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Description of the provisions of the Labour Code   2020-11-04

On 14 September 2016 the Parliament of the Republic of Lithuania approved the Labour Code, (Republic of Lithuania Law on Approval, Enforcement and Implementation of the Labour code No. XII-2603), which entered into force on 1 July, 2017.

Part I of Labour Code “General provisions”

The first part of the Labour Code is traditionally called “General Provisions”, since it contains law norms outlining material, territorial and temporal scope of application of the whole Code and defines labour law norms, principles of regulation of employment relationships and other provisions of horizontal application (protection of labour rights, time limits, etc.).

Part II of Labour Code “Individual Employment Relationships”

The second part of the Labour Code is called “Individual Employment Relationships” and is designated to regulate the aspects of employment contracts between the employee and the employer, i.e. conclusion of the employment contract, performance of the employment contract and termination of the employment contract, working and rest time, remuneration, liability for the breach of work duties. The Code does not regulate safety and health of employees at work since this regulation is set forth in the special Law on Safety and Health at Work applied to a wider circle of persons (including public service and similar legal relationships).

Chapter I. The parties to the contract of employment and their general obligations

Important innovation of the new Labour Code is regulation of the new and important principles of labour law in order to achieve the balance of employees’ and employers’ rights and interests.

The principle of fairness and cooperation means that, in exercise of their rights and performance of their duties, employers and employees must act in good faith, respect the rules of communal life, not abuse the right and each party must exercise their rights in such a way that the other party could defend their interest at the minimum time and other expenses.

The principle of correct information and protection of confidential information means that both parties of employment contract shall inform each other about circumstances which could influence the conclusion, performance and termination of the employment contract. Such information should be given to the employee in a correct way, free of charge and in reasonable time. In case the Code sets the rule requiring to provide information in writing, it is considered to be fulfilled when data is transferred by means of information technologies that are commonly used (e-mail, mobile equipment, etc.), provided that it is possible to identify the content of information, the sender, the fact and time of its submission. There should also be reasonable means to save that information. It is the duty of the employer to prove these circumstances.

The principle of anti-discrimination is developed in the Code. This principle has already been expressed in the laws of the Republic of Lithuania transposing respective directives of the European Union. The norms of the Labour Code are designated for the effective implementation of this principle, e.g. employers with more than 50 employees must publish their policies on the implementation of equal opportunities, and they must also have the system of remuneration which should be clear and non-discriminatory and so on.

Fragmentally discussed in the other laws of Lithuania, the principles of the protection of the employee’s personal data and the privacy of the employee’s personal life are specified in the Code. For the first time the Code sets forth that the exercise of the right of ownership to the information and communication technologies used in the workplace must not infringe the inviolability of employee‘s communication. Video surveillance and audio recording in the workplace may be exercised in cases where due to the character of work it is necessary to ensure the security of persons, property or the public safety, as well as in other cases when other means are insufficient, and (or) inadequate for the achievement of the abovementioned objectives, except in the event when it is directly intended to control the quality and scope of work. In cases of video surveillance or audio recording in the workplace the employees must be informed by a visual sign in a visible place.

The principle of respect of the employee’s family commitments (work-life balance) takes a new meaning in the legal norms that oblige the employer to take measures to help the employee fulfil his or her family commitments, except for the cases when it is impossible due to specific features of the work function or the employer’s activities or due to excessive expenses on the employer‘s part. The employer must consider and give a reasonable response to the requests of the employees. Employee’s actions at work must be considered in order to fully and effectively implement the principle of work-life balance.

Greater attention is paid to the improvement of employee’s qualifications, professionalism and the ability to adjust to the changing business, professional or working conditions. For this purpose Labour Code sets forth that in cases and in the order established by law or the agreements between the parties, the employer must provide conditions for employee‘s training, in-service training, and the improvement of professional skills.

The Labour Code sets prerequisites for the protection of property and non-property interests of the employee and the employer. For example, it is set forth that an employee must use the work equipment, property and resources given to him or her by the employer in accordance to their intended destination and economically. The employer is entitled to set the order of the use of his own work equipment, property and resources given to the employee without violating the rights of the employee set forth in the laws. As one of the employer's protection measures, the Code provides for the possibility to conclude non-competition agreements within the defined limits of permissibility, as well as agreements on the protection of confidential information. And the employee is for the first time protected by law in cases of so called whistleblowing (the employee may not be persecuted for reporting on the potential infringement of law norms by the employer) and mobbing (persecution, harassment, psychological abuse and so on), whereas the innovations of the employee aimed at the improvement of the activities of the employer and effective use of the work equipment, property and resources must be encouraged and protected.

Chapter II. Concept of Employment Contract and Conditions of Employment Contract

Conditions of employment contract are traditionally divided into the essential and the additional conditions. The latter must not be agreed upon in the employment contract, however, they become binding once the parties agree on them. At the same time the parties are prohibited from concluding agreements of civil nature for the purpose of exercise of rights and fulfilment of obligations set forth in the Code. The essential conditions are work function, remuneration for work and place of employment. In comparison to the previous regulation, the condition of remuneration for work is determined as essential condition.

New: regulation of non-competition agreements and agreements on the protection of confidential information.

Chapter III. Conclusion of an employment contract

For the first time pre-contractual employment relationships are governed by the labour law of Lithuania. It is foreseen that before the conclusion of an employment contract (also in cases when an employment contract has not been concluded) the parties to the employment contract must observe the obligations of non-discrimination, fairness, the duty to provide the information necessary for the conclusion and performance of the employment contract and to preserve the confidential information. Non-observance of these obligations provides the other party with the right to apply to dispute resolution bodies and to claim compensation for damages.

Chapter IV. Performance of an employment contract

New Labour Code provides that the essential conditions and the conditions separately agreed in the contract by the parties may be changed only with the written consent of the employee. As a novelty should be regarded the fact that the condition on work remuneration again becomes the essential condition which leads to the fact that it cannot be changed without the written consent of the employee.

The Labour Code newly regulates payment for idle time (when an employee is not provided with work without any fault on the part of an employee). In case idle time continues up to one day, the employee shall retain his wage, if it continues up to three days – 2/3 of wage, if it continues for more than three days – 40 per cent of wage.

In the Labour Code telework is perceived not as a type of employment contract which requires an agreement, but as a form of organising or performing work when an employee performs his or her work functions or a part thereof on a full-time or part-time basis following the procedure agreed with the employer away from the employer‘s premises on a regular basis, i.e. in an agreed place, acceptable for the parties to an employment contract, which is other than the employment place, also using information technology.

Chapter V. Expiry of an employment contract

The grounds of dismissal from work are classified according to the will and fault of the parties. An employment contract may be terminated by agreement between the parties or on the initiative of one of the parties. The employee’s possibility to terminate an employment contract is differentiated according to the grounds on which the termination is based.

Termination of employment contract on the initiative of the employer is divided into two groups: based on grounds not related to the fault on the part of an employee and for reasons related to the fault on the part of an employee.

New basis of dismissal – at the employers will (notice 3 working days in advance, severance pay – not less than the average wage of 6 months).

Employees raising one or more children under three years of age retain their protection.

The cases of the bankruptcy of an employer and collective redundancies are regulated separately.

Chapter VI. Types of employment contracts

Beside the already well-known types of employment contracts (open-ended employment contract, fixed-term employment contract, temporary- work employment contract, seasonal employment contract), the Labour Code establishes a whole set of new types of employment contracts - apprenticeship employment contract, project-based employment contract, workplace-sharing employment contract, and multiple-employer employment contract.

New regulations for fixed-term employment contracts: fixed-term employment contracts can also be concluded for jobs of a permanent nature; the maximum duration for a fixed-term contract to carry out the same job function is two years, and five years to carry out different job functions, except in cases when the employee is hired to fill a temporarily vacant position.

For the first time the Lithuanian law provides for a severance pay in case the employee’s fixed-term contract has lasted for over two years and has expired due to the expiry of its term – such employee shall be paid a severance pay in the amount of one monthly wage.

Fixed-term employment contracts for jobs of a permanent nature cannot make up more than 20 per cent of all of the employer’s employment contracts.

Apprenticeship employment contracts are new type of the employment contracts which should encourage employers to provide employees with work, in case they are seeking an opportunity to acquire professional skills. Contracts of this type are in all cases concluded for a fixed term. Parties to the apprenticeship employment contract may contractually agree on compensation of the employer’s expenses incurred in relation to training by an allocation of not more than 20 per cent of the employee's average wage for such compensation. The employer is obliged to appoint one of its competent employees as a supervisor who shall direct the training process, supervise the performance of work function, advice and consult the employee.

For the performance of tasks that do not require direct or immediate control of the employer the parties may choose a project-based employment contract under which the employee undertakes to perform his or her work function for the achievement of specific results while working at the place, other than the employment place. An agreement on this type of employment contract can be made upon the conclusion of a new employment contract, as well as by temporarily (not longer than for five years) changing the existing employment contract of the other type, and by entering into an agreement on project-based work next to the existing employment contract of the other type. The contract may provide for work remuneration at an hourly rate or based on work results, or a mixed method of calculation may be used. It is likely that this type of employment contract will encourage parties not to hide the employment relationship under the form of self-employment or avoid undeclared work.

The Labour Code establishes two other completely new types of employment contracts which should help solve the problems that arise in cases where two employees take one job or the services of one employee are required by several employers at the same time. Under a workplace-sharing employment contract each of the two employees’ record their rate of working time, however, the distribution thereof in a day or a week depends on their agreement – in any case the employees must substitute each other in such a way that the fulfilment of work function is not affected. As for the multiple-employer employment contract, there could be indicated two or more employers for whom the employee performs a work function in a working day or week. Each of the employers, within the limits of the employee’s working time allocated to them, have the right to exercise the employer’s rights and fulfil the obligations in respect of the employee, as well as to ensure the application of the Labour Code and other labour law norms. The contract may provide that the employee’s working time is not distributed among the employers in case the employee performs the tasks of several employer’s at the same time, however, the part of the rate of working time remunerated by each of the employers must be specified.

Chapter VII. The peculiarities of employment relationships

For the first time in the Lithuanian labour law, separately grouped are the legal norms which govern the employment relationships in a differentiated way depending on the particularity of the employee’s work function (managing employees), on the exclusive nature of work, the place of performance of work (posted employees), or depending on the size of the employer’s undertaking (employers employing less than 10 employees). Such a differentiated regulation in respect of particular employees and employers is necessary not only because of the peculiarities of employment relationships which up to now have received too little attention, but also because of the need to ease the administrative and substantial burden of labour law on the small employers, thereby promoting the competitiveness of small and micro-enterprises, and taking into account the peculiarities of the personal relationships between several employees.

Chapter VIII. Working time and rest period

In the Labour Code working time and rest period are regulated separately.

In the Labour Code a concept of rate of working time is introduced which is distinct from the concept of work time regime. Rate of working time is an average time during which an employee must perform work for the employer over a certain period of time to fulfil duties under the employment contract and receive remuneration accordingly. This rate of working time is defined in the employment contract or a default rate of working time of 40 hours per week applies. This is the maximum rate since labour law norms may only set a shorter rate of working time or the parties may agree on a part-time work. Whereas work time regime is the actual distribution of the rate of working time in a working day (shift), week, month or other recording period which may not exceed three consecutive months. If the contract does not provide otherwise, an employer and an employee may choose one of the following types of work time regime: a fixed duration of working day (shift) and a fixed number of working days in a week; summary recording of working time whereby the rate of working time for the whole recording period is fulfilled during the recording period; flexible work schedule whereby an employee must be at the workplace during the core hours of working day (shift) and may work the rest of the time of working day (shift) before or after those core hours; or a different individual working time regime. If it is not provided otherwise, the rate of working time is deemed fulfilled during the recording period of one week when work is performed five days a week and the same number of working hours each day.

Chapter IX. Wage

Labour Code provides for a universal concept of wage (remuneration for work performed by an employee under a contract of employment) which is further specified in detail: 1) the basic (rate) remuneration (hourly wage or monthly salary); 2) additional remuneration established by mutual agreement or paid according to labour law provisions or the remuneration system applicable at the workplace; 3) bonuses for qualifications acquired; 4) allowances for additional work or the execution of additional duties or tasks; 5) bonus payments for work performed, established by mutual agreement or paid according to labour law provisions or the remuneration system applicable at the workplace; 6) bonus payments allocated on the initiative of the employer to motivate an employee for work well done or for the activities or performance results of the employee or of the enterprise, department or group of employees.

New Labour code established that employers are required to approve a remuneration system unless this is already established in the collective agreement. In workplaces with an average number of employees of twenty or more, the remuneration systems must be approved by the employer. Said must be available for all employees to become acquainted with.

Before approving or revising the remuneration system, information and consultation procedures must be carried out.

The remuneration system specifies the employee categories based on position and qualification as well as the salary range (minimum and maximum) and forms of payment for each of them, the grounds and procedures for allocating additional payment (bonuses and allowances), and the procedure for wage indexation.

Employers are obliged to prepare the remuneration system in such a way so as to avoid any kind of gender-based discrimination: equal pay for the same or equal work. A definition is provided for what is considered the same or equal work.

Minimum monthly wage can be paid only to unskilled employees. Unskilled work means work for which no special qualification skills or professional competences are required.

A new procedure for determining the minimum monthly salary: the minimum hourly rate and the minimum monthly wage shall be approved by the Government of the Republic of Lithuania upon recommendation of the Tripartite Council of the Republic of Lithuania and taking the indicators and trends of development of the national economy into account. The Tripartite Council of the Republic of Lithuania shall present its conclusion to the Government of the Republic of Lithuania on an annual basis, by the 15th of June or other date as requested by the Government of the Republic of Lithuania.

Chapter X. Compensation of damages

The regulation of disciplinary liability and material liability, as relics of Soviet labour law, has been abandoned in the new Labour Code. New legal norms regulating compensation of damages caused by one of the parties to the other party in employment relationships are included in the institute of compensation of damages. The main principle stipulates that each party to the employment contract must compensate the other party for property damage, as well as non-property damage, caused by violation of its work duties by its own fault.

In the Code a conception is developed according to which, departing from the principles of civil law, the amount of damage to be compensated is calculated strictly. When determining the amount of damages to be compensated, account must be taken, inter alia, of the value of property less depreciation and natural reduction of property and the expenses (direct losses) sustained, the fact that the damage caused is typical to the employer’s activities, and commercial and industrial risk borne by the employer, the degree of fault of the party and actions taken to avoid damage, as well as the fault of the other party or responsibility for the infringement which caused the damage. Additional protection of an employee is established in the legal norm according to which a body for the resolution of labour disputes may reduce the amount of the compensation of damage taking account of the property status of the employee, with the exception of cases where damage was caused deliberately.

Chapter XI. Safety and Health at Work

New Labour Code does not regulate in detail all the issues of safety and health at work since they are comprehensively regulated by the special Law on Safety and Health at work. The Labour Code just establishes the main principles: every employee must be provided with the appropriate, safe and healthy working conditions as established in the Republic of Lithuania Law on Safety and Health at Work; employees have the right to refuse to work in case there is danger to their safety and health, as well as to perform work which they have not been trained to perform safely, or when collective protective equipment has not been installed or necessary personal protective equipment has not been provided; the employer must compensate for the damage caused to the employee’s health due to injury or any other health impairment, or employee’s death or an occupational disease.

Part III of Labour Code “Collective employment relationships”

In the new Labour Code, the chapters of collective employment relationships are structurally divided by general provisions, by the institutes of parties of social partnership (works councils, employees’ trustee, trade unions, representatives of employers) and by forms of social partnership (labour and social affairs councils, collective bargaining and collective agreements, information, consultation and other participation of employees’ representatives in the employer's decision-making process).

Chapter I. General Provisions

This chapter sets forth the principles of social partnership as the mechanism of interests’ coordination between parties of employment relationships and the state (equality of parties, goodwill, respect for legitimate mutual interests, voluntary and independent assumption of responsibilities binding the parties, actual fulfilment of responsibilities and other principles) as well as stipulates levels of social partnership (national, sector (production, professional), territorial and employer).

Chapter II. Parties of Social Partnership

The dualistic employee representation system was developed in the new Labour code:

-                    trade unions shall have the right to organise themselves in any level of social partnership and represent their members collectively and individually. They shall have exclusive rights to bargain collectively and conclude collective agreements (first of all, to regulate wage, work and rest time, issues of social guarantees) as well as the right to collective actions;

-                    works councils elected by all employees of an enterprise shall be organised on enterprises’ level (they must be established compulsory in an employer’s enterprise where the average number of employees is 20 or more) as well as represent all employees of an enterprise but only in information, consultation and other procedures of participation, under which employees and their representatives are involved in the employer’s decision-making processes due to the European Union legal acts and the requirements of Lithuanian legal norms. Within the framework of its competence, a work council may conclude an agreement with an employer but only concerning the implementation of its rights. Where the average number of employees is up to 20 employees in enterprises the employees’ trustee might be elected.

The Labour Code emphasises that all activities of employees’ representatives shall be organised and exercised by their mutual co-operation so that general interests and rights of employees shall be protected as efficiently as possible. Employees’ representatives (works councils and employees’ trustees) shall not exercise such functions of employee representation, which shall be considered as exclusive trade unions’ rights.

The new Labour Code lays down the guarantees of all employees’ representatives unanimously and systematically, excluding:

-                    guarantees of the independence of employees’ representatives;

guaranties of the activities of employees’ representatives;

-                    guarantees and protection against discrimination of the representatives implementing the representation of employees.

In order to implement properly international standards, there is the regulation of new peculiarities. First of all, not only the protection of employees’ representatives against their dismissal from work on an employer’s initiative is established, but also protection against the deterioration of their working conditions, as compared with their previous working conditions, or as compared with other employees’ of the same category working conditions, as well as the protection against discrimination is established. It is important that the said protection is valid not only for the period of their term of office, but also for six months after this period. It is stipulated that if an employer wants to terminate an employment contract with an employees’ representative or to change his working conditions during mentioned periods, he needs to receive a prior consent of an impartial subject – the representative of State Labour Inspectorate. The latter gives the consent if an employer submits the data that the termination of an employment contract or the changes of working conditions are not related to the performance of employee representation activities. The decision of the labour inspector not to give the consent may be contested in court. The Code specifies the number of trade unions’ members, which are covered by these guarantees – guarantees are applied for such number of members of the governing body of the trade union functioning on an employer level, as it should (shall) be the number of members of a works council, depending on the average number of employer’s employees.

Chapter III. Forms of Social Partnership

The legal provisions regulating collective bargaining and collective agreements shall apply to employees and persons working on the basis of legal relations deemed the equivalent of employment relations as specified in the Republic of Lithuania Law on Employment.

Employers, employers’ organisations, trade unions and trade union organisations shall, in accordance with the procedure established by this Code, have the right to initiate collective bargaining for the conclusion or amendment of collective agreements, to participate therein and to conclude collective agreements.

Employees may only be represented in collective bargaining by trade unions.

Collective agreements shall apply to employees who are members of the trade unions that concluded them. If the trade union and the employer agree on application of an employer-level or workplace-level collective agreement to all employees, it will be applied to all employees if said is approved by the general meeting (conference) of the employees of the employer. A conference is a meeting of employee representatives elected at the structural/organisational units of an enterprise, institution or organisation.

The new Labour Code regulates not only the peculiarities of collective bargaining in civil service but also in the public sector. It is set forth that the Government or its authorised institution after receiving the proposal to begin collective bargaining on a sectorial or inter sectorial level must invite the employers’ organisations of the respective sector of economic activity operating in private sector. Said organisations may participate together in collective bargaining. In order to achieve wage bargaining as the main object of collective bargaining in public sector, it is suggested that the bargaining should be finished no later than the Ministry of Finance starts to prepare the project of the State budget as well as the project of financial indicators of municipal budgets. Further, the parties of the prepared and agreed project of a sectorial collective agreement shall receive the conclusion on it from the Ministry of Finance.

The new Labour Code elaborates the content of employees’ information and consultation. Besides regular employees’ information and consultation, information and consultation in the event of transfers of businesses or parts businesses as well as in the event of collective redundancies, the Code states the duty of the employer, who employs average 20 employees or more, to inform employees and consult with them in the procedure of confirming the local norms of labour law (work rules, the introduction of new technologies, the protection of employees’ private life, etc.). Representatives of employees shall be informed about these forthcoming decisions before their confirmation. They shall have the right to submit remarks and proposals as well as to initiate consultations.

 

Part IV of Labour Code “Labour disputes”

Chapter I. General Provisions

In the new Labour code labour disputes are defined as disagreements between the parties to an employment relationship arising from the employment or the legal relations related thereto.

Based on the object of dispute and the subjects involved in the labour dispute, labour disputes are divided into:

* labour disputes on rights (individual labour disputes on rights and collective labour disputes on rights);

* collective labour disputes on interests.

Section II. Settlement of Labour Disputes on Rights

Labour disputes on rights shall be resolved by labour disputes commissions and courts. However, the competence of the Labour Dispute Commission has been extended – it may hear disputes arising due to termination of employment contracts, suspension from work, award of non-pecuniary damages, as well as collective labour disputes, which up until 1 July, 2017 have been the exclusive jurisdiction of courts.

Such a model saves funds of the State and parties of a labour dispute, also the duration of settlement is shorter, because of the less complicated decision making procedure where social partners try to find the resolution to the dispute, which could be acceptable by both parties in order to reconcile or at least better match their interests, rather than look for one party’s approval of truth or denial. The legal expenditure of a party incurred during the resolution of a labour dispute are not reimbursed, which means that employees are not discouraged from initiating disputes for potential losses.

Section III. Settlement of Collective Labour Disputes on Interests

A collective labour dispute on interests is a disagreement between employee representatives on one side, and the employer or employers’ organisations on the other side, arising from regulation of the mutual rights and obligations of the parties or the establishment of labour law provisions.

Firstly, the Labour code states that the trade union shall make demands to the employer and only if employer or employers’ organisation refuses these demands or does not submit any response a collective labour dispute on interests may be initiated.

The primary stage of the settlement of collective labour disputes on interests shall be the dispute commission established by the both parties of the collective labour dispute, which stipulates its hearing order and conditions by itself. In case of failure (to conclude the collective agreement), the dispute commission may state the dispute as not solved and refer it to the mediation or the labour arbitration for further consideration.

A mediator is an impartial and independent expert who facilitates the parties to a collective labour dispute on interests in reconciling their interests and reaching a mutually satisfactory compromise agreement.

The labour arbitration committee is an ad hoc institution that resolves collective labour disputes on interests. The labour arbitration committee is formed under the territorial office of the State Labour Inspectorate that the registered office of the employer or employers’ organisation is under the jurisdiction of. The decision of the labour arbitration committee shall be binding on the parties to the collective labour dispute on interests.

Trade unions or organisations thereof shall have the right to organise a strike in accordance with the procedure established by this Code in the following cases:

1) when the dispute committee pronounces the collective labour dispute on interests unresolved, or one of the parties withdraws from negotiations, or the employer/employers’ organisation does not appoint members to the dispute committee during preliminary examination of the collective labour dispute on interests;

2) when the mediator adopts a decision to pronounce the collective labour dispute on interests unresolved or partially resolved;

3) when the employer or employers’ organisation does not comply with the decision of the labour arbitration committee.

It is easier to declare strike in the new Labour Code: the consent of at least one-quarter of the members of the trade union must be obtained in order to declare an employer-level strike according to the procedure established in by-laws.

A lockout is when an employer or employers’ organisation announces the temporary suspension of the employment contracts of employees of a single employer or several employers who are on strike. Employers and organisations thereof shall have the right to organise a lockout in the following cases:

1) if trade unions or organisations thereof fail to comply with the agreement made during mediation or the decision of the labour arbitration committee in a collective labour dispute on interests case;

2) if trade unions or organisations thereof declare a strike when said has been postponed or recognised as unlawful by the court.

Labour Code of the Republic of Lithuania

 

Information from the website of Ministry of Social Security and Labour