Employment issues in M&A transactions in Czech Republic

1. Check whether:

• any internal regulations exist at the companies involved which grant individual employees additional entitlements as a result of the transaction (e.g. employment guarantees, golden parachutes, etc.). This remains rare in the Czech Republic; 
• the share deal will trigger any implications and measures for the employees (such as a change of working conditions) as set out in Articles 279 and 280 of Act 262/2006, Coll., Labour Code, as amended (the “Labour Code”); 
• any employees’ representative bodies such as trade unions, works councils, European works councils, etc. exist, and whether the internal regulations or collective bargaining agreements of the company grant these bodies additional rights in the event of a transaction

2. Prepare the following in draft form:

• Not applicable, unless stated otherwise in a collective bargaining agreement or the internal regulations in force.

3. Inform / Notify

• The employee representative bodies. In the absence of such bodies, all employees set to be affected should be informed about the change of the employer’s ownership structure and other implications and measures (and changes thereof) specified in Article 279 of the Labour Code, if triggered due to the share deal; 
• Collective bargaining agreements or internal regulations may state further obligations. 

4. Consult

• The affected employees or their representative bodies must be consulted by the employer regarding the implications and measures (and changes thereof) specified in Article 280 of the Labour Code, if triggered due to the share deal.
• Collective bargaining agreements or internal regulations may state further obligations.

5. Implement

• Not applicable unless stated otherwise by the internal regulations in force.

1. Check whether:

• any internal regulations exist at the companies involved which grant individual employees additional entitlements as a result of the transaction (e.g. employment guarantees, golden parachutes, etc.). This remains rare in the Czech Republic; 

• any employees’ representative bodies, such as trade unions, works councils, European works councils, etc. exist, and whether the internal regulations of the company or collective bargaining agreements grant these bodies additional rights in the event of a transaction.
• the share deal will trigger any implications and measures for the employees (such as a change of working conditions) as set out in Articles 279 and 280 of the Labour Code; 

2. Prepare the following in draft form:

• Not applicable, unless stated otherwise in a collective bargaining agreement or the internal regulations in force.

3. Inform / Notify

• the employee representative bodies. In the absence of such bodies, all employees set to be affected should be informed about the change of the employer’s ownership structure and other implications and measures (and changes thereof) specified in Article 279 of the Labour Code, if triggered due to the share deal. 
• Collective bargaining agreements or internal regulations may state further obligations.

4. Consult

• The affected employees or their representative bodies must be consulted by the employer regarding the implications and measures (and changes thereof) specified in Article 280 of the Labour Code, if triggered due to the share deal.
• Collective bargaining agreements or internal regulations may state further obligations.

5. Implement

• Not applicable, unless stated otherwise in the internal regulations in force.

1. Check whether:

• the transfer of assets will result in transferring employees and, if so, which employees; 
• any internal regulations/collective bargaining agreements exist which grant individual employees additional entitlements as a result of the transaction; 
• any internal regulations exist regulating the information and/or consultation of employees’ representative bodies (trade unions or works councils, if such bodies exist) in relation to the transaction; 
• there are any outstanding employment liabilities related to employees to be taken over; 
• any employees’ representatives, such as trade unions, works councils, European works councils etc., exist, and whether the internal regulations of the company or collective bargaining agreements grant these bodies additional rights in the event of a transaction. 

If a termination notice is given by the employee on the grounds of the transfer within 15 days of the date on which the employee was informed of such transfer to the extent required by law not later than 30 days before the effective date of such transfer, the employment relationship shall terminate not later than the day preceding the effective date of such transfer. 

If the employee has not been informed of the transfer to the extent required by law at least 30 days before the effective date of the transfer, and the employee serves a termination notice, the employment shall end on the day preceding the effective date of such transfer (if the notice is served before the effective date) or within 15 days after the notice is served (if the notice is served within two months after the transfer). 

2. Prepare the following in draft form:

• Not applicable, unless stated otherwise in a collective bargaining agreement or the internal regulations in force.

3. Inform / Notify

• At least 30 days before the effective date of the transfer of employees to another employer, the present and future employer are required to inform the trade union and works council of this fact, and consult with them on the following:
  • an established or proposed date for the transfer;
  • the reasons for the transfer;
  • the legal, economic and social effects of the transfer for employees;
  • any planned measures relating to employees.

If trade unions/works councils do not exist, all affected employees must be informed directly, but not consulted.

4. Consult

• Not applicable.

1. Check whether:

• the transfer of assets will result in the transfer of employees and, if so, which employees; 
• any internal regulations/collective bargaining agreements exist which grant individual employees additional entitlements as a result of the transaction; 
• any internal regulations exist regulating the information and/or consultation of employees’ representative bodies (trade unions or works councils, if such bodies exist) in relation to the transaction; 
• there are any outstanding employment liabilities related to employees to be taken over; 
• any employees’ representatives, such as trade unions, works councils, 
• European works councils etc., exist, and whether the internal regulations of the company or collective bargaining agreements grant these bodies additional rights in the event of a transaction. 

2. Prepare the following in draft form:

• Not applicable, unless stated otherwise in a collective bargaining agreement or the internal regulations in force. 

3. Inform / Notify/ Consult

• At least 30 days before the effective date of the transfer of employees to another employer, the present and future employers are required to inform the trade union and works council of this fact, and consult with them on the following: 
  • an established or proposed date for the transfer; 
  • the reasons for the transfer;
  • the legal, economic and social effects of the transfer for employees; 
  • any planned measures relating to employees. 
• If trade unions/works councils do not exist, all affected employees must be informed directly, but not consulted.

4. Implement 

• The purchaser who assumes the transferred employees is obliged to preserve the terms of employment of the transferred employees, both contractual as well as other terms (e.g. non-contractual benefits). The terms and conditions contained in an employment or other contract may only be amended with the explicit consent of the employee.; 
• After the effective date of the transfer, an employee is entitled to serve a termination notice. If an employee’s notice was given within two months from the effective date of the transfer, or if the employee's employment relationship was terminated by agreement within the same period, the employee may seek a court ruling which declares that the employment relationship was terminated on the grounds of considerable impairment of working conditions in connection with the transfer. If the court holds in favour of the employee, the employee shall be entitled to a severance payment in compliance with the Labour Code (the amount differs depending on the employee’s length of service); 
• If the transferred employees were subject to a collective bargaining agreement, this remains valid until its expiry, but for no longer than the end of the calendar year immediately following the transfer. After such a term has expired, a new collective bargaining agreement may be concluded to cover the transferred employees. 

1. Check whether:

• the merger will result in a transfer of employees and, if so, which employees; 
• any internal regulations/collective bargaining agreements exist which grant individual employees additional entitlements as a result of the transaction; 
• any internal regulations exist regulating the information and/or consultation of employees’ representative bodies (trade unions or works councils, if such bodies exist) in relation to the transaction; 
• there are any outstanding employment liabilities related to employees to be taken over; 
• any employees’ representatives, such as trade unions, works councils, European works councils etc., exist, and whether the internal regulations of the company or collective bargaining agreements grant these bodies additional rights in the event of a transaction. 

2. Prepare the following in draft form:

• Not applicable, unless stated otherwise in a collective bargaining agreement or the internal regulations in force.

3. Inform / Notify

• At least 30 days before the effective date of the transfer of employees to another employer (i.e. the merger), the present and future employers are required to inform the trade union and work council of this fact and consult with them on the following: 
  • an established or proposed date for the transfer; 
  • the reasons for the transfer; 
  • the legal, economic and social implications of the transfer for employees; 
  • any planned measures relating to employees. 
•  If trade unions/works councils do not exist, all affected employees must be informed directly, but not consulted. 

If a termination notice is given by the employee on the grounds of the transfer within 15 days of the date on which the employee was informed of such transfer to the extent required by law not later than 30 days before the effective date of such transfer, the employment relationship shall terminate not later than the day preceding the effective date of such transfer. 

If the employee has not been informed of the transfer to the extent required by law at least 30 days before the effective date of the transfer, and the employee serves a termination notice, the employment shall end on the day preceding the effective date of such transfer (if the notice is served before the effective date) or within 15 days after the notice is served (if the notice is served within two months after the transfer).

4. Consult

• The purchaser who assumes the transferred employees is obliged to preserve the terms of employment of the transferred employees, both contractual as well as other terms (e.g. non-contractual benefits). The terms and conditions contained in an employment or other contract may only be amended with the explicit consent of the employee.; 
• After the effective date of the transfer, an employee is entitled to serve a termination notice. If an employee’s notice was given within two months from the effective date of the transfer, or if the employee's employment relationship was terminated by agreement within the same period, the employee may seek a court ruling which declares that the employment relationship was terminated on the grounds of considerable impairment of working conditions in connection with the transfer. If the court holds in favour of the employee, the employee shall be entitled to a severance payment in compliance with the Labour Code (the amount differs depending on the employee’s length of service); 
• If the transferred employees were subject to a collective bargaining agreement, this remains valid until its expiry, but for no longer than the end of the next calendar year immediately following the transfer. After such a term has expired, a new collective bargaining agreement may be concluded to cover the transferred employees.