It’s Not Only In Prague That People Are Supposed To Be Happy; How Czech Courts Determine the Value of Work

Hana Brablcová

In late August this year, the Constitutional Court ruled on a case that unexpectedly stirred up the debate on „what is fair remuneration for work“. The crux of the dispute in this case was not the different remuneration of women and men, but the question of whether employers can remunerate employees differently based on the location where they are employed. Despite this, people interested in the topic of pay equity for women and men should familiarise themselves with the decision. The Constitutional Court, as well as other courts that have ruled on the case, have elaborated on the content of the term „equal work“ and how an employer can dispute in court that it is equal work.

The Czech Post case: Why does a driver in Olomouc get less money than in Prague?

An employee who works for the Czech Post as a driver in Olomouc and its environs turned to the courts. The employee was dissatisfied with the fact that he was paid several thousand less than drivers who work for the Czech Post in Prague and its environs. The complainant demanded that his employer pay him the difference in wages. He based his claim on the rule that employers must pay the same wages to employees who perform the same or comparable work for them.

Czech Post, not entirely surprisingly, did not agree with its employee’s request. First of all, according to the employer, drivers in different regions do not perform the same work. The work in Prague is more complex, given the size of the region, the shift patterns, the distribution of the operation and other aspects. Later, the employer also argued in court to have been taking into account the real wage level in relation to the cost of living, which is higher in Prague area than in other regions. Thus, if the employer offered Prague drivers the same wages as drivers in other regions, those employees would ultimately be paid less because they could not afford the same standard of living for their wages. At the same time, it would be very difficult for the employer to attract quality employees because it would not be competitive in Prague.

The Labour Code addresses equal work but is silent on the cost of living

Simply put, an employer cannot act arbitrarily in determining the amount of wages, but must use fixed criteria in determining the amount of wages. At the same time, the employer must equally remunerate employees who perform the same or comparable work. When assessing whether the work is the same, the criteria for determining the amount of pay must be used. Thus, the employer must, for example, assess whether the employees who are being compared perform comparable work or work in comparable conditions. The Labour Code does not explicitly mention the cost of living in relation to remuneration.

The courts concluded that the drivers in Prague and Olomouc performed the same work, so the employer was obliged to provide them with the same pay. The employer may not provide higher wages to drivers in Prague solely because of the higher cost of living in Prague.

General courts on the complainant’s side

The courts have dealt in detail with the employer’s objection that the work of the drivers in Prague and Olomouc is not comparable in view of the more demanding conditions of the drivers in Prague. The courts concluded that, although the working conditions of specific drivers in Prague and Olomouc may differ (e.g. shift patterns and the obligation to work at weekends), such differences can also be found within the regions that are being compared (e.g. between two drivers in Prague). The drivers in Prague thus had, among other things, both higher and lower number of stops on the route compared to the complainant, and the route itself could be either shorter or longer. The courts thus concluded that the work of a driver in Prague and that of a driver in Olomouc were comparable.

According to the courts, when determining the amount of the wage, it is also necessary to base it on the conditions at the employer’s workplace, not on external conditions such as the prices of goods and services in the region. In other words, the courts concluded that the employer violated the „equal pay for equal work“ rule when it provided drivers in Prague with higher wages compared to other drivers in order to compensate them for the higher cost of living in Prague.

The courts concluded that the drivers in Prague and Olomouc performed the same work, so the employer was obliged to provide them with the same pay. The employer may not provide higher wages to drivers in Prague solely because of the higher cost of living in Prague.

How did the Constitutional Court rule?

As the employer believed that the above-mentioned conclusions of the courts had infringed its fundamental rights (e.g. the right to own property and to run a business), it lodged a complaint with the Constitutional Court. The Constitutional Court rejected the complaint as manifestly unfounded. Although the Constitutional Court did not deal with the complaint in detail, several points in its decision are worth noting.

The Constitutional Court pointed out that the employer claimed two reasons for the difference in wages between drivers in Prague and Olomouc. At the same time, however, the employer did not specify how much of the difference in wages was due to the claimed higher workload of the drivers in Prague and how much of the difference in wages was to compensate for the increased cost of living in Prague.

Furthermore, the Constitutional Court pointed out that although the employer had suggested that the socio-economic conditions in the region in question should be taken into account when determining the amount of the wage, the employer itself failed to indicate how this taking into account should be carried out. In other words, the employer did not indicate how it had set up the remuneration system to take account of the differences in the cost of living in the various regions in a fair manner. Although in the present case the wages of drivers in Prague and Olomouc were compared, the evidence showed that the employer only differentiated between drivers working in Prague and the rest of the country. In the opinion of the court, it is „difficult to conclude that the necessary cost of living is significantly higher only ‚in Prague and the surrounding area,‘ whereas outside Prague it is a homogeneous variable. Even when comparing Brno and Olomouc, for example, the cost of purchasing housing will not be completely identical, and the difference between other regional cities will be even more significant.“[1]

Last but not least, the Constitutional Court explicitly states that „different socio-economic conditions of individual regions or different levels of the necessary cost of living are not, according to the legislation, included under the criteria used to compare the ‚equal work‘ of two employees or the ‚equal wage‘ of two employees, since not only are they not explicitly mentioned among the criteria, but they cannot be included under the criterion of working conditions either, since these are, according to the list included in Section 110(4) of the Labour Code, subject to the internal conditions under which the work is carried out.„[2]

 The case raises the issue of compensation for women and for men

In cases involving unequal pay between women and men, women have argued before the courts that (like the driver in our case) they do the same work as their male colleagues but are paid less for it. Employers then usually (like the Czech Post) give reasons for the pay gap, i.e., why the men, with whom the complainants compare themselves, are paid more. Unfortunately, however, the remuneration criteria alleged by employers are often uncritically accepted by the courts which reject the claims of the female employees on the basis of these alleged criteria. The alleged criteria range from the undoubtedly legitimate ones to dubious ones (to put it mildly). However, if the courts were to adopt the approach applied in this case, i.e.:

  1. if they focused on what work was performed by the employees in the position in question,
  2. if they examined whether the criterion applied to the difference in remuneration as stated by the employer is such that the employer may use it in determining the amount of remuneration,
  3. if they examined whether the employer applies that criterion consistently to all employees performing comparable work; and
  4. how this criterion is reflected in the remuneration of employees (what weight the employer gives to this criterion),

then the decisions in cases of alleged unequal remuneration would undoubtedly be more convincing than they are at present.

Have the courts ruled fairly? And what does this imply?

As I mentioned at the beginning of this article, the decision of the courts in the case of the „Czech Post“ aroused quite strong emotions. It is not surprising – the fact that work in Prague and big cities is usually better rewarded financially has long been taken for granted by most of society. It is therefore understandable that, given the objectively higher cost of living in these cities, the courts‘ decisions may be perceived as unfair. One can also understand the resentment on the part of employers operating nationwide, which is perhaps best summed up in the statement sent to the Constitutional Court by the Chamber of Commerce. According to the statement, the Chamber of Commerce considers the interpretation of the courts to be „a dangerous economic and social experiment leading to a substantial reduction in the standard of living of all citizens of the Czech Republic, to the increase in the price of goods and services and to the decline of the Czech economy.“ As a result of this interpretation, according to the Chamber, „the mechanism of free determination of the price of labour on the market will be suppressed.“[3]

On the other hand, I believe that this criticism is often wrongly directed at the courts in question. In my view, under the current legal framework, the courts have had little scope to consider the matter differently. In its decision, the Constitutional Court also stated that “it is of course aware of the  business entities’ point of view and of the situation in the labour market which the complainant also refers to in its constitutional complaint, but it is primarily the legislator’s task to reflect the functioning of the labour market and the socio-economic differences between the various regions (and the differences in real wage levels), it is not the task of the general courts or the Constitutional Court which is not responsible for performing the function of a positive legislator and for shaping or interpreting legislation in a way that differs from the text of the law (and its meaning).[4]

We will have to wait for the final resolution of the case; the courts must now decide whether to award the complainant the claimed difference between the wages he received from his employer and the wages of the drivers in Prague. Similarly, we will have to wait to see what impact the decision will have not only on employers‘ wage policy but also on the courts‘ decision-making practice.

 

The author is a collaborator with the project. She works as a lawyer in the Office of the Ombudsman. This article does not represent the views of the institution she works for.

[1] Ruling of the Constitutional Court of 31 August 2021, file no. I ÚS 2820/20, item 41.

[2] Ibid., paragraph 37.

[3] Ibid., item 22.

[4] Ibid., item 45.

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