May 2024 - Law Firm - AVOCAD

Employee protection or medieval inquisition?

Posted on 2024-05-30 by avocad_bxgv12hf

Unemployment in Lithuania has been declining steadily over the past decade, except during the pandemic. The number of job vacancies has also increased steadily. Increasingly, what we hear in the public sphere is not about workers' difficulties in finding a job, but about employers' challenges in attracting or retaining workers.

Teleworking, incentive travel, health insurance - these are just a few of the ways employers try to "please" their employees. The advantage of timely and official salaries, highlighted by employers, has become a mockery of the dawn of independence.

"Meanwhile, the Labour Code of the Republic of Lithuaniacontinues to live successfully in the spirit of the early 21st century, when it was necessary to use extremely harsh measures to protect the "weak and abused" worker. Today's labour market makes it necessary to seriously reconsider the concept of the employee as a weak party," says Laurynas Staniulis, partner at the law firm AVOCAD.

One of the most serious problems in today's labour market is the employer's ability to dismiss an employee. Dismissal of an employee is one of the most difficult or expensive risks to manage and can cost more than 12 months' salary.

The LC provides that if the dismissal of a worker is found to be unfair, the worker is entitled to compensation for the entire period during which the dispute between the worker and the employer over the lawfulness of the dismissal is pending, up to a maximum of 12 months. As court proceedings in Lithuania are not fast, as a rule, the case almost always takes more than a year to be heard. As a result, if an employee's dismissal is found to be unfair, the compensation awarded to the employee is usually 12 months' salary, regardless of whether or not the employee worked during that period.

This is fundamentally at odds with the essence of compensation, which aims to cover the loss of income suffered by the worker when he or she is dismissed and loses income. In the meantime, it is rare for anyone not to have found a new job, and often to have been employed practically since the dismissal. In such a case, if the court awards the employee the maximum compensation, the question arises - is it compensation for the employee or a penalty for the employer?

It is not the institution of compensation itself that is being questioned, but the need for a personalised approach to cases. If the court were to take into account the fact that the worker was unfairly dismissed but found a new position relatively quickly, the compensation to be awarded should be calculated exclusively for the period during which the worker had no earnings, thus compensating the worker for the damage suffered by him.

Inflexible interpretation of the provisions of the Labour Code on compensation to an employee in case of unfair dismissal, contrary to the objective of preventing employer abuse, often creates room for employers who seek ways to avoid dismissal of an employee at the initiative of the employer and to "force" the employee to submit a request themselves. Such attempts can take the form of worsening working conditions, mobbing, etc. Meanwhile, honest employers, whose values and business ethics do not allow them to use similar methods, are forced to risk being penalised for dismissing an employee under the Labour Code if some procedural irregularity leads to the dismissal being found inappropriate.

Data from the State Labour Inspectorate for the first quarter of 2024 show that, although dismissal disputes account for only 8% of the total number of labour disputes, labour disputes concerning the unlawful dismissal of an employee are the second most frequent. This only confirms that the problem is of great importance.

Is it not time to adapt the regulation, interpretation and application of labour relations to today's rapidly changing labour market?

The modern company director: legal challenges and risks

Posted on 2024-05-17 by avocad_bxgv12hf

Endless geopolitical tensions and military conflicts, shifting trade patterns and significant economic fluctuations are the challenges of modern business. Maximising profits without serious legal concerns is the ultimate goal of today's managers. Does everyone manage to break even and where are the biggest risks? Egidijus Langys, Managing Partner of AVOCAD, talks more about this and the limits of a manager's responsibility .

The Chief Executive Officer is the decision-maker who first organises the day-to-day running of the company. He or she hires and fires employees, concludes and terminates their contracts of employment, gives them incentives and imposes penalties. The manager acts on behalf of the company and has the right to conclude transactions, except where the company's articles of association provide for quantitative representation of the company. In short, he/she is responsible for the organisation of the company's activities and the achievement of its objectives.

Must act honestly and reasonably, with loyalty and confidentiality

As well as ensuring the day-to-day running of the company, a manager must also fulfil fiduciary duties of loyalty and care. "This means that a manager must act honestly and reasonably towards the legal entity and other members of the legal entity's organs, be loyal to the company and observe confidentiality. He must avoid situations where his personal interests conflict or may conflict with the interests of the legal person. A director should not confuse the assets of the legal entity with his or her own assets, use them or information obtained in his or her capacity as a member of an organ of the legal entity for personal benefit or for the benefit of a third party without the consent of the members of the legal entity, etc. The duty of a director is to act solely in the interests of the company," the lawyer stresses.

According to Mr Langis, a company's CEO must meet the objective criteria of a careful and qualified businessman. According to the lawyer, the duties of care and loyalty will not be breached if the decision is made in good faith - without conflict of interest, after having investigated the information about the possible consequences of the decision, after having been provided with all the necessary information, and after having evaluated whether the business decision does not exceed a reasonable commercial risk. In making decisions, the manager must also consider the normal business and commercial activities and the nature of the business of the company, taking into account the degree of risk tolerance of the company.

The manager and the creditor do not have a direct contractual relationship, and the manager's fiduciary duties to take into account the interests of creditors when taking decisions relating to the company's business activities only arise when the company's financial situation deteriorates. "The manager's liability to creditors arises only if the company is unable to satisfy the creditor's claims on its own," notes Langys.

Creditor's right to bring a direct action for damages against a company's director

A creditor can bring a direct action against the directors and shareholders of a company in two cases: where there is direct damage to the creditor and where the bankruptcy is declared intentional and the directors or shareholders are found to be guilty of intentional bankruptcy.

Liability of the manager can only arise if it is established that the manager of the company has acted unlawfully in order to infringe the rights of a particular creditor (misrepresentation, misrepresentation in the conclusion of a contract between the company and a particular creditor, or other unfair acts directed at a particular creditor). A director is also liable where those acts have caused damage to the creditor and the company is unable to meet the creditor's claims itself. Moreover, damage does not include the general insolvency of the company or a reduction in its solvency, which affects the individual creditor and other creditors of the company equally.

According to the lawyer, if a direct action against the manager is brought by the tax authorities, the unpaid taxes can be considered as damage caused to the creditor, as the taxes are only legally due to the creditor. If the manager evades the payment of tax, his actions must be regarded as directed against the creditor in question. "A very important point in such situations is whether the company would have been able to pay the tax at the time when it should have been calculated and paid," points out Mr Langys.

Risks and legitimacy of business decision-making

Langys points out that a business transaction that ends in a loss does not automatically mean that the manager has acted unlawfully. Liability is not for the negative economic result of the action, but for the legality of the actions taken at the time of the decision. "A business decision taken without breaching the duty of care and loyalty is considered lawful, even if it is detrimental to the company", says the lawyer.

The lawyer points out that all managers must be aware of the possible consequences of their decisions, which can range from damages to disqualification from holding the office of manager of a public or private legal person or from being a member of a collegiate management body for a period of 1 to 5 years. Improper decisions by a manager may also lead to administrative and criminal liability.

Persecution. Do we have effective tools to protect ourselves from it?

Posted on 2024-05-14 by avocad_bxgv12hf

There is a common perception that only public, famous and popular figures are most likely to face persecution. However, this latent illegality is quite widespread in society and almost anyone can be a victim of stalking.

Persecutors can not only be those who have experienced an unhappy love or marriage, but also, for example, parents towards their children. According to the Lithuanian Centre for Human Rights, almost one in ten people will be persecuted in 2021. Persecution has long been beyond social status or gender. Social space and various media platforms are a particularly favourable and comfortable environment for persecution.

What should we do when such intense attention may prove to be not only unwanted, but also cause negative experiences, discomfort, and ultimately the risk of a real threat, and do we have effective legal means to protect ourselves from such actions?", says Karolina Laura Briliūtė, lawyer at AVOCAD .

Stalking is generally understood as repeated, unwanted behaviour directed at a specific person. The Criminal Code elaborates on the elements of this offence in more detail: stalking is understood as an act of systematically carrying out, against a person's express will and without lawful justification, a series of acts which have the effect of forcing the victim to change his or her place of residence or work or educational institution or have any other negative impact on his or her social life or emotional state.

Although the Criminal Code used to criminalize acts of stalking (systematic intimidation), the criminalisation of stalking as such is relatively recent, dating back to 2021. In 2024, a draft amendment to this article was registered, with a view to strengthening the liability and introducing imprisonment of up to three years as an alternative punishment. However, a glance at the explanatory memorandum of the amending law shows that the assumptions behind the need to increase liability are exclusively related to maintaining the consistency of the Penal Code, the norms, the sanctions for the commission of offences, but not to taking into account the widespread extent of persecution in society, the investigation and trial of such acts in the courts, and the corresponding assessment of the need to increase liability.

How is persecution treated in case law?

Since the amendment of the Criminal Code, the Court of First Instance has heard 5 cases in which people have been found guilty of persecution. In a number of cases, other offences have been committed in connection with persecution. In the light of these court decisions, it is clear that, in order to be found guilty, the person experiencing the unlawful acts should, at the time of their occurrence, keep a record of the acts in the following ways: 1) keep correspondence, calls, record calls if possible, take screenshots; 2) film and photograph unwanted visits; and 3) tell the people around them and their relatives as much as possible about the acts of persecution, in order to be able to confirm them in the pretrial investigation and in the courts if needed.

However, although there are court decisions finding individuals guilty of persecution, there are several important points to bear in mind: on the one hand, the court decisions reviewed do not reflect the reality that a significant number of individuals are victims of persecution and are afraid or avoid going to the pre-trial investigation authorities; on the other hand, criminal measures should only be seen as a last resort. It is therefore certain that there are a number of cases where pre-trial investigators refuse to open pre-trial investigations because of the possibility of prosecution. Thus, persons subjected to acts of persecution continue to be immune from such acts being used against them.

As a conditional alternative, the Protection from Domestic Violence Act provides for the possibility of obtaining a domestic violence protection order, which is designed to protect people at risk of violence if there is a sufficient risk that domestic violence may be used.

Under the scope of the law, acts of harassment could fall within the definition of violence (intentional mental exposure resulting in non-pecuniary damage). Such a warrant could, inter alia, order the person carrying out the stalking to stay away from a specified distance, to refrain from communication and to refrain from seeking contact. However, this option also has several drawbacks: firstly, such a warrant, even if issued, would only be issued for a period of 15 days; secondly, the warrant could only be issued to persons living in close proximity, which excludes persons who are not known to the applicant, or who are not well-known, and who are carrying out such unlawful acts.

Thus, an assessment of the legal framework for protection against persecution shows that it is not sufficient to fully protect those suffering from such acts. This is all the more so when the acts of victimisation are not only physical but also extend to social media and, moreover, go beyond the immediate environment. Often, such unlawful acts are not always sufficient to trigger a prosecution or criminal measures.

Given the prevalence of this act and in order to protect individuals, amendments to the Law on Protection against Domestic Violence could be initiated. Namely, by providing for additional cases in which a protection order against domestic violence could be issued, broadening the range of persons against whom it could be issued. Accordingly, it is likely that, once a warrant of this kind has been issued in respect of a particular person, and if the indications of persecution persist and a pre-trial investigation is requested and the case is brought before a court, the fact that a warrant has been issued would be seen as an additional circumstance in support of the persecutor's guilt.

Household consumers and small businesses can terminate their energy supply contract without any termination fee

Posted on 2024-05-08 by avocad_bxgv12hf

According to recent case law, it is clearly established that household consumers, micro-enterprises and small enterprises have the right to unilaterally terminate their electricity sales contract and switch to an independent supplier free of charge from 15 July 2021, without paying any termination fees.

According to Mantas Baigis, Senior Associate at AVOCAD, the Lithuanian Court of Appeals has recently issued a very important decision rejecting a claim of more than EUR 1 million for the payment of termination fees.

"Until now, both household consumers and small businesses have been afraid to initiate the termination of uneconomic electricity contracts and change electricity supplier, because electricity suppliers demand huge termination fees for terminating contracts," Mantas Baigys notes.

Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 concerning common rules for the internal market in electricity and amending Directive 2012/27/EU (Directive 2019/944) provided for an obligation for Member States to ensure that unreasonable switching charges are not levied, and for the Member States to ensure, by their proactive action, that relevant unreasonable charges (i.e., switching-only charges that are unrelated to a specific loss of the supplier) are not levied against household consumers and small businesses.

Legislator 01 June 2023 The Energy Law of the Republic of Lithuania established that household consumers, micro-enterprises and small enterprises as defined in the Law on Small and Medium Business Development of the Republic of Lithuania shall have the right to unilaterally terminate the contract for the sale and purchase of electricity or the contract for the sale and purchase of electricity and provision of the transmission service to an independent supplier, and shall have the right to change the independent supplier.

According to the legislator, it is prohibited to provide for termination fees, switching fees and penalties to be charged to the consumers referred to in this paragraph for the unilateral termination of a contract for the sale and purchase of electricity or a contract for the sale and purchase of electricity and the provision of a transmission service.

Recent case law has clarified that the provisions of Directive (EU) 2019/944 have been properly transposed into the Lithuanian legal system since the adoption of Law No XIV-483 of 30 June 2021, which meant that as of 15 July 2021, it was ensured that household consumers and small businesses would not pay any switching fees when unilaterally terminating their contracts.

In other words, even if the termination fee was provided for in the contract between the parties in the electricity sales contracts concluded after 15 July 2021, it cannot be applied to the termination of the contract in accordance with the legal framework. Even if a termination fee has been paid (on or after 15 July 2021), you have the right to claim its reimbursement.

According to the lawyer, both ordinary consumers and businesses (micro and small enterprises) have the right to review their electricity contracts and assess whether there are any objective criteria for choosing another electricity supplier, and not to pay any termination fee. Even if termination fees are fixed in the contract.

"This does not in itself mean that it is possible to initiate the termination of contracts in haste. It is necessary to responsibly assess whether all the necessary conditions for such action exist. It is therefore advisable to seek legal advice," points out the AVOCAD lawyer.

Lawyer's tips for e-business: how to sell not only profitably but also legally

Posted on 2024-05-08 by avocad_bxgv12hf

Often, businesses only become interested in the legal requirements of their business when they encounter problems, but law is not just about solving disputes, it helps prevent them from happening in the first place. "Those who know this rule are much less likely to face legal challenges, which cost much more to resolve than to prevent," says Egidijus Kieras, an attorney at AVOCAD. He highlighted the most important international legal aspects of e-commerce for the participants of the GlobalShop "Innovation Agency" Academy, which are essential for e-business developers.

According to the lawyer, anyone starting and running an e-business should be aware that non-compliance with the law is punishable by a fine of up to 4% of annual turnover. "If fines don't scare you, be aware that if the infringements are repeated, your e-marketplace could simply be blocked," warns Egidijus Kieras.

What is important for an entrepreneur to do with e-commerce?

According to Kier, almost every action has a legal expression, so the rules of trade are set out in law. Acts come in two flavours: national law and international law.

Each country makes laws that apply only to itself, regulating the activities of individuals, their requirements, etc. For example, there may be differences in terms of return periods, delivery, etc.

The rules and requirements for e-commerce are, in most cases, laid down in directives issued by the EU, but they are not directly applicable in the country and each country has to incorporate the provisions of the directives into its national legislation, i.e. issue laws, e.g.: after the adoption of a directive, the Civil Code or other laws in Lithuania are revised.

"Trade rules need to be harmonised according to the rules of the specific country where the goods are sold to consumers. A website is tailored to the consumers of that particular country if it is available in their language, the presentation of the website is automatically adapted to the consumer's country (with appropriate extensions), and there are other clear indications that the offer of the goods is a targeted act in that particular territory," says the lawyer.

Distance Purchase Agreement - what must be included in it?

The legal relationship between the consumer and the trader is established by the sales contract. What must it contain?

Key product features. Although, according to the lawyer, it seems to be very clear to everyone, there are a number of fines for this. Last year, the State Office for Consumer Rights Protection fined €45,624 to a company" that operates an online shop. The Office found that the information published by the portal was incomplete and that the goods presented to consumers differed from their description, for example, they were scratched, there were certain irregularities, etc. Thus, the bottom line is that the description of the product must be specific and not mislead the consumer.
Trader's identity: name, address, telephone, email;
The total price of the goods or services, including taxes and other costs. If the total cost cannot reasonably be calculated in advance, the method used to calculate the price must be indicated. "The important thing to understand here is that if you don't specify the total price including all taxes, you won't be able to collect them from the buyer later," notes Kieras.
If you apply personalisation of the price, this must be stated. The buyer must understand that you have personalised the price he sees according to certain automated criteria. What problem does this rule solve? Businesses can use algorithms based on a consumer's purchase history or the websites they visit to determine whether a consumer is interested in a particular product, and if the answer is yes, they increase the price of the product or service. So, if you have personalised the price, you need to make that clear to the buyer.
Payment, delivery, the procedure for performance of the contract and the period by which the trader undertakes to deliver the goods.
If a right of withdrawal applies, the conditions, time limit and procedure for exercising this right, as well as a model withdrawal form. If there is no possibility to withdraw, this must also be stated. If applicable, it shall state that the consumer must bear the costs of returning the goods after withdrawal. If you do not specify this beforehand, you will not be able to claim later.
A reminder that there is a legal guarantee on the goods (2 years).
Commercial warranties (warranties provided by the manufacturer or seller).
Illegitimate dispute procedures.

And these are just some of the conditions required for a contract.

What is unfair trading?

Egidijus Kieras also points out which actions are considered unfair in all EU countries and which should be avoided. A commercial practice is unfair if it prevents the consumer from making an informed decision or influences his free economic behaviour:

Illegal indication of the reliability and quality mark.
Fraudulent claiming of a licence (authorisation), or product approval.
You make an offer with a price, but you know that you won't actually sell the goods on those terms.
Misleading claims that the product will only be available for an extremely short period of time.
Specifying the consumer's statutory rights as an exclusive condition of the offer.
Fraudulent closures by announcing sales.
Deceptive claims that the product cures.
Offering to enter a competition or receive a prize, but not giving the prizes or their equivalents specified.
Including an invoice or similar payment document in marketing materials.
Creating a pyramid distribution system.
Inappropriate labelling of advertising.
Rating.

What is important to know about ranking on an e-marketplace?

E-Commerce operators that allow consumers to search for products offered by different sellers must inform consumers of the main criteria that determine the ranking of the products provided to the consumer as a result of his search query. For example, it may indicate that products are ranked on the basis of price, the ratings of the customers who have purchased the product, popularity, or a combination of different criteria. If the ranking of a product in the search results is based on paid advertising or other payments received from the relevant merchants, this information should also be clearly indicated to users.

Genuineness of feedback, who guarantees it?

Where a trader makes product reviews available to the consumer, information on whether and how the trader ensures that the reviews published are from consumers who have actually used or purchased the product shall be considered essential. The aim is to better inform the online shopper so that he is not misled and makes a correct, informed decision.

It is up to the entrepreneur to ensure that the review is genuine. "Usually the authorities ask for clarification and then you have to provide evidence that the reviews are written by your real customers, as well as how the reviews were obtained, whether the users have the possibility to make negative comments as well, and whether they are visible to the public," notes Kieras.

In his view, these questions must be answered, as failure to do so could result in sanctions.

The delivery deadline must be taken seriously

Delivery must be made within 30 days. If the consumer does not receive the goods within this period, he has the right to terminate the distance contract and the seller must immediately refund any money paid by the consumer. "In practice, the deadline depends more on the consumer's wishes. However, this time limit should be taken seriously, as many of the fines imposed are because of this", says Kieras.

The lawyer advises that, in any case, businesses must cooperate with both the consumer and the authorities. "The fines are then much lower, even if infringements are found. Remember that the most common sanctions are those for failure to refund funds on time and failure to respond to consumer complaints on time," notes Egidijus Kieras.