The Supreme Court of the Czech Republic has recently ruled that the Civil Code provisions on suspension of prescription periods (effective from 1 January 2014) apply to the Labour Code. As a result, after obstacles defined in the Civil Code suspending the prescription period set forth in the Labour Code cease to exist, the prescription period will be extended and will end no sooner than six months later.
The case concerned an employee whose employment relationship was terminated on 30 October 2014 by her employer with immediate effect, in accordance with the Labour Code because of her continuous unjustified absence from workplace.
On 23 May 2016 (almost two years later), the employee concerned filed a lawsuit against her employer, claiming that the immediate termination of her employment was invalid. On 24 September 2014, the employee was found capable of performing her job by her attending physician. She successfully appealed against the physician’s decision and, on 11 February 2015, was deemed temporarily incapable of performing her job. The medical reason for her incapacity for work was her mental condition (she had even been committed to a psychiatric hospital). The employee claimed that she had not been capable of defending herself against the immediate termination of her employment within the legally prescribed period of two months due to mental health problems.
The court of first instance dismissed the lawsuit on the grounds that the prescription period in Section 72 of the Labour Code had already expired. This conclusion was confirmed on appeal. However, the courts gave the matter very little consideration and essentially only referenced a past Supreme Court decision (no. 21 Cdo 5088/2015 dated 26 February 2016) stating that:
‘the extinguishment of legal right when not exercised in time is always connected with the period prescribed for filing a lawsuit against invalid termination of employment relationship under the Section 72 of the Labour Code, regardless of the reasons due to which this right was not exercised.’
In its decision of 12 June 2018 (no. 21 Cdo 343/2018), the Czech Supreme Court addressed the extraordinary appeal lodged by the employee in light of the new Civil Code that came into effect in 2014. It reached an altogether different conclusion this time.
The Supreme Court emphasised that the Supreme Court decision referenced by the lower courts only applied to past legislation under which it was not possible to suspend or postpone the prescription period in any way, in contrast with the current regulatory framework (Act No. 89/2012 Coll., the Civil Code, as amended).
It stated that, as there are no special provisions on limitation and prescription periods in the Labour Code, general Civil Code provisions (including Section 652 according to which a prescription period shall end no sooner than six months after the date when it started to run again) apply.
The Supreme Court also demanded that the lower courts further address the issue of whether any of the legally recognised obstacles suspending the prescription period apply to the facts of the case in question.
The employee’s extraordinary appeal was therefore successful and the matter has been referred back to the court of the first instance.
As of 1 January 2014, suspension of the prescription period (or postponement of its beginning) due to an obstacle recognised by law now also applies to employment relationships. This will affect prescription periods included in the Labour Code, particularly those relating to contesting various forms of dismissal or termination.
Under the Civil Code provisions, these periods can be suspended due to obstacles recognised by law and after the removal of these obstacles, are prolonged to at least six months. Where this applies to short prescription periods (some last only days), it would be contrary to the principle of legal certainty that lies at the very core of labour law.
The Supreme Court decision does not come as a complete surprise. Lawmakers have been aware of this issue and attempted to fix it by amending the Labour Code. The proposed amendment was meant to introduce a new special provision on prescription periods for the purposes of labour law. The Labour Code would then have operated with obstacles suspending prescription periods, however, after such obstacles ceased to exist, the rest of the period would not be prolonged by six months as stipulated by the Civil Code. Should the remaining period be shorter than five days, it would be extended and would end no sooner than ten days from the day on which it began to run again.
The final Regulatory Impact Assessment (RIA) report on the proposed amendment stated:
‘the use of the rule as provided for by the Civil Code significantly prolongs the prescription period which is not desirable when it comes to a prompt and flexible solution of issues that arise from employment relationships. Undue extension is contrary to the public interest and to the aims of protection afforded to both the employee and the employer in employment relationships.’
However, the previous Chamber of Deputies did not manage to amend the Labour Code in time. This decision of the Czech Supreme Court confirms that the Civil Code provisions have to be applied currently, even though the rules set forth by the Civil Code are completely unsuitable for the purposes of labour law.
As for the obstacles recognised by the Civil Code that could possibly apply in labour law, they include force majeure (such as illness in this case) or the conclusion of an agreement on out-of-court dispute resolution.
One could easily imagine a situation where an employee is given a termination notice by their employer and challenges its validity at the very beginning of the two-month prescription period. The employer then suggests a settlement and offers to provide the employee with compensation in return for the promise that no lawsuit will be filed. The employee accepts but changes his mind at the end of a meeting that lasted for several hours and led nowhere. An ‘obstacle’ consisting of a short meeting (falling under out-of-court dispute resolution) could lead to an extension of the prescription period for bringing an action to six months. As far as employment relationships are concerned, this uncertainty goes against the interests of both the employer and the employee. The prescription periods in labour law are short for a reason: if they were supposed to be interpreted more generously, they would have been constructed as mere limitation periods (not the disproportionately extensible prescription periods that have been introduced by the Civil Code). In the case of the proposal above to resolve the matter out of court, the employer would be incentivised to refuse and start negotiations only after a lawsuit had been filed.
The Supreme Court decision confirming that Civil Code provisions on suspension of prescription periods apply to employment relationships exposes the need for Labour Code amendment and should serve to remind the lawmakers to address this issue as soon as possible.