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Controversial legislation adopted in 2014

Temporary employment, Civil Code amendment, changes to the Income Tax Act, the Commercial Code, and the Collective Bargaining Act

Changes to temporary employment are also seen as controversial.(Source: SME)

The Slovak Spectator spoke about these changes with Daniel Futej, partner at Futej & Partners, Allen & Overy Bratislava law firm, Tomáš Urban, attorney at Čechová & Partners, Ľubomír Leško, attorney at Peterka & Partners, and Havel, Holásek & Partners law firm.

TSS: Which legislative changes or new laws adopted in 2014 do you consider controversial or problematic, and why?

Daniel Futej : The amendment to agency employees may cause significant cost problems for businesses. Under the new law the user employer is obliged to pay the difference in wages if those of a temporary employee are lower than those of its own comparable employees. Such balance payment must be paid within 15 days from the payday agreed on between the user employer and the agency. It means that if temporary employees get a lower wage than a comparable employee of the user employer, it may mean that the temporary employees can enforce their right directly against the user employer before a court! Moreover, for the purposes of payment of the difference in wages, user employers shall be obliged to make all obligatory deductions (social security, health insurance, tax advance payments); for this purpose, the user employer is considered a regular employer of a temporary employee. It will not be possible to conclude the contract on providing other services if these services would basically mean that the user employer is giving the instructions to the employees of another employer or agency; the services would be performed on the premises of the user employer; and the scope of activities performed by employees belong to the scope of business of the user employer. Such employees would be considered as user employees and would be entitled to get the same wage as actual employees of the user employer. Finally, the conditions of temporary assignment are stricter.

Read also: Read also:The most important legislative changes

Allen & Overy Bratislava: Another consumer-related amendment to the Civil Code and the implementing legislation has underlined the often non-conceptual and idiosyncratic method of protecting Slovak consumers. Whilst consumer protection is certainly a legitimate policy, it is questionable whether it is really advanced by setting a minimum font size of 1.9 mm and, most importantly, by sanctioning all non-compliant contracts with nullity. At the end of the day, the nullity of contracts may even be detrimental to consumers. In any event, at least the legislator did not adopt the bizarre proposal tabled in the legislative process that all consumer contracts should be printed in one specific font (Times New Roman).

Another problematic piece of legislation was the amendment to the Income Tax Act. In addition to headline changes such as the introduction of thin cap rules, extension of transfer pricing and restrictions on tax expenses, we have encountered numerous problems concerning the practical application of the withholding tax on pharmaceutical companies, in particular regarding non-monetary benefits.

Tomáš Urban : Probably 2014’s most controversial topic in Slovak corporate law was adoption and subsequent presidential veto of the amendment to the Commercial Code. The intent of the amendment, among others, was to make setting up a company easier (which should encourage new start-ups) by allowing creation of new private limited liability companies with registered capital as low as €1 as opposed to the currently required minimum amount of €5,000. At the same time the amendment intended to introduce new limitations in terms of operation of such “small” companies compared to the “regular” private limited liability companies with minimum registered capital of €25,000. The president vetoed the amendment arguing it is incomplete and insufficient, criticising for example the limitations applicable to the “small” private liability limited companies, inconsistency in the ban on returning the contributions to the registered capital or the ban on transactions between a company and its shareholders that would be applicable only to private liability limited companies but not to joint-stock companies. As the attempt of the governing party to overcome the president’s veto in the parliament was unsuccessful, the amendment has not become valid and effective.

Also a new amendment to the Competition Act, which introduced the possibility to reward an individual who informed authorities on a horizontal agreement restricting competition and provided related essential evidence, raised some controversies. The reward may amount to 1 percent of the aggregate fines imposed on all members of the cartel with a maximum of €100,000. Critics of the amendment argue that it is rather a non-standard practice within the EU to reward whistleblowing individuals in such cases, and they warn that this may encourage misuse of such an institute and false allegations raised by bitter ex-employees of the accused corporations.

Read also: Read also:Laws which need further revision

Ľubomír Leško : The amendment to the Collective Bargaining Act, which became effective on January 1, 2014, limited employers in regard to extending higher-level collective agreements in a given sector. According to the amendment, higher-level collective agreements can be signed for a whole sector or part of a sector. Their validity can be extended also to employees without their consent, after getting permission from the Ministry of Labour, Social Affairs and Family. The proposal to extend the higher-level collective agreements can be submitted also by only one of the contracting parties (for example trade unions). In 2014 higher-level collective agreements were extended in several sectors.

Havel, Holásek & Partners: The controversial amendment to the Public Procurement Act does not reveal the final beneficiaries from public procurements, but contains the identification of people who have managing rights in companies. In this respect a public register should be created of final beneficiaries from the order which, however, still does not exist. In our opinion the amendment will not stop companies with secret owners from winning tenders, since it requires only the revelation of the formal owners of the bidders.
Within the amendment to the Income Tax Act mostly the following problematic changes were adopted: prolonging the depreciations of some kinds of property; low capitalisation on connected business companies; transfer pricing of transactions between domestic related legal entities; extending the group of services on which the duty to register the revenues in electronic or virtual cash registers applies, etc.

 

Topic: Finances and Advisory


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