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The amendment to the Labour Code, effective 1 January
2024, introduced a mandatory liability of contractors for wage
claims of their subcontractor’s employees in the construction
industry. Simply put, if a subcontractor’s employee does not
receive their wage, they can claim the payment from the
contractor.
Contractor – Subcontractor
For the purposes of the suretyship, a contractor is a
construction businessperson or entity that uses the services or
materials provided by a subcontractor while performing
consideration for a third party. An employment agency is also
considered to be a subcontractor if it supplies employees to the
contractor.
Satisfaction of wage claims
Should the employee not be duly paid for the work they have
performed in the course of performance for the contractor, they
may, within 3 months of the end of the
pay period, require the contractor in writing to satisfy the wage
claims. The contractor is liable for the wages of the
subcontractor’s employees to the extent of the contractual
performance for the contractor, up to the amount of the minimum
wage (CZK 18,900, approx. EUR 746).
If the employee requests payment of the wage from the contractor
and the contractor pays the unpaid wages to the employee, the
contractor may subsequently seek reimbursement from the non-paying
subcontractor.
The contractor is obliged to pay the wage within 10
days of receipt of a written request from the
employee and is also obliged to make mandatory deductions from the
wage paid, i.e., tax, insurance premiums, etc.
Avoidance of liability
The good news is that the contractor may prevent liability if
they receive confirmations that the subcontractor
has no outstanding social security and health
insurance claims and that it has not
been imposed a fine of over CZK 100,000
(approx. EUR 4,000) in the past year for
breaches of labour law. The issue is that the confirmations must
not be older than three months and must be submitted to the
contractor upon the commencement of the contractual consideration,
not upon the conclusion of the contract between the contractor and
the subcontractor.
Failure to fulfil the obligation
If the surety fails to comply with its obligation to pay the
subcontractor’s employee the past due wages on time, it
commits an offence for which it may be fined up to CZK 200,000
(approx. EUR 8,000) by the Labour
Inspectorate.
Key Action Points for Human Resources and In-House Counsel
- Building contractors are now liable for the wage claims of
their subcontractor’s employees. - To avoid liability, the supplier must obtain prescribed
confirmations from the subcontractor. - A subcontractor’s employee may claim their past due wage
from the contractor within three months from the due pay date.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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