The Supreme Court again dealt with the issue of the admissibility of the co-existence of functions in the exercise of the position of a member of the statutory body and at the same time the employment relationship with the same company. The Chairman of the Board of Directors (as an employee) entered into a management agreement with the company (as an employer) for the position of Chief Executive Officer. The duties of the CEO were, however, the same as those under the responsibility of the Board of Directors.

In its previous decisions, the Supreme Court concluded that such an employment (management) agreement was invalid because it was a violation of the law, since a member of the statutory body as an employee cannot exercise the same activity for the company under an employment agreement which is in the responsibility of the statutory body. If this agreement was not valid, it could not provide a member of the statutory body with the right for wages or other benefits.

As we have previously informed you, the Constitutional Court in 2016 inferred that these arguments contradict the subjective right to freedom of action within the legal limits, the autonomy of will and freedom of contract and the fundamental principle of the interpretation of the agreements, i.e. the advantages of such interpretation which does not constitute the invalidity of the agreement to the interpretation which constitutes the invalidity of the agreement.

With respect to the above finding of the Constitutional Court, the Regional Court in Hradec Králové and subsequently the Supreme Court concluded that the parties in a relationship may, within the legal limits, choose any legal regime, i.e. including the regime of the Labour Code. This arrangement, however, does not mean that there will be an employment relationship between a member of a statutory body and a commercial corporation. It will continue to be a commercial relationship which will be subject to those provisions of the Labour Code which are not inconsistent with the provisions of the Commercial Code (please note that the procedure related to the period before the validity of the Act on Business Corporations) which cannot be derogated in the case of a relationship between a member of the statutory body and a business corporation (mandatory rules of law).

The panel of judges of the Supreme Court thus reached a legal opinion that was different from the previous rulings of the Supreme Court and the issue was referred to the panel of 15 judges - 13 representatives of the various court departments, the vice-chairmen and the chairman of the court. The panel of fifteen judges confirmed that in such a situation the management agreement should not be invalid just because of the choice of Labour Code. Instead, it should be perceived as an addendum to the agreement on the performance of the position and it should have the same requirements as the agreement on the performance of the position itself. These include the conditions for the performance of the position and the consequences of their absence, remuneration, the form of contract for the performance of the position and the obligation to approve it by the competent authority, the obligation to perform the position with due diligence or rules governing the establishment and termination of the position of a member of the statutory body. In other areas, a member of a statutory body and a business corporation may depart from the Commercial Code, for example by choosing the Labour Code regime for their relationship.

It seems therefore that the issue of co-existent positions could be resolved. The above conclusions are likely to be applicable even under the current regime which does not differ significantly from the amendments in the Commercial Code. In the case of co-existent positions, we recommend that the legal relationship be treated by a quality agreement on the performance of the position which can include the vast majority of the benefits of standard employees under the Labour Code, including travel allowances, holiday or traditional employee benefits.

Miroslav Černík and Šárka Veselá