On 16 August 2017, amendments to Latvia’s Labour Law came into force. The aim of the changes to the previous wording of the law is to clarify the procedure for using additional leave and to clearly set the scope of competition restriction after termination of employment. Likewise, employers will be able to terminate an employment contract while an employee is suspended and to compensate an employee’s overtime work through paid rest by agreement with the employee. In this Employment Newsflash, we review what we see as the most significant amendments.

Clarity in calculation of employees’ hourly salary rate

In practice, most specialists already calculate an employee’s salary rate by dividing their monthly salary by the number of hours during a particular calendar month. However, in future this procedure is now required by the Labour Law, effectively decreasing possible interpretations. In practice, problems were often caused by calculating the hourly salary rate via aggregated working time and monthly salary at the same time. Under the amendments, the hourly salary rate in these cases is calculated by dividing the set monthly salary by the average number of monthly working hours during the particular calendar year.

For overtime work – paid rest as an alternative to mandatory cash bonus

By agreement between employer and employee, the supplement for overtime work can now be replaced by paid rest at some other time in line with the number of overtime hours worked.

An employee can be dismissed while suspended

Employers now have an option to give notice to employees under suspension. Previously, lack of precise regulation led to the view that an employer wishing to dismiss a suspended employee had first to end the suspension.

Clearer procedure for using and obtaining compensation for additional leave

Now, extra paid leave for the current year is granted and used before annual paid leave for the following year. Regulation of annual leave sets the principle similar to paid annual leave, that is, compensation for additional leave in cash is only allowed on termination of employment when an employee has not used their additional leave.

Employees whose behaviour causes dismissal must return training funds

Changes are introduced to the range of cases when an employee must return to their employer funds incurred for the employee’s training.

Now, the employer can also claim the cost of an employee’s professional training or increase in qualifications when the employee’s behaviour is the reason for dismissal. Previously, this claim was possible only when the employee terminated the employment contract.

Scope of limits to supplementary work expanded

In practice, employers have already set broader regulation for limiting supplementary work during employment. Now, the legislator has also expanded the scope of limits to supplementary work in the Labour Law, so that supplementary work is not simply employment on the basis of an employment contract, but also all other forms of employment, such as service agreements.

Clearer rules of competition restriction after termination of employment

The amendments clarify the purpose of restrictions on competition, in that they do not protect the employer against competition in general but rather protect the employer against possible competition based on the employer’s confidential information available to the employee.

These amendments raise concerns whether they could effectively merge two previously separate institutions: competition restriction and protection of confidential information (or trade secrets) after termination of employment. The new regulation could cause complications for employers who need to protect their trade secrets after termination of employment as was previously possible without paying additional compensation.