Jul 16

Is a business corporation entitled to enter into employment agreement with a member of its statutory body?

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According to case law, an employment agreement entered into between a company and a member of its statutory body was automatically regarded as invalid.
The Supreme Court changed this case law by its decision file no. 4831/2017 of 11 April 2018.
In its previous decisions, the Supreme Court stated that performance of office as a member of the company’s statutory body was not regarded as employment and therefore, this relationship was not regulated by the Labor Code.
Now, the Supreme Court referred to the decision of the Constitutional Court file no. I. ÚS 1190/5 of 13 September 2016, where the Constitutional Court referred to the principles of contractual freedom and the autonomy of parties’ will and concluded that it was possible that a company and a member of its statutory body agreed that their relationship would be regulated by the Labor Code, however, only to the extent of mandatory standards of the Business Corporations Act. For the sake of completeness, mandatory standards are such standards by which the parties must abide in the form as these standards are provided in the applicable laws and from which they cannot derogate.
Mandatory standards provided in the Business Corporations Act and in the Civil Code are for example the provisions on: remuneration of members of a statutory body, beginning and end of office, preconditions of performance of office, obligation to perform office applying due manager’s care, form of agreement on performance of office, obligation to have such agreement approved by the respective company body – by the general meeting or by all shareholders with unlimited liability for the company’s debts etc.
Although that a company may enter into employment agreement with a member of its statutory body, it is still a commercial-law relationship, and not an employment under the Labor Code, including all that it would imply (e.g. protection rules at termination of employment).
The final summary is that an employment agreement for performance of activities falling within the scope of a statutory body is not automatically null and invalid; however, the above-mentioned limits apply to such agreement.
Should you have any questions concerning this issue, please do not hesitate to contact us and we will be happy to give you answers.

Mgr. Lenka Shánělová,
Junior Associate AK Pajerová s.r.o.
11 July 2018