Czech Republic: The termination of a commercial lease may under certain conditions trigger the transfer of rights and obligations associated with an employment relationship
In terms of legislation, the passage of rights and obligations from employment relationships is no novel concept, but its real-life occurrence and consequences often lead to disputes which end up in the general courts.
One such case concerned an employer who notified their employee that their lease had been cancelled for premises on which they ran a café, and who noted that the rights and obligations associated with the employee’s employment had thus passed in their entirety to the new tenant of the café, who had automatically become their employer. This new “employer”, however, denied any demands and claims brought in this respect by the employee, arguing that there existed no contractual relationship whatsoever between them and the former operator of the café. The thus rebuffed employee took his original employer to court, seeking a court ruling that would confirm the continued existence of their employment with that original employer.
The case rose through the courts until it reached the Supreme Court of the Czech Republic, which in its judgment 21 Cdo 3712/2015 of 14 July 2016 ruled that the transfer of an employer’s operations or work tasks may essentially be triggered by any legal transaction which results in the previous employer’s (complete or partial) abandonment of operations (or of the fulfillment of tasks), which are thereafter carried out by another qualified legal entity or private individual. According to the Supreme Court, this legal transaction may also take the form of a cancellation (or mutually agreed termination) of the lease agreement for commercial premises on which the employer pursues its business, provided that this termination is linked to a new lease agreement between the same landlord and a new tenant based upon which the new tenant takes over the operations (or the fulfillment of tasks) of the previous employer (or pursues similar operations).
Anxious to avoid this kind of situation in the future, the lawmaker has since submitted an amendment bill to the Labor Code which spells out the conditions that must be met with respect to the passage of one employer’s operations (or parts thereof) to another before employees automatically switch employers. The amendment is envisaged to come into force as of 1 July 2017.
Source: Act No. 262/2006 Coll. Supreme Court judgment 21 Cdo 3712/2015 of 14 July 2016 parliamentary press 903/0