Will the employers be obliged to amend the existing employment contracts after NLC comes into force?
The revision of the existing employment contracts is not necessary, it may be useful though. Leinonen team recommends the clients to review the existing employment contracts in order to achieve more clarity in the legal matters of the employment relations. Below we identify key aspects to take into consideration when reviewing the existing employment contracts. We note that the list set out is not exhaustive since the employment contracts of the companies are different.

The revision / amendment of the employment contracts:

The amount of the work time. Based on NLC the amount of work time must be clearly defined in the employment contracts (i.e. the accurate number of working hours must be indicated). The amount of work time shall be indicated as the working hours per week, working hours per day or other accounting period.

Non-competition. First, employers should pay attention to the employment contracts of those employees, which have obligated not to compete with the company. Part of the employers were paying the compensations for non-competing before NLC came into force, now, however, it is important to note that the amount of compensation for non-competition is regulated by NLC. The amount of compensation for non-competition shall not be less than 40 percent of the average monthly salary paid to the employee.

Annual Leave. The annual leave is being counted in working days according to NLC. There are cases when the duration of annual leave is specified in exact number of days in the employment contract. Our recommendation is to amend the employment contract so that the annual leave would be provided according to the valid legal acts.

Compensation of the learning costs. It is worth paying attention, that the parties may agree on the compensation that the cost of the employee’s learning and improvement of the qualification, which were incurred by the employer during the last 2 years, when the employment contract is terminated upon the employee’s will or the will of the employer for the fault of the employee. By enclosing the appropriate wording of the provision into the employment contract may grant the employer a right to claim to the compensation of the additional expenses related to the employee’s learning (for example, travel and accommodation costs). The amendments of the existing employment contracts might be favourable for the employers which invest in the staff development.

Confidentiality Agreement. NLC provides the ability to agree on forfeit for the violation of the confidentiality agreement. In the light of the fact that this regulation is new, it would be worthwhile to complement the existing employment contract including a confidentiality agreement with a provision of forfeit for violation thereof.

Is the amount of the fixed-term employment contracts in the company limited?
The fixed-term employment contracts were suitable only for the works that had not any features of the constancy (e.g. substitution of the employee on parental leave, etc.) before NLC came into force. NLC provides the ability to conclude the fixed-term employment contracts with the employees whose work is of constant manner. However, the number of fixed-term employment contracts in the company may not exceed 20 percent of the total number of contracts concluded in the Company.

What types of internal documents shall be drafted?
NLC establishes an obligation to prepare new Internal Rules and Policies in the companies. We list the main documents that companies shall prepare and enforce due implementation in the table below.

Document

Average number of employees 20 and more

Average number of employees 50 and more

The procedure of usage of the information and communication technologies, monitoring of employees and control in the work place


+


+

Scheme of payment for work

+

+

The policy of equal opportunities

 

+

The policy of personal data protection

 

+

There shall be listed in the scheme of payment for work the categories of the employees according to their positions and qualifications, the ways of payments and amounts of payments (minimum and maximum), the grounds and order of allotting the additional payment (bonuses), salary indexation system.


What should be defined in the Internal Rules?
According to NLC there are no strict requirement set for the companies to have the Internal Rules. However, it shall be prepared if the employer aims to protect its own interests or the ones of the employees. We would like to inform you that the information indicated below should be renewed in the companies' Internal Rules:
  • a plan of improving work results of the employees;
  • the procedure of election of the work board (this is obligatory for the companies having 20 employees or more);
  • the list of administration workers;
  • the order of submitting the remarks for the violations of the duties;
  • provision of the information to the employees using electronic means of communication;
  • other information.

Has the employee the right to choose the days-off instead of payment for the overtime or work on national holidays?
Yes, according to Article 144 Part 5 of NLC the employee has the right to choose the day-off. The time of work on days-off or national holidays or overtime may be added to the annual leave by multiplying the time by its coefficient.

Are the bonus included to the average monthly salary of the employee?
In those cases when the employee according to NLC, other labour law regulations or employment contract is paid the average monthly salary (or part of it), which is based on the previous monthly salary, the calculation of this average monthly salary does not include the bonus, that are awarded by the employer on its initiative in order to encourage the employee for the work well done, results achieved and activities carried out by him, the company, the undertaking or the group of the employees.

We emphasize that bonuses which the employer has obligated to pay according to the employment contract or other internal documents are included into calculation of the average monthly salary. It is important that the procedure of payment of such bonuses shall be clearly established in the employment contract or other internal documents of the company.

How should the unused annual leave be recalculated?
As we have mentioned above NLC counts the annual leave in working days. The annual leave of 20 working days is provided for those employees working 5 working days per week. The annual leave of 24 working days is provided for those employees working 6 working days per week. The following formula is applied for recalculating the unused annual leave:
  • the unused annual leave multiplied by 5 and divided in 7 (for working week of 5 days);
  • the unused annual leave multiplied by 6 and divided in 7 (for working week of 6 days).

Noteworthy, in case the calculated number of leave days is not a whole number, the part of the day counts as a whole day (i.e. the number after comma shall be rounded up for the benefit of the employee).

The annual leave of not less than four weeks shall be provided to those employees whose number of working days per week is lower than the above-mentioned ones or differs depending on week.

The main changes in the employment law are listed in the following table.

TILL 30 JUNE 2017

FROM 1 JULY 2017

1.     TYPES OF THE EMPLOYMENT CONTRACT

Types

  • non-term employment contract;
  • fixed term employment contract;
  • remote work employment contract;
  • additional work employment contract.
  • non-term employment contract;
  • fixed-term employment contract;
  • temporary work employment contract;
  • employment contract for project work;
  • job-sharing employment contract;
  • employment contract with several employers;
  • apprenticeship employment contract;
  • seasonal work employment contract.

1.1. FIXED TERM EMPLOYMENT CONTRACT

Duration term

  • 5 years.
  • 2 years (with several exceptions where the maximum duration is 5 years).

Notice period for expiration

  • no notice period.
  • 5 working days (work relation lasts more than 1 year);
  • 10 working days (work relation lasts more than 3 years).

Compensation

  • no compensation.
  • upon expiration of fixed-term contracts exceeding 2 years, employees will be entitled to severance compensation in amount of 1 average monthly salary (hereinafter – AMS).

For the permanent positions

  • can not be concluded (unless other laws or the collective agreement allowed).
  • fixed-term contracts for permanent positions can be concluded but they must not exceed 20% of all employment contracts concluded at the company.

 

-  

  • the double rate (i.e. 3,2%) of Unemployment Social Security for the fixed term employment contracts (such as temporary, apprenticeship, project work, seasonal work, job-sharing) will be applied.

 

-      

  • the information regarding fixed term contracts shall be submitted to the State Social Insurance Fund Board till 30 July 2017.

1.2. TEMPORARY WORK EMPLOYMENT CONTRACT

Main touch points

  • there was no temporary work employment contract.
  • contract is concluded between the employer and the temporary work agency;
  • could be fixed-term or non-term term;
  • agency shall inform the employee of the first working day before two working days, unless the employee agrees to start work earlier.

 

-          

  • the employee shall have a right to refuse the proposal upon 1 working day notice from the day of the submission of the proposal.

Notice on termination of employment contract

-          

  • 5 working days. This term may be prolonged by collective agreement, but may not be longer than 14 working days.

 

-          

  • the maximum term for fixed-term temporary work employment contract is 3 years.

1.3. EMPLOYMENT CONTRACT FOR PROJECT WORK

Main touch points

  • no employment contract for project work at the moment.
  • only fixed-term;
  • concluded for a specific project;
  • the employee sets the working time mode by himself and works in the work or other place;
  • expires upon reaching the pre-agreed results;
  • hourly/monthly salary is paid to the employee (it may be agreed to pay the additional remuneration at the end of the project depending on the successful results);
  • maximum period:
    • up to 2 years for new employee or in case the employment contract of other type is valid, or
    • up to 5 years provided the valid employment contract of other type is being replaced.

1.4. JOB-SHARING EMPLOYMENT CONTRACT

Main touch points

  • there was no job-sharing employment contract.
  • two employees can agree with the employer on sharing one job position;
  • it can be agreed upon conclusion of a new employment contract or change of valid employment contract of other type;
  • the employer is obligated to consider a request to temporary change valid employment contract to job-sharing when it is submitted by the employee caring for a child under 7 years of age;
  • each employee will be able to agree with other employee about the work time (according to work and rest obligations);
  • if the employment contract with one of the employee is terminated, the employment contract of the other employee is valid for one month. After one month, if a partner is not found, the contract of the latter employee may be terminated provided he refuses to work full-time, except for the employee caring for a child under 7 years of age provided he stays for a part-time work;
  • in case of termination, notice period is 3 business days, and a severance compensation – 0,5 of the employee’s AMS.

1.5. EMPLOYMENT CONTRACT WITH SEVERAL EMPLOYERS

Main touch points

  • there was no employment contract with several employers.
  • should indicate the primary employer who establishes the employee’s schedule, pays remuneration, takes care of payroll taxes and is responsible for other obligations to the employee on behalf of all employers of the contract. All other employers compensate all costs in proportion of working time to the main employer.

1.6. APPRENTICESHIP EMPLOYMENT CONTRACT

Main touch points

  • there was no apprenticeship employment contract
  • this contract may be concluded when the employee is recruited for the purpose of acquiring skills and qualifications necessary for a certain profession;
  • the maximum duration of the contract is 6 months, except for the apprenticeship employment contract concluded alongside with training contract;
  • other terms related to concluding the contract and its termination, reimbursement of training costs  are also important.

-         1.7. SEASONAL WORK EMPLOYMENT CONTRACT

Main touch points

  • there was no seasonal work employment contract
  • it is concluded for a work of seasonal character:
    • works of seasonal character shall be inscribed into the list of seasonal works;
    • these works may not continue longer than 8 months in a row.

FEE FOR PAYMENT FUND OF LASTING WORK

Main touch points

  • there was no such fee
  • 0,5 % from the salary shall be paid for the State Social Insurance Fund Board.

2.     TERMINATION OF THE EMPLOYMENT CONTRACT

2.1.  ON THE INITIATIVE OF THE EMPLOYER WITHOUT THE FAULT OF THE EMPLOYEE

Reasons of termination

  • only essential reasons.
  • reasons are indicated in the Labour Code:
    • changes in the employer’s work organization (obligation to offer another position);
    • employee did not reach the results according to the plan of work results improvement;
    • employee refused to work under the different necessary conditions of the employment contract;
    • employee refused to work after a transfer of business;
    • court or employer adopts a decision regarding expiration of the employer.

Notice period

  • 2 months (in special cases – 4 months).
  • 1 month – standard notice period;
  • 2 weeks – when the duration of employment is less than 1 year;
  • double notice period - for the employee who has less than 5 years remaining until retirement age;
  • triple notice period – for the employee who cares for a child under 14 years of age or a disabled child under 18 years age, or if the employee is disable or has less than 2 years until retirement age.

Severance pay

The employer pays:

  • from 1 to 6 employee’s AMS (depending on the duration of the employment with the company).

The employer pays:

  • 2 AMS – standard severance payment;
  • 0,5 AMS – if the duration of employment is less than 1 year.

The special state fund pays:

  • 1 AMS - when the duration of employment is from 5 to 10 years;
  • 2 AMS - when the duration of employment is from 10 to 20 years;
  • 3 AMS - when the duration of employment is 20 or more years.

2.2. DISMISSAL ON THE EMPLOYER’S WILL

Reasons and compensation

  • the employer is not able to dismiss the employee without substantial reason for termination.
  • the employer has the right to dismiss the employee with the notice period of 3 days paying compensation which shall be not less than 6 AMS. The employer cannot terminate the employment contract for discrimination reasons, also during the pregnancy, maternity, paternity or child care leave. Noteworthy, that the employer seeking to terminate the employment contract under this article shall indicate the termination reason.

2.3. UNDER THE MUTUAL AGREEMENT OF THE PARTIES

Period to make a decision

  • 7 calendar days to accept the offer on termination.
  • 5 working days to accept the offer on termination.

2.4. ON THE INITIATIVE OF THE EMPLOYEE WITHOUT ESSENTIAL REASONS

Notice period

  • statement shall be submitted before 14 working days to the employer.
  • statement shall be submitted before 20 calendar days to the employer;
  • the employee may withdraw his request within 3 working days, later only having the consent of the employer.

2.5. ON THE INITIATIVE OF THE EMPLOYER ON THE FAULT OF THE EMPLOYEE

Reasons

  • the employee breached the work responsibilities 2 times per year;
  • other reasons indicated in the Labour Code.
  • the work duties have been breached roughly;
  • the employee breached the same Internal Rules 2 times per year;
  • other reasons indicated in new Labour Code.

 

-          

  • the employer has a right to terminate the employment contract in 1 month from the date the breach has turned out but no later than 6 months after it has been done.

3.     NON-COMPETE

3.1. THE NON-COMPETITION AGREEMENT

Main touch points

  • the Labour Code does not regulate the rules of non-compete.
  • the parties can agree that the employee will not compete with the employer during the period of employment and / or after the employment contract was terminated;
  • agreements may be concluded only with employees who have specific skills and knowledges;
  • maximum period of non-competition is two years after termination of the employment contract;
  • during the period of non-competition, the compensation to the employee should be at least 40% of AMS;
  • forfeit may not exceed the amount of compensation for 3 months;
  • the employee has a right to terminate the non-competition agreement provide the employer does not pay the compensation for 2 months.

4.     MATERIAL LIABILITY OF THE EMPLOYEES

The Full Material Liability Agreement

  • the Labour code allows to conclude the full material liability agreements with the employees.
  • the new Labour Code eliminates a possibility to conclude the full material liability agreements. Therefore, the employee’s liability will be unlimited under certain circumstances provided in the new Labour Code (e.g. the damages is made on purpose, the confidential information agreement is breached, etc.);
  • all material liability agreements concluded before the new Labour Code shall cease to be valid.

Limits of employee’s liability

  • 3 AMS of the employee.
  • standard - 3 AMS of the employee;
  • damage is caused regarding gross negligence – 6 AMS of the employee;
  • in the collective agreement, the higher liability limit could be indicated, however, maximum amount could be 12 employee’s AMS.

5.     REPRESENTATION OF THE EMPLOYEES

5.1. WORK COUNCIL

Establishment of the Work Council

  • the Labour Code indicates that the work council could be established on the initiative of the employees. It is not obligatory to have the work council or trade union in the company.
  • the new Labour Code regulates that in the companies with 20 or more people, the employers have an obligation to initiate an establishment of the work council in the company. The election commission of the work council shall be established until 1 January 2018. The election commission shall start the organization of the election of the work council no later than 7 days after its formation. The election of the work council shall take place in 2 months after the formation of the election commission. 

Functions

 

 

  • the employer has to inform and consult with the work council due to the following:
    • before the termination of the group of employees;
    • once a year to submit an information regarding the fixed term agreements in the company (e. g. how many employees works under the fixed term agreements, etc.);
    • on the procedure of compiling the work schedules for the employees;
    • once a year to submit an information about the salaries of the company (by the groups of profession and gender). The work council announces this information to the employees;
    • and other obligations.

6.     WORKING TIME, REST TIME, PAYMENT SYSTEM

Holidays

  • 28 calendar days per year of annual leave.
  • 20 working days per year of annual leave (if an employee works 5 days per week);
  • 24 working days per year of annual leave (if an employee works 6 days per week).

Holiday pay

  • annual leave shall be paid at least 3 calendar days before the commencement of annual leave.
  • annual leave shall be paid no later than the last working day before the commencement of annual leave.

Overtime

  • overtime shall not exceed 120 hours per year.
  • overtime shall not exceed 8 hours per 7 days or 12 hours provided there is a written consent of the employee but the average working time including overtime and excluding the extra work time may not exceed 48 hours per 7 days. The working time including overtime and extra work time may not exceed 12 hours per day (shift) and 60 hours per 7 days. The maximum amount of overtime is 180 hours per year, unless longer term is agreed by the collective agreement.

Pay for overtime during public holidays

  • the overtime pay during public holiday shall be at least the double rate of the hourly pay/monthly wages established for the employee.
  • the overtime pay during public holiday shall be at least double and a half rate of the hourly pay/monthly wages established for the employee;
  • for overtime pay during night or days off shall be at least double rate of the hourly pay/monthly wages established for the employee.

 

-          

  • upon request of the employee the time worked during the days off and public holidays also overtime may be added to annual holidays. In such case the mentioned work time is multiplied by corresponding coefficient.

Working time mode

  • a five-day or six-day working week;
  • no possibility of flexible working schedule.
  • the employer for one, several or all employee has a right to establish:
    • flexible working schedule, appointing the fixed working hours. An employee may set the beginning and the end of working day;
    • constant duration of the work day and number of work days per week;
    • summary working time accounting;
    • divided working day time mode;
    • individual working time mode.

Teleworking

  • a matter of agreement.
  • the opportunity to work from home for pregnant women, women who have recently given birth, employees who are taking care of children under 3 years of age, are solely raising a child under 14 years of age or a disabled child under 18 years of age. The employer must allow those employees to telework at least one fifth of the total working time unless it would lead to excessive costs.

Limitation of working time on night shifts

-          

  • the average working time on night shifts may not exceed 8 hours per day (shift) within a 3 months accounting period.

Minimum wage

  • no restrictions.
  • minimum wage could be paid only for unskilled labour. Unskilled labour is treated as labour which does not require professional skills.

7.     SUMMARY RECORDING OF WORKING TIME

Period

  • the duration of a reporting period may not exceed 4 months.
  • the duration of a reporting period may not exceed 3 months.

Working time schedules

  • working time schedules shall be announced not later than 2 weeks in advance.
  • working time schedules shall be announced not later than 7 working days in advance.

Pay for Idle time

  • the pay for idle time which is not the employee's fault shall be paid at least two-third of the AMS but not less than the minimum hourly pay approved by the Government for each idle hour.
  • if idle time does not exceed 1 working day – the employee is paid the AMS;
  • if idle time is announced for a period up to 3 working days – the employee is paid the AMS while he is at work, for the rest of the time he gets two thirds of the AMS; 
  • if idle time is longer than 3 days or non-term – for the time exceeding 3 days the employee is paid 40 % of his AMS. 

8.     ADDITIONAL AGREEMENTS IN THE EMPLOYMENT CONTRACTS

Compensation of training expenses

  • for period of 1 year.
  • for period of 2 years, unless the collective agreement establishes other period that may not exceed 3 years;
  • only those expenses related to acquiring of knowledge and abilities which exceed the requirements of the particular work activity are compensated;
  • there may be agreed in the employment contract that training expenses include the expenses of business trip (traveling, accommodation, etc.).

Confidentiality agreement

 

  • there may be agreed on forfeit for the breach of the confidentiality obligation. The amount of the forfeit is not regulated, still it shall comply with the principle of reasonableness.

Agreement on different work conditions

 

  • the employer and the employee paid the salary exceeding 2 average gross salaries of the country economy (approx. 1 600 EUR) may agree on different work conditions, the balance between the parties shall be maintained though.

Agreement on passive duty

 

  • the parties may agree on the passive duty at home. The employee shall be paid at least 20 % of his AMS per month for each week of duty.

Should you have further questions regarding the new Labour Code, please do not hesitate to contact us:

Živilė Morkūnaitė
Lawyer 
email: zivile.morkunaite@leinonen.lt
tel.:  +370 656 73318