Collective Bargaining Agreements and Trade Unions

What is a collective agreement and when must you conclude one?

The law does not require you to conclude a collective agreement. However, if a trade union that meets the statutory conditions operates at your workplace and submits a written proposal for a collective agreement, you are obliged to negotiate with it. This means you must respond in writing within seven working days at the latest and address the proposals you do not accept.

The lawyers at the ARROWS law firm can help you assess whether the trade unions at your company are operating legally and what your obligations are in collective bargaining. For an immediate solution to your situation, write to us at consultation@arws.cz. 

The content of a collective agreement is not stipulated by law, but it must not curtail employees' rights or impose new obligations on them. It must always be in compliance with legal regulations. The agreement must be concluded in writing and signed by both parties on the same document; otherwise, it is considered void.

What are your obligations towards a trade union?

If trade unions operate at your company, the law imposes three basic categories of obligations on you: the duty to inform, the duty to consult, and the duty to obtain consent.

The duty to inform

The employer must inform the trade union of a range of matters in a timely and appropriate manner. These include, in particular, the employer's economic and financial situation and its likely development, the status and structure of the workforce, wage trends and average wages, fundamental questions about working conditions, and occupational health and safety.

You must provide the information in such a way that the trade union can assess the matter and, if necessary, prepare for consultation. A mere formal notification without the necessary details is not sufficient.

The duty to consult

Consultation is a more intensive form of cooperation than merely informing. The employer is obliged to discuss certain measures with the trade union before implementing them and to take its opinions into account. The trade union has the right to receive a reasoned response to its opinion.

For example, you must consult on transferring an employee to a job different from that specified in their employment contract if the employee disagrees, on giving notice of termination, or on immediate termination of employment. Failure to comply with the duty to consult does not in itself render the legal act invalid, but it can lead to penalties from the labour inspectorate.

Consent or agreement

In some cases, the law requires the prior consent of the trade union or an agreement with it. A typical example is the issuance of work rules or the scheduling of annual leave. Without the union's consent, these measures cannot be validly implemented.

How does collective bargaining work?

Collective bargaining is a formal process that begins with the submission of a written proposal to conclude a collective agreement. The proposal can be submitted by either the trade union or the employer.

The party that receives the proposal is obliged to respond to it in writing within seven working days, unless another period is agreed upon. In the response, it must address the proposals it has not accepted. The parties are obliged to negotiate with each other and provide the necessary cooperation.

If you have a fixed-term collective agreement or have agreed on the possibility of amending it by a certain date, you must start negotiations for a new collective agreement at least 60 days before the current agreement expires. This deadline is binding on both parties.

If more than one trade union operates at your company, the situation is more complex. The employer is obliged to negotiate with all trade unions operating at its workplace. The trade unions should agree on a joint approach. If they do not agree within 30 days, the employer may conclude a collective agreement with the trade union that has the largest number of members in employment with the employer.

Even in this case, however, the employer must discuss the proposed collective agreement with the other trade unions within seven days of the start of negotiations. The final draft of the collective agreement must be discussed with the other trade unions before it is concluded.

In practice, these procedural steps often lead to disputes, as non-compliance can result in the invalidity of the collective agreement or penalties. The ARROWS law firm provides comprehensive legal advice on collective bargaining, representation in all negotiations with trade unions, and preparation of documents that meet legal requirements. For an immediate solution to your situation, write to us at consultation@arws.cz. 

What to do when collective bargaining leads to a dispute?

If the employer and the trade union cannot agree on concluding a collective agreement, the law provides a procedure for resolving disputes. The first step is mediation. Either party may propose to initiate proceedings before a mediator.

The mediator tries to find a solution that is acceptable to both parties. If they still cannot agree during mediation, the dispute may be submitted to an arbitrator. The arbitrator's award has the nature of a collective agreement and is binding on both parties.

The last resort is a strike. A strike is only permitted in a dispute over the conclusion of a collective agreement and must be called by the trade union after consultation with its members. The employer has the right to a lockout, i.e., to shut down operations in response to a strike, if the legal conditions are met.

These procedures are regulated by the Collective Bargaining Act, and their incorrect application can lead to further legal complications. The ARROWS law firm provides representation in proceedings before mediators and arbitrators, legal advice in the event of a threatened strike, and defence in court disputes. Do not hesitate to contact our firm at consultation@arws.cz. 

Collective redundancies and the role of trade unions

Collective redundancy is a situation where an employer terminates the employment of a certain number of employees for organisational reasons within a period of 30 calendar days. The definition of collective redundancy depends on the total number of employees at the employer and is precisely defined in the Czech Labour Code.

If a trade union or works council operates at your company, you are obliged to inform them in writing of your intention to carry out collective redundancies at least 30 days in advance. The information must include the reasons for the intended measures, the total number and structure of the employees concerned, the intended time period for the redundancies, and the criteria for selecting the employees.

After the notification, you must start negotiations with the trade union. The aim of the negotiations is to reach an agreement on measures aimed at preventing or limiting collective redundancies and mitigating their adverse consequences for employees.

At the same time, you are obliged to inform the regional branch of the Labour Office in writing about the intended measures. After concluding negotiations with the trade unions, you must deliver a written report on your decision and the results of the negotiations to the Labour Office.

If no trade union or works council operates at your company, you are obliged to fulfil all these obligations towards each employee affected by the collective redundancy. This means individual information and negotiation with each of them.

Protection of trade union officials – what to watch out for

Members of the trade union body authorised to act on behalf of the trade union at the employer's premises have enhanced protection against dismissal. This protection applies during their term of office and for one year after it ends.

The employer's notice of termination or immediate termination of employment of such an employee requires the prior consent of the trade union. If the trade union refuses to give its consent and the employer nevertheless gives notice, the termination is invalid.

By law, consent is also deemed to have been given if the trade union does not refuse to give consent in writing within 15 days of being requested to do so by the employer. Thus, the silence of the trade union after the 15-day period has elapsed means consent.

In practice, however, it often happens that the employer does not know that the employee they want to dismiss is a member of a trade union body. For the sake of legal certainty, the trade union should notify the employer of the composition of its body, including any changes. If it fails to do so and the employer does not request consent because it was unaware of the employee's membership in the union body, a lawsuit may arise over the invalidity of the dismissal.

In court proceedings, it will be up to the employer to prove that the dismissal was for lawful reasons and in a lawful manner, and not because the employee is a member of the trade union. However, the court may conclude that the dismissal is valid if it cannot be fairly required that the employer continue to employ the employee.

If you have any doubts as to whether an employee you intend to dismiss is a trade union official, you should verify this with the trade union. The ARROWS law firm provides a review of documents before dismissal, representation in negotiations with the trade union, and defence in lawsuits concerning the invalidity of dismissals. Contact us at consultation@arws.cz for a tailored legal solution.

Penalties and inspections from the labour inspectorate

The State Labour Inspection Office, through its regional inspectorates, checks compliance with labour law regulations, including in the area of collective bargaining and cooperation with trade unions.

If the labour inspectorate finds that you have breached your obligations towards trade unions, it can impose a fine. The amount of the fine depends on the seriousness of the breach. For general offences, the fine can be up to CZK 200,000, and from 2024, up to CZK 1,000,000 for certain offences.

For breaches of obligations in the creation, amendment, or termination of an employment relationship, the fine can be up to CZK 2,000,000. For the most serious offences, such as allowing illegal work or failing to have a written employment contract, the fine can reach up to CZK 10,000,000.

In addition to the fine, the labour inspectorate may also order you to pay the costs of the proceedings, which amount to CZK 2,500. You can appeal against the inspectorate's decision within 15 days of its delivery.

In practice, the labour inspectorate most often penalises failure to comply with the duty to inform or consult with trade unions, breaches of the collective redundancy procedure, or the unlawful dismissal of a trade union official without the union's consent.

The ARROWS law firm deals with this agenda daily, which allows us to significantly save clients' time and minimise the risk of errors. It is worth noting that ARROWS is insured for damages up to CZK 500,000,000. It is therefore safer for the client to have the matter handled professionally. For an immediate solution to your situation, write to us at consultation@arws.cz. 

Can a collective agreement also bring benefits?

A collective agreement does not have to be just an administrative burden for the employer. If set up correctly, it can also bring tangible benefits to the company.

A well-drafted collective agreement can replace individual negotiations with employees about wage and working conditions. This saves the HR department's time and ensures uniform rules for all employees.

A collective agreement can also stabilise the workforce. Employees have clearly defined rules for remuneration, benefits, and working conditions, which reduces the scope for ambiguity and conflict. Companies with a collective agreement have, on average, lower employee turnover.

Another benefit is the ability to use the collective agreement as a marketing tool when recruiting new employees. A company with a functioning collective agreement signals that it has a stable and professional work environment with transparent rules.

For employers operating in sectors with a traditionally strong trade union presence, a collective agreement is also a tool to minimise the risk of labour disputes and strikes. Dialogue with trade unions within the framework of collective bargaining can prevent situations from escalating.

The ARROWS law firm provides comprehensive legal advice on the preparation and negotiation of collective agreements that take into account not only legal requirements but also the business interests and strategy of the employer. Our portfolio includes more than 150 joint-stock companies, 250 limited liability companies, and 50 municipalities and regions. We pride ourselves on speed and high quality. Do not hesitate to contact our firm at consultation@arws.cz. 

International scope and foreign employees

If your company employs workers from abroad or operates in an international environment, the issue of trade unions and collective agreements takes on another dimension. In some countries, employee representation is mandatory and has a different legal framework than in the Czech Republic.

The ARROWS law firm also provides legal services outside the Czech Republic, thanks to its ARROWS International network built over ten years, and handles cases with an international element on a near-daily basis. If you have foreign branches or are planning to expand abroad, our lawyers can help you navigate local labour law regulations, including the role of trade unions and collective bargaining.

In some countries, for example, the works council (similar to trade unions) has the right to participate in major company decisions, such as organisational changes, mergers, or dismissals. Failure to respect their rights can lead to these actions being blocked or to heavy fines.

If you are dealing with international labour law issues, contact us at consultation@arws.cz for a tailored legal solution.