Unions sound the alarm: new law could bring back mass “Švarc system” abuse in Czechia

The Czech-Moravian Confederation of Trade Unions (ČMKOS) has warned that upcoming legislative amendments could trigger a return of the so-called Švarc system — an illegal practice in which companies register employees as self-employed contractors instead of hiring them under standard employment contracts, in order to avoid social and health insurance contributions.

The term originates from entrepreneur Miroslav Švarc, who used this scheme at the football club FC Benešov back in the early 1990s. According to the unions, the risk of the scheme spreading extends beyond couriers and taxi drivers to entire sectors — including administration, IT, cleaning services and even manufacturing.

The changes are being drafted as part of a new law on digital platforms, whose main goal is to establish clear rules for couriers and drivers working for services like Uber and Bolt: if their activity effectively resembles an employment relationship, it will automatically be classified as such. “The key is to preserve people’s right to decide for themselves when, where and for whom they work,” said Tomáš Prouza, President of the Czech Confederation of Commerce and Tourism.

At the same time, the general definition of so-called dependent work — which determines whether a person must be employed under a standard labor contract — is also being revised. Instead of the current four criteria, only three will remain: work performed on behalf of the employer, a relationship of subordination, and personal performance of the work by the employee. To prove the existence of a subordination relationship, authorities will additionally need to demonstrate work organization, supervision, instructions from a manager, and a fixed schedule.

“All of these criteria must be met simultaneously,” the unions stress. This, they say, is precisely where the main danger lies: employers will be able to structure how tasks are assigned so that, formally, one of the criteria is missing. For instance, instead of a clearly defined shift, an employee might simply be given a deadline for completing an order.

Unions fear that many low-paid workers will agree to switch to self-employed status for the sake of a few thousand crowns extra per month — or that companies will offer this arrangement outright when hiring. In practice, this would strip workers of all the legal protections that come with formal employment.

Around Prague, based on reporting by novinky.cz