Reorganizace firmy z pohledu pracovního práva

What an organizational change actually means from a legal perspective

The Czech Labour Code distinguishes between three basic types of organizational changes that can lead to termination of employment by notice:

Termination of the employer or a part thereof – if a company ceases its activities, enters into liquidation, or closes a specific branch or department. It is crucial here to correctly define what is considered a "part of the employer," as the mere abolition of a job position generally does not fall into this category.

Relocation of the employer – if the company or a part of it moves outside the place of work agreed in the employment contract. Here, too, a detailed assessment is necessary to determine whether it is a relocation of an entire part of the employer or just a change within the organization.

Redundancy of an employee – arises from a change in the employer's tasks, technical equipment, a reduction in the number of employees to increase work efficiency, or other organizational changes. This third case is the most common in practice and also the most complex to prove.

ARROWS lawyers routinely handle organizational changes for medium and large companies. If you are planning a restructuring, contact us, and we will guide you through the entire process.

Who can decide on an organizational change and how to do it correctly

A decision on an organizational change is not just an internal memo for employees. It is a legally binding act that must be adopted by the competent body of the employer according to established rules.

For a legal entity (s.r.o. - LLC, a.s. - JSC), the statutory body – i.e., the executive director, the board of directors, or another statutory representative – is primarily authorized. This is the default rule that always applies. However, this authority can be delegated to other persons, such as a director, HR manager, or department head.

But here lies the first catch – the delegation must be proper and sufficiently specific. A general mention in the job description that a manager "manages human resources" is not enough. The authorization must stem either from a special power of attorney or from an internal regulation (organizational rules, directive) that explicitly includes the authority to adopt organizational changes and abolish job positions.

The Supreme Court has addressed this issue and emphasized that if the authorization is not sufficiently clear, the organizational change may subsequently be considered as not having been adopted by the competent body, and therefore invalid. This means that a termination based on such an organizational change will be invalidated, and the employer will be forced to pay wage compensation.

The ARROWS legal team will help you prepare proper authorizations and internal regulations to comply with the requirements of the Czech Labour Code and case law.

Timing is key – what if you get it wrong

An organizational change has two important phases: validity and effectiveness. An organizational change becomes valid as soon as the competent body decides on it. However, it only becomes effective at the moment specified in the decision itself, or at the moment the change is actually implemented.

For employment law purposes, this means the following: an employee can only become redundant from the moment the organizational change becomes effective, not before. Therefore, if you give an employee notice of termination stating they have become redundant as of July 1, but the organizational change does not take effect until August 1, the notice will be invalid.

What happens in such a case? The employer must continue to assign work to the employee and pay their wages. However, if the employer can no longer assign work (because the position has been abolished), it is an obstacle to work on the employer's side, for which the employee is entitled to wage compensation – until the end of the notice period.

Court practice clearly shows that an improperly timed reorganization can cost an employer hundreds of thousands in wage compensation, severance pay, and other costs associated with legal proceedings. It is common for legal disputes to last a year or more, during which the employer must pay wage compensation.

Connect with us and get a legal solution for timing organizational changes tailored to your company. Minimize the risk of costly mistakes.

Notice of termination for redundancy – what it must contain

A notice of termination of employment for redundancy must meet strict formal and content requirements. Missing elements can lead to the invalidity of the notice, which means the employer is obliged to pay the employee wage compensation until a final court decision.

The notice must contain:

• A clear statement of the reason for termination – specifically, it must be stated that the employee has become redundant as a result of the employer's decision on an organizational change

• A description of the organizational change – what specifically is changing (e.g., abolition of a department, reduction in the number of job positions, change in technical equipment)

• The effective date of the organizational change – from when the change is effective

• Identification of the employer and employee – including identification of the employment relationship

• A handwritten signature of the authorized person – not just an electronic or mechanical signature

The delivery of the notice is also important. The Czech Labour Code requires that the notice be delivered in accordance with the rules for delivery. This is most often done by personal delivery at the workplace, where the employee confirms receipt with their signature.

As of June 2025, the 'flexi-amendment' to the Labour Code has come into effect, fundamentally changing some rules. The notice period now begins on the day the notice is delivered, not on the first day of the following month as was previously the case. For employers, this means a need to thoroughly recalculate all deadlines during organizational changes.

ARROWS lawyers continuously monitor all legislative changes and routinely handle cases of organizational changes, including in the context of the flexi-amendment. For the safe preparation of termination notices, contact our firm.

Collective redundancies – another level of complexity

If your reorganization leads to the dismissal of a larger number of employees, you enter the regime of collective redundancies. Here, it is not enough just to issue termination notices – you must comply with a whole range of additional procedural obligations, the violation of which can have serious consequences.

It is considered a collective redundancy when, within a period of 30 calendar days, you give notice of termination for organizational reasons (Section 52(a)-(c) of the Labour Code) to at least:

• 10 employees, if you employ 20 to 100 employees

• 10% of employees, if you employ 101 to 300 employees

• 30 employees, if you employ more than 300 employees

The first obligation is to inform the trade union or the works council at least 30 days before giving the first notice. If there are no trade unions or works council at your company, you must inform all affected employees directly.

The information must include:

• The reasons for the collective redundancy

• The number and professional structure of the employees to be dismissed

• The period over which the dismissals will take place

• The criteria for selecting the employees

• Information on severance pay and other employee rights

The second step is to negotiate with the trade unions or the works council about the intended collective redundancy. The aim is to reach an agreement or at least to discuss measures to limit the number of dismissals and mitigate their impact.

The third step is to inform the regional branch of the Labour Office – at the same time as informing the trade unions. You send the Labour Office information about the intended collective redundancy and subsequently a written report on the results of the negotiations with the trade unions and the final decision.

The 30-day period is then key: the employment of a dismissed employee cannot end earlier than 30 days after the delivery of the written report to the Labour Office. If you do not comply with this deadline, the notice period is automatically extended, which means higher wage costs and other complications.

The ARROWS law firm has experience in handling collective redundancies for both medium and large companies. We will ensure the entire procedure is handled comprehensively, including communication with authorities and trade unions. Write to consultation@arws.cz. 

Severance pay and other employee entitlements during organizational changes

When you terminate an employment relationship for organizational reasons, you must pay the employee severance pay. The amount of severance pay is set by law as a minimum and depends on the length of employment with your company.

Amount of severance pay in 2025:

• Employment relationship shorter than 1 year – one time the average monthly earnings

• Employment relationship of 1 to 2 years – two times the average monthly earnings

• Employment relationship longer than 2 years – three times the average monthly earnings

In the case of a work-related injury or occupational disease, severance pay can be up to twelve times the average monthly earnings. This is particularly important in physically demanding professions.

What if you want to re-hire a dismissed employee after an organizational change? This is also possible, but you must pay attention to the conditions for returning the severance pay. If an employee returns to work for you before the period determined by the number of multiples of average earnings has passed, they must return a proportional part of the severance pay.

Example: An employee received severance pay equal to three times their average monthly earnings (corresponding to three months). If they were to return to work after one month, they would have to return the severance pay for two months. The only exception is the conclusion of an agreement to complete a job (dohoda o provedení práce) – in that case, the severance pay is not returned.

ARROWS lawyers routinely deal with issues of severance pay and other employee entitlements. If you are dealing with organizational changes, contact us for comprehensive legal advice.

Preventing fictitious organizational changes – how to protect yourself from legal disputes

One of the most common reasons why courts invalidate terminations due to organizational changes is a fictitious organizational change. This occurs when an employer formally makes a decision on an organizational change but, in reality, only pretends to do so to get rid of an inconvenient employee.

How does a court recognize a fictitious organizational change? There are several typical indicators:

• The employer formally abolishes a job position but immediately fills the same position with a new employee with a virtually identical job description

• The organizational change has no real impact on the company's operations – it is merely a formal adjustment of the organizational structure

• The decision on the organizational change is vague and indefinite, lacking a clear justification of the real organizational reasons

• Only one specific employee is dismissed, while others in similar positions remain

If the court concludes that it was a fictitious organizational change, it will declare the termination invalid. The employer must then pay the employee wage compensation for the entire period from the termination of employment until the final court decision – which can be more than a year.

How to protect yourself? The key is a thorough justification of the real organizational reasons. The decision on the organizational change should contain a specific description of why the change is occurring – for example, due to the need to reduce costs, streamline production, change business strategy, or respond to market changes.

ARROWS lawyers routinely prepare decisions on organizational changes with justifications that will stand up in court. For an immediate solution to your situation, contact us.

Communication with trade unions and the works council – employer's obligations

If a trade union or works council operates in your company, you must discuss organizational changes with them. This does not just mean informing them – it involves a genuine consultation with the possibility for the trade unions to express their opinion.

Discussion means that the employer must:

• Inform the trade union body of a certain legal act or measure sufficiently in advance to give the trade union body adequate time to comment on the proposal

• Provide necessary information, consultations, and documents in a timely manner

• Strive to reach an agreement in negotiations

It is important that the decision on the matter is always within the employer's competence – the trade unions only express an opinion but cannot block the organizational change. However, this does not mean you can ignore their opinion – the employer should take it into account as far as possible.

If there are no trade unions or works council in the company, your obligations are significantly simpler. In the case of ordinary organizational changes, there is no need to inform anyone for discussion (except, of course, the employee to whom you are giving notice). The exception is collective redundancies, where you must inform all affected employees directly.

The ARROWS legal team will help you prepare communication with trade unions and the works council in accordance with the current requirements of the Czech Labour Code. Do not hesitate to contact our firm.

Transfer to another job as an alternative to termination

Before you proceed with a notice of termination for redundancy, the law requires you to consider whether you can offer the employee another suitable job within your company. If you have such a job available and have not offered it to the employee, the termination may be invalid.

What kind of job is suitable? The law states that it must be suitable with regard to the employee's health condition, abilities, and, if possible, their qualifications. This means you cannot simply offer a senior engineer a cleaner's job or an economist a warehouse worker's job – that would probably not be suitable.

However, there are situations where an employer can or even must transfer an employee to another job without their consent. This is possible, for example:

• For health reasons (if the employee can no longer perform their current job)

• In case of pregnancy and maternity

• If there is temporarily no work for the employee (an obstacle on the employer's side)

• During the notice period, if the notice was given due to failure to meet prerequisites or unsatisfactory work performance

When transferring to another job, it is necessary to distinguish whether it is a transfer within the agreed type of work (in which case the employee's consent is not required), or outside of it (in which case an agreement or one of the legal reasons is necessary).

The ARROWS legal team will help you assess whether it is appropriate in your situation to offer the employee another job, or whether you can proceed directly to termination. For a legal consultation, contact our firm.

Personal data protection during reorganization – what you need to watch out for

During organizational changes, you work with a large amount of employees' personal data. This means you must comply with the requirements of the GDPR and the Czech Personal Data Protection Act.

Key GDPR risks during reorganization:

• Processing of personal data for the purpose of making decisions about dismissals – a legal basis is required (typically the employer's legitimate interest)

• Sharing personal data with external advisors – if you use the services of a law firm or HR consultants, you must have a data processing agreement with them

• Information obligation towards employees – you must inform them about how you process their personal data in connection with the reorganization

• Archiving of documents – after the reorganization, documents with personal data must be properly archived, and retention periods must be observed

A GDPR violation can lead to fines of up to 20 million euros or 4% of the total worldwide annual turnover – whichever is higher. In practice, protecting personal data during a reorganization is just as important as complying with employment law regulations.

The ARROWS law firm provides comprehensive advice on GDPR during organizational changes. Our lawyers will ensure that all processes comply with personal data protection requirements.

Why most companies prefer to entrust reorganization to experts

As you can see from the previous sections of the article, organizational changes from an employment law perspective are an extremely complex area where even a minor mistake can have fatal consequences. In practice, we encounter a whole range of hidden pitfalls that a layperson often does not see:

Procedural details and deadlines that influence each other – for example, the timing of the organizational change's effectiveness vs. the delivery of the termination notice vs. the deadlines for the Labour Office. A mistake in one date can invalidate the entire process.

• Connections to other regulations – the Labour Code, the Labour Inspection Act, GDPR, the Civil Procedure Code, and a number of other legal norms that you must coordinate.

• Exceptions and special cases – pregnant women, employees on parental leave, employees with disabilities, employees in a protective period – specific rules apply to each group.

• Case law – in addition to the law itself, it is necessary to know the decision-making practice of the courts, which interprets specific provisions of the code. Without this knowledge, you risk that your procedure will not be acceptable from the court's point of view.

• The 'flexi-amendment' – from June 2025, it has brought a number of changes in notice periods and other rules that need to be taken into account.

The ARROWS law firm handles organizational changes and dismissals practically every day. Thanks to this, we can significantly reduce clients' time and minimize the risk of errors. We have experience providing long-term services to more than 150 joint-stock companies, 250 LLCs, and 50 municipalities and regions. We pride ourselves on speed and high quality.

Our firm is insured for damages up to CZK 500,000,000. It is therefore safer for the client to have the matter professionally handled. We also commonly partner with in-house corporate lawyers to resolve special issues. Thanks to the ARROWS International network, we handle cases with an international element daily and have more than ten years of experience providing legal services abroad.

If you do not want to risk mistakes, damages, or fines, you can safely leave the entire matter to ARROWS – just contact our office.

Connecting clients and investment opportunities

As part of our practice, we have contacts with a wide network of entrepreneurs, investors, and business partners. If, in connection with a reorganization, you are looking for an investor, a business partner for the sale or purchase of part of a company, or financing for further development, we would be happy to hear your business ideas.

We can connect clients with each other if they have interesting investment or business opportunities.