Lithuania

    1.1 In what circumstances does the employee transfer law apply?

    Employee transfer law applies upon the transfer of a business or part of one. A transfer will qualify as the transfer of a business if the business is an economic entity which retains its identity after transfer. Whether this is the case depends on the circumstances, including:

    • the type of business;
    • whether tangible assets transfer;
    • the value of intangible assets;
    • whether the majority of employees transfer;
    • whether customers are taken over;
    • the similarity between pre- and post-transfer activities and the length of any suspension of activity.

    An overall assessment should be made, with no single factor considered in isolation.

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    Author: COBALT Lithuania

    Date: January 2017

    1.2 Does the employee transfer law apply to (a) a sale of a business or (b) outsourcing?

    (a) Sale of a business

    The employee transfer law applies to the sale of a business or part of one if the business retains its identity. Employee transfer law can apply, for example, to mergers and acquisitions, leases and gifts.

    (b) Outsourcing

    Employee transfer law applies in cases when a business entrusts another business to provide a service and takes on the obligations of an employer towards the employees assigned to performing that service. It does not matter if the transferred activity is merely ancillary to its main activities, or if the activity was performed by a single employee before the transfer.

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    Author: COBALT Lithuania

    Date: January 2017

    1.3 In outline, what are the implications of the employee transfer law?

    If the employee transfer law applies:

    • employment relationships continue under the same conditions at the transferee;
    • the transferee is prohibited from amending employment conditions or terminating employment contracts as a result of the transfer;
    • employees must be notified by the transferor at least ten working days before the transfer;
    • the transferor must provide information about the transfer to employee representatives (i.e. the trade union or labour council) and to consult with them (or if there are no employee representatives it must inform the employees directly);
    • if employees have claims relating to their employment with the transferor, they may be brought against the transferee;
    • applicable collective agreements transfer.
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    Author: COBALT Lithuania

    Date: January 2017

    2.1 Who transfers?

    Employees who are employed by the transferor and predominantly work in the business transferred, will transfer to the transferee by operation of law. This includes all employees who have been posted or seconded, those on maternity leave and those temporarily incapacitated for work. 

    There are no specific rules applicable in the case of transfer of a part of business. However, the rules developed by the ECJ will apply, i.e. an employment relationship is characterized the part of the undertaking or business to which the employee assigned. Therefore, it is important to establish which part of the business the employee actually worked in.

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    Author: COBALT Lithuania

    Date: January 2017

    2.2 Can employees object to transferring?

    Employees must be notified about a transfer at least ten working days in advance. If an employee provides a written objection to the transfer within five business days of receipt, the transferor will terminate the employment contract on its own initiative.

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    Author: COBALT Lithuania

    Date: January 2017

    2.3 What happens to terms of employment contracts?

    In the case of a transfer the employment conditions must not be changed and the employment contracts must not be terminated. The employment contracts of employees and all their legal effects and implications, will automatically transfer to the transferee.

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    Author: COBALT Lithuania

    Date: January 2017

    2.4 What about other employee benefits?

    Generally, the transferee must provide transferred employees with pay and benefits equivalent to those specified in the employment contract.

    However, whether bonus and benefit schemes transfer depends on whether they are mandatory or discretionary. If, however, benefits are provided in an employment contract and the employee has the right to receive them, they are deemed mandatory. If benefits are discretionary, the transferee need not continue to provide them.

    If the transferee must continue certain benefits but cannot replicate them, it must provide an equivalent benefit or compensate employees.

    Past employment with the transferor counts as ‘continuous employment’ with the transferee.

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    Author: COBALT Lithuania

    Date: January 2017

    2.5 What happens to pension rights?

    Pension benefits may be guaranteed by the state social insurance system and/or private pension schemes.

    The employer must pay social insurance contributions to the State Social Insurance Fund, including pension contributions. After a transfer, the transferee must pay these contributions.

    If a supplementary pension scheme forms part of the employment contract, it must be continued after transfer. Supplementary pension schemes are run by management companies and benefits accumulated may be transferred by a member of the scheme (i.e. an employee) to a pension fund managed by another company. Each party may terminate the agreement unilaterally at any time for any reason by serving prior notice on the other party before the termination date. After a transfer of business, a new pension scheme agreement must be signed.

    If a supplementary pension is provided at the employer’s discretion, it can be discontinued in accordance with the provisions of that scheme.

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    Author: COBALT Lithuania

    Date: January 2017

    2.6 What liabilities transfer?

    All liabilities arising from employment relations between the employee and the transferor before the transfer pass to the transferee.

    However, claims for unlawful dismissal as a result of the transfer should be made to the transferor. Conversely, financial claims (e.g. for severance pay or late payments) relating to the time before the transfer must be made to the transferee.

    The general rule is that criminal liability relating to legal entities does not transfer. However, any criminal liability relating to a natural person remains with that person.

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    Author: COBALT Lithuania

    Date: January 2017

    2.7 Do collective agreements transfer?

    A collective agreement concluded between the transferor and the transferred employees which is valid at the moment of transfer, must be applied by the transferee.

    Where there is a valid collective agreement applicable to transferred employees, it will apply at the transferee for two years, unless the collective agreement expires earlier or a new collective agreement is made.

    The terms of a pre-existing collective agreement may only be changed in accordance with the procedure stipulated in that agreement. If no procedure is stipulated, the collective agreement may be amended and supplemented in the same way as the agreement was concluded, namely by negotiation.

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    Author: COBALT Lithuania

    Date: January 2017

    2.8 How does the transferee obtain information on transferring employees?

    Where the terms of transfer are negotiated between the transferor and transferee (e.g. on a business sale) there is usually an agreement about the provision of information on transferring employees and their terms. In Lithuania, the parties are bound to disclose to each other all information which is essential for the execution of a contract. Accordingly, the transferor must disclose any relevant information about the transfer. This would include, for example, conditions of employment contracts and collective agreements, and any legal proceedings involving employees. However, the law provides no definitive list of information that must be disclosed to the transferee.

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    Author: COBALT Lithuania

    Date: January 2017

    3.1 Can employers make changes to employment contracts?

    Where the employee transfer rules apply, it is prohibited to amend employment conditions or terminate employment contracts solely by reason of the transfer. However, that does not preclude the parties from harmonising the terms of employment contracts provided this does not worsen the employment conditions.

    According to ECJ case law, the transferee can amend the conditions of employment only to the same extent as the transferor could have done, and the transfer itself may never constitute a reason for the amendment.

    Therefore, making changes to terms of employments contracts for reasons unrelated to the transfer in accordance with all applicable requirements does not infringe the law.

    Essential terms of employment contracts (e.g. remuneration, job function and place of employment) cannot be changed unilaterally by the transferee without the written consent of the employee. Although the parties can, to a certain extent, determine which conditions are non-essential, normally all of the conditions agreed by the parties in the employment contract are considered essential and their modification is subject to the employee's consent. However, non-essential conditions of employment contracts may be unilaterally amended by the transferee if there are changes in production, its scope, technology or labour organisation, as well as in other cases of production necessity. The amendments should not be directly related to the transfer and the employees should be familiarised with their amended terms

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    Author: COBALT Lithuania

    Date: January 2017

    3.2 When can employers safely dismiss employees before or after a transfer?

    Dismissals based purely on the transfer of a business are prohibited and, if challenged, can be declared ineffective by the court. However, it is permissible to terminate employment relationships on economic, technical or organisational (‘ETO’) grounds. It is also possible to dismiss employees for other valid reasons, such as reasons related to their qualifications, professional skills or conduct.

    ETO reasons will be recognised as valid by the court if they are genuine, not related to the transfer (e.g. if they emerged after the transfer) and relate to changes to the structure of the business that mean that the functions of the dismissed employee have either ceased to exist or can be performed by fewer employees. The court will also assess whether the dismissed employee was subsequently replaced by another person to perform the same or similar functions. In the event that the employee’s claim for unlawful dismissal is successful, he or she will be entitled to a severance payment plus his or her average monthly wage for the entire period from the date of dismissal until the date the court ruling came into effect.

    Note that termination of the employment contract by mutual agreement of the parties is recommended where possible, as this mitigates the risk of any potential dispute.

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    Author: COBALT Lithuania

    Date: January 2017

    4.1 Who must employers consult?

    Prior to taking a decision on the transfer of a business, the transferor must inform the employee representatives (i.e. the trade union or the works council or, if none, the employees directly) and hold consultations.  

    Individual employees must be notified in writing by the transferor of the prospective transfer at least ten working days before it takes effect.

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    Author: COBALT Lithuania

    Date: January 2017

    4.2	What information must they provide?

    The information provided must include:

    • the fact of the transfer;
    • the date of effect;
    • the legal basis for the decision to transfer;
    • the legal, economic and social implications for the affected employees.
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    Author: COBALT Lithuania

    Date: January 2017

    4.3	What does consultation involve?

    The transferor must consult about the reasons for the decision to transfer the business; the legal, economic and social implications for the employees; and any measures it envisages will avoid or mitigate the expected consequences.

    There is no timeframe in law for the consultation, but the employer is required to have consulted before it takes the decision to transfer the business. The consent of the employee representatives to the transfer is not required, but the employer must make a record summarising the results of the consultation. It may then continue with the transfer.

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    Author: COBALT Lithuania

    Date: January 2017

    4.4	How long does consultation last?

    The consultation process should take at least five business days.

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    Author: COBALT Lithuania

    Date: January 2017

    4.5	What happens if an employer fails properly to inform or consult?

    The transferor may be liable for failure to inform the employees or to consult with them. This is an administrative offence and a fine can be imposed on the transferor of between EUR 80 and EUR 880. The employer may also be liable under industry or sector-specific regulatory acts, collective agreements or other arrangements.

    Non-compliance with the information and consultation obligations may also trigger liability for damages to employees. If there is no requirement to obtain employees’ consent to the transfer, failure to inform or consult will not be considered sufficient reason to declare it ineffective.

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    Author: COBALT Lithuania

    Date: January 2017

    5.1	Identify up to three issues in this country of which employers should be aware?

    The employee transfer rules only took effect on 1 December 2012. However, the Lithuanian courts had recognised the concept of transfers of undertakings before the provisions came into force. The existing case law follows the rulings of the ECJ and there is no departure from this by the local courts.

    However, it should be noted that there is no precedent for how the courts should interpret an explicit prohibition on amending employment conditions as a result of the transfer of a business.

    There is also no case law on outsourcing. In this case, the national courts will follow the case law of the ECJ in this regard.

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    Author: COBALT Lithuania

    Date: January 2017

    5.2	Would the employee transfer law apply on a cross-border transfer into or out of this country?

    There are no rules in Lithuanian law to determine how employee transfer law would apply in the case of cross-border transfers.

    However, since Lithuanian labour law applies to employment relationships in the territory of the Republic of Lithuania, it can be assumed that if a business is transferred to Lithuania, the employee transfer law should apply in respect of the transferee. Accordingly, if a business is transferred from Lithuania, the employee transfer law should apply in respect of the transferor.

    In the case of a cross-border merger, additional procedures may need to be followed regarding employee participation under specific legislation.

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    Author: COBALT Lithuania

    Date: January 2017

    6.1	What are the main national laws protecting employees upon transfers of businesses?

    The law implementing the employee transfer rules is the Labour Code of 2016. 

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    Author: COBALT Lithuania

    Date: January 2017

     

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