Law
Legal News [July 2026]: The Supreme Court Clarifies Rules on Set-Off, Termination of Employment Relationships and Shareholders’ Rights
The July selection of Supreme Court case law brings important conclusions in the areas of employment law, corporate law and civil procedure. The Supreme Court clarified the rules governing the interpretation of declarations of intent in relation to the set-off of claims and the award of wages after statutory deductions have been paid, defined the conditions under which an employer may terminate employment with immediate effect during uncertainty as to whether the employment relationship continues to exist, and interpreted the commencement of the limitation period for bringing an action under Section 156(2) of the Business Corporations Act. The selection concludes with a decision highlighting the limits of the admissibility of appeals based solely on procedural defects and the requirements of the court's duty to instruct the parties under Section 118a of the Civil Procedure Code.
- In its judgment of 13 May 2026 (Case No. 31 Cdo 213/2026), the Czech Supreme Court addressed (i) the interpretation of a declaration of intent aimed at setting off claims, (ii) the certainty required for a set-off where multiple claims exist, and (iii) whether wages should be awarded in their gross amount even if the employer has already paid the statutory deductions before the court’s decision.
- The claimant, a former employee, sought payment of outstanding wages, a variable remuneration component and severance pay. The defendant argued that the wage claim had been set off against its claim for damages by means of an email sent by the claimant. The lower courts rejected the set-off as insufficiently certain and awarded the claimed wages.
- The Supreme Court emphasised that (i) when interpreting a declaration of intent, the decisive factor is the true intention of the person making it (Sections 555–556 of the Civil Code), assessed in light of all the relevant circumstances rather than merely its literal wording. It further departed from its previous case law and concluded that (ii) a set-off is not rendered uncertain merely because it does not specify which of several claims are extinguished; in such circumstances, the rules laid down in Sections 1932 and 1933 of the Civil Code apply. As regards wages, the Court confirmed that (iii) wages should generally be awarded in their gross amount; however, where the employer has already paid the statutory deductions, the employee’s claim is extinguished to that extent. The Court therefore quashed the appellate court’s judgment in this respect and remitted the case for further proceedings.
- In its judgment of 26 May 2026 (Case No. 21 Cdo 720/2026), the Czech Supreme Court considered whether an employer may validly terminate employment with immediate effect where an employee, before the expiry of a fixed-term employment contract, has notified the employer that they insist on continued employment under Section 39(5) of the Labour Code, while it has not yet been definitively established whether the employment relationship actually ended upon expiry of the agreed term.
- In the case at hand, the claimant had been employed under a fixed-term contract that had been repeatedly extended. Before its expiry, the claimant informed the employer that they insisted on continued employment. A dispute subsequently arose between the parties, including the sending of inappropriate text messages and critical emails, after which the employer terminated the employment with immediate effect. The employer maintained that the employment relationship had already ended on a particular date but terminated it “as a precaution” should it still be deemed to exist. The lower courts held that such termination was invalid, considering it to constitute an impermissibly conditional legal act.
- The appeal was admissible and well-founded because it raised a previously unresolved substantive legal issue. The Supreme Court emphasised that, under Section 39(5) of the Labour Code, legal uncertainty arises as to whether the employment relationship actually ended upon expiry of the agreed term or whether it was converted into employment for an indefinite period, with only the courts being able to determine that issue conclusively. During this interim period, however, the parties remain entitled to terminate the employment relationship by any of the methods provided for by law, including termination with immediate effect. The Court further held that the employer’s statement that it was terminating the employment “as a precaution” in the event that the employment relationship still existed did not constitute an impermissible suspensive condition but merely reflected uncertainty as to the legal status of the relationship and therefore did not render the legal act invalid.
- In its judgment of 4 June 2026 (Case No. 27 Cdo 621/2025), the Czech Supreme Court addressed a previously unresolved substantive legal issue concerning the commencement of the preclusive time limit for bringing an action under Section 156(2) of the Business Corporations Act, namely whether the time limit begins to run upon the expiry of the deadline set by the shareholder in its request for information or only once the company expressly refuses to provide the requested information.
- In the case at hand, the claimant, acting as a shareholder, sought access to information and the company’s documentation. The company failed to respond within the deadline set by the shareholder, subsequently communicated that the requested information would be provided, disclosed part of the requested documents, but ultimately refused to provide the remaining information. The court of first instance partially upheld the claim, whereas the appellate court dismissed it, holding that the action had been filed after the expiry of the one-month preclusive time limit, which it considered to have commenced upon the expiry of the deadline specified by the shareholder.
- The Supreme Court held that the preclusive time limit under Section 156(2) of the Business Corporations Act begins to run only when the shareholder is notified that the company refuses to provide the requested information, that is, upon a clear and unequivocal expression of the company’s intention to deny the request, irrespective of its form. Mere silence on the part of the company or the expiry of the deadline set by the shareholder does not amount to such refusal and therefore cannot trigger the commencement of the preclusive period. The Court further concluded that the date on which the company was obliged to provide the requested information is irrelevant for determining the commencement of that period. At the same time, it observed that where the company remains silent, the shareholder is not prevented from bringing an action before the court even though the preclusive period has not yet begun to run. The Supreme Court therefore held that the appellate court had erred in its legal assessment, quashed its judgment and remitted the case for further proceedings.
- By its resolution of 27 May 2026 (Case No. 25 Cdo 3107/2025), the Czech Supreme Court considered whether objections relating to procedural defects, specifically the court’s failure to provide proper instructions under Section 118a of the Civil Procedure Code, may in themselves establish the admissibility of an appeal on points of law. In the case at hand, the claimant sought damages representing lost profits arising from the inability to lease a racing circuit during repairs made necessary by damage caused by the defendant. The court of first instance dismissed the claim on the grounds that the alleged lost profits had not been proven. After taking additional evidence, however, the appellate court largely upheld the claim, emphasising that the claimant had not been properly instructed under Section 118a of the Civil Procedure Code and was therefore entitled to supplement both factual allegations and evidence during the appellate proceedings. The defendant subsequently lodged an appeal based primarily on alleged procedural defects, namely the inadequate instructions given by the first-instance court and the allegedly impermissible taking of additional evidence on appeal.
- The Supreme Court dismissed the appeal as inadmissible, emphasising that objections concerning procedural defects alone cannot establish the admissibility of an appeal unless they are accompanied by a substantive legal issue on which the contested decision depends. The Court further stated that merely making a party aware of the court’s legal opinion does not replace the formal duty to instruct under Section 118a(3) of the Civil Procedure Code, which must include an invitation to supplement factual allegations or evidence together with information on the consequences of failing to do so. Where such instructions have not been given, additional evidence may be admitted during appellate proceedings without infringing the rules governing the concentration of proceedings.
