After much deliberation on 21 June 2016 the Parliament of the Republic of Lithuania adopted a new Labour Code which gave rise to many discussions between business, government and trade unions’ representatives.

The new Labour Code together with the amendments to the accompanying laws constitutes one of the seven blocks of the new social model which aims to liberalise and improve employment relations. The new social model which includes projects of 7 main and 27 accompanying laws related to the increase of employment, improvement of labour relation regulation and sustainability of social insurance was launched in the Parliament sessions from October 2015.

If the President of the Republic of Lithuania approves it, the new Labour Code will come into force from 1 January 2017.

Below is brief information about some, from our point of view, most important innovations of the Labour Code:

  • It shall be allowed to conclude the indefinite time employment contracts. According to such contracts, the employee shall be paid agreed remuneration based on actually worked hours. In case of such an employment contract the employee shall work not less than 8 hours per month. In case the employee works less than 8 hours, he/she shall be paid for 8 hours.
  • Reduction of existing severance payments to be paid to employees dismissed on the employer’s initiative without the employee’s fault. The maximum amount of the severance payment shall be equal to 2 monthly average wages. It shall be paid to employees that worked in that workplace 1 or more years. In case of dismissed employees whose length of the employment in that workplace is shorter than 1 year the severance payment to be paid shall be equal to half of the monthly average wage. Based on the new Labour Code the employees that are working in that workplace 5 and more years shall be additionally paid compensations from a specially created long-term employment benefit fund which shall be formed from the employer’s contributions made by respectively reducing their contributions to the State Social Insurance Fund Board (SODRA) budget.
  • Changes related to the period of notice when the employment contract is terminated on the employer’s initiative without the employee’s fault. In such cases the employee shall be given a notice 1 month before, in case of employees who worked in that workplace up to 1 year the notice shall be given 2 weeks before the termination of employment contract. These terms shall be doubled for employees who are raising a child under the age of 14 years and to employees who will be entitled to the old-age pension in less than 5 years. The terms shall be tripled in case the employees will be entitled to the old-age pension in less than 2 years or they are disabled.
  • Instead of 28 calendar days as provided by the current Labour Code, the new Labour Code establishes a minimum annual leave of 20 working days.
  • Changes related to overtime work are introduce: the maximum duration of overtime work per year is increased by 60 hours, i.e. the employee’s overtime work can amount to up to 180 hours per year. For the overtime work an employee shall be given a monetary payment or additional leave (the latter is not possible option based on the current Labour Code).
  • In the workplaces where there are 20 and more employees, the Work Council shall be formed. It is formed on the initiative of the employer for a three-year term. In case there is a trade union operating in that workplace and it’s members account for more than half of all workplace employees, the Work Council is not formed and the trade union acquires all the powers of the Work Council and performs all functions of the Work Council. In the workplaces, where the average number of employees is lower than 20, the general meeting of employees will be able to elect a trustee who shall implement employees’ representation rights.
  • New Labour Code introduces a new instrument - a lockout. Lockout is the employer’s right to strike. During lockout the employer can suspend the works and validity of employment contracts. This could be considered as employer’s “weapon” against employees in case of a conflict situation.

If the President of the Republic of Lithuania signs the Labour Code, it will come into force from 1 January 2017. Until then employers will have to revise the existing forms of employment contracts, internal work orders and procedures in order to ensure compliance with the laws and business interests. Even though the Labour Code would come into force only after a few months, it is very important to consider and to take into account its provisions already now when concluding new or changing existing employment contracts and other document related to organization of works. If not amended, employment contract provisions establishing or replicating employees’ rights and guarantees as determined in current law are likely to remain in force even though they will not be in the new Labour Code anymore.