January 2025 - Law Firm - AVOCAD

Recruiting a manager: what are the biggest mistakes and what has changed since the New Year?

Posted on 2025-01-29 by avocad_bxgv12hf

The recruitment of a CEO is a key element of an organisation's activities, requiring not only legal clarity but also a clear division of responsibilities. The manager of a legal entity is responsible for the day-to-day running of the company and his/her decisions have a direct impact on the success and reputation of the organisation. However, in practice, according to lawyers, there are often situations where the employment of a manager teeters on the brink of illegal employment.

Why this happens, what mistakes are made and how to avoid legal violations in this situation and how to properly organise the recruitment of a manager - answers AVOCAD Managing Partner, attorney-at-law Egidijus Langys.

The CEO is appointed by the company's board of directors or, if there is no board of directors, by the general meeting of shareholders. This body also approves the manager's remuneration, the job description and decides on bonuses or disciplinary action.

The Labour Code stipulates that a manager must have an employment contract, except for exceptions provided for by law. "This means that a manager's activity in a company without a properly concluded employment contract may be considered illegal employment," points out Langys.

While these requirements are clear, in practice companies often face situations where non-compliance leads to legal and financial consequences.

According to the lawyer, it is not uncommon for company managers not to be given employment contracts on the grounds that they are appointed by the shareholders, or not to be informed of their employment. This omission also leads to illegal employment, which has a number of negative consequences for companies.

The lawyer notes that a common mistake is the incorrect submission of information to Sodra. Failure to notify the manager's employment or late notification can not only lead to fines, but also hinder the provision of social security benefits to the manager. If the company's HR department fails to notice that the manager's employment contract must be registered in the Sodra system before the start of his/her employment. This exposes the company to administrative fines and the manager to temporary loss of insurance cover.

As of 1 January 2025, the Labour Code changes to provide that the conclusion of an employment contract and the recruitment of the head of a legal person must be notified to the territorial division of the State Social Insurance Fund Board at least one hour before the scheduled start of work.

"It is likely that this provision will not raise any questions about the proper recruitment of a manager, and that the amendment will be a help and a reminder to the company's accountants or HR representatives who perform the company's recruitment functions," notes AVOCAD's lawyer.

Preliminary agreement: how to avoid unfair treatment and protect your rights?

Posted on 2025-01-23 by avocad_bxgv12hf

Preliminary contracts for the sale and purchase of real estate may seem like a simple first step towards a successful transaction, but even small details can be a source of significant conflict, lawyers say.

What if the seller refuses to conclude the main contract? What to do when the deposit has already been paid and the agreements do not meet the original expectations of the parties? How can I protect my interests? Viktorija Dubovskienė of AVOCAD answers these questions .

You own real estate and have decided to sell it. A potential buyer has come along and you have entered into a preliminary contract for the sale of the property with him. In the contract, you agreed on a date by which the main contract for the sale of the land must be concluded. The purchase price consisted of an advance to be paid immediately after the signing of the preliminary contract, a further advance after a certain period of time, and a third, remaining part after the main contract had been signed, within 6 months from the date of signing the main contract.

Everything went smoothly in your situation - both advances from the buyer were paid. However, when the signing of the main contract is arranged at the notary's office, the seller indicates that he does not want to conclude the main contract and refuses to reimburse the advances to the buyer. The argument put forward by the seller is that the money has to be paid at the time of conclusion of the main contract.

The lawyer points out that it is in such a situation that the legal basis for civil liability is the party's dishonest behaviour. The case law of the Supreme Court of Lithuania notes that it is the party's dishonest behaviour that is regarded as unlawful conduct when deciding on pre-contractual civil liability when a party fails to perform a preliminary agreement, i.e. refuses to conclude a main contract.

As mentioned above, the buyer paid most of the advance into the seller's bank account before the main contract was signed. The parties agreed in the Preliminary Agreement that the remaining amount of money, the third payment, would be made after the signature of the Main Contract within 6 months from the signature of the Main Contract. The draft main contract, which included the condition of payment of the balance of the price at the time of conclusion of the main contract, was not in conformity with the essential conditions for the conclusion of the main contract, which had been agreed between the parties in the preliminary contract, concerning the payment procedure for the purchase of the property. For that reason, the buyer's refusal to sign such a draft contract on the ground that the procedure for payment of the price of the property was not in accordance with the intention of the parties under the preliminary agreement cannot be regarded as unreasonable and unfair conduct.

The Civil Code obliges each party to a contract not only to perform its obligations in good faith and properly, but also to carry out its duties as economically as possible and to cooperate with the other party. "Both parties to a contract have a duty to cooperate and to exercise their rights in good faith, and therefore both parties must act actively and perform actions that are consistent with reasonableness, which is a prerequisite for proper cooperation between the parties," attorney-at-law V. Dubovskienė notes in her commentary on the case law.

Since the draft of the main contract in such a situation was prepared by the notary proposed by the seller in accordance with the terms and conditions specified by the seller, the Court of Cassation held that it was the seller's duty to ensure that the proposed draft was in conformity with the provisions of the main contract on the procedure for payment for the purchase of the purchased property as laid down in the preliminary contract. The seller failed to fulfil that obligation by taking the position that the price of the property to be acquired was to be paid on the date of signature of the contract and, if the buyer did not agree to sign the main contract in accordance with the design proposed by the defendants, by informing the buyer that the contract was to be regarded as not having been concluded through the fault of the buyer.

According to the lawyer, this behaviour of both parties can be qualified as a breach of the duty of cooperation between the parties, which led to the failure to conclude the main contract. As a result of the breach of the duty to cooperate by both parties and the failure to conclude the main contract, it was decided to oblige the seller to reimburse the buyer for the advance paid by him, but not to grant the buyer's request for a penalty.

Thus, in such a situation, the most frequent and initial assessment will be the pre-contractual relationship and its evaluation, with a particular focus on the behaviour of the parties. Therefore, according to AVOCAD's lawyer, it is necessary to pay attention to what has been agreed and not to deviate unilaterally from the original agreements.

Working while ill: legal challenges, employer and employee responsibilities

Posted on 2025-01-16 by avocad_bxgv12hf

In Lithuania, workers have the right to paid sick leave, which is provided for and regulated in detail by law. Nevertheless, some workers choose to go to work even when they are ill.

"Such behaviour, not only in the context of the pandemic experienced and survived, but also during the annual infectious disease season, raises significant legal, health and occupational safety issues," says Karolina Briliūtė, a lawyer at the law firm AVOCAD.

She said that Lithuanian labour law provides for measures to ensure workers' health and regulate employers' obligations, but there are no explicit prohibitions on working when ill. This highlights the need for stricter or more creative application of existing laws and regulations, or for regulating such situations through internal workplace regulations to address what is known as "presenteeism". This is a situation where an employee loses productivity in the performance of his/her job functions at his/her workplace due to illness, injury or other objective circumstances. Nevertheless, even when ill, individuals often feel the need and desire to physically go to work.

Under Lithuanian labour law, employers are obliged to ensure the health and safety of their employees, as set out in the Occupational Safety and Health Act. This law obliges employers to implement measures to prevent risks in the workplace, including the spread of communicable diseases. By encouraging or allowing (or failing to prevent) sick workers to work, employers not only violate their obligations to ensure a safe working environment, but may also be in breach of the Labour Code of the Republic of Lithuania, which stipulates that employers have a duty to provide suitable working conditions and to ensure the well-being of employees.

Karolina Briliūtė notes that the legislation does not explicitly prohibit working when ill, which may place too much responsibility on employees and employers by regulating such situations in internal workplace regulations. "For example, the Occupational Safety and Health Act imposes an obligation on the employer to take measures to ensure that the working environment complies with the requirements of the occupational safety and health legislation, which may also include the obligation to regulate situations where employees go to the workplace when they are ill, thus endangering the health and safety of other employees," notes AVOCAD's lawyer.

She also notes that staff who work while ill, especially in cases of communicable diseases, not only endanger the health of colleagues but also violate the principles set out in the Public Health Act. "This law obliges employers and employees to contribute to public health, and working when sick hinders this. "The instruments in the existing legislation are sufficient for creative interpretation, allowing employers to set stricter, clearer instructions in their internal regulations," the lawyer notes.

Employers have a wide range of responsibilities to reduce the risks associated with sick workers in the workplace. They must ensure a clear sick leave policy, encourage employees to prioritise their health, and inform them of their rights and responsibilities, ensuring that employees are aware not only of their own health but also that of their colleagues. Employers should take proactive measures, such as health checks or favourable teleworking policies, especially in areas wherepresenteeismcan have serious consequences, such as the healthcare or food service sectors and areas where there is constant contact with individuals. Such provisions could be added to the Occupational Safety and Health Act or, through creative application of existing statutory provisions, elaborated in sub-statutory or internal legislation.

According to Briliūtė, in order to fully address the challenges posed bypresenteeism, Lithuania could consider amendments to legislation that would provide legal consequences for non-compliance with such obligations and mechanisms for anonymous reporting of breaches by employees. "These provisions could be included in the Labour Code or the Law on Public Health Care, thus creating a coherent legal framework to ensure workers' health and public safety. Strengthening this legislation would promote a healthy working culture, reduce risks in the workplace and ensure the well-being of workers and society," she stresses.

Actual and formal head of the company - who is liable for damages?

Posted on 2025-01-14 by avocad_bxgv12hf

"I'm just a placeholder...", "I was only formally appointed here, the real manager was someone else...", "my friends asked me to be formally present...", "I didn't handle the money, another manager did". These and similar excuses often baffle lawyers when dealing with managerial responsibility.

"It may be the result of innocent naivety or blind trust, or perhaps a lack of basic understanding and knowledge, but sometimes these cases can also be the result of deliberate action," says Egidijus Langys, Managing Partner at AVOCAD. He says that the most important thing is not to blame, but to help managers avoid such situations or to get out of them as soon as possible. So, how can we protect ourselves from the potential risks that can arise from the formal performance of managerial duties?

Limits to the responsibilities of the actual and formal manager

Before the holidays, the Supreme Court of Lithuania (SCL) issued an important clarification that distinguishes between the formal, or in other words legal, and de facto liability of a company's manager. This clarification is of particular relevance for those who find themselves caught between formal duties and real managerial control.

"Today's leader, in my opinion, is either a hero or a madman," Langys wryly remarks. According to the lawyer, managers must work with the utmost care, competence and compliance with the law, because the limits of liability can be wide and sometimes very unexpected.

The mere existence of a de facto manager does not exclude the liability of a formal manager. If both managers committed illegal acts, the question is whether they acted as accomplices. "It must be assessed whether the managers acted jointly with the intention to cause damage (subjective complicity) or whether the interaction of several actions simply led to the consequences (objective complicity)," explains Egidijus Langys.

Liability for aiding and abetting in court

One of the most common cases is when a person agrees to become a formal manager out of friendship or a simple request. Such a manager may believe that nothing serious will happen: after all, he or she has done nothing but sign a few documents. "But even in this case, the liability remains because the activity was carried out in his name. The formally appointed manager who signs the documents often does not look into the details and relies on the actual manager, but in court all this proves subjective complicity," warns Langys.

It is therefore necessary to assess the risks if you are asked to become a formal manager, whatever the purpose. "If you are already a formal manager and blindly follow the instructions of others, you should step down as soon as possible. It is important to remember that leadership is not only a responsibility, but also a huge risk, so a responsible approach to this role is vital.

What liability can a manager face?

According to AVOCAD's Managing Partner, the manager may be subject to civil, administrative or even criminal liability depending on the nature and extent of the damage caused. "For example, if a manager signed documents without looking at the information contained in them and this caused financial damage, he or she may be liable for damages," explains Mr Langys. In cases of criminal liability, the manager can face fines, imprisonment or even imprisonment.

"That's why it's important not only to understand the limits of your responsibilities, but also to ensure that all actions are legal and justified. Leadership is not only an opportunity to develop your career, but also a responsibility for all the consequences that may arise from poor decisions," emphasises Langys.

Current ruling: order of the Supreme Court of Lithuania in civil case No e3K-3-243-403/2024 of 16 December 2024.

When does public performance of music become an offence?

Posted on 2025-01-08 by avocad_bxgv12hf

Imagine you're walking down a city street, and a nearby café is playing a jazz tune, while a passer-by is blasting a popular song on his phone. Music is almost everywhere in the city, but have you ever wondered when such public performances cross the boundaries of legality?

When is music a legitimate source of joy, and when can it lead to serious consequences? Where are the limits of copyright protection and how do you avoid being listed as a copyright infringer? Rokas Puodžiūnas, lawyer at AVOCAD, answers these questions.

Musical works are protected by Copyright. Copyright objects are original literary, scientific and artistic works that are the result of creative activity expressed in some objective form.

Thus, there are two requirements for works to be protected by copyright: originality and objective form. The latter means that the work must have been created in a form (which does not necessarily have to be fixed in a tangible medium) that allows it to be perceived by others (e.g. a book that can be read, a painting, etc.). A work cannot be considered to be merely an idea that has not been realised.

The moment of creation of protection in works

Copyright protection of works starts from the moment the work is created, i.e. from the moment the work is expressed in an objective form. Whether or not the person who created the work intended it to be the subject-matter of copyright protection is irrelevant to the triggering of protection. Nor does the law require any formalities that are relevant to the emergence of protection (such as registration, special marking, recognition).

The author's moral rights are rights that have no economic content. They are intrinsically linked to the personality of the author. The purpose of these rights is to protect the author's personal interest in the work being known as he created it. Non-proprietary rights cannot be transferred to other persons.

The law establishes 3 personal moral rights:

authorship right - the right to claim authorship of a work by having the author's name clearly indicated on all copies of the work published, or by any other practicable means of public performance of the work;
the right to the author's name - the right to request that any use of the work include or exclude the author's name or a pseudonym;
the right to integrity of the work - the right to object to any distortion or other alteration of the work or its title, as well as to any other interference with the work which may harm the author's honour or reputation.

Copyright is the right to use the author's work. Only the author, another rightholder or his/her representative can authorise or prohibit the public use of the work in any way. Unlike in the case of moral rights, the author is entitled to receive a fair and proportionate royalty for each use of the work in relation to the author's moral rights. Economic rights can also be transferred by contract and inherited. However, economic rights are subject to a term of preservation: authors' economic rights last for the lifetime of the author and for 70 years after the author's death.

The law provides for this non-exhaustive list of property rights:

reproduce the work in any form or manner;
to publish the work;
translate the work;
adapt, arrange, stage or otherwise rework a work;
distributing the original or copies of the work by sale, including by public offer to buy or by targeted advertising of the original or copies of the work to encourage consumers to buy them, or renting, lending or otherwise transferring the original or copies of the work for ownership or possession, or for importing or exporting;
display the original or copies of the work in public;
perform the work publicly by any means and by any means;
broadcasting, retransmission and other communication of the work to the public, including making it available to the public on computer networks (the internet).

Any use of the original work or copies thereof without the permission of the author, his successor in title or his duly authorised representative is considered unlawful.

How are copyright regulations reflected in the public domain when a piece of music is released?

First of all, it should be noted that publishing music without the author's consent is not always an infringement.

The publication of music in a public space is considered a public performance of the work. A public performance is the playing, singing, playing, reciting, reading, dancing or other means of public performance of a work, either directly (live performance) or by means of any means or equipment, in any public place where an unspecified group of members of the public is present at the same time, or is likely to be present.

It is clear from this definition that a performance of a work is not only when it is performed live, but also when it is made audible to an unspecified group of members of the public by technical means.

An undefined group of members of society is understood as a group of individuals who are not bound by any strong reciprocal relationship (e.g. family; friends; classmates) and therefore cannot be defined. Therefore, playing music loudly at a private party of friends will not constitute copyright infringement.

However, playing music in a public space where any passer-by can hear it (e.g. music played over loudspeakers in a shopping mall, in restaurants; in hotel lobbies), unless the author's consent has been obtained and the author has been compensated fairly, will already be considered an infringement. For such an infringement, the author will be able to claim the cessation of the unlawful acts (if they have continued for a longer period of time) and compensation for the use of the infringing work.

How to avoid a possible infringement?

If the aim is to legally play music in a public setting in order to create a cosy atmosphere, it may seem difficult on the face of it, as you would have to agree with all the songwriters whose work you want to play, and it may be even more difficult if you want to play a foreign work. It can be even more complicated if the author and the performer of the musical work are not the same, as in such a case the copyright belongs to the author of the song, but the performer of the song owns the neighbouring rights to the performance of the song (neighbouring rights are derivative rights to the result obtained by the use of the work, i.e. performance of the work, recording of the work, the first take of a film, etc). This would entail contracts with several entities.

To this end, collecting societies exist to administer and enforce the economic rights of performers by concluding contracts with them. It is therefore more convenient for users to be able to conclude contracts for the lawful exploitation of their works with a single organisation that manages such right holders.

In Lithuania, such organisations are often heard in the public domain, such as LATGA (Lithuanian Association for the Protection of Copyrights) and AGATA (Lithuanian Association of Neighbouring Rights). As the name suggests, LATGA represents copyright holders and ensures that authors are compensated for the use of their works. AGATA ensures the rights of related rights holders by representing the interests of performers, producers of phonograms and audiovisual works.

So, if individuals want to legally use music in their activities, they need to enter into agreements with both LATGA and AGATA. Otherwise, an infringement of the law is being committed, for which appropriate legal consequences may be imposed.