In the Czech Republic, employment agreements fall into two main categories: employment contracts and agreements outside of employment relationships. Each category offers different levels of formality and social security benefits.

Employment Contracts (Pracovní Poměr)

Employment contracts are the most common type of employment agreement and provide the most comprehensive rights and obligations for both employer and employee. They must be concluded in writing and typically include details such as term (fixed-term or open-ended), working hours (full-time or part-time), and remuneration (salary or wages).

Types of Employment Contracts

Employment contracts can be either fixed-term or open-ended. Fixed-term contracts can last for a maximum of three years, with a possibility of two renewals. Open-ended contracts, on the other hand, provide ongoing employment with no predetermined end date.

Agreements Outside of Employment Relationships

Agreements outside of employment relationships offer more flexibility for both parties but provide fewer social security benefits for the employee. There are two main types: Agreement on Work Performance (Dohoda o provedení práce - DPP) and Agreement on Work Activity (Dohoda o pracovní činnosti - DPČ).

Agreement on Work Performance (Dohoda o provedení práce - DPP)

This type of agreement is limited to a maximum of 300 hours of work per calendar year with one employer. It offers simpler administration compared to employment contracts. Social and health insurance contributions are only required if exceeding a certain remuneration threshold.

Agreement on Work Activity (Dohoda o pracovní činnosti - DPČ)

In this type of agreement, working hours cannot exceed an average of 20 hours per week. It offers more flexibility than a standard employment contract. Similar to the DPP, social and health insurance contributions are only required if exceeding a certain remuneration threshold.

Czech employment agreements must adhere to specific mandatory elements outlined in the Labour Code. These essential clauses ensure a clear understanding of the employment relationship for both parties.

Mandatory Clauses

• Type of Work: The agreement must clearly define the employee's job title and the specific duties they will perform. This provides clarity on expectations and responsibilities.

• Place of Work: The primary location where the employee is expected to work should be specified in the agreement. If remote work possibilities exist, these details can also be outlined.

• Commencement Date: The official start date of the employment relationship must be clearly stated.

• Term of Employment: The agreement needs to specify whether it's a fixed-term contract (maximum 3 years with possibilities for renewal) or an open-ended (indefinite) contract.

Additional Recommended Clauses

While not mandatory, several additional clauses are highly recommended for a comprehensive employment agreement:

• Probationary Period: While optional, a probationary period can be included, with a maximum of 3 months for regular employees and 6 months for managerial positions.

• Remuneration and Benefits: Details regarding salary or wages, payment frequency, and any additional benefits (such as bonuses, health insurance contributions, vacation pay) should be clearly defined.

• Working Hours and Schedule: The agreement should specify the employee's regular working hours (typically 40 hours per week) and any potential variations or flextime arrangements.

• Notice Period for Termination: The required notice period for termination by either party should be outlined in the agreement.

• Confidentiality and Intellectual Property: If the role involves access to sensitive information or intellectual property, confidentiality clauses can be included to protect the employer's interests.

• Dispute Resolution: The agreement can specify preferred methods for resolving any disputes that may arise during the employment relationship.

The Czech Labour Code permits, but does not require, a probationary period in employment agreements. This initial trial period serves as a time for both the employer and the employee to assess suitability for the role.

Key Aspects of Probationary Periods

• Maximum Duration: The probationary period cannot exceed three months for regular employees and six months for managerial employees.
• Written Agreement: The probationary period must be agreed upon in writing and included in the employment contract or an annex.
• Fixed-Term Contracts: The probationary period cannot be longer than half of the agreed fixed-term of the employment contract.
• No Extensions: Once the initial period is over, it cannot be extended under any circumstances.

Benefits of a Probationary Period

• Evaluation for Both Parties: The probationary period allows employers to assess the employee's skills, work ethic, and suitability for the role. Employees can also determine if the job aligns with their expectations and career goals.
• Reduced Termination Costs: During the probationary period, termination of employment can occur by either party without notice or reason. This reduces administrative burdens and potential severance costs compared to termination after the probationary period.

Important Considerations

• Non-Discrimination: The probationary period cannot be used as a discriminatory practice to unfairly dismiss an employee based on protected characteristics.
• Sick Leave Protection: An employer cannot terminate an employee's contract during the probationary period within the first 14 days of temporary sick leave.
• Termination Requirements: Even during the probationary period, termination must be made in writing to be considered valid.

In Czech employment agreements, confidentiality and non-competition are two key areas that can be addressed to protect an employer's interests. However, the legal regulations and enforceability of these areas differ.

Confidentiality Clauses

The Czech Labour Code does not establish a general duty of confidentiality for all employees in the private sector. To enforce confidentiality obligations, employers typically utilize separate Non-Disclosure Agreements (NDAs) alongside or as an addendum to the employment contract.

NDAs in the Czech Republic must clearly define the confidential information to be protected (e.g., trade secrets, customer lists), the authorized use of the information, and the duration of the confidentiality obligation. Unlike some jurisdictions, Czech NDAs cannot include contractual penalties for breaching confidentiality.

Non-Compete Clauses

Non-compete clauses are permissible but subject to strict legal requirements outlined in the Labour Code. A non-compete clause can only be enforced if it's deemed justifiable based on the employee's position and access to sensitive information or know-how. This typically applies to managerial or highly specialized roles.

The non-compete period cannot exceed one year following the termination of employment. For a non-compete clause to be valid, the employer must provide the employee with financial compensation during the restricted period. This compensation must be at least half of the employee's average monthly salary for each month the clause is in effect.

Important Considerations

Employees have the right to challenge overly broad or unreasonable non-compete clauses in court. Employers can only withdraw from a non-compete agreement during the employment relationship and for a pre-defined reason stipulated in the contract.