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Published 2020 07 16, 21:41

Employment Termination on the Initiative of the Employer: Lawful and Unlawful Actions

The true application of the so-called new Labor Code (LC) is becoming clearer only after three years of its adoption. The new LC sets forth a new basis for termination of employment on the initiative of the employer, involving a severance pay equal to the employee’s salary of six months.
Haroldas Ivanauskas
Haroldas Ivanauskas

In its Decree of June 25, 2020 in Civil Case No. e3K-3-199-701/2020, the Supreme Court of Lithuania (SCL) explained how Article 59 of the LC regulating the termination of employment on the initiative of the employer should be applied in real situations.

In the future, this Decree shall serve as the basis for hearing labor disputes regarding the termination of employment pursuant to Article 59 of the LC in lower instance courts and labor dispute committees. The explanations presented in the SCL Decree are relevant to all employers who intend to lay off their employees using this expensive choice that nevertheless grants the employer certain freedoms.

What should the employer consider before terminating the employment agreement as explained by the SCL?

Firstly, the termination of employment must comply with three important requirements.

The employment agreement may be terminated on the basis of Article 59 of the LC only if all of the following conditions are satisfied: (1) An order is issued according to Article 64 of the LC; (2) The order sets forth lawful and sufficient reasons (one or several) for termination of employment; (3) The reason for the termination of employment is not included in the list of reasons, where the employment agreement cannot be terminated according to Article 59 of the LC (protection of reporting persons, etc.).

In general, the reason for employment termination cannot be related to discrimination or other protected free rights of the citizens.

Secondly, the reason for employment termination must be real (based on facts).

The reason for employment termination on the basis of Article 59 of the LC may be related to the personal traits of the employee, his/her conduct at work or professional qualification, the financial status of the employer, etc. In each individual case, the employer can freely choose the reason at own discretion; however, this reason must exist, i.e. it cannot be alleged or presupposed. The reason for employment termination must be lawful and sufficient to be considered a suitable basis for such actions. The employers should do their homework and collect evidence to serve as a basis for employment termination.

Thirdly, employers should take care not to forget to serve the employee a notice of termination.

When the employment agreement is terminated on the basis of Article 59 of the LC, the terms for serving the notice of termination must be adhered to strictly as set forth in Article 64 of the LC. The notice must be served in writing and contain the reason for employment termination and the legal norm indicating the basis for termination of the employment agreement and the last day of work. The notice must also contain the specific reason for employment termination. When issuing the order to terminate the employment agreement on the basis of Article 59 of the LC, the employer cannot indicate another termination reason than the one written in the notice.

Fourthly, the requirements of registering the termination of the employment agreement on the basis of Article 59 of the LC must be adhered to.

The decision of the employer to terminate the employment agreement must be presented in writing and contain the basis of employment termination and the legal norm indicating the basis for termination of the employment agreement and the last day of work.

Fifthly, the employer will be responsible for proving the legality of employment termination.

If the laid-off employee initiated a hearing of the labour dispute, the employer will be responsible for proving that the employment termination process was lawful, also proving that the employment termination reason used as the basis was legal, including but not limited to providing evidence that the employment termination reason was lawful, real and sufficient to terminate the employment agreement.

Finally, not all employers may use this employment termination basis.

This basis for employment termination cannot be used by state enterprises and municipal institutions supported from the state or municipality budget, State Social Insurance Fund Board budget or other state-funded budgets, also state enterprises, municipal institutions and public institutions, the owner of which is the State or the municipality, and also the Bank of Lithuania. In general, the SCL seconded the conclusion of the Court of Appeals presented in the same case that the institutions which cannot use Article 59 of the LC as the basis for employment termination should not be covered too broadly and should not encompass state or municipal joint-stock companies that are not directly listed in Article 59 of the LC.

Thus, even though the new employment termination provisions are rather liberal, the employers should take care to do their homework.

Translated by MP Translations Agency in Kaunas.

Norėdamas tęsti – užsiregistruok

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