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Legal newsletter September 2021

The new "kurzarbeit" legislation

The essence of partial work allowance is to partially compensate employers for wage costs so that jobs in an unfavourable economic situation can be maintained for a certain period of time until the economic situation improves.

According to Czech legislation, the use of the partial work allowance is only possible if the government activates this institute by decree. The government may activate the allowance if the economy or its sector is seriously threatened by a natural disaster or epidemic, cyber-attack or other emergency situation constituting force majeure, but may limit the allowance to a specific territory or sector. The Government shall also determine by regulation the period for which the allowance will be granted (maximum 6 months) and the extent of the weekly working hours during which the employer is unable to assign work to employees.

The employer will only be able to draw the allowance for employees whose employment relationship lasts at least 3 months. Conversely, the allowance will not be available where a working time account (konto pracovní doby) is applied. Employers sanctioned for allowing illegal work are also excluded from the scheme.

The allowance will then be due to employers who, due to a serious threat to the Czech economy or its sectors for economic reasons, are unable to assign work to their employees to a minimum of 20% and a maximum of 80% of their weekly working time, in aggregate for all positions in the company. As a result, the outcome will depend significantly on the composition of the workforce, i.e. the number of employees actually affected by the restrictions.

The amount of the contribution is to be 80% of the employee's wage compensation and social security contributions, state employment policy contributions and public health insurance contributions. The maximum contribution during partial work is then limited to 1.5 times the average monthly wage.

The use of the allowance will continue to be subject to a ban on termination for organisational reasons and a ban on drawing on other sources of public funds. As a new rule, the allowance will not be payable to employers who have paid out profit  or made early repayments of loans or borrowings in the month preceding the entry into force of the Government Decree.

Even if the government does not activate this partial work allowance scheme or if it does not apply to certain companies, it will still be possible to use the existing regulation of Section 209 of the Labour Code, which regulates the so-called employer’s work obstacles in the event of partial unemployment, in justified cases. Here, although the employer will be able to introduce a wage replacement of 60%, the cost will not be compensated in any way.

We can conclude that this is a relatively well regulated aid, but it is entirely dependent on the will of the government. In practice, therefore, it will depend significantly on the political decisions of the current cabinet.


Investing from the joint property of spouses into the sole property of one spouse

In the absence of any other agreement or decision, the joint property of spouses consists of the assets belonging to both spouses, namely everything acquired by one or both spouses jointly during the marriage (excluding gifts, inheritances, personal effects, etc.). In the division of the community property, each spouse is then to reimburse what has been spent from the joint property of spouses on his/her sole property, unless the spouses agree otherwise.

In the above-mentioned case, the courts have generally held that the owner of the property is obliged to compensate the other spouse for the fact that the mortgage loan was paid from the joint property of spouses, regardless of the fact that the property was used by the spouses for living purposes before the divorce.

This view of the concept of investment has been changed by a recent decision of the Supreme Court of the Czech Republic. It took into account the provisions of Section 690 of the Civil Code, according to which each spouse contributes to the needs of family life, including the provision of housing, according to his/her means, and does not replace the money so spent in the settlement of the matrimonial property. In a case where the need for housing is met by the use of real estate owned by one of the spouses and at the same time the mortgage payments are paid from the matrimonial property, the Court considers that it must be examined individually whether (i) in a situation when the amount was not spent on the sole property of one of the spouses, the amount spent on the mortgage payments would have to be spent to provide for the same family housing, and whether (ii) it was a reasonable expenditure.

Therefore, if the amount spent on the mortgage repayments is the same or even less than the amount of rent for the same or similar housing, the property owner will not be obliged to compensate the other spouse for the investment in the mortgage repayment. If the mortgage repayments are higher than the rent, the compensation will have to be provided.


Will reservation of ownership help in case of insolvency of the buyer?

The Civil Code currently distinguishes between cases where (a) the reservation of ownership is negotiated in the form of a notarial deed or the contract bears certified signatures, and cases where (b) the reservation of ownership is merely embodied in a contract without such formal requirements.

In the first case, such a reservation also has effects against the buyer's creditors and is therefore a powerful tool for protecting the supplier in insolvency proceedings. If the insolvency administrator includes the goods in the buyer’s assets, the supplier can claim the return of the goods by means of an exclusion action.

However, in the case of an informal reservation of ownership, the reservation only operates in the relationship between the parties to the contract. It cannot be successfully invoked against the buyer's creditors.

In the context of insolvency proceedings, an informally agreed reservation of ownership has no effect on creditors. The insolvency administrator will therefore register such goods in the assets and monetize them despite the informal reservation of ownership. The supplier then has no choice but to file a claim for the purchase price of the goods.

Therefore, when entering into contracts with retention of ownership, suppliers should consider not only simply covering the retention of ownership in the contract, but also consider the proper form of the contract, taking into account the creditworthiness of the business partner and the nature of the goods.