The Government of the Czech Republic, in order to prevent the spread of the coronavirus known as SARS-CoV-2 within its territory, declared a state of emergency and adopted several crisis measures that significantly impact the activities of many entrepreneurs and public law corporations. Here, we provide a clear summary of their effects in the most important areas along with practical legal recommendations.
1. LABOR LAW ASPECTS OF THE SPREAD OF SARS-CoV-2
Employer’s obligation to minimize health risks related to work performance.
Employers are required to take measures to protect employees’ health at work, including in connection with the coronavirus, specifically:
Provide awareness among employees about coronavirus infection prevention (recommendations on basic personal hygiene, timely reporting of suspected infection or contact with an infected person, etc.);
Provide protective equipment appropriate to the nature of the work (disinfectants, masks, respirators, etc.) and ensure increased disinfection of the workplace;
Limit large in-person meetings of employees, restrict third-party presence on the premises, and limit business trips;
Inform employees about the adopted measures and update them as the situation develops.
All measures must be properly documented so the employer can prove that they are fulfilling their occupational health and safety obligations. When implementing measures, the privacy of individual employees must also be respected.
Transition of employees to working from home (home office)
This reduces the risk of infection and spread of the coronavirus, as well as the economic impacts of crisis measures. However, working from home is still dependent work, where the employer bears responsibility for the employee (e.g., occupational health and safety, work accidents, reimbursement of costs for wear and tear on employee’s equipment). The employee must perform assigned tasks to the same extent and quality as if working on-site. When broadly transitioning employees to home office, clear rules for remote work must be established, employees informed, and compliance monitored by managers.
Temporary reduction in labor demand due to decreased demand for products and services
The Labor Code offers several options to address a temporary reduction in labor needs:
Prohibit employees from attending the workplace and reduce wage compensation up to 60% of average earnings via internal regulations (or agreement with the trade union);
Schedule vacation at least 14 days in advance (or sooner by agreement);
Reschedule shifts at least 14 days in advance (or sooner by agreement).
Impacts of obstacles on employees’ side – mandatory quarantine, school closures
Employers must excuse temporary employee incapacity due to crisis measures in cases of:
Employee staying in a risk area, typically for 14 days from return;
Need to care for a child under 10 years old.
If the employer wants the employee to work from home, this must be agreed in advance to avoid issuing a sick leave certificate.
2. CONTRACTUAL RELATIONSHIPS
Coronavirus in contractual relations
Government measures related to the coronavirus epidemic can have significant legal impacts not only on international trade but also on domestic commercial transactions. Czech suppliers and customers currently face the question of whether it is possible to renegotiate contractual terms for delivery of goods or services due to increased costs or loss of expected profit, or to excuse delays, suspend, or even cancel deliveries.
These legal issues must always be assessed based on the specific contract content. However, the Civil Code establishes the following basic rules:
Fundamental change of circumstances
The coronavirus epidemic or related government measures may be considered a fundamental change of circumstances if they cause an especially severe imbalance, benefiting one party by disproportionately increasing the costs of performance or disproportionately decreasing the value of performance.
In such cases, the affected party may request renegotiation of the contract from the other party within 2 months of learning about the circumstances causing the severe imbalance. If no agreement is reached within a reasonable time, either party may take the matter to court.
This applies only if the parties have not assumed the risk of change of circumstances in the contract (i.e., if they have not excluded the application of Section 1765(1) of the Civil Code).
In any case, the affected party must continue fulfilling contractual obligations during renegotiations or court proceedings, otherwise they are in default.
Force majeure
The coronavirus epidemic or related government measures may excuse non-performance due to extraordinary, unforeseeable, and insurmountable obstacles beyond the control of the obligated party, temporarily or permanently preventing performance (so-called force majeure).
Unpredictability must be assessed at the time the contract was concluded; insurmountability depends on individual circumstances.
If a party breaches the contract due to force majeure, it is not liable for damages to the other party. However, if the contract does not contain different provisions, force majeure does not excuse other consequences such as contractual penalties or contract termination.
Subsequent impossibility of performance
In exceptional cases, the epidemic or related government measures may lead to termination of the contract due to subsequent impossibility of performance, if performance cannot be provided even under more difficult conditions, higher costs, with assistance from another person, or after a specified time.
How to proceed in specific cases:
Check if the contract includes a clause on the assumption of risk of changed circumstances;
Check if the contract contains a force majeure clause or if statutory rules will apply;
Immediately notify the contractual party of any fundamental change of circumstances, force majeure, or subsequent impossibility of performance;
Continuously evaluate the fulfillment of conditions for application of fundamental change of circumstances, force majeure, or subsequent impossibility of performance.
3. PUBLIC PROCUREMENT
A crisis situation generally requires an adequate response, which often cannot be implemented without appropriate material resources. If it is a qualified crisis situation as defined by Act No. 240/2000 Coll., on Crisis Management and amendments to certain laws (the Crisis Act), under which we currently are, it is possible to consider using an exemption from the obligation to conduct lengthy procurement procedures under Act No. 134/2016 Coll., on Public Procurement, as amended (the Public Procurement Act), when procuring necessary supplies, services, or even construction works.
Such a procedure may not only be permissible but often necessary to effectively protect the interests of the Czech Republic and its citizens, which the crisis situation acutely threatens.
Conditions for applying the exemption under § 29(c) of the Public Procurement Act:
The contracting authority is not obliged to conduct a public procurement procedure;
It concerns the awarding or performance of a public contract within special security measures established by other legal regulations;
It is not possible to take measures that would allow the procurement procedure to be carried out.
Review by the Office for the Protection of Competition (ÚOHS)
The ÚOHS reviews only whether the conditions for direct award of a public contract in crisis situations are met; however, the specific contracting procedure does not fall under ÚOHS review.
4. COMPENSATION FOR DAMAGES
In connection with crisis measures adopted due to the coronavirus epidemic, the state is, in accordance with § 36 of the Crisis Act, which sets out the special liability of the state for damages, obliged to compensate damages incurred by natural or legal persons causally linked to the crisis measures.
The following conditions must be met for liability for damages under § 36 of the Crisis Act:
Existence of a crisis measure;
Occurrence of damage;
Causal link between the crisis measure and the damage;
The injured party did not cause the damage themselves, e.g., by breaching preventive duties.
The claim for compensation must be made by the injured party no later than 6 months from the day they learned of the damage, to the relevant crisis management authority. Filing the claim with the relevant authority is a prerequisite for possible judicial claims or proceedings.
It is crucial for the injured party to diligently document and record all damages incurred in connection with the crisis measure, as they must prove fulfillment of all above conditions to establish state liability. It is also necessary to continuously take all possible steps to minimize damages (e.g., negotiate with contractual partners to extend agreed deadlines).
5. STATE AID
To mitigate economic impacts, several measures prepared by the Government are currently available:
Apply for an interest-free COVID loan from ČMZRB (currently 1.5 billion CZK allocated);
Use the option to delay filing tax returns or control statements and tax payments by up to 3 months;
Request waiver of penalties for overdue tax payments;
Request changes to the amount of tax prepayments or exemption from the obligation to make advance tax payments.
The Government has also announced that further relief measures are being prepared. Funds from reallocated European operational programs should also be available to mitigate impacts. Due to the high demand for subsidies and grants, it is essential to monitor government announcements and respond with very fast and flawless applications.
