Employment contract (what they must and may contain)

Mandatory elements of an employment contract

Elements that an employment contract must contain in any case are listed, quite briefly, in Section 34 of the Labour Code. These essential elements include:

• type of work
• place or places of work
• day of commencement of employment

The type of work that the employee is obliged to perform for the employer is in most cases defined by the job title to which the employee is to be assigned. However, the definition of the type of work should not be underestimated as the employer is obliged and also entitled to assign to the employee only work within the agreed type of work, which corresponds to the employee’s obligation to perform such work. While it is obviously more advantageous for the employee to define the scope of activities in more detail, the opposite is true for the employer. In the case of certain groups of employees, the provisions of the Labour Code on special working conditions for some employees (especially pregnant or breastfeeding women, minors and the disabled) must also be taken into account and work must be assigned in accordance with them.

The place of work is the place where the employee performs or is obliged to perform the agreed activities. Of course, there can be more than one of these places and they may be agreed in different broad terms, for example, by indicating a specific municipality and simply stating the Czech Republic. The place of work is then closely related to the issue of travel allowances, which is why we recommend taking this fact into account when concluding the contract, and if the place of work is agreed to be wider than a single municipality, the employment contract must also stipulate a regular workplace for the purposes of travel allowances. This may not be agreed more widely than by reference to one municipality. If it is not agreed contractually, the statutory legal presumption that the municipality in which the employee’s business trips mostly start is considered as the employee’s regular workplace applies.

The date of commencement of employment is important for both the employer and the employee primarily because this date is usually the date on which the employment relationship is established pursuant to Section 36 of the Labour Code. The Supreme Court has ruled that “the date of commencement of employment may be agreed not only by a direct indication of time but also on the basis of other objectively ascertainable facts, not marked by a specific date, about which the parties may not even be certain as to when exactly they will happen when concluding the employment contract, but which leave no doubt that the date of commencement of employment has been unmistakably marked by them and which allow an unequivocal conclusion as to the date on which the employment relationship will commence”. For example, the fact may consist in completing a specific course of study (e.g. a master’s degree at a university). The employment relationship would therefore start on the day following the passing of the final exam.

Other elements of the contracts

In addition to the essential elements of an employment contract, the employment contract may also stipulate other aspects that the parties want to regulate. For example, it is possible to agree on individual wage conditions, non-competition clauses, confidentiality agreement, overtime work, etc. However, when negotiating the content of an employment contract, it must be taken into account that if the employment contract contains provisions that contravene the law, this part of the employment contract could be invalid.

Remuneration

As far as remuneration is concerned, there are several ways to agree on the amount of remuneration for the work performed. The wage may be agreed in the employment contract or it may be unilaterally determined by an internal regulation or a wage assessment. Agreeing on the wage in the employment contract is particularly advantageous for the employee because it can only be adjusted (i.e. increased or reduced) by agreement between the employer and the employee. If the wage is unilaterally determined by a wage assessment or an internal regulation, the employer may unilaterally adjust it at any time without the employee’s consent. However, the employer cannot act completely arbitrarily. Even if the wage is determined unilaterally, the employer is obliged to comply with the principles of equal treatment and prohibition of discrimination.

Leave

Although the length of leave is not a mandatory element of the contract as the minimum length is set by the Labour Code, these arrangements often appear in employment contracts (as employee benefits). The length of leave is generally at least four weeks per calendar year. But there is nothing that prevents the employer and the employee from agreeing on a longer leave in the employment contract. Again, the employer must be careful not to violate the principle of equal treatment and prohibition of discrimination. It is considered permissible to extend leave depending on the duration of the employment relationship or the nature of the work. On the other hand, extension depending on the employee’s age or managerial position is problematic.

Non-competition clauses

A non-competition clause is one of the arrangements that appear quite frequently in employment contracts. It is one of the instruments to protect the employer from leakage of important information, usually constituting the content of its trade secret, to a competitor through employees who naturally come across this information during the employment relationship and whose employment relationship with the employer has been terminated. No employer wants its know-how or trade secrets to fall into the hands of its competitors, and this instrument is used to prevent their disclosure.

However, a non-competition clause gives rise to rights and obligations for both parties to the non-competition clause agreement. On the one hand, pursuant to Section 310(1) of the Labour Code, the employee undertakes to refrain for a certain period (no longer than one year) from performing gainful activities that could be of a competitive nature with respect to the employer. If this obligation is violated, the employee is obliged to pay the employer the agreed contractual penalty. The employer, on the other hand, undertakes under the same provision to provide the employee with monetary compensation of at least ½ of the average monthly earnings for each month of the obligation for the duration of the non-competition clause.

But even a non-competition clause is subject to some statutory requirements. If you want to be sure that the non-competition clause is negotiated effectively and sensibly, it is advisable to consult a professional. We will be happy to help you in this regard.

Non-disclosure agreement

The confidentiality obligation is one of the clauses that can be encountered not only in employment contracts but generally in the work rules or other internal regulations. But please note that the latter cannot impose new obligations but only specify the obligations arising from legal regulations (however, not from the Labour Code in this case). The best way to oblige employees to maintain confidentiality in accordance with the law is to conclude a separate non-disclosure agreement or to include this obligation in the employment contract.

In practice, the most common mistake is in the definition of confidentiality, which is either too vague (“all facts related to the performance of work”) or, on the contrary, too specific where there is a risk of omitting certain information. Provisions concerning the penalty for a breach of confidentiality are also problematic as a contractual penalty is not an option if employees are concerned. In such a case, it is advisable to consult experts who have experience with these “bad habits” about the wording of these agreements or clauses in an employment contract.

Overtime work

Wages can be agreed in the employment contract taking into account any overtime work. However, even such an arrangement is subject to legal limits, which must be considered if we want to include this arrangement in the employment contract. In particular, it is necessary to agree on the scope of overtime work, which will be reflected in the wage. Therefore, it cannot be stated in general terms that the agreed remuneration includes any overtime work or even that the employee is not entitled to overtime pay.

The scope of overtime work reflected in the agreed remuneration is not unlimited. The maximum overtime limit is 416 hours per year for senior staff and 150 hours per year for ordinary staff. This is the maximum amount of overtime for which the employer is not obliged to provide benefits. However, this arrangement is always subject to a mutual agreement; the employer may not decide on its own that the wage of employees includes any overtime work. In other words, reflecting overtime work in the basic wage is not possible if the wage is determined by a wage assessment or an internal regulation.

Conclusion

A good employment contract should be, above all, sufficiently definite to avoid disputes and confusion in the relationship with employees. Furthermore, it should not contain provisions that are contrary to the Labour Code and that are thus disregarded. If you need to draw up or modify an employment contract so that its wording complies with the law and meets your needs as an employer, please do not hesitate to contact us. We will be happy to provide you with the necessary legal assistance.

What issues do we typically handle for clients in relation to employment contracts?

• How to draw up an employment contract correctly?
• What must be included in an employment contract?
• Part-time contract
• Model employment contracts
• What elements can be included in an employment contract?
• What should I do if my employment contract is contrary to the law?
• What is a non-competition clause?
• How to draft a non-competition clause properly?
• How to draw up a non-disclosure agreement properly?
• What is the permissible scope of overtime work?
• How to set special working conditions for employees in the employment contract correctly?
• How to include bonuses and remuneration in the contract
• Place of work and branches
• Definition of the probationary period
• Overtime work
• Fixed-term and indefinite-term contracts
• Application of sick days
• Obligation regarding leaves in employment contracts