why Choose Us?

Our services are used by companies of all sizes because they know we provide comprehensive solutions in the field of employment law. For example:

• Tailor-made Employment Documentation: We will prepare employment contracts, internal policies, and other key documents tailored precisely to your company's needs.

• Dispute and Legal Complication Prevention: We will help you prevent disputes and reduce the risks of legal problems in the workplace.

• Clarity Without Legal Jargon: We will explain everything to you simply and clearly, without unnecessary complicated terminology.

We know that deciding on legal services is not always easy. That's why we want to show you how we work.