In a recent liability case the Supreme Court of Lithuania emphasized that the mere fact that a person works in a company governed by their spouse does not mean a breach of loyalty obligations of the manager. Such case could be discrimination on the grounds of marital status.
The manager employed his spouse in a sales manager office. After the company had entered into bankruptcy the enterprise bankruptcy administrator claimed damage compensation against the manager based on the illegal conduct of the manager, namely, for paid bonuses to his spouse, who, as mentioned early, had served as a sales manager in the company.
The claimant argued that the bonuses paid to the spouse exceeded twice the average earnings of the remaining employees. The company, when the bonuses were paid, did not receive profit and had incurred losses, therefore by facilitating additional pay to his spouse the manager had caused damage to the company, which shall be compensated.
The enterprise administrator brought proceedings against the manager. The first instance of the court as well as the appeal court found in favour of the manager. The claimant asserted a cassation complaint.
The Supreme Court started with the case law under which the liability of the manager arises, inter alia, after the breach of loyalty obligations is established. The Supreme Court evaluated the concept of duty of loyalty of the manager. The Supreme Court emphasized the loyalty obligation, whilst acting in the best interests of the company, shall not be broadened without particular investigation of the evidence of the case, in that the mere fact that a person works in a company governed by their spouse implies a breach of duty of loyalty of the manager. This would mean, the Court pointed out, that the particular persons would be discriminated against for their marital status. Furthermore, this could be a deviation of the constitutional principle of equality. A violation of the duty of loyalty may be found if the spouse’s work duties conflict with the company’s goals, or if the wage (its supplements) were commercially unreasonable, unequal to market average or paid promoting only a single employee, or if failing to comply with the statutes of the company or other documents, etc. Such findings, however, were not established in this case. On those grounds, the Court ruled that the manager did not violate the duty of loyalty, therefore, he shall not be liable for the claimed damage. Thus the cassation complained was dismissed.
What makes this decision interesting from a Lithuanian employment law perspective is that the Court at its discretion triggered the discrimination issue. As can be read from the content of the judgment, no party based its arguments on the grounds of discrimination. Nevertheless, the Court found this to be the case.
The judgment, admittedly, is scarce in respect of discrimination reasons. By raising the issue of discrimination, the Court did not refer to any national or EU legislation or case law. This could likely be considered as an overreach of the judge in this case, as the main grounds for the claim was a breach of the fiduciary duties of the manager, but not discrimination.
Nevertheless, the Court has given a clear message that an allegation for misconduct merely for the employment of a spouse may lead to a presumption of discrimination. The clients (employees, employers, directors and shareholders) are therefore well advised to treat complaints (statements of defence) more comprehensively, encompassing a possible discrimination issue, which, unfortunately, is still not frequently used in Lithuania case law.
Judgment data: The Supreme Court of Lithuania, Judgment of 8 January 2016, civil case No. 3K-364-248/2016.
Author: Inga Klimašauskienė, GLIMSTEDT Senior Associate
The article published in eela.org