Czech Republic: Constitutional Court ruling does not improve legal certainty
A recently published ruling by the Constitutional Court has rekindled lively debate in professional circles over whether concurrence of positions is permissible under the law – i.e., whether a statutory body (or a member of it) may be employed by the company, aside from their agreement to fulfil a corporate office. This decision by the Constitutional Court more or less calls into question case law established by the Czech Supreme Court. The Supreme Court in principle forbids concurrence of positions unless activity under an employment agreement is other than “business management”. By contrast, the Constitutional Court now argues that – given that (a) no written law stipulates a ban on concurrence of positions, and (b) the ban was actually developed by the judiciary interpreting the law – the courts should present cogent arguments as to why they find concurrence of positions not permissible. However, this was not done in the case heard by the Constitutional Court. Moreover, in its ruling the Constitutional Court also expressed the view that relationships other than performance of dependent work may also be submitted to, and be governed by, the Labour Code.
However, the Constitutional Court then omitted to say under what conditions concurrence is permissible, or what the mutual relation between the Corporations Act and the Labour Code should look like in cases where concurrence is allowed (e.g. with respect to a resignation or recall from corporate office), whether conclusion of an employment agreement may result in a breach of the duty of due care of a prudent businessperson, and so forth. The “safer choice” for statutory bodies and their members thus continues to be a sole agreement on performance in a corporate office, which is a type of contract anticipated and regulated by the Corporations Act. As for the institutions known from labour law (e.g., benefits, severance pay, claims arising from work-related injuries), they should replicate them in the manager agreement which should then be approved in the proper manner anticipated by the Corporations Act – at least until the Czech Supreme Court “picks up the gauntlet” thrown down by the Czech Constitutional Court.
Source: I. ÚS 190/15