August 2011 – The Slovak Parliament passed an amendment to the Slovak Labour Code on 13 July 2011 (the “Amendment”). The Amendment, which was published in the Collection of Laws under No. 257/2011 Coll., will take effect on 1 September 2011. It is known as perhaps the most criticized and debated bill of the new Slovak Government. This article provides a summary of the most important changes being introduced by the Amendment.
I. Managerial employees
The Amendment introduces a number of changes relating to managerial employees.
Definition
It is important to note that in some instances, the Amendment introduces and uses the terms ‘managerial employee’ (“Manager”), ‘managerial employee directly responsible to the executive body’ (“First Line Manager”) or ‘such (latter) managerial employee’s directly subordinated managerial employee’ (“Second Line Manager”) as distinct types of positions. Although the Amendment does not explain the difference between these positions, in particular the difference between ‘Manager’ and ‘First Line Manager’, in our view, it is reasonable to interpret Manager as a more general term and First Line Manager as a specific position directly responsible to director(s) of the Company.
Probationary period
The Amendment introduces the possibility to agree with a First Line Manager in his/her employment contract that his/her probationary period will be up to six months (as opposed to the standard three months under the current Labour Code and which remains applicable to all other types of employees even after the Amendment).
Also, the Amendment will make it possible to agree in the collective agreement that the probationary period of a First Line Manager is up to nine months.
Weekly hours
At present, the maximum average weekly working hours over any four month period must not be longer than 48 hours. One exception applies to medical staff, where the weekly hours can be as long as 56 hours over a four month period.
The Amendment will extend the above exception (i.e. the 56 hours in a week) also to First Line Managers and Second Line Managers. Such extension of weekly working hours will be subject to the First Line Manager’s or Second Line Manager’s (as the case may be) consent which can be withdrawn by giving one month’s notice.
Overtime
Maximum overtime
In connection with the change of weekly hours (see above), the Amendment extends the maximum overtime which can be requested in total from a First Line Manager or Second Line Manager in a given year to 550 (as opposed to the 400 hours currently provided by the Labour Code). The maximum overtime may be requested where the respective First Line Manager and/or Second Line Manager has consented to it, which consent can be withdrawn by giving one’s month notice.
The Amendment does not deal with the consequences of the withdrawal of consent by the First Line Manager and/or Second Line Manager, or with the extension of weekly working hours, i.e. how much yearly overtime such an employee can work if he/she initially agreed to extended weekly hours and subsequently withdraws his/her consent (see above). Therefore, we recommend this issue be examined on a case-by-case basis.
Additional time off
The employer and the employee can agree that instead of payment for overtime, the employee will receive additional time off in the amount of the overtime hours. Such additional time off must be provided within three (3) months from the month when the overtime work was performed, otherwise the employee has the right to receive payment for the overtime. The Amendment will extend this three month period to 12 months.
II. Termination of employment
Notice period
The Amendment will modify the rules on notice periods. The notice period, which is at least two months at present, will no longer need to be identical for both the employer and the employee. Also, dismissal and immediate dismissal by the employer will no longer need to be consulted with employee representatives in order to be valid. Pursuant to the current Labour Code, the notice period for all dismissal grounds[1] is two (2) months or three (3) months, in the event the employee has been with the company for at least five years. The Amendment will now differentiate between various dismissal grounds and this will also determine the applicable notice period, as follows:
- As one month notice period will apply in cases where the employee has been with the company for less than one year, while two months notice will apply in situations where the employee has been with the company for more than one year.
- As an exception to the above general rule, a three months’ notice period will apply only in situations where the employee is being dismissed by the employer on the grounds of (i) redundancy due to organisational changes (Section 63(1)(b) of the Labour Code) if the employee worked with the company for more than five (5) years, (ii) the winding-up of the employer or (iii) the employer’s relocation (Section 63(1)(a) of the Labour Code).
Also, the Labour Code at present provides that if the employer dismisses an employee for organizational changes (Section 63(1)(b) of the Labour Code), the employer must not recreate the redundant position within three months from the dismissal. The Amendment will shorten this period to two months.
Termination by employee
If the employment is terminated by the employee and if the employee has been with the company for at least one year, the notice period will be two months. Otherwise, if the employee has been with the company for less than one year, both the employer and the employee can terminate the employment with one month’s notice (which does not apply to the probationary period, during which it is generally possible to terminate the employment immediately and without giving any grounds).
Limitation of rights arising from termination
If the employment is terminated unlawfully by the employer, the employee has the right to compensation for his or her wage equal to his or her average monthly salary. If such compensation should be provided for more than 12 months, the employer can petition the court to lower the compensation to the level of 12 months’ salary or to lower the amount of compensation which exceeds such 12 months’ salary. The Amendment will change this concept and provides that the maximum compensation will be for nine months’ salary (without any need by the employer to petition the court in this respect).
III. Severance payment
The Amendment is going to change the rules on the payment of severance payments, as follows:
The present situation
Pursuant to the Labour Code now in effect, an employee whose employment is terminated on the grounds of the winding-up of the employer or its relocation (Section 63(1)(a) of the Labour Code) or on the grounds of redundancy due to organisational changes (Section 63(1)(b) of the Labour Code) or on the grounds that the employee lost his/her medical ability to carry out work, such employee is entitled to a severance payment ranging from between two and ten times the employee’s average monthly salary (depending on how long the employee has been with the company and whether his/her medical condition was a result of the work he/she has been doing). The severance payment applies in addition to the wage that is being paid during the termination period (e.g. if an employee is dismissed for organizational changes, the notice period is two months during which time the employee works and is being paid a salary and in addition, he/she is entitled to a severance payment equal to two times his/her average monthly salary).
The changes by the Amendment
The Amendment provides that the employer will be bound to pay the employee a severance payment only in the event that the employment terminates by agreement. This will mean that if the employer serves a termination notice on an employee, the employee will have the right to request that employment be terminated by agreement, upon which the employee will receive a severance payment for the duration of notice period (except for employees dismissed for medical reasons, who will be entitled to a severance payment equal to ten (10) months’ salary). If the employee elects to stay with the employer during the notice period, he or she will not be entitled to any severance payment at all.
The employer and the employee will also be entitled to a combination of the above, i.e. that the employee works partially through the termination period and thus will be entitled to some wage for work performed during the termination period and to some severance payment for the time he/she has not worked.
IV. Non-compete
The Amendment extends the scope of the non-compete undertaking for the term of the employment relationship and introduces the possibility to agree on a non-compete undertaking going beyond the termination of employment.
Non-compete during employment
At present, employees are prohibited from carrying out any gainful activity outside their employment if the activity is identical with the employer’s scope of business, unless the employer consents in writing. The Amendment extends the non-compete provision in a way that the employee will be required to notify the employer of his/her intention to carry out a gainful activity which has a character that could compete with the employer’s scope of business. The employer is entitled to require that the employee refrains from carrying out such gainful activity by giving the employee written notice within 10 business days from receipt of the employee’s notification.
Non-compete after employment
The Amendment introduces an entirely new possibility for the employee and the employer to agree on a post-employment non-compete undertaking by the employee.
The employer and employee will be able to agree on such non-compete undertaking for a period of up to one year after the termination of the employment. This option will be open only to employees who, in the course of their employment, had the chance to obtain information or knowledge which is not publicly available or the use of which could cause harm to the employer.
The non-compete undertaking will have to be proportionate to what is necessary to protect the employer and the court will have a right to amend excessive non-compete clauses.
Employers will be bound to provide their employees with consideration for the non-compete undertaking in the amount of at least 50% of the employee’s average salary for each month of the non-compete undertaking. The parties will be able to agree on a fair compensation to be paid to the employer in the event the employee breaches the non-compete clause. However, such compensation must not exceed the agreed consideration and, if the non-compete clause is partially fulfilled by the employee, then the compensation will be decreased accordingly.
V. Renewal of employment for a fixed term
With a view to the protection of employees, the Labour Code now allows that employment for a fixed term may have a maximum duration of two years and within such two years, it may be extended and/or renegotiated twice at the most (e.g. the employment may be initially agreed for a definite term of six months, then prolonged for another fixed term of six months, then again prolonged by a fixed term of one year and after such time, it can only be further agreed for an indefinite term).
Pursuant to the Amendment it will be possible to agree the employment for a fixed term of a maximum of three years during which it can be prolonged or renegotiated three times at the most. A further renewal of employment for a fixed term beyond three years or more than three times within three years will be also possible, among other things, for certain types of work agreed in a collective agreement.
VI. Limitation of weekly days off
The Labour Code generally requires that an employee has two consecutive days off work in a week, but it allows in exceptional circumstances that the two days be limited to 35 hours. The Amendment is going to enable that the employee has only one day off in two weeks (which, in principle, should be a Sunday according to the Amendment), while he/she will have a right to additional time off within four months from the week when he/she was supposed to have the two consecutive days off work.
VII. Working time account
A new form of irregular working hours will be introduced, called ‘working time account’. The working time account will make it possible, subject to employer’s needs, for an employee to work different hours every week, provided that the average weekly hours do not exceed the statutory weekly hours (40) over the period of 12 months. The employee will be receiving a wage for the statutory weekly hours. The employer will have to keep detailed and separate records (separate ‘accounts’) of the employee’s working time, paid wage and the (i) difference between statutory weekly hours and the hours actually worked by employee in a given week and (ii) difference between the actually paid wage and the wage to which the employee would be entitled for the actual hours of work. If the employee received a wage which is less than he or she would have been entitled to according to the records of actual working hours of such employee, such employee will be paid the difference at the end of his or her employment. Similarly, if the employee is paid more than he or she would have been entitled to, the employer can claim such amount within two months from the termination of employment; however, only of the employment has been terminated for specific reasons (e.g. such as immediate dismissal for breach of work discipline). Introduction of the working time account at an employer will be subject to a written agreement with employee representatives.
For further information please contact Viliam Mysicka, Counsel, at , or Zuzana Hodonova, Counsel, at .
[1] These are (i) winding up and relocation, (ii) organisational changes, (iii) medical condition, (iv) loss of qualification and poor performance and (v) breach of work discipline.