Traditional Czech textiles company goes bankrupt

On 3 May 2010, the Regional Court in Brno sent the country’s biggest clothes manufacturer, Oděvní podnik Prostějov, into bankruptcy. The company had been in a bad financial situation since January. Although it tried to reorganise itself, it did not manage to get enough funding. The company blames current economic conditions, the low volume of orders and a lack of money. Cheaper products from Asia and a strong Czech currency were other negative factors.

Mounting economic difficulties

The largest clothes manufacturer in the Czech Republic, Oděvní podnik Prostějov (OP Prostějov) – based in the city of Prostějov in the Olomouc region of Northern Moravia – has been facing problems for some time. In 2007, the company experienced a significant slump in revenues and in 2008 it recorded a loss. Within the framework of austerity measures, OP Prostějov was gradually closing its Moravian plants in the eastern cities of Ostrava and Olomouc, and the southeastern town of Uherské Hradiště. By 30 April 2010, the company had dismissed some 600 employees and announced the closure of its plant in the northeastern city of Jeseník in the Olomouc region, employing about 300 people (see factsheet in the European Restructuring Monitor (ERM)).

The company planned to retain its remaining 900 employees in the reduced operation of the plant. A spokesperson for OP Prostějov, Karel Samec, explained: ‘The company needs the employees who were not dismissed in order to ensure the reduced operation in future. In May, job orders are secured for the existing number of employees.’ However, despite this reassurance, the company’s Director, Jiří Tuvora, admitted that a full shutdown could not be ruled out.

On 3 May 2010, the Regional Court in the southeastern city of Brno declared OP Prostějov to be bankrupt. The company had been in a particularly bad financial situation since the start of the year. Mr Samec blamed current economic conditions, the low volume of orders and insufficient operating finances. Cheaper products from Asia and a strong Czech currency were other factors leading to the bankruptcy.

Workers face challenging labour market

Currently, the only operating unit of OP Prostějov is a workshop where tailor-made clothes are manufactured. Even the company’s trade union cannot say whether it will stay operating. The Chair of the OP trade union, Helena Vyroubalová, stated: ‘We are waiting to see what happens. The shop was supposed to be maintained; the best qualified people are there.’

The respective labour offices have already registered the dismissed employees. The Labour Office in Prostějov estimates that, due to the dismissed company employees, unemployment in the city will exceed 10%. As of 28 April 2010, 5,860 people were looking for work, and job offers registered by the office amounted to about 120 – only six of these were for needleworkers and dressmakers. The spokesperson of the labour office, Adolf Tomandl, conceded: ‘It means that those who will be dismissed from OP Prostějov will be in a rather difficult situation when looking for a job, especially in their original professions.’

Employees dismissed in the Jeseník district are in an even more difficult position, as this area has the highest unemployment rate in the Czech Republic (19%). The Jeseník Labour Office is currently registering 77 job offers only.

Company unable to meet severance payments

Moreover, problems are also arising in relation to severance pay. According to the collective agreement, employees are entitled to severance pay amounting to five monthly wages; however, OP Prostějov has no funds for making these payments. Therefore, the labour office will provide severance pay for the employees, pursuant to Act No. 118/2000 Coll. on protection of the workforce at the employer’s bankruptcy. Under this law, the labour office can pay CZK 35,313 (€1,371 as at 18 June 2010) per employee, whereas in February 2010 the average monthly pay in OP Prostějov amounted to CZK 13,410 (€520).

Complaints about heavy workload

In connection with dismissals, some of the former employees have started complaining about allegedly inhumane working conditions consisting of unpaid overtime work and poor communication with the management. Their reservations are, however, strongly denied by trade union representatives, who – according to their own words – never received any written complaint from any employee. Ms Vyroubalová explained:

‘The chair of the trade union in the plant in Jeseník is in everyday contact with the trade union of OP Prostějov, regularly informing me about the situation in the plant, both in terms of secured orders for production, human resources and also matters relating to trade union issues in the plant.’

Allegedly, employees were not meeting performance standards and were not finishing their work during the defined working hours. Therefore, they had to do overtime but, as it was not requested overtime work, they were not paid an overtime bonus. Ms Vyroubalová points out:

‘Now, when the company is in the situation of dismissing employees and getting rid especially of those who do not meet performance standards and is paying high sums to top up the minimum wage for them – sometimes even half of it – these employees complain.’

Nevertheless, this is disputed by employees who claim that the daily workload cannot be completed in one shift. For the time being, the company management does not want to comment on the situation in Jeseník.

Soňa Veverková, Research Institute for Labour and Social Affairs (RILSA)