Without much fanfare, a new Section 324a of the Czech Labour Code came into effect on 1 January 2024, introducing a new legal obligation for construction companies to guarantee the wage claims of their subcontractors' employees. Construction companies now guarantee the wages, salaries and remuneration of their subcontractors' employees up to the minimum wage, including for employment agencies. The obligation to pay the unpaid wages arises based on the employee's written request. Non-compliance with the obligations under the guarantee may lead to a fine of up to CZK 2,000,000 imposed by the Labour Inspectorate.  

Nevertheless, the guarantee can be avoided if, no later than the commencement of the subcontractor's performance, the construction company secures confirmation that the subcontractor has no outstanding arrears or penalties related to insurance payments for employees (not exceeding three months). Additionally, the subcontractor must not have incurred fines of more than CZK 100,000 for breaching labour law obligations within the preceding 12 months.

We therefore recommend that construction companies review their standard documentation and thoroughly check their subcontractors, even within ongoing projects. Given the lack of a transitional provision, it is possible that the statutory liability will also apply to them!

Authors: Tomáš Král, Lukáš Tománek

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