Collective redundancies

What are collective redundancies and when is the regime activated

Under Section 62 of the Czech Labour Code, collective redundancy is defined as the termination of employment relationships within a 30-calendar-day period based on notices given by the employer for reasons specified in Section 52(a) to (c). The reasons must be organisational – i.e., the winding-up of the employer or a part thereof, the relocation of the employer or a part thereof, or an employee becoming redundant as a result of an organisational change.

The decisive factor is the number of employees being made redundant in relation to the size of your company. Collective redundancies are activated if you give notice of termination within a 30-day period to at least:

• 10 employees at an employer with 20–100 employees,

• 10% of employees at an employer with 101–300 employees,

• 30 employees at an employer with more than 300 employees.

For employers with fewer than 20 employees, the collective redundancy regime does not apply, and the rules for individual dismissals are followed.

Time aspect and inclusion of agreements

Many employers try to circumvent the collective redundancy regime by concluding termination agreements with some employees instead of giving notice. However, the Labour Code anticipates this.

If the employment of at least 5 employees is terminated by notice within the decisive 30-calendar-day period, employees with whom the employer has terminated their employment by agreement for the same organisational reasons are also included in the total count.

In practice, this means that even if you give notice to only 5 people and "agree" with another 5 on their departure due to redundancy (in a company with 80 employees), you are already in the collective redundancy regime. The lawyers at ARROWS law firm deal with this issue regularly and point out that the substantive reason for termination is decisive, not just the form.

Qualification of organisational reasons

Here too lies a risk. The term organisational change means a decision by the employer (or the competent body) to change its tasks, technical equipment, reduce the number of employees to increase efficiency, or other organisational changes.

The employer must be able to prove that there is a causal link between the decision on the change and the redundancy of a specific employee. If it were to turn out that someone else was immediately hired for the same job to replace the dismissed employee, it would not be a case of redundancy, and the notice of termination would be invalid.

Conditions for activating collective redundancies

The collective redundancy regime is not activated if you employ fewer than 20 people. The threshold number of employees is assessed as of the day preceding the day on which the first notice of termination was given. All employees in an employment relationship are included in the total number of employees.

Calculating the percentage of employees in medium and large enterprises

For companies with 101–300 employees, the criterion is calculated as 10% of the total number of employees. For example, if you have 250 employees, you must make at least 25 people redundant within a 30-day period for it to be considered a collective redundancy. For companies with over 300 employees, the criterion is absolute – it must be a minimum of 30 people being made redundant.

Identification of organisational reasons

Only terminations of employment for the reasons set out in Section 52(a) to (c) of the Labour Code are counted towards the collective redundancy total. Other reasons for dismissal are not included in this category.

If, during the given period, you were to give notice to an employee for a breach of work discipline (Section 52(g)) or for health reasons unrelated to work (Section 52(e)), this employee would not be counted towards the collective redundancy quotas.

Legal procedures: What an employer must do and when

Collective redundancy is a process with strictly defined steps. If you fail to comply with any of the obligations, you risk a fine from the labour inspectorate or an extension of the duration of the employment relationships.

Step 1: Informing representatives or individual employees

You must take this step in a demonstrable and written form at least 30 days before you give notice to the first employee. If a trade union or works council operates at your company, you inform them. If not, you must inform each affected employee directly.

According to Section 62(2) of the Labour Code, the information must include:

• The reasons for the collective redundancies,

• The number and professional structure of the employees to be made redundant,

• The number and professional structure of all employees,

• The period over which the collective redundancies are to take place,

• The criteria proposed for the selection of employees to be made redundant,

• Severance pay and, where applicable, other employee rights.

This information must be in writing and delivered. The best way is personal delivery against a signature or delivery to the employee's data box (if they have one set up and have not prohibited delivery), or by registered mail.

Negotiations with employee representatives

The employer is obliged to discuss with the trade union or works council (or with individual employees if there are no representatives) measures to mitigate the adverse consequences of the collective redundancies (e.g., the possibility of transfer to another job).

Important: Even if you do not reach an agreement, you have fulfilled the obligation to consult by initiating and conducting the negotiations.

Step 2: Notifying the Labour Office

You must simultaneously deliver a written notification with the same content as for the employees/trade unions to the regional branch of the Labour Office competent according to the employer's place of business.

Step 3: Issuing notices of termination

Only after the 30-day period from informing the employee representatives (or the employees themselves) has expired can you start issuing the notices of termination. The notice must be in writing and must specify the reason in such a way that it cannot be confused with another.

Step 4: Sending the final written report to the Labour Office

The employer is obliged to demonstrably deliver a written report on its decision on collective redundancies and the results of negotiations with the trade union or works council to the relevant regional branch of the Labour Office. In the report, you will state the total number and professional structure of the employees affected by the redundancies. You must also deliver one copy of the report to the employee representatives.

Key rule: The employment of an employee subject to collective redundancy will be terminated by notice no earlier than 30 days after the delivery of this written report to the Labour Office, unless the employee declares that they do not insist on this extension.

If you are late in delivering the report (e.g., you send it only a week before the end of the standard notice period), the employment relationship is automatically extended to ensure that the 30-day period from delivery is observed. The employee is entitled to wage compensation for this period.

Severance pay: Amount, calculation, and payment

Employees whose employment is terminated by notice or agreement for organisational reasons (Section 52(a) to (c)) are entitled to severance pay by law.

Amount of severance pay according to the length of employment

The minimum amount of severance pay is governed by Section 67 of the Labour Code:

• Less than 1 year of employment: one month's average earnings.

• 1 year to less than 2 years: two months' average earnings.

• At least 2 years: three months' average earnings.

A collective agreement or internal regulation may provide for higher severance pay.

How the average earnings are calculated

For the purposes of severance pay, the average monthly earnings are used. This is determined from the gross wage credited for payment in the reference period and the hours worked in the reference period. The reference period is the preceding calendar quarter.

Deadline and method of payment

The employer pays the severance pay after the end of the employment relationship on the next payday designated for wage payment, unless the employer and employee agree on payment on the day of termination of employment or on a later payment date.

A practical detail: If an employee starts working for the same employer again (in an employment relationship) before the expiry of the period corresponding to the amount of severance pay provided, they are obliged to return a proportional part of the severance pay. This also applies to work based on agreements (DPP, DPČ).

Risks and penalties for non-compliance

Financial penalties

Under the Employment Act, the labour inspection authority may impose a fine of up to CZK 500,000 for a breach of obligations related to collective redundancies (e.g., failure to deliver a report to the Labour Office). If the employer's conduct constitutes other administrative offences under the Labour Inspection Act, the fines can reach up to CZK 1 million.

Invalidity of terminations and litigation

A much greater financial risk than an administrative fine is a lawsuit for invalidity of termination. If a court finds the termination to be invalid (e.g., due to a fictitious organisational reason or discriminatory selection), the employment relationship continues, and the employer is obliged to pay the employee wage compensation for the entire duration of the dispute, which can last for several years.

Extension of the employment relationship

If you do not deliver the final report to the Labour Office on time, the employment relationship is extended by law. This means extra wage costs that you had not planned for.

Employee protection: Special situations

Pregnant women and women on maternity leave

The Labour Code provides special protection for certain groups of employees. It is prohibited to give notice of termination for redundancy (Section 52(c)) to pregnant employees, employees on maternity leave, or employees on parental leave.

Exception: The prohibition of notice does not apply if the employer or a part thereof is being wound up (Section 52(a)). In the case of collective redundancies due to the winding-up of the employer, a pregnant employee can therefore be given notice of termination. However, if it is "only" a matter of downsizing (redundancy), a pregnant woman is absolutely protected and cannot be given notice.

If the employer is merely relocating (Section 52(b)), the prohibition of notice applies to pregnant women and employees on maternity/parental leave, except in cases where the employer is relocating outside the place of work of these employees and they do not agree to the transfer.

Employees on sick leave

The protection period also applies to employees who are certified as temporarily unfit for work (unless they caused the incapacity intentionally or while intoxicated). They cannot be given notice of termination for redundancy during their illness.

If the notice was given before the start of the illness, the protection period is not included in the notice period, unless the employee states that they do not insist on an extension. Here too, the exception for the winding-up of the employer applies – in such a case, the protection does not apply.

Members of trade union bodies

Members of a trade union body operating at the employer's premises may only be given notice of termination during their term of office and for a period of 1 year after its end with the prior consent of the trade union. If consent is refused, the notice of termination is invalid, unless a court in a dispute finds that the employer cannot be fairly required to continue to employ the employee.

Employee selection tactics: How to avoid discrimination

The Labour Code and the Anti-Discrimination Act prohibit direct and indirect discrimination. An employer may not select employees for dismissal on the basis of age, sex, disability, race, religion, or sexual orientation.

Objective criteria

To select redundant employees, you must choose objective criteria that are related to the company's needs. Examples of legitimate criteria:

• Work results and performance,

• Qualifications and skills (e.g., language skills, specialisation),

• Length of experience in the field (be careful not to confuse this with age),

• Versatility of the employee (ability to cover multiple positions).

Criteria that are risky

Age: Dismissing exclusively employees of retirement age or, conversely, young people without families may be considered age discrimination.

Family situation: Criteria such as "single mothers" or "mothers with children" are inadmissible if they would lead to their disadvantage. On the other hand, taking into account the social situation in favour of the employee (the so-called social aspect) is possible, but it must not be the sole criterion at the expense of expertise if the employer needs expertise.

Documenting the process

It is essential to have written documentation of why employee A was chosen and not employee B. If it goes to court, the burden of proof (in the case of alleged discrimination) may shift to the employer, who must prove that they did "not discriminate".

Special situations: Workers on probation and temporary employees

Probationary period

The employment of employees on probation can be terminated in writing for any reason or without giving a reason (Section 66 of the Labour Code). However, these employees are also included in the total number of employees relevant for the collective redundancy limits. Note: An employer may not terminate an employment relationship during the probationary period within the first 14 calendar days of an employee's temporary incapacity for work.

Temporary and agency employees

Agency workers are not employees of the user, but of the employment agency. They are not counted towards the collective redundancy quotas at the user's company. However, if the assignment of a larger number of agency workers is ending, the user must discuss this with the trade unions.

What actually happens in practice

The lawyers at ARROWS law firm deal with this issue on a daily basis. Common mistakes we handle:

• The employer forgets to include workers on agreements (DPP/DPČ) in the total number of employees to determine the size of the company, or forgets to include "termination agreements" in the number of redundancies.

• The final report is sent to the Labour Office by "ordinary" mail and there is no proof of delivery, or it is delivered to the wrong branch.

• The employer does not respect the prohibition of notice for a pregnant employee during a reorganisation (mistakenly believing that collective redundancy cancels all protection).

ARROWS law firm can handle this entire agenda for you. With liability insurance up to tens or hundreds of millions of crowns, you can be sure that your risks are covered.

European aspects and international work teams

The collective redundancy regime is harmonised in the EU by Council Directive 98/59/EC. This means that similar rules apply in other member states, but the time limits and thresholds may differ.

If you are managing redundancies in an international group, do not assume that "it's the same in Germany". Local law must always be applied. Thanks to its network of partners, ARROWS International can also ensure coordination abroad.

Summary table of procedures and deadlines

Conclusion

Collective redundancy is a formalised process where improvisation does not pay off. A mistake in calculating deadlines or an omission of the information duty can lead to the invalidity of terminations and the need to pay wage compensation for months when employees were not working.

The lawyers at ARROWS law firm have experience in handling these situations for clients of all sizes. If you do not want to take risks, entrust this agenda to experts. Write to us at consultation@arws.cz and arrange a consultation.