The Labour Code of the Republic of Lithuania, which entered into force on 01.07.2017, established a new basis for dismissal of employees in Lithuanian labour law – termination of the employment contract at the will of the employer. Noteworthy, that Part 1 of Article 59 of the Labour Code of the Republic of Lithuania provides that „An employer, with the exception of state and municipal institutions or establishments funded from the budgets of the state, municipality or State Social Insurance Fund or from other funds established by the state, state and municipal enterprises, public institutions owned by the state or municipality, and the Bank of Lithuania, shall be entitled to terminate an employment contract with an employee due to reasons not specified in Article 57(1) of this Code by giving notice three working days in advance and paying severance pay in an amount no less than six times the employee’s average remuneration”. Thus, a novelty in the legal regulation of employment relations was introduced in order to liberalize them and simplify the dismissal of an employee – the possibility for the employer to more flexibly terminate the employment contract with the employee, but with a higher severance pay.

The application of this ground for dismissal has raised a number of questions in practice how to apply this rule of law: Can an employer apply this ground for dismissal without giving any reason? Does the reason for dismissal have to be relevant? Which employers can use this method of termination? How can the dismissal procedure be properly applied to avoid disputes in the future? Relevant issues often discouraged employers from making dismissal decisions on this basis, as the case law of lower courts was inconsistent and unpredictable.

The Supreme Court of Lithuania in 2020 June 25 made an order in civil case no. e3K-3-199-701/2020, in which the substantive law regulating the termination of the employment contract at the will of the employer were decided. This is the first ruling of the court of cassation, which exhaustively discusses and analyzes the conditions for termination of an employment contract at the will of the employer in accordance with Article 59 of the Labour Code of the Republic of Lithuania.

In the present case, it was found that the employee was dismissed due to her behavior, which created tension between the company’s employees and adversely affected the working environment.

The employer proved this reason with explanations from the supervisor and witnesses. The manager and colleagues described the dismissed employee as an ambitious, selfish, arrogant person, who constantly replicates about the given tasks, customers or  the work of other employees, uses profanity towards other employees, which has led to the division of the team. Pursuant to Article 59 of the Labour Code of the Republic of Lithuania, the Supreme Court of Lithuania recognized the dismissal of the employee as lawful in this case.

It is important to mention that the court of cassation, interpreting Article 59 of the Labour Code of the Republic of Lithuania, stated that on the basis of termination of an employment contract established in Part 1 of this Article, an employment contract may be terminated when: a) there is the initiative of the employer, expressed in accordance with the procedure established in Article 64 of the Labour Code; b) there is a legitimate, sufficient reason (one or more) for the need of a particular employer to terminate the employment contract; c) this reason is not mentioned in Part 1 of the Article 57 of the Labour Code and is not included in Part 2 of the Article 59. Thus, the Supreme Court of Lithuania essentially states that for the lawful termination of an employment contract at the will of the employer must exist as a whole of the three conditions mentioned above.

In the case under review, the court of cassation stated, inter alia, that the reason for terminating an employment contract on the grounds set out in Part 1 of the Article 59 of the Labour Code of the Republic of Lithuania may be related to the employee personality, his behavior at work, qualifications, the position of the employer, but, as mentioned, it must actually exist (it means that it is not fictitious), lawful, sufficient to justify the termination of the employment contract and is not among the Part 1 of the Article 57 and Part 2 of the Article 59 of the Labour Code of the Republic of Lithuania.

Upon termination of the employment contract at the will of the employer must comply with the requirements of Article 64 of the Labor Code of the Republic of Lithuania, which regulates the warning to terminate the employment contract, it means that in the employee’s notice should be stated the reasons for the termination of the employment contract that determined the employer’s subjective decision to terminate the employment contract on this basis with the law specifying the grounds for termination and the date of termination. If the reason at the time changes, the employer must re-warn the employee in order to terminate the employment contract for another reason.

The Supreme Court of Lithuania also noted that the right of an employer to terminate an employment contract on the basis of Article 59 of the Labor Code of the Republic of Lithuania is not absolute. This article provides for exceptions where the employer is not entitled to terminate the employment relationship on the following grounds: 1) the employer is the state and municipal institution or establishment funded from the budgets of the state, municipality or State Social Insurance Fund or from other funds established by the state, state and municipal enterprises, public institutions owned by the state or municipality, and the Bank of Lithuania; 2) on the submission of information about the violation in accordance with the Law on the Protection of Whistleblowers of the Republic of Lithuania, participation in proceedings against an employer accused of violations of law or due to application to administrative bodies regarding discrimination based on gender, sexual orientation, race, nationality, language, origin, citizenship and social status, faith, marital and family status, intention to have a child/children, convictions or views, political affiliation, age, or other discriminative grounds.

Thus, despite the fact that Article 59 of the Labor Code of the Republic of Lithuania gives the employer the opportunity to terminate the employment relationship with the employee more flexibly, the employer must prove the existence of the reason for terminating the employment contract. If the termination of the employment contract was based on the cause of the illegality or inappropriateness of the employee’s conduct, then in the event of a dispute, the employer bears the burden of proving the employee’s illegal or inappropriate behaviour, whereas the employer’s subjective will to declare that employee is inappropriate is obvious and cannot be proved separately. The employer should prove the illegality or inappropriateness of the employee’s conduct at a level of standard of proof that meets the standard of bonus pater familias.

ARTICLE PREPARED BY:

Černiauskas and Partners Law Firm Advocate’s assistant Ida Skiecevičė.