Employee vs Contracter. Schwartzsystem – what is it?

It is not a secret that so-called Schwartzsystem is a common practice, despite its illegality. What is it? It is, the name which became nominal, designation of the economic activity, when the person who works for the employer, but is not formally an employee and acts as an independent entrepreneur.

The Labour Code of the Czech Republic distinguishes the illegal labor practices. According to the code, illegal work is defined – The implementation of the “dependent” work by the individual outside the labor relations, or in other words relations “employer-employee”.

Paragraph 139 of the Labor Code, namely article 3 letter C, supplements that the penalty for this violation by that illegal work for the Individual Entrepreneur (in Czech – OSVČ – Osoba Samostátně Výdělečně Činná = in other words freelancer) is 100,000 Czech Crowns, and for the same time for the employer is 250,000 Czech Crownes.

In order to avoid the field of illegality – it is necessary to distinguish between the:

1. Dependent work:

a. Where is existing the subordination of the employee to the employer,

b. The work is done in the name of/ on behalf of the employer,

c. The work is done on the instructions of the employer,

d. The work is done for the salary or the wage,

e. The work is done on the costs and responsibility of the employer,

f. The work is done in a specific working hours

g. In a specific workplace.


2. The Entrepreneurship:

a. On the basis of the Civil contract – for cooperation or the contract for the service providing- where is certainly identified the activity (and/or the results of such activity), the set of the terms of such cooperation (and should be stressed, that there should not be sub missed relationships, hierarchy, stable working hours, workplace, sentence about vacations)

b. The award – on the basis of the actual work or/and its results.

c. The control is over the executed work, but not the executing (or work in the process). Moreover, the entrepreneur usually provides services to multiple customers rather than one.

Thus, there is a need to carefully weigh, in the framework of what areas in which entrepreneurs build their working relationships – under the Labour Code or under the Civil Code. It is worth to mention, that the control of illegal employment carries the Labour Inspectorate (Inspektorát Práce). Should be also added, that only in the first half of year 2012 were imposed about 2000 fines amounting to more than 100 milion Czech krones. (the statistics from the http://www.suip.cz/)

(c) Elmira Lyapina


Disclaimer about the nature of the information contained in this article. The information provided in this article is general information, and does not constitute legal advice, and may not be valid in a particular situation. To obtain qualified legal consultancy, you should contact a lawyer with the provision of the necessary documents regarding the case. For example, by email: juristpraha@gmail.com. This article was prepared on the basis of an analysis of legislative regulations for the year 2014. Therefore, while using such information, any changes made to the legislation after that date should be taken into consideration. This is a translation of an article which was published firstly in the Russian language on February 21, 2014 http://vk.com/jurist_praha?w=wall-60692647_14