Written by: Eglė Gliaudelytė, Jolanta Raudonytė; COBALT (Lithuania)
In Lithuania, as in other countries, using employee leasing or temporary agency workers provides welcome flexibility for employers, especially when workload is unpredictable. However, it’s important to understand the legal requirements and restrictions on this type of work
‘Employee leasing’, also described as ‘temporary agency employment’, can provide flexibility for organisations, especially where workloads and staffing needs vary. It can also help save costs on recruitment and employment, human resources management, and payroll accounting costs.
With remote work opportunities growing, the demand for temporary agency workers is also on the rise. A foreign company looking to recruit from Lithuania does not need to relocate its operations or register in Lithuania for tax purposes, as employees can be employed through a temporary work agency.
However, there are numerous instances when the selected model of operations has temporary agency work characteristics but is not considered temporary agency work.
For instance, organisations often enter into a service agreement under which they agree on the assignment of a specific employee to work for a client, the place and hours of work, the nature of work, and remuneration.
Some groups also have intra-group employee sharing arrangements in place. An employee is employed by one company but carries out work for several companies within the group, so the employee is ensured sufficient work. Sometimes an employee of one organisation works for another which has the equipment and supplies needed to perform the work.
In other cases, a foreign national is employed by a company to which simplified conditions for employment of foreign workers are applied, although the employee performs his/her job functions for another employer.
However, not everyone is aware that practical solutions such as these must comply with specific legislative requirements. For example, if you are not on the official list of temporary work agencies, you are not eligible to engage in temporary agency employment activities. If you do, the head of your organisation may incur administrative liability for engaging in illegal commercial activities.
Added to this, you will not only be liable to pay a fine but could also have any products manufactured while engaging in this activity and income generated from this activity confiscated.
Where an employee works for a company other than by which he/she was employed, or where the rules for employment of foreign workers are violated, this is deemed to be illegal work. The consequences for the sanctioned employer go beyond financial penalties and may include restrictions on hiring foreign workers, exclusion from public procurement procedures, non-eligibility for subsidies, benefits or state aid. Further provision of these services becomes a ‘ticking bomb’ that will sooner or later lead to unwanted liability.
Are you engaged in temporary work agency activity?
Check whether your activity has the following elements of temporary agency employment:
- A company engaged in employee leasing is an employer of record. If your functions as an employer are limited to entering into, amending and terminating an employment agreement, paying salary and other costs, most likely you are acting as a temporary work agency. In making such assessment, the courts also consider whether the company is engaged in the type of activity to which the assigned employee’s role is attributed.
- Reporting. If you do not exercise control over the work process, the employee complies with the client’s instructions and internal regulations, the client provides the employee with work equipment, it is likely that the client is acting as a user undertaking.
- Remuneration. If the client reimburses the employer’s costs on the employee’s salary, leave pay, severance pay, it is likely that a temporary agency employment relationship exists.
For instance, one employer argued in litigation that its employee received instructions from the client, worked under the client’s supervision, used the equipment provided by the client, and the service agreement between the parties provided that ‘the client shall organise the entire work process from start to end’.
However, the court of first instance did not find that the elements necessary for a temporary agency employment relationship to exist were present. According to the facts of the case, the client did not carry out actual supervision, did not give instructions or directions to the employee; in other words, it did not organise the work process from start to end, and the employee complied with spoken instructions from other employees of the employer.
What else do you need to know?
This type of relationship is characterised by the sharing of the role of employer between the temporary work agency and the user undertaking and the requirement to comply with specific obligations.
The temporary work agency is required to pay the temporary agency worker the same salary as s/he would be paid if permanently employed by the user undertaking. The user undertaking also has subsidiary liability for compliance with this requirement.
It follows that if the employee is not paid the appropriate salary by the temporary work agency, the employee can claim it from the user undertaking.
The user undertaking must create the same conditions of work and employment for workers employed through a temporary work agency as for its permanent employees. This requirement applies to salary, working and rest time, and leave entitlement.
Temporary agency workers must also be provided with access to collective facilities, such as canteens, childcare and transport services, on the same basis as other employees, unless there are objective reasons justifying different conditions.
Before temporary agency workers start work, they must be briefed by the user undertaking on the conditions of work, work regulations and must be informed of the potential risks related to the work they will carry out, including the necessary specific qualifications, skills or medical checks.
Responsibility for failure by the user undertaking to implement measures ensuring health and safety at work is also shared by the temporary work agency. The position adopted by the courts in case law is that in the event of an accident at work, it needs to be assessed whether the employer (temporary work agency) and the user undertaking have properly discharged their duties, i.e. whether they have exercised sufficient control over the employees’ compliance with health and safety requirements.
The temporary work agency may not prevent the temporary agency worker from taking up employment with the user undertaking, and is not allowed to prevent the latter from employing the temporary agency worker. Any agreements that prohibit employment and/or impose fines for a violation of these prohibitions are invalid.
The user undertaking is prohibited from replacing its employees dismissed on a no-fault basis with temporary agency workers. The prohibition is intended to prevent abuse by employers and their attempt to avoid dismissal procedures and the accompanying financial consequences, i.e. severance payments. Employees dismissed in these circumstances may seek a declaration that their dismissal is unlawful from the Labour Disputes Commission.
If there is no agreement in place on the transfer of intellectual property created by the employee for the user undertaking, the owner of the IP will be the direct employer: the temporary work agency.
Although temporary agency employment can seem a tricky and complicated process, employers find this option more convenient, as projects vary and business needs change. However, understanding the law and taking the right approach is important.
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