Category: Labor law

When terminating an employment contract, many employees—and often employers as well—believe that compensation for unused vacation time can be paid for a maximum of three years of service. However, according to lawyers, the regulations do not provide for such a rule.

According to Sandra Mickienė, a senior lawyer at the law firm AVOCAD, this misconception often leads to compensation being calculated incorrectly for employees whose employment contracts have been terminated, while employers face the risk of legal disputes. “This approach is still very common in the market, which is why quite a few mistakes are made when calculating compensation for unused annual leave,” she notes.

According to the lawyer, the Labor Code does not establish a rule that, upon termination of an employment contract, compensation for unused annual leave may be paid for a maximum of three years. The law does not set a limit on the compensation period, but rather establishes the conditions under which an employee loses the right to take all or part of their annual leave (or to receive monetary compensation for it upon termination of the employment contract). Therefore, in each case, the employer must individually assess the specific employee’s situation and, in accordance with the rules established by law, accurately calculate the compensation due to them. To determine when the right to take all or part of the annual leave (or to receive monetary compensation for it upon termination of the employment contract) is lost, it is important to establish the following key points: the date on which the right to the full duration of annual leave was acquired, the end of the calendar year in which the right to the full duration of leave was acquired, and, accordingly, to count three years from the end of that calendar year.

For example, if an employee started work on April 15, 2022, the annual leave accrued for the period from April 15, 2022, to April 14, 2023, must be calculated according to the aforementioned criteria. The right to the full duration of annual leave is acquired on April 15, 2023, and the end of the calendar year in which this right was acquired is December 31, 2023. The three-year period calculated from this date ends on December 31, 2026; therefore, the right to use the vacation accrued during the period from April 15, 2022 – April 14, 2023 (or to receive compensation for them upon termination of the employment contract) would be lost as of January 1, 2027.

Accordingly, when terminating an employment contract with an employee, all periods of their employment with the company must be assessed in the same manner—determining the aforementioned points for each period separately and calculating how much annual leave the employee has accrued and not used, for which compensation must be paid (the employee would lose the leave for the second year of employment (April 15, 2023–April 14, 2024) on January 1, 2028, for the third year of employment on January 1, 2029, and so on).

Let’s imagine a hypothetical situation in which an employee was hired on April 15, 2022, under a standard 5-day workweek schedule and never took any vacation. Their employment contract is terminated on March 19, 2026. Calculating the accrued vacation days according to the rules established above, we would arrive at a total of approximately 79 unused vacation days:

April 15, 2022 – April 14, 2023 – a full 20 days;

April 15, 2023 – April 14, 2024 – a full 20 days;

April 15, 2024 – April 14, 2025 – a full 20 days;

April 15, 2025 – March 19, 2026 – approximately 18.58 days.

In such a case, compensation should be paid not for 60 working days, as is often assumed (in a typical scenario, an employee is entitled to 20 days of vacation per year, in which case 3 × 20 = 60 days), but for all 79 accumulated unused vacation days.

Another very important aspect that, according to an AVOCAD lawyer, should be noted, – the general rule: the right to take all or part of annual leave is forfeited upon the expiration of the aforementioned three-year period, which is calculated separately for each year worked. However, there is one significant exception: if an employee was actually unable to take the leave for objective reasons, this right is not lost and compensation for unused leave must be paid, regardless of the usual three-year period.

The Labor Code does not specifically define what constitutes an objective reason if an employee was actually unable to take leave, nor does it specify the timeframe within which such leave must be taken once the objective reasons have ceased to exist. In practice, such circumstances may include, for example, temporary incapacity for work, parental leave, quarantine, or emergencies, as well as actions by the employer that prevented the employee from taking annual leave. Since the principle of disposability applies in labor law, each situation should be assessed individually: a decision should be made as to whether to extend the deadline for using accrued leave or to consider this deadline expired.

Due to the mistaken belief that compensation for unused annual leave must be calculated for a maximum period of three years, workplaces have, to this day, seen inaccurate calculations of compensation for unused vacation days, which often lead to disputes between employers and employees. Disputes often also concern the legality of “writing off” vacation days: employees claim that the employer unlawfully “wrote off” vacation days because the conditions for using them were not actually provided. There are also cases where vacation days are not “carried over” to the next year, but upon termination of the employment contract, they are suddenly “written off” on the day of dismissal, which leads to additional disputes.

What is important to know when resolving such disputes?

First,the deadline for forfeiting the right to vacation set forth in the LaborCode is mandatory—it cannot be altered by agreement or by the employer’s decision. The only exception applies when an employee was actually unable to take the vacation—in such cases, the vacation days are not forfeited.

Second, in the event ofa dispute, the employer must prove that the employee was given a realistic opportunity to take leave (the employee was encouraged to take leave, leave was scheduled according to the leave rotation, but the employee refused, etc.), while the employee must prove that, for objective reasons, they did not have such opportunities (requests for leave were denied, leave was canceled, there was no possibility of finding a replacement, the nature of the work or the scope of duties did not allow for taking leave, etc.). Each party must submit supporting documents.

Third, unusedvacation days should not be “written off” on the day of termination. This should be done on a regular basis, typically annually, with employees being informed of their accrued days to avoid surprises and disputes.

Sandra Mickienė points out that decisions regarding the “write-off” of vacation days are made not by the accountant, but by the manager or another responsible person. “An accountant cannot independently ‘write off’ vacation days, because each employee’s situation is unique and requires assessment (the accountant cannot determine on their own whether the employee had the opportunity to take vacation or was unable to do so for objective reasons, and therefore cannot decide whether the days should be ‘written off’ or whether an extension should be granted to use them). Furthermore, accounting entries can only be made if there is a supporting document. Therefore, the “write-off” of vacation days must be formalized by a decision of the manager—only then can the accountant take the appropriate actions,” the lawyer emphasizes.

The Labor Code does not specify detailed procedures for how unused annual leave must be “written off” (the Labor Code does not specify whether such “write-offs” must be formalized by a manager’s order or other decision, nor does it specify the period during which an employee has the opportunity to use accumulated leave that, for objective reasons, could not be taken within the prescribed timeframe). “It is recommended that every company establish internal procedures governing the ‘write-off’ of vacation days, or that relevant provisions be included in the company’s work rules,” advises an AVOCAD lawyer.

Such a document should clearly specify how and when unused vacation days are "written off," the basis for accounting entries, and the circumstances under which employees are granted additional time to use them. It is also possible to stipulate employees’ obligation to take leave and provisions for cases of abuse (when an employee arbitrarily fails to take the mandatory uninterrupted annual leave). Such a procedure helps to effectively manage the vacation process, ensures transparency, and helps avoid disputes.

In conclusion, Sandra Mickienė once again points out that the misconception that compensation for unused vacation days is calculated for a maximum of three years often leads to incorrect calculations and disputes. In fact, the Labor Code does not impose such a limitation—compensation depends on the actual number of accrued and unused vacation days, with each year evaluated separately. The right is not lost if an employee was unable to take vacation for objective reasons. Therefore, it is important to clearly document processes, “write off” vacation time in a timely manner, and ensure that employees can actually take it.

 

When an employee agrees on a salary but receives less for several months and does not say anything to the employer, thinking that these are temporary difficulties or that the company is going through a difficult period, serious problems may arise later when a claim is made.

According to Viktorija Dubovskienė, a lawyer at the AVOCAD law firm, the latest court practice sends a very important and clear message: silence in labor relations can be understood as consent, and an arbitrary decision to no longer perform one's duties can be understood as a gross violation.

Lower pay: when does an employee's expectation become consent?

The case examined a situation where an employee had agreed on a specific salary, but the amounts actually paid were subsequently reduced. The employee claimed that this was an unpaid portion of his salary and that he therefore had the right to terminate the contract and claim the outstanding amount. The employer took the opposite view, arguing that the reduction in remuneration had been agreed and that the employee had not made any claims for a long time.

The Supreme Court of Lithuania emphasized a fundamental rule: if an employee believes that the terms of their employment contract have been changed unlawfully, they must take active steps. The law sets a time limit within which potentially violated rights can be challenged. If no dispute is initiated within this period, the employee is deemed to have agreed to work under the changed terms and conditions.

According to the lawyer, in this case, the employee could have noticed the reduction in remuneration when he received the first smaller payments. However, he continued to work, accepted his salary, and did not initiate a formal dispute for a long time. Only later, when the conflict escalated, was a significant amount claimed for the entire period. The court found that there was no basis for such an "accumulated" claim because the employee had not exercised his right to dispute the situation in a timely manner.

Discussing the latest ruling by the Supreme Court, Viktorija Dobovskienė points out that labor law protects employees, but it is also based on the principle of legal certainty. "If a person accepts a lower salary for months and does not react, the court may consider that they have agreed to this situation. Waiting in good faith can become a legal risk," she warns.

Absence from work – a serious violation

An equally important part of the case concerns dismissal for absence from work. The employee, believing that his request to terminate the contract had already taken effect, did not go to work for almost two months. Meanwhile, the employer clearly stated that it did not agree with such termination and considered the employment contract to be valid.

The court assessed this behavior as a continuous and deliberate failure to perform duties. It was emphasized that if the basis for termination of an employment contract is disputed, an employee cannot unilaterally decide that they no longer need to perform their duties. Until there is legal clarity, the obligation to work remains.

"Long-term absence from work without a valid reason was recognized as a gross violation, and dismissal was considered a proportionate measure, especially given the employer's loss of trust. The court also noted that even if there is debate about certain procedural details, this does not in itself negate the fact that a gross violation may have been committed," notes Viktorija Dubovskienė.

The AVOCAD lawyer also points out that if the employer clearly states that the contract is valid, the decision to simply not come to work is extremely risky. "In such a case, the safest course of action is to resolve the dispute through legal means, rather than arbitrarily terminating the performance of duties," says the lawyer.

According to her, this ruling highlights two clear rules. First, if you believe that your salary or other essential terms have been changed unlawfully, react immediately. In labor law, "later" often means "too late." Second, if there is a dispute over the termination of an employment contract, a unilateral decision to stop performing your duties can have serious consequences.

In labor relations, inaction also has a price. The court has once again demonstrated that it is not those who suffer in silence who prevail, but those who defend their rights in a timely and appropriate manner.

Imagine a situation: your work schedule clearly shows your days off, but your employer asks (or even tells) you to come to work. On payday, it turns out that you were not paid twice as much as the Labour Code stipulates, but much less. Can the employer do this?

According to Viktorija Dubovskienė, an attorney at AVOCAD, the legislation is quite strict on this issue - an employee must be paid at least double pay for working on a rest day that is not scheduled in accordance with the work (shift) schedule. "This means that if the timetable is not changed on your initiative, the employer cannot unilaterally decide to pay only the regular rate for working on rest days," the lawyer says. This is where the disputes start: whose will was it to change the working schedule - the employee's or the employer's?

The lawyer notes that the Labour Code stipulates that, where aggregate working time is used, employees shall work according to the approved work/shift schedules, subject to maximum working time requirements. Employees must be notified of the schedules at least 7 days before they enter into force. They may be changed only in exceptional cases beyond the employer's control and must be notified 2 working days in advance.

"The schedules are approved by the employer in agreement with the works council, trade union or collective agreement. They must be drawn up in such a way that working hours do not exceed 52 hours per week," points out Viktorija Dubovskienė.

If an employee works more hours than the norm during the accounting period, this is considered overtime. It shall be paid in addition or, at the employee's request, the excess hours (multiplied by 1.5) may be added to annual leave.

The Supreme Court of Lithuania has noted in its recent case law that although the Labour Code norm regulating payment for work on days off is mandatory, it must be interpreted taking into account its purpose. The legislator, by imposing an obligation on the employer to pay double remuneration for work on days other than those specified in the timetable, sought to protect the employee from unexpected changes in work schedules at the will of the employer.

Under Article 115 of the LC, the employer must draw up and approve work schedules and inform the employees of their entry into force at least seven days in advance. Moreover, schedules may only be amended in exceptional cases beyond the employer's control and the employee must be given at least two working days' notice.

However, according to the lawyer, these obligations on the employer cannot be interpreted as limiting the employee's own right to request a change in the timetable if he or she needs one. If the employee were always paid double wages, the purpose of the law would not be achieved. On the contrary, it would be to the detriment of the worker himself, since the employer, knowing that he would have to pay double, would be unlikely to agree to the worker's request.

Summarising the court's ruling, V. Dubovskienė says that the employer's obligation to pay double pay for working on rest days stems from the legislator's aim to protect the employee's ability to plan his/her working and rest time. Article 144(1) of the Labour Code must be interpreted as meaning that if an employee works on a rest day on the employer's instructions, he or she must be paid double remuneration. However, if the employee himself initiates the change of his working time for his own personal interests, he cannot reasonably expect double payment.

It is also important who has to prove the reason for the rescheduling. If it is established that the worker did not work on the days specified in the timetable, it is for the employer to prove that the change was made at the worker's request and in the worker's interest. However, the mere fact that the employer does not have a realistic opportunity to change the working timetable within the time-limits laid down in the Labour Code is not sufficient to prove that the change was made at his own initiative.

"So, if you work on your days off and your work schedule has been changed at your request, please be aware that under the Labour Code, you must be paid at least double your salary. Your employer cannot unilaterally change your schedule and expect you to pay less for working on your days off," stresses the lawyer. The Court of Cassation has ruled that it is the employer who bears the burden of proving that the work schedule was changed at the initiative of the employee. In the absence of such proof, you are deemed to have worked at the will of the employer and are entitled to double pay. So if you find yourself in a situation where you have worked on your day off, check that your pay has been calculated correctly.

Recent Supreme Court case law - https://www.infolex.lt/tp/2339219

When two people in a company do the same job but are paid differently, the natural question is: is this legal? Is this situation already discrimination? Or does the employer have a legitimate reason for treating them differently?

Viktorija Dubovskienė, an attorney at AVOCAD, answers these topical employment issues by analysing both national labour law and the case law of the European Court of Human Rights.

According to the senior lawyer, the Labour Code (LC) stipulates that employers must ensure gender equality and not discriminate against employees on any grounds. The Court of Cassation has also clarified that any discrimination, whether direct or indirect, on grounds unrelated to the employee's abilities or statutory criteria, such as membership of a particular organisation, is prohibited.

The Labour Code stipulates that a worker's salary cannot be lower than what is laid down by law, collective agreements or the company's remuneration system. It also makes it clear that the system must be fair and ensure that workers are not discriminated against on grounds of sex or other grounds. Same work means the performance of work activities that are, according to objective criteria, identical or similar to other work activities, to the extent that the two can be interchanged without significant cost to the employer.

A systematic interpretation of the above-mentioned provisions of the LC means that the parties to an employment contract must lay down in the employment contract non-discriminatory rules for calculating wages, which establish equal pay for equal work.

However, the case law of the European Court of Human Rights shows that not all unequal treatment is discrimination. It is only recognised when there is no objective and reasonable explanation for such treatment. If an employee raises a reasonable suspicion of possible discrimination, then the burden of proving that the difference was legitimate lies with the employer, who has access to all the relevant data.

Viktorija Dubovskienė points out that the Supreme Court of Lithuania has examined the employee's complaint in this situation. It stated that the employee had been subject to unequal pay conditions for a certain period of time after the reorganisation, but that this temporary difference in remuneration was objectively justified - it was part of the reorganisation process in order to unify the pay system throughout the employer's company during the transitional period.

"In this case, workers were temporarily treated differently for the good cause of improving their situation. The public authorities decided to apply a transitional period during which salaries were equalised and increased", explains the lawyer.

To achieve this, interim compensatory measures (salary supplements) were applied and the system itself was converged faster than planned, i.e. within 7 months instead of 2 years.

The Court of Cassation noted that the temporary unequal pay was known in advance, the employee had been informed of it, had consented to it, and the differences were not discriminatory. The Court of Cassation emphasised that, according to the case-law of the European Court of Human Rights, where the aim is to improve the situation of all workers and the implementation of the restrictions is not contrary to the fundamental principles of human rights, such restrictions are acceptable.

Thus, according to the lawyer, it is not enough in each case to conclude on the face of it that a provision is discriminatory, but the context of all the circumstances and the ultimate true objectives of the action must be assessed.

 

Investing in staff development is a common practice among modern employers. Courses, seminars, training or even paid studies often become part of an overall strategy to develop loyal, motivated and adaptable team members.

However, things don't always work out as the employer expects. In some cases, after taking advantage of an opportunity to develop their skills at the employer's expense, they decide to leave their job shortly after completing their training. In such situations, the question arises: does the employer have the right to demand that the employee reimburse the training costs? How can I protect myself from such cases and what costs can the employer claim in general?

Meanwhile, it is important for workers to know whether the employer's demand is justified and in line with labour law. Employers often deduct training costs from employees' wages. In such cases, questions arise not only as to the lawfulness of the employer's actions, but also as to whether the employee is obliged to reimburse the employer for the costs incurred by the employer at all.

Laura Jodeliukaitė, a lawyer at AVOCAD, talks about all these situations and the legal issues they raise .

When can an employer claim reimbursement for training or further training?

According to the lawyer, the Labour Code regulates the agreement on the reimbursement of training costs. It allows the parties to an employment contract to agree on the terms and conditions for reimbursement of the employer's training or further training costs incurred by the employee in the event of termination of the employment contract:

• at the employer's initiative for reasons attributable to the employee, or

• at the initiative of the employee without valid reasons.

Thus, if the employment contract is terminated at the initiative of the employee for important reasons (e.g. where the employee is unable to perform his/her job properly due to sickness or disability, or otherwise), or where it is terminated at the initiative of the employer for reasons not attributable to the employee (e.g. where the employee's job function becomes redundant for the employer due to a change in the organisation of work or for reasons connected with the employer's activities, or otherwise), etc, then the employer would be precluded from claiming the costs of the employee's training or qualification.

The aim is to protect the employer's investment in the employee's skills development, which also increases the employee's value on the labour market. The employer, who has a reasonable expectation that an employee in good faith will continue in the employment relationship in order to 'repay' him for the opportunity to develop his skills, is entitled to reimbursement of such costs if the employment contract is terminated through the fault of the employee or at his own initiative without good cause.

Which expenses are considered reimbursable?

AVOCAD points out that not all investments made by employers in training or skills development can be considered remunerated. Under the Labour Code, only costs that are related to the provision of knowledge or skills that go beyond the requirements of the job can be reimbursed.

"This means that an employee can only be obliged to reimburse the costs of training or further training if the training was intended to provide additional knowledge or skills that are not necessary for the immediate functions of the job," emphasises Laura Jodeliukaitė.

The agreement may also specify whether the cost of training or further training includes mission expenses (travel, accommodation, etc.).

What does case law say?

The Supreme Court of Lithuania has stated that under the Labour Code, an employer is obliged to train an employee to the extent necessary for the performance of his or her job functions. The employer is also obliged to take measures to improve the qualifications and professionalism of employees and their ability to adapt to changing business, professional or working conditions.

An employee can only be liable to reimburse the employer for costs incurred by the employer if he or she acquires additional knowledge or skills that go beyond the requirements of the job (competence) and increase his or her value on the labour market.

"For example, if the employee was already qualified to perform the duties of the job, but received training that took him or her beyond the level of knowledge required to perform his or her immediate duties, then such expenses could be considered reimbursable," she says.

An employer's obligation to train an employee to the extent necessary to perform the functions of his job does not constitute the provision of additional knowledge or skills beyond the requirements of the job. Therefore, such training costs are not to be regarded as reimbursable expenses of the employee.

For an employer to justify the reimbursement of training or further training costs incurred by an employee, it is necessary to prove:

• what knowledge is needed to carry out the functions of the job;
• the training provided to the staff member was at a higher level than that required for the performance of his/her direct duties.

This could be based on training programmes, certificates or other documents showing the knowledge acquired by the employee. If this acquired knowledge, when compared to the requirements of the employee, indicates that the employee has acquired a higher level of knowledge than that required for the performance of his/her direct functions, such expenses would be considered as reimbursable.

According to the lawyer, the courts have dealt with situations where workers have attended conferences and exhibitions. If such events were related to the employee's direct work and job functions, and the knowledge acquired was applied at work, the employer's claim for reimbursement was not justified.

Deadline for reimbursement of learning expenses

Educational expenses may be reimbursed if they were incurred during the last two years before the end of the contract, unless a longer period - up to three years - is laid down in the collective agreement.

Can an employer deduct from an employee's wages for paid training?

The law is very clear on when an employer can deduct from an employee's wages - the list is exhaustive. There is a clear prohibition against deductions on grounds other than those provided for in the law. These cases do not include the possibility for an employer to deduct from an employee's wages the cost of paid training.

This means that even if the employee has signed an agreement to reimburse the employer for training costs, the employer cannot deduct the employee's wages on the basis of this agreement alone.

However, the Labour Code allows the parties to derogate from the mandatory rules laid down in the Labour Code or other labour law provisions in the employment contract, provided that all the following conditions are met:

• the monthly salary of the worker is sufficiently high (at least two times the gross average monthly salary of the national economy, as published by the State Data Agency);
• not agreeing on legal rules that the Labour Code does not allow to be changed (e.g. maximum working time, minimum rest time, occupational safety and health, etc.);
• balancing the interests of the worker and the employer.

Thus, while it is not normally permissible to agree on deductions from an employee's wages to reimburse the employer for the employee's training costs, this possibility does exist in certain cases.

The exhaustive list of deductions from wages set out in the law is mandatory (imperative), but can be derogated from if the employer and employee agree. However, the employee's wages must not be lower than those set out above, and a balance must be struck between the interests of the employee and the employer. If these conditions are not fulfilled, the agreement could be declared unlawful if challenged by the employee.

What does it mean to balance the interests of employees and employers?

The lawyer points out that in the case law of the Supreme Court of Lithuania, the balance was considered to be ensured when:

• the employee has undertaken to reimburse the costs of the training only if the employment contract is terminated earlier than 12 months after the end of the training (under the Labour Code, a period of 24 months can be agreed for twice as long);
• the agreement stipulated that the employee would not reimburse the full amount of the expenses, but only that part of the expenses which was proportional to the period of time not worked.

"This agreement ensured the employer that the employee would work for the company for at least a year and apply the knowledge he or she had acquired, and that the employee would no longer be obliged to pay anything back after a year. Even if the employee leaves early, the amount to be repaid is calculated on a pro rata basis," says Laura Jodeliukaitė, reviewing case law.

The Labour Code also regulates a special case where an employee, on his/her own initiative, is studying for a bachelor's degree, a master's degree and/or a vocational qualification in a formal vocational training programme, and the employer pays all or at least half of the costs. In such a case, it may be agreed that the employee may terminate his/her contract of employment on his/her own initiative without good cause during the period of studies and for a period of three years thereafter only if he/she reimburses the employer for the costs incurred.

The most important thing to know is that it is possible for an employer to recover the cost of training, but this can only be done in accordance with the procedures laid down in the law and with a clear agreement.

 

 

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.

 

Thanks to the Covid-19 pandemic, society has discovered the benefits of teleworking. Many employers and employees still choose teleworking, or at least a hybrid model, today. Many people living in Lithuania, taking advantage of teleworking opportunities, also conclude employment contracts with employers based and operating in foreign countries, but actually working remotely from Lithuania.

It is usual for an employer to draw up an employment contract in accordance with its national law. Usually, the employment contract is drafted in the national language of the employer, the employment contract refers to the labour law rules of the employer's country, and the working time, wages, holidays, termination and other conditions of employment are also set out in the contract in accordance with the national law of the country of the employer. However, since such employment contracts go beyond the borders of a single State, the question naturally arises: should the employment relationship arising from such contracts nevertheless be governed by the labour law of the Republic of Lithuania, from which the employee actually performs his/her work functions, since that is where the employee works and lives?

Sandra Mickienė, a lawyer at AVOCAD, comments on the cases in which the law of the Republic of Lithuania may apply and what it depends on.

To discuss the situation, let's take the United Kingdom as an example, i.e. let's imagine that an employment contract is concluded between an employee (a permanent resident of the Republic of Lithuania) who performs his/her work functions remotely from Lithuania and a company established in the United Kingdom and operating in the United Kingdom, which does not have a branch or any other structural unit in Lithuania, and which carries out its activities in the country of its own (the United Kingdom). This could be administrative work, which employees can do by accessing the employer's internal systems and communicating with management and employees by electronic means.

According to the lawyer, when concluding an employment contract, the parties have the option of specifying in the contract which country's law will apply to the employment relationship between them. However, in many cases the employment contract does not specify the applicable law (even the model form of employment contract approved by the Minister of Social Security and Labour does not contain such a provision). Although a contract with an employer established and operating in the United Kingdom is likely to be drafted in English and to refer to the national law of the United Kingdom, this does not mean that any employment relationship between the employee and the employer would automatically be governed by the law of the United Kingdom, as the employment relationship is a bi-national one.

The Labour Code provides that if the parties to an employment contract have not chosen the law applicable to the employment relationship, it is governed by the law of the country in which the employment contract is regularly performed. According to the commentary to the Labour Code, the key criterion here is the permanent place of work, which means the place where (from which) the employee actually performs his/her duties.

AVOCAD's lawyer points out that despite the fact that the employer is established and operates in the United Kingdom, Lithuanian law should apply to the relations between the parties in accordance with this provision of the Labour Code. However, the Labour Code also provides for exceptions to this rule: if the employee is not permanently employed in one State, the law of the State in which the employer or the employer's place of work is situated applies. Both the first and the second rules also do not apply if, by reason of the substance of the contract of employment and the circumstances in which it was concluded and performed, the employment relationship is more closely connected with another State.

The Labour Code does not clarify when an employment relationship is deemed to be more closely connected to one or another country, but, in the light of case law, the following may be considered as circumstances that may indicate a connection to one particular jurisdiction: nationality of the parties to the contract or their belonging to a particular jurisdiction, the language of the contract, the place of conclusion and performance of the contract, the currency of the contract, the place of settlement of the disputes, the terminology used, the reference to the applicable collective agreements, etc. In addition, the country in which the worker is taxed on his income, where he is covered by social security and the relevant pension, sickness and disability insurance schemes are also relevant considerations.

"Thus, if the parties have not defined the applicable law in the employment contract, the totality of the circumstances would lead to a decision as to which country the employment relationship is more closely connected with and the national law of that country should prevail," says S. Mickienė.

If the parties choose the law applicable to the employment relationship, the law chosen would prevail. However, even if the choice of applicable law is made (if the employer is based in the UK, UK law would most likely be chosen), such an employment contract could still be subject to the mandatory provisions of the LR's employment law.

According to Ms Mickienė, the Labour Code itself does not specify which mandatory provisions should be applied when the choice of applicable law is made in a contract. However, according to the general provisions of the Labour Code, mandatory provisions are considered to be laws, regulations or collective agreements and arbitration awards which have been declared generally applicable and which cannot be derogated from by agreement of the parties under the law of the applicable State.

"Such provisions would cover all the provisions of the legislation governing employment relations that govern the conclusion, performance and termination of the employment contract and cannot be derogated from by agreement between the parties, i.e. the legislation does not provide for the possibility of an agreement to the contrary," she says.

These include: maximum working hours and minimum rest periods; the duration of minimum paid annual leave; pay, including increased pay for overtime, night work, rest and public holidays; working conditions for temporary workers; occupational safety and health; safety at work for persons under 18, pregnant workers, workers who have recently given birth or are breastfeeding; prohibition of discrimination at work; conclusion and termination of employment contracts, etc.

It should be noted that the mandatory provisions of Lithuanian labour law would only apply if the provisions of the United Kingdom's labour law in the same areas (e.g. termination of employment rules, etc.) would give the employee less protection than the provisions of Lithuanian labour law.

Advice for employees and employers

"When concluding employment contracts that cross national borders, we would recommend making sure they specify which country's law will apply to the employment relationship between the parties. This reduces the likelihood of potential disputes and also provides a clear agreement that the law chosen by the parties will apply to at least the majority of situations," emphasises an AVOCAD lawyer.

If, at the time of conclusion of the employment contract, the totality of the circumstances and facts shows that the employment contract is more likely to be related to Lithuania, i.e. to the country from which the employee will actually perform his/her work functions (e.g., taxes on the employee's salary will be paid in Lithuania, the employee will be covered by a social security scheme in Lithuania, the employee's work functions will be related to Lithuania, etc. If the employee's functions are related to Lithuania, i.e. the employee will provide services to Lithuanian residents, or the employee will perform physical work in Lithuania and not just connect to the employer's internal systems, etc.), it is advisable to conduct an analysis of the mandatory provisions of the labour law of both countries and to ensure that the employee is subject to the mandatory provisions of the labour law of the country that provides for a greater protection of the employee's rights and interests.

"Although we have discussed the case of an employment contract with an employer in a non-EU country, very similar rules would apply in the case of an employment contract with an employer established and operating in an EU country," she points out.

The success and profitability of companies depend on many factors, one of which is employee engagement and performance. Successful companies are well aware that in a competitive market, it is important to have an efficient team where everyone contributes to the common goals.

But what if an employee's performance does not meet the employer's expectations? How do I legally terminate my contract in such cases? What should employees know to protect their interests and avoid unfair dismissal? Laura Jodeliukaitė, a lawyer at AVOCAD, answers all these questions .

If the employer finds that the employee's performance is unsatisfactory and the probationary period has not yet expired, the employer may, before the end of the probationary period, decide to terminate the employment contract on the basis of Article 36 of the Labour Code, by giving the employee a written notice of three working days' notice, and not to pay the redundancy pay.

"If the probationary period of the employee has expired, termination of the employment contract on the grounds of unsatisfactory performance takes longer and becomes more complicated," she notes.

According to her, at the end of an employee's probationary period, the Labour Code gives the employer the right to terminate the employment contract if the employee does not achieve the agreed performance in accordance with the performance improvement plan. The Labour Code provides that an employee's performance may be grounds for termination if the employee has been informed in writing of his or her performance shortcomings and personal underperformance, and a performance improvement plan has been jointly drawn up covering a period of at least two months, and the results of that plan are not satisfactory.

She points out that for an employer to lawfully terminate an employment contract, it is not enough for the employer to inform the employee that his or her performance is unsatisfactory, but it is necessary to comply with this specific procedure for terminating the employment contract:

Firstly, the staff member must be given a written explanation of the shortcomings in his/her performance and the personal results not achieved;

Second, the employer and the employee must draw up a performance improvement plan for a minimum period of 2 months;

Thirdly, when the deadline for the implementation of the performance improvement plan has passed and the performance of the plan has been evaluated, it will be found that the performance of the plan is unsatisfactory.

What to look out for:

• The deficiencies identified must be clearly presented and explained to the employee

When an employer points out shortcomings in a worker's performance, the employer must not merely say that the worker is not performing well, but rather what specific results and objectives the worker has not achieved. The purpose of the regulation is to allow the worker to improve his/her performance and to ensure that the employer is actively involved in assessing the reasons for the worker's individual underperformance and that the worker is given all the necessary conditions to properly assess his/her shortcomings and to remedy them.

• The employee must be adequately informed of the consequences of failing to comply with the performance improvement plan

When a performance improvement plan is drawn up, the employer must give the employee adequate notice of the consequences of not complying with the plan. The employer's information must give the employee a clear and unambiguous understanding (and not an assumption or guess) that failure to achieve the agreed performance results in accordance with the performance improvement plan will result in the termination of the employment contract with the employee.

• The employer must not unilaterally draw up a performance improvement plan, but must agree it with the employee

The Labour Code stipulates that a performance improvement plan must be drawn up jointly by both the employee and the employer, and therefore requires the employee's approval. If the employee does not agree to such a plan, does not sign it and the employer terminates the employment contract, the dismissal of the employee in such cases may be declared unlawful.

• Identify specific results to be achieved and criteria for measuring them in the performance improvement plan

The plan for improving results must be as specific as possible. The results to be achieved should not be stated in terms of: working more efficiently, etc. The plan must be clear about the specific results and objectives the employee needs to achieve in order to avoid possible dismissal. In order to assess whether the employer has objectively evaluated the results of the plan, clear criteria must be established to determine when the performance improvement plan can be considered to have been achieved (for example, whether 100% of the relevant indicators must be achieved or only a higher proportion of them must be met to achieve the plan).

According to AVOCAD's lawyer, an employee performance plan must not set results or targets that are objectively impossible to achieve. The performance improvement plan must be realistically achievable and the objectives set for the employee must be realistic and relevant to the employee's job functions.

Thus, the termination of the contract for unsatisfactory performance will only be possible if the employee fails to achieve the agreed results in accordance with the Performance Improvement Plan, and the dismissal procedure has been properly followed.

According to lawyer Laura Jodeliukaitė, it should be remembered that the dismissed employee will have to be paid a severance payment of two times his average salary, or half his average salary if the employment relationship lasts less than one year. In addition, the worker must be given notice of termination in accordance with the procedure laid down in the Labour Code.

If the employer is not satisfied with the employee's performance, the employer can also offer to terminate the contract by mutual agreement. Such an offer should be made in writing and should set out the terms and conditions of the termination of the employment contract (the date of termination of the employment relationship, the amount of compensation, the procedure for granting unused leave, the payment procedure, etc.). The employee's agreement to the employer's offer should also be expressed in writing.

 

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?