Severance Pay for a Removed Manager? Only If the Position Actually Ceases to Exist

Removal from a managerial position represents, in employment law practice, a situation in which the employer’s managerial discretion intersects with the statutory protection of the employee against the actual consequences of organisational changes. A particularly sensitive and common issue is when termination of employment following removal from a managerial position is associated with entitlement to severance pay. This issue was also addressed by the Supreme Court, which provided clarification in its judgment of 11 December 2025, Ref. No. 21 Cdo 3286/2024.

In the above decision, the Supreme Court examined whether a removed managerial employee is entitled to severance pay where the employer terminated their employment by notice invoking the fiction of a dismissal ground under Section 52(c) of Act No. 262/2006 Coll., the Labour Code (the “Labour Code”), while according to the employee, the actual reason for termination was the abolition of their position due to an organisational change.

Factual background

The claimant (i.e. the former employee) worked as a director for several companies. The positions held were managerial positions within the meaning of Section 73(3) of the Labour Code, with an agreed possibility of removal. On 4 September 2019, the claimant received notice of removal from the managerial position pursuant to Section 73a(2) of the Labour Code and, at the same time, notices of termination of employment pursuant to Section 52(c) of the Labour Code on the grounds that the companies could not offer him other work corresponding to his qualifications and health condition. The claimant sought payment of severance equal to three times his average earnings pursuant to Section 67(1) of the Labour Code, arguing that the actual reason for the terminations was the abolition of his position as a result of an organisational change.

The defendant companies (i.e. the former employers), on the other hand, argued that the director position had not been abolished – in some of the companies it had already been filled before the termination of the claimant’s employment, and in others it remained formally vacant for a period of time but was ultimately filled. The claimant, however, argued that in one of the companies the director position was filled by an employee with a different agreed working time than that agreed between the company and the claimant. For this reason, according to him, the position of the new employee could not be regarded as identical to his original position.

The Supreme Court therefore, inter alia, addressed the question of whether, when assessing the abolition of a position, it is relevant that a new employee in the same position has a different agreed working time than the removed managerial employee.

Assessment by the Supreme Court

In addressing this issue, the Supreme Court recalled that removal from the position of a managerial employee does not terminate the employment relationship. The employer is obliged to propose a change to the employee’s further work assignment to other work corresponding to their health condition and qualifications. Only if the employer does not have such work (or if the employee refuses it) does an obstacle to work arise on the employer’s side under Section 208 of the Labour Code and, at the same time, a ground for termination under Section 52(c) of the Labour Code is established. However, while in the case of termination under Section 52(c) of the Labour Code (i.e. redundancy) the employee would otherwise be entitled to severance pay pursuant to Section 67(1) of the Labour Code, the situation differs in the case of applying the statutory fiction upon removal from a managerial position. In this case, the employee is entitled to statutory severance pay only if the termination of employment following removal from the managerial position occurred in connection with the abolition of that position as a result of an organisational change.

At the same time, the Supreme Court emphasised that redundancy must be assessed exclusively with regard to the type of work performed as defined in the employment contract. According to the Supreme Court, an agreement on shorter working hours (as well as other working and remuneration conditions) cannot play a role in assessing redundancy, which is determined solely by the “lack of need for the employee’s type of work by the employer”.

In the case at hand, the Supreme Court therefore concluded that although a shorter working time was agreed with the new director than with the claimant, it cannot be inferred on that basis alone that this constituted a different position.

Conclusion

The cited decision is significant for both employers and managerial employees. In practice, it confirms that the determining factor for entitlement to severance pay in cases of termination of employment following removal from a managerial position is whether the position in question was actually abolished as a result of an organisational change. At the same time, the Supreme Court held that a different (shorter) working time or other contractual arrangements that do not form an essential element of the employment contract are not decisive for assessing redundancy within the meaning of Section 52(c) of the Labour Code.

From the employers’ perspective, this is positive news – a contrary interpretation would have led to the conclusion that even minimal differences in contractual arrangements with individual employees would be decisive when comparing positions. 

This text was translated by AI.