Legal Rights and Negotiation Strategies for Senior Manager Terminations

When a senior manager finds themselves in a situation where their employer initiates the end of their engagement, it represents one of the most sensitive moments in their career. This is not just about the emotional dimension, but about real financial outcomes, legal protection, and long-term professional prospects. In this article, our Prague-based law firm clarifies what rights a senior manager has under Czech law, how to negotiate effectively, and which tactics work in practice.

Quick Summary

• A senior manager in a leadership position has specific rights and obligations under Czech law. Their employment can only be terminated by recall if a recallability clause was agreed upon in the contract and the position meets the legal requirements for executive roles.
• If a recall from office occurs and the job position is not abolished, there is no automatic entitlement to statutory severance pay. However, if the reason for the recall is the redundancy of the position, the manager is entitled to severance pay, at a minimum of three times their average monthly earnings.
• Many senior executives unnecessarily accept unfavorable terms. Proper preparation and knowledge of one's position during negotiations can ensure the payment of contractual severance or other benefits even in situations where there is no direct statutory entitlement.
• A seemingly simple process hides legal pitfalls. Failing to properly secure protection in a termination agreement can mean the loss of hundreds of thousands to millions of Czech korunas. ARROWS law firm in Prague handles these matters daily and understands all associated risks.

What defines a senior manager in the legal sense

In practice, the term "senior manager" is often used loosely, but the Czech Labour Code is precise in its definitions. A managerial employee is generally someone who manages at least one other employee and has the authority to assign them work tasks.

For the possibility of recall from office (and resignation from office), the distinction under Section 73 of the Czech Labour Code is key, which stipulates that only managerial employees at the two highest levels of management are subject to recall.

These consist of the following two categories:

1. Managerial employees directly subordinate to the statutory body (e.g., department directors reporting directly to the Managing Director/Board of Directors).
2. Managerial employees directly subordinate to the managerial employee mentioned in point 1 (provided that another managerial employee is subordinate to this manager).

This distinction is decisive. If a manager does not fall into these categories, a recallability clause cannot be validly negotiated, and their employment cannot be terminated by mere recall, but only through standard methods under the Czech legal system.

Our attorneys in Prague at ARROWS deal with these nuances for senior executives continuously, and merely clarifying the legal status often improves the senior manager's negotiating position significantly.

The recallability clause – what is hidden in the employment contract

One of the most important facts a senior manager must address is whether their employment contract or amendment contains a so-called recallability clause. This is an agreement that allows the employer to recall the manager from an executive position and simultaneously allows the manager to resign from the position according to Section 73, Paragraph 2 of the Czech Labour Code.

If the clause is agreed upon, the employment relationship does not end by the recall itself, unless the parties agree otherwise. In such a case, the employer is obliged to offer the manager another job corresponding to their health status and qualifications.

Only if the employer has no such work, or if the manager refuses it, does an impediment to work on the part of the employer arise, followed by a legal fiction of a reason for termination due to redundancy. This is the moment many senior executives overlook – it is precisely here where negotiations can take place.

The right time for protection is when signing the employment or managerial contract, because once the employer proceeds with the recall, it is too late to challenge the existence of a validly negotiated clause.

MicroFAQ: The clause and its consequences

1. If I have a recallability clause in my employment contract, can I be recalled without warning?
Yes, the employer can recall you at any time. The recall must be in writing and delivered to the employee; the performance of the function ends on the day following delivery (unless a later date is specified). Subsequently, your further future in the company is addressed (the job offer obligation).

2. Is the clause invalid if it wasn't directly in the employment contract?
The clause can be agreed upon in the employment contract or in any other written agreement (e.g., a managerial contract or an amendment). However, it must be agreed upon in writing.

3. What if a manager works in a position that does not meet the legal requirements for recall?
If your position does not fall under Section 73, Paragraph 3 of the Czech Labour Code (no other managerial employees are subordinate to you or you are not directly subordinate to the statutory body), the recallability clause is invalid, even if you signed it. The employer then cannot simply recall you.

Differences between recall, termination notice, and termination agreement

Many senior managers confuse these three legal instruments. There is a fundamental difference that affects the amount of severance pay and the manager's rights.

Recall from an executive position means the employer is exercising the right to remove you from your role. At this moment, the employment relationship does not end, only the performance of the managerial function ends, and the process of offering alternative work follows.

A termination notice is a unilateral legal act that ends the employment relationship. It must be in writing, delivered, and contain a specific legal reason (unless it is during the probation period). The notice period is at least 2 months, and for organizational reasons, statutory severance pay is due.

A termination agreement is a bilateral legal act under Section 49 of the Czech Labour Code. Beware – if the reason for termination is not explicitly stated in the agreement, it may be complicated to prove entitlement to severance pay for the purposes of unemployment benefits or tax relief.

In practice, a combination of recall from office followed by a termination agreement is most commonly used. Our Czech legal team at ARROWS can identify errors on the employer's side at every stage and utilize them during negotiations.

Severance pay – what you are entitled to by law

This is the most important financial aspect. We distinguish between several scenarios:

Statutory severance pay for senior managers during organizational changes

If the employment ends by notice or agreement due to organizational changes (abolition of part of the company, redundancy, abolition of the position), you are entitled to statutory severance pay. Its minimum amount depends on the length of employment according to Section 67, Paragraph 1 of the Czech Labour Code:

• Employment lasting less than 1 year: 1× average monthly earnings
• Employment lasting 1–2 years: 2× average monthly earnings
• Employment lasting more than 2 years: 3× average monthly earnings

Average earnings are calculated from the gross salary for the previous calendar quarter. Bonuses and premiums paid during this period play a key role, as they are included in the average calculation under Czech law.

If you were recalled without the position being abolished

This is where the greatest legal pitfall arises. If your employer recalls you from a management position but does not abolish the role (for example, they simply replace you with another manager), and the employment subsequently ends due to redundancy, you are not entitled to statutory severance pay under the Czech Labour Code.

However, if you were recalled and the position was abolished in causal connection with that recall, then severance pay is due in this case as well.

This is why negotiation is critical. If you know you might end up without statutory severance, it is necessary to negotiate so-called contractual severance or a "golden parachute" within the employment termination agreement.

Health obstacles and occupational injuries

If employment ends because the employee is no longer allowed to perform their current work according to a medical assessment due to an occupational injury or occupational disease, they are entitled to a lump-sum compensation upon termination equal to twelve times their average monthly earnings under Czech legislation.

MicroFAQ: Calculation and Payment

1. How exactly is average earnings calculated?
It is based on gross earnings in the relevant period, which is the previous calendar quarter according to Section 353 of the Czech Labour Code. Earnings include wages, salaries, rewards, and bonuses accounted for payment in this period (with specific rules for distributing annual bonuses).

2. When must the lump-sum compensation be paid?
The employer is obliged to pay the compensation on the nearest pay date after the termination of employment, unless you agree on a different date in writing.

3. Can I negotiate a higher lump-sum compensation than the one specified by law?
No, in this specific case of health-related termination, the law sets a fixed amount for the lump-sum compensation. 

How to properly prepare for negotiations

Negotiating severance pay and exit conditions is a strategic process. Better preparation leads to a better outcome in the Czech business environment.

Analysis of your position

Before entering negotiations, you must understand your position. What is the employer's interest? Often it is speed, peace of mind, handover of the agenda, confidentiality, and the avoidance of litigation in Czech courts.

Your leverage may be unique know-how, the risk of a lawsuit regarding the invalidity of the recall or dismissal, the need to train a successor, or the company's reputational risk.

Define three positions

If you are preparing to negotiate, define three scenarios:

• Ideal position – e.g., severance pay amounting to 9–12 months, retention of benefits, and excellent references.
• Realistic target position – e.g., 6–7 months of severance pay and a non-compete agreement.
• Walk-away position (BATNA) – the limit below which you will not go and would rather resolve the matter through legal channels.

Prepare arguments based on facts

Negotiations should not be emotional. Prepare supporting documents such as your results and contribution to the company, a legal analysis of weaknesses in the employer's procedure, or an overview of unused vacation days.

In practice, our attorneys in Prague at ARROWS law firm devote time to analyzing the senior executive's legal standing and estimating risks on the employer's side, which serves as a powerful weapon in negotiations.

Tactics that work – and those that don't

What works: Mutual benefit strategy and the "quid pro quo" principle

The most successful negotiation is one where both parties gain something. The employer buys legal certainty and a smooth departure of the manager, while you sell your consent to the agreement in exchange for financial compensation. An example could be an offer of immediate departure by agreement and waiving potential legal claims in exchange for contractual severance pay of a specific amount.

Whenever the employer requests a concession (e.g., a longer handover period, confidentiality beyond the scope of the law, a non-compete clause), demand a counter-value. If the company wants peace and confidentiality, they must pay for it in the form of higher severance.

What doesn't: Empty threats and emotions

Aggression and unsubstantiated threats of litigation often lead to the employer shutting down and handing the matter over to their lawyers, which closes the window for an agreement. Negotiate firmly, but factually and professionally.

Risks and Sanctions	How ARROWS helps (office@arws.cz)
Invalid recall clause: If the clause does not meet statutory requirements or the position does not correspond to the law, the recall is invalid. However, a senior executive often does not know they can defend themselves and leaves with a minimum.	Legal Analysis: Our Czech legal team performs a detailed analysis of the contract. If the clause is invalid, the executive's position is extremely strong – the employer effectively cannot fire them without a serious reason, which dramatically increases the price of the exit.
Absence of severance during a "simple" recall: The employer recalls the manager, does not abolish the position, and claims that no entitlement to severance pay arises.	Strategic Negotiation: Even if a statutory claim does not arise, our Prague-based attorneys use other leverage (offering obligation, risk of litigation) to negotiate contractual severance (an exit package).
Disadvantageous termination agreement: The executive signs an agreement waiving all further claims without having bonuses or non-compete clauses resolved.	Contract Review: ARROWS reviews the text of the agreement to ensure it protects the executive's rights and clearly defines financial settlements, bonuses, and non-compete restrictions.
Incorrect qualification of the reason: The reason for termination is missing from the agreement, which can lead to the loss of full unemployment benefits or problems with the tax exemption of severance pay.	Correct Formulation: We ensure the agreement contains the correct reasons (organizational changes, redundancy), which is crucial for social security and taxes in the Czech Republic.

Practical steps – what a senior executive should do

Have your employment contract and management contract analyzed by an expert. Find out if the recall clause is valid and if you fall into the category of recallable managers. Collect documentation about your work, evaluations, and communication. If a dispute arises, evidence is key.

If your employer presents you with an agreement saying you must sign it immediately, refuse. You have the right to take the document and have it checked by a lawyer; our Prague-based attorneys at ARROWS can review the agreement within hours. 

The presence of an attorney at a meeting (or even their background support) sends a clear signal to the employer that you know your rights and are taking the situation seriously. This usually leads to more serious offers under Czech law.

Termination Agreement – What it must contain

The agreement is the final document that confirms the terms of departure. Pay close attention to the following points.

The reason for termination is crucial for the purposes of severance pay and unemployment benefits, even though an agreement can be valid without it. Without stating a reason, a senior executive risks a reduction in unemployment benefits and a lack of evidence regarding their entitlement to severance pay under the Czech Labour Code.

The amount of severance pay and the due date should be specified as a concrete sum or via a clear calculation method. Ideally, a specific date or a link to the nearest payroll date should be stated.

The agreement should include a so-called severability clause or an express confirmation that signing the agreement does not affect claims to unpaid bonuses or performance from a non-compete clause. Protective clauses can also be negotiated, such as the employer's obligation to provide a job reference in a specific wording or a commitment to refrain from negative references.

Risks and mistakes you want to avoid

The most common mistake is signing a document containing a clause stating that the employee has no further claims against the employer, thereby unknowingly waiving, for example, an annual bonus.

Senior executives are often persuaded that because they were recalled from their position, they are not entitled to anything, and they sign an agreement without financial compensation. However, even in the case of a recall, there is often room to negotiate a "golden parachute" or exit package.

If you have a non-compete clause in place, the employer must pay you monetary compensation after the termination of employment according to Section 310 of the Czech Labour Code. Sometimes employers try to get rid of these clauses in the agreement without providing compensation.

Special situation: A senior manager who is retired

Even a senior manager who is already receiving an old-age pension and continues to work has full rights under the Czech Labour Code. If their employment is terminated for organizational reasons (by notice or agreement), they are entitled to severance pay just like any other employee in the Czech Republic. Age or the receipt of a pension are not grounds for reducing these entitlements.

Conclusion

The departure of a senior manager is a complex legal and business transaction. Knowledge of the Czech legal framework and the right strategy play a decisive role. If a senior executive does not know whether their recall is valid, or allows themselves to be pressured into signing a disadvantageous agreement, they can lose hundreds of thousands of crowns.

Our attorneys in Prague at ARROWS law firm handle executive departures regularly. They know employer tactics and the legal arguments that work. Our Prague-based law firm is insured for professional liability for high amounts in the hundreds of millions of crowns, which guarantees security for our clients. If you are facing an involuntary departure from your position, do not hesitate to contact our Czech legal team at ARROWS.

FAQ – Most frequent legal questions regarding senior manager departures

1. What is a recall clause and must I have it in my contract?
A recall clause allows the employer to remove you from a management position (and allows you to resign from the position). It must be agreed upon in writing. If you do not have one (or your position is such that you cannot have one), the employment relationship cannot be terminated by a mere recall, which significantly strengthens your position under Czech law.

2. What is the statutory severance pay for a senior manager?
If the employment ends for organizational reasons (e.g., redundancy) and lasted longer than 2 years, the minimum severance pay is 3 times the average monthly earnings. However, in the case of a "simple" recall without the position being abolished, the right to statutory severance pay does not arise unless otherwise agreed in the contract.

3. Is a senior manager entitled to severance pay if they were only "recalled" but the position was not abolished?
Not by law. If the position continues to exist and is filled by someone else, it is not an organizational change. Here, it is necessary to rely on negotiation or on contractual severance pay agreed in advance in the management contract.

4. Can I negotiate a higher severance pay with the employer?
Yes, the law sets only the minimum. Within a termination agreement, it is common to negotiate higher severance pay (an exit package) in exchange for a quick and conflict-free termination of cooperation.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue. Although we ensure maximum accuracy of the content, legal regulations and their interpretation evolve over time. To verify the current wording of regulations and their application to your specific situation, it is essential to contact ARROWS law firm directly (office@arws.cz). We bear no responsibility for any damages or complications arising from the independent use of information from this article without our prior individual legal consultation and professional assessment. Every case requires a tailor-made solution, so please do not hesitate to contact us.

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