Changes to illegal work definition and agency work conditions

From 1 January 2024, an amendment to the Employment Act will enter into effect, introducing changes in employment and rules for employment agencies. One of the most discussed changes is a new definition of illegal work (a last-minute reintroduction of provisions originally omitted from the government's proposal), which was widely criticised by the professional community due to its controversy.

Prior to the amendment’s effective date, the labour inspection officers inspecting illegal work had to assess whether the dependent work was being performed outside employment for a prolonged period of time. In practice, however, it was often very difficult for the inspection officers to prove that a particular worker had performed dependent work at the workplace also on days other than the actual inspection day. The amendment thus aims to make it easier for the inspection authorities to detect the rather widespread illegal Svarc system (whereby dependent work is concealed as work performed by independent providers – sole traders). 

The amendment explicitly stipulates that the parameter of consistency, i.e., the length of the work performance, will no longer be decisive for the conclusion that the work is illegal. However, this goes against the existing case law of the Supreme Administrative Court, according to which the employer’s superiority and the employee’s subordination cannot exist without the consistency (i.e., long-term nature) of the work performance. Yet, inspection authorities will still be obliged to assess and prove the existence of superiority and subordination as one of the basic features of dependent work. Since the consistency of work performance has been one of the main stumbling blocks of inspections by the labour inspectorate, it is not yet clear how illegal work inspections will be carried out; the effect on this practice will certainly be significant. The sanctions for illegal work will also be stricter:  it will now be possible to impose a ban of activity for up to two years for this offence.

The law will also have a major impact on employment agencies, with the stated aim to make them more efficient and to increase the protection for agency workers. Among the significant changes is the obligation to prove that natural persons or professional guarantors of legal entities have acquired their professional experience (of at least 20 hours per week) within the ten years immediately preceding the application for the permit.

Furthermore, employment agencies will be obliged to pay an additional security deposit, increased from CZK 500,000 to CZK 1,000,000, within three months of the law's effective date.
 
The process of granting the permit to mediate employment has also been changed. The condition for granting the permit now is that the applicant, apart from being debt-free, has not in the last three years committed an offence for which the permit could be revoked.

In contrast, the regulation will be more lenient as regards the reasons for which the authorities are obliged to withdraw the permit: under the current wording of the law, this situation de facto arises for any violation of the Employment Act; under the new rules, the authorities will assess whether it is appropriate to withdraw the permit, considering the seriousness of the agency's misconduct.

There is also a new obligation for employment agencies to provide regular data on the number of employees assigned to each entity and sector in which the work is carried out.

Finally, the issuing and withdrawing of employment mediation permits has been transferred from the Directorate General of the Labour Office to the Ministry of Labour and Social Affairs.

The prohibition of employment agencies to conclude contracts with employees for a period defined by the duration of the employee’s temporary assignment to the user has been omitted from the final wording of the act, as well as the limitation of the temporary assignment of an agency employee to the user to a period of three years. 

The amendment thus introduces some measures aiming primarily to improve the functioning of the labour market and increase the protection of assigned employees. However, only practice will show how the legislators’ intention will be fulfilled.