Constitutional Court rejects sickness benefit reform

The Czech government has lost an important battle in the Constitutional Court of the Czech Republic concerning the implementation of its public finances reform act. Basing its decision on every citizen’s equal right to material security, the court repealed the part of the act stipulating that the first three days of sickness will be unpaid. The change in legislation will take effect from 30 June 2008. Opposition parties and trade unions welcomed the court’s ruling in this regard.

Background

The government’s public finances reform – Act No. 261/2007 Coll. on the stabilisation of public finances – entered into force at the beginning of 2008. The act stipulates a number of fundamental economic measures in the public sphere, in order to halt the rise in public deficit as well as government debt (CZ0706049I).

In October 2007, members of parliament from the biggest opposition party, the Czech Social Democratic Party (Česká strana sociálně demokratická, ČSSD), contested the reform by lodging a complaint with the Constitutional Court of the Czech Republic (Ústavní soud České republiky). In their complaint, they proposed repealing the entire act or at least part of it. Meanwhile, members of parliament from the Communist Party of Bohemia and Moravia (Komunistická strana Čech a Moravy, KSČM) and a group of senators also filed other petitions with the Constitutional Court.

Complaints lodged with Constitutional Court

The court divided the proceedings into three thematic parts, which is the first time since it has done so since its establishment in 1992. The first part of the proceedings dealt with the complaint contesting the constitutionality of adopting the legislation and the tax rules contained in the public finances reform act. In the second part, the court examined the petitions targeting the reforms affecting the healthcare system. In the third part, it focused on complaints against the legislative changes affecting welfare payments, including the sickness insurance system (CZ0801039I).

Regarding the first part, the court confirmed in its ruling at the end of January 2008 that the way in which the legislation, as well as the new tax rules, had been adopted was in accordance with the country’s constitution. According to the court, the parliament debate on the act showed a number of shortcomings and was characterised by a low standard of political culture, but it was not unconstitutional to adopt the legislation following the debate. Concerning the second part of the proceedings covering the healthcare system, the judges could not reach agreement after two public hearings and deferred their ruling for an unspecified period.

At its session on 23 April 2008, the court turned its attention to the third, so-called ‘social’ part of the Act on the stabilisation of the public finances, which covers the legislative changes affecting social welfare payments. Besides the question of the provision of sickness benefits, this part also covers other important social welfare benefits, such as unemployment benefit, parental and maternal leave, as well as maternity and child allowances.

Petition for repeal of social welfare benefits reform

The petition for the repeal of the entire third part of the public finances reform act was based on the argument that the right to social welfare benefits pertains to a different legislative subject area than public finance legislation. In their appeal, the members of parliament also argued that no substantive justification exists for combining both subject areas in one law. They contended that the extensive reform of the entire social security system contained in the act has no connection – either substantively or formally – with tax matters and should therefore be covered by a separate act or more than one act.

As far as the contested regulations on the sickness insurance system are concerned, the act provided for the introduction of a so-called ‘buffer period’: this means that benefits are no longer provided during the first three calendar days of a temporary work incapacity due to sickness or an ordered quarantine. The complaint was based on the argument that the sickness insurance system is established on the insurance principle which is supposed to cover insured persons in the case of an unexpected event included in the insurance policy – here, in the case of sickness. However, according to the complaint, the new legislation violates the right of insured citizens, and the sickness insurance system is merely subsidising the state budget deficit.

Court ruling regarding sickness benefits

The Constitutional Court upheld the complaint only in the case of the contested sickness insurance rules, while it rejected the opposition’s petition for the repeal of the entire social part of the government reform. In its ruling, the court essentially approved the arguments put forward in the complaint:

Employees are forced to pay for the first three days of sickness, whereas their obligation to pay insurance premiums has remained unchanged… It is a somewhat lazy and even arbitrary move by the state, which is punishing all categories of employees for the sake of an indefinite number of sickness benefit abusers. ... This has resulted in a violation of employees’ rights that attains constitutional significance. The sickness insurance system should not serve to cover the state budget deficit.

According to the judges, the legislation is in conflict with every citizen’s right to commensurate material security.

Reaction of government and parliamentary opposition

Prime Minister Mirek Topolánek told journalists that he respects the court’s decision. Nonetheless, he emphasised that

it does not mean that I agree with it. This legislation is so common throughout Europe, that I would be really interested to know what is unconstitutional about it. ...We are going to have to look for other instruments that will enable us to achieve the same goal.

In terms of instruments to achieve the same goal, Prime Minister Topolánek refers to savings in the payment of sickness benefits, which he claims is excessively used across Europe.

The opposition welcomed the verdict, and ČSSD has offered to cooperate with the government in parliament to implement the court’s verdict in the legislation. The trade unions, which have repeatedly protested against the government reforms of public finances (CZ0803019I, CZ0707019I, CZ0706049I), are also satisfied with the court’s ruling on the payment of sickness insurance benefits during the first three days of sick leave.

Commentary

Political commentators agree that Czech citizens will have to wait several weeks for the government to decide on the level of sickness benefit paid out in the first three days of sick leave. According to Labour and Social Affairs Minister Petr Nečas,

We have several alternative solutions regarding sickness benefit, but we are not going to publish them until the Constitutional Court rules on the healthcare part of the reforms.

In response to this statement, the court’s spokesperson, Milan Spáčil, promised that ‘the court should issue its ruling in this regard by the end of May 2008’.

Jaroslav Hála, Research Institute for Labour and Social Affairs (RILSA)