The Supreme Court of the Czech Republic has issued another judgment in a long line of rulings devoted to the so-called ‘concurrence of duties’ issue, i.e. performance of the office of a governing body in parallel with the employment relationship. The court held that a legal entity and a member of its governing body may diverge from the provisions which determine their relationship when concluding a contract for the performance of the office. It can be governed by a mandate contract, whereby certain provisions may be subsumed under the Czech Labour Code. Nevertheless, the relationship will stay commercial in its nature and does not turn into an employment relationship. It is not possible to diverge from certain provisions of the Business Corporation Act, such as provisions on remuneration of the member of the body.
According to the rules on deductions of salary and other earnings contained in the Czech Civil Procedures, the so-called “unseizable sum” cannot be deducted from selected categories of earnings. The specific amount of the unseizable sum is calculated according to formula encompassed in a governmental decree. Nevertheless, remuneration received by the member of the governing body is not considered to fall within the categories of earnings that are protected by the legal institute of the unseizable sum. As a consequence, should the member of the governing body become subject to seizure, the whole amount of his/her earnings can be seized.
In our opinion, earnings of members of the governing body will not be protected by the legal institute of the unseizable sum even when the contract on performance of the office will be subsumed under the Czech Labour Code, and it will be possible to seize the entire amount. One of the possible solutions, if possible under the given circumstances, may be to conclude two contracts between the entity and member of its body – contract on performance of the office and an employment agreement. Under such circumstances, it would be possible to protect a received salary based on the employment agreement at a minimum, as it will place the proof of burden with respect to origin of the earnings on the executor should he/she want to seize the whole salary.
For more information on this issue, please feel free to contact one of our experts.