As of August 1, 2024, a new Section 130a was introduced into the Labor Code, which addresses the circumstances related to the topic of this article – payment of wages in subcontracting relationships. Since we have been receiving numerous inquiries from clients regarding its application, we have prepared a brief overview in the form of questions and answers based on our understanding of this provision.

Which relationships does this provision apply to?

This provision addresses the relationships between a service provider and their direct subcontractor or between the service provider and the employee of the subcontractor. If you are a service provider but provide the service solely with your own resources (employees), this provision does not apply to you. Likewise, this provision does not directly protect your subcontractors or other entities they use to fulfill their obligations (e.g., sole traders who, from a legal perspective, are subcontractors of your subcontractor). The application of the provision is limited to the relationship between the service provider and the direct subcontractor of the service, and therefore, the service provider is not responsible for unpaid wages throughout the entire chain of subcontractors, just as the direct subcontractor is not responsible for their subcontractors.

Further limitations:

1. Material – It concerns construction work related to the construction, repair, maintenance, remodeling, or demolition of buildings (listed demonstratively in Appendix 1aa of the Labor Code). It should be noted that the Labor Code limits the application of this provision exclusively to building construction work, i.e., generally to land buildings according to current legislation, not to other construction works (e.g., civil engineering works such as road construction, bridges, communication networks, etc.).
2. Territorial  - The service must be provided within the Slovak Republic.
3. Temporal – According to the transitional provision in Section 252t(1), Section 130a applies only to legal relationships between service providers and subcontractors that arise after August 1, 2024.

Which employers (entities) does this provision apply to?

As mentioned above, it will apply to service providers in the Slovak Republic who use subcontractors for their performance. However, the liability of these entities will always arise only in relation to the employees of the direct subcontractor (not the subcontractors of the direct subcontractor, etc.).

Can the service provider take measures to prevent their liability under Section 130a of the Labor Code?

Yes, the law directly provides in Section 130a(7) that the service provider may refuse to pay the wages if, when selecting the subcontractor for the purpose of establishing a legal relationship between them and the subcontractor, they could not foresee, even with due diligence, that the subcontractor would not pay wages to their employees (but only on the condition that the service provider, by the time the wage payment request is made, has fulfilled their payable financial obligation arising from the legal relationship between them and the subcontractor). The assessment of whether due diligence was exercised will depend on the specific circumstances (i.e., it should be individual), but it will particularly take into account whether (failure to meet any of the following will mean that due diligence was not exercised):

• The agreed price for the subcontractor's performance cannot be unreasonably low without economic justification;
• The companies are not affiliated;subdodávateľovi
• The subcontractor has not been fined for violating the prohibition of illegal employment in Slovakia or in the country of its registered office within two years prior to the establishment of the legal relationship between the service provider and the subcontractor;
• The subcontractor has no outstanding debts for social insurance premiums in Slovakia and has no comparable or similar debts in the country of its registered office;
• The subcontractor has no outstanding tax or customs debts according to special regulations in Slovakia and has no comparable or similar debts in the country of its registered office;
• The subcontractor's assets are not subject to bankruptcy proceedings, the subcontractor is not in liquidation, no bankruptcy proceedings have been discontinued due to lack of assets, or bankruptcy has not been canceled for lack of assets;
• The subcontractor has been conducting business for more than six months.

The facts under points (3) to (7) can be verified for Slovak companies through publicly available registers maintained by the relevant state authorities (e.g., http://www.ip.gov.sk, www.orsr.sk, http://www.financnasprava.sk, etc.) or in aggregated form on commonly available websites such as www.finstat.sk.

For foreign companies – subcontractors, verification options may be significantly limited.

As a possible means of securing the service provider against the obligation to pay wages to the subcontractor's employees, a mechanism similar to that used for temporarily assigned agency workers is available – when the subcontractor’s invoice becomes due (where a 60-day period is generally standard in business relations), it can be conditioned on the subcontractor proving that they have paid the relevant wages to the participating employees. However, since such a mechanism would require increased administrative complexity (tracking which subcontractor employees and to what extent are working on the contract, and whether they are being paid at least the minimum wage), it would be necessary to consider to what extent it could be implemented. Additionally, the issue of the personal data of the affected employees would need to be considered, although Section 130a(5) of the Labor Code already anticipates and allows for their sharing (but only in the context of the wage payment request).