More changes to the regulatory framework of lay-offs and grants: additional requirements for employee or group lay-offs and new rules on subsidisation

The amendments of Article 47 of the Labour Code, which had recently come into force on 19 March 2020, were changed yet again following a decision made by the Seimas on 31 March 2020. The new statutory amendment, which came into effect on 8 April 2020, lays down additional requirements for the lay-offs (furlough leave) of employees or their groups in cases where the Government of the Republic of Lithuania declares an emergency and a quarantine (lockdown).  Furthermore, 10 April 2020 saw the amendments to the Law on Employment come into force amending the provisions on salary grants for lay-offs. We will give an overview of the most relevant changes below.

Additional requirements for lay-offs

From 8 April 2020, employees may be laid off (furloughed), on the basis of Article 47(1)(2) of the Labour Code, provided the following conditions are met:

  • The Government has declared an emergency and a quarantine, and
  • as a result thereof, the employer is unable to provide the employee with the job agreed in their employment contract because:
    • due to the specific nature of the working arrangements, it is impossible to do the job remotely, or
    • the employee does not accept a different job offered to them.

Under the former wording of Article 47(1)(2) of the Labour Code, a lay-off (furlough leave) may have been imposed by the employer where: (i) the Government has declared an emergency or a quarantine, and (ii) as a result thereof, the employer is unable to provide the employee with the job agreed in their employment contract.

It is clear that the new regulatory framework establishes additional conditions for and impediments to lay-offs: the employers have essentially been placed under an additional organisational, administrative and bureaucratic burden, because, in a dispute regarding the legitimacy of a lay-off, they are likely to be required to prove that the company has such working arrangements in place, which preclude the employees from doing their agreed job remotely, and that it is not possible to offer a different job to the employees, or that the employee has not agreed to do a different job offered. In other words, the employers will have to make more careful assessments and possibly even record, in writing, the facts demonstrating that the aforementioned conditions have been met, e.g. to state, in the employer’s decree imposing a lay-off, the reasons as to why it is not possible to do the agreed job remotely, identify the (non) existence of a different viable job that the employee could do, or prepare the employer’s offer for a different job to be done accordingly and, in the event of the employee’s disagreement, obtain a written objection of the employee, etc. In addition, it may be necessary to evaluate the existing structure, and vacant positions as well as consider the need to recruit new employees, redundancies, leave, etc., i.e. the data that may demonstrate the availability of vacant positions.

The inconsistent steps of the legislator taken within such a short period of time generate confusion, because lay-offs were subject to different requirements in the exact same factual circumstances during the period between 19 March 2020 and 7 April 2020, if compared to the ones applicable from 8 April 2020 onwards.

The new Law does not expressly provide for retrospective application of Article 47(1)(2) of the Labour Code. Yet, many employers still have an obligation to review, without delay, the lists of employees laid off a couple of weeks ago following the procedure established in Article 47(1)(2) of the Labour Code, perform the above organisational and administrative procedures, and assess whether any of the employees must not be withdrawn from a lay-off and whether all of them may remain laid off.

It is worth noting that during the period of a full lay-off imposed on the aforementioned grounds, the employer must pay the employee a salary at the rate equivalent to not less than the minimum monthly salary approved by the Government (EUR 607 gross), where their employment contract provides for full-time working arrangements. Where there is an agreement for part-time working arrangements (e.g. 20 hours a week) and/or in case of a partial lay-off (short-time working, where the weekly number of working days is reduced by at least 2 working days or a daily number of working hours, by at least 3 working hours), the lay-off shall be subject to proportionately less payments.

Duty to report imposed lay-offs

Since 8 April 2020, employers have been put under a new obligation to inform the State Labour Inspectorate, following the procedure established by the Chief State Labour Inspector of the Republic of Lithuania, of the lay-offs (furlough leave) imposed on their employees on the basis of Article 47(1)(2) of the Labour Code:

  • Any new lay-offs (furlough leave) to be imposed, i.e. from 8 April 2020 onwards, should be reported to the State Labour Inspectorate no later than within 1 working day following the imposition of a lay-off (furlough leave).
  • Meanwhile, the employers that had imposed a lay-off (furlough leave) on their employees before 8 April 2020 should notify the State Labour Inspectorate no later than within 3 working days of the date the Law Amending Article 47 of the Labour Code came into effect (i.e. by 13 April 2020 at the latest).

It is interesting that the notification procedure established by the Chief State Labour Inspector of the Republic of Lithuania had been adopted on 6 March 2020, i.e. before the amendments to Article 47 of the Labour Code, which were the basis for the above procedure to be adopted, became effective. Therefore, in our view, the duty to comply with the established notification procedure should be linked explicitly to the date the amendments to Article 47 of the Labour Code entered into force as opposed to the date when the aforementioned procedure became effective, as the latter is insidiously earlier.

The information about the employees or their groups laid off (furloughed) shall be provided to the State Labour Inspectorate by submitting a notification of the imposed lay-offs (furlough leave) on the form published on the website of the State Labour Inspectorate. Such a notification shall contain the employer’s name and number, the length of the imposed lay-off (furlough leave), the number of laid-off (furloughed) employees (not individual employees), and the forename, surname and contact details of the responsible person appointed by the employer.

The procedure provides that the reported data may be revised or supplemented by submitting a new completed form for the notification of an imposed lay-off (furlough leave), with the most relevant data being considered those submitted the most recently. That said, given that only one form submitted and the data contained therein are relied upon, it is unclear how to provide the data correctly and accurately in cases where the length of lay-offs (furlough leave) imposed on individual employees differ for a variety of reasons. In practice, there are issues as to the correct way of stating the commencement of a lay-off (furlough leave) (because the ground for lay-offs set forth in Article 47(1)(2) of the Labour Code has been effective since 19 March 2020 rather than from the declaration of an emergency or a quarantine) in addition to the correct way of indicating the end of the lay-off (furlough leave) (as different employers used different ways to indicate the length of lay-offs in lay-off decisions).

If we follow the explanations and guidelines provided on the website of the State Labour Inspectorate (e.g. that ‘a notification on an imposed lay-off (furlough leave) is only required to be submitted once (…), no information on additional lay-offs (furlough leave) of a single employee or of other employees in the same company shall be required (…). There is no need to resubmit information where a laid-off (furloughed) employee takes leave or is given a certificate of being unfit for work (…)’, it is evident that the information on lay-offs (furlough leave) provided in accordance with above regulations and in the manner prescribed therein will not be complete and accurate, which is why it is advisable to additionally retain the communications with and advice from the officers at the State Labour Inspectorate.

Moreover, the published notification procedure should also be called into question because of the fact that the notification/form of lay-offs (furlough leave) is required to be submitted via the Google docs platform as this does not appear to be professional and reliable. A submitted notification of a lay-off (furlough leave) has not been acknowledged (at least until recently) with any confirmation of such notification and its contents. In addition, the details of lay-offs (furlough leave) may be submitted by virtually any persons, i.e. the authenticity of the notifier is not subject to any verification. Such defects go beyond comprehension given that the State Labour Inspectorate is committed to making all employers imposing lay-offs (furlough leave) public and, where they fail to fulfil this duty in an appropriate manner, punishing them in accordance with the Law.

Additional requirements for imposing lay-offs

It is important to note that the employer should not lay off (furlough) any employees who are temporarily unfit for work, in particular where they have been issued with a sick note due to compulsory self-isolation and under Article 111(2) and (3) of the Law on Sickness and Maternity, as well as any employees whilst on leave. Their lay-off (furlough leave) would cause the risk of such employees either being denied sick notes or being denied sick pay. Therefore, such workers should be laid-off (furloughed) only after the end of their period being temporarily unfit for work or of their leave, in accordance with the requirements applicable to lay-offs (furlough leave).

Further, before notifying public authorities, the employers should properly scrutinise the information and documents to be submitted lest there be any issues regarding both the legitimacy of the lay-off (furlough leave) and the payment of other benefits (grants/sick pay). For instance, when notifying the State Labour Inspectorate of the employee lay-offs (furlough leave) on the basis of Article 47(1)(2) of the Labour Code, the employers should only provide information on such employees that are to be (have been) laid-off (furloughed) and that are actually subject to the lay-off (furlough leave) at the time, i.e. no notification of any employees that have not been laid-off (furloughed) (workers who are temporarily unfit for work or on leave). An identical rule should also be followed when making an application to the Employment Services for a grant, as discussed below.

In addition, employers should take particular care when providing information to Sodra, in particular when submitting the NP-SD2 notification, which is to be submitted in the case of an employee being unfit for work. The said notification to be completed is subject to one procedure where an employee is not laid-off (furloughed) during their unfitness for work or withdrawn from the lay-off (furlough leave) due to being unfit for work, and to a different procedure where an employee is laid-off (furloughed) and in receipt of a salary for the lay-off (furlough leave) during their unfitness for work. In case of discrepancies, there may be a risk of certain sums being awarded by a court of Law from the employer.

New amendments passed on grants in case of lay-offs

On 7 April 2020, the Seimas passed the amendments to the Law on Employment, which entered into force on 10 April 2020, amending the original rules on the value of and conditions applicable to grants for lay-offs (furlough leave) and employer duties. Key rules:

Employers eligible for grants: 

The grants will be available to employers that, during the lay-offs (furlough leave) resulting from an emergency and a quarantine declared by the Government, retain their employees, who had been laid-off (furloughed) on the basis of Article 47(1)(2) of the Labour Code, on a payroll. Employers who meet the following conditions will be eligible for such grants:

Value of a salary grant: 

A salary grant would be paid on the basis of the salary accrued to each laid-off (furloughed) employee. The value of the salary grant will be calculated as a percentage of the salary accrued to the employee, which may not exceed the salary provided in the employee’s employment contract prior to the date of an emergency and a quarantine declared by the Government. At the employer’s choice, a grant would consist of:

  • Either 70 per cent of the estimated funds, but not exceeding 1.5 minimum monthly salaries approved by the Government (EUR 910.50). In financial terms, in the case of full-time working arrangements, this option is best suited for the cases where the salary to be paid to the employee by the employer would be between EUR 867 and EUR 1,300 during the lay-off (furlough leave). To benefit from the maximum grant, the salary for the lay-off (furlough leave) should be EUR 1,300 upwards. In this case, the employer’s costs would be EUR 390 upwards, while the value of the grant, up to EUR 910.
  • Or 90 per cent of the estimated funds, but not exceeding the minimum monthly salary approved by the Government (EUR 607). Financially, in case of full-time working arrangements, this option is best suited for the cases where the salary to be paid to the employee by the employer is between EUR 607 and EUR 867 during the lay-off (furlough leave). Should the employer opt for the minimum salary, the employer’s costs would be EUR 61, while the value of the grant, around EUR 546.
  • If the employee is laid-off (furloughed) for a period shorter than a monthly full-time working equivalent, the value of the salary grant shall be calculated in proportion to the length of the lay-off (furlough leave) (e.g. where full-time working arrangements have been agreed with the employee, but the employee is laid-off for ½ of their working time, in this case, the maximum value of the above grant would be halved)

Length and cessation of grants:

The grant would be paid as long as an emergency and a quarantine are in place.

The grant is also ceased in the following cases:

  • Where an emergency or a quarantine has been lifted, or either of them has expired;
  • Where a court ruling instituting bankruptcy proceedings against the employer becomes final or a meeting of creditors passes a resolution for out-of-court bankruptcy proceedings;
  • Where the status of an undertaking in liquidation has been registered;
  • Where the State Labour Inspectorate finds that the laid-off (furloughed) employee, who has a grant paid to compensate for their salary, is performing their job functions during the lay-off (furlough leave).

Employer’s additional duties:

  • The Law provides that the employers who are paid a salary grant for their laid-off (furloughed) employees should retain at least 50 per cent of their jobs on the payroll for at least three months after the end of the salary grant. The specific liability for violating this rule still remains unclear, except as indicated in the paragraph below.
  • Moreover, there is another rule, which sets forth that the employers that have made redundant more than 50 per cent of the subsidised employees within 3 months of the cessation of the grant shall not be able to participate in the measures of supported employment, subsidised job creation and implementation of local employment initiative projects as prescribed in the Law on Employment, for 12 months after the cessation of the grant. As it can be seen, this rule is in place to protect the employees who were paid a salary grant for their lay-off (furlough leave). Yet, this rule does not apply if the employees are dismissed due to the outcome of their probationary period in addition to where the contract is terminated at the employee’s initiative without a valid reason or for valid reasons, where the employee is dismissed at the employer’s initiative through the employee’s fault, and where the contract is terminated in the absence of the will of the parties to the employment contract or due to the employee’s death.
  • It is also important that the employer will be under the obligation to provide evidence to the Employment Services about the fact that it has properly paid the employee their salary, which had been subsidised, i.e. both the employer’s share and the subsidised share.

Repayment of grants:

The Law expressly provides that the employer must repay a full grant for the employee provided the payment of the salary grant for the lay-off (furlough leave) was ceased where the State Labour Inspectorate has found that the employee was performing their job functions during the lay-off (furlough leave) while in receipt of the grant. The grant should also be repaid/recovered from the employer in other cases, including but not limited to, where the lay-off (furlough leave) was imposed without a valid reason (e.g. in breach of the regulations provided in Article 47(1)(2) of the Labour Code), where the authorities were provided with false information, also where the Employment Services were not provided with the documents on the grants paid to employees, and in other similar cases as prescribed in Article 61 of the Law on Employment. It should be noted that the Law does not expressly stipulate that the grant shall be repaid in cases where the employer fails to maintain a sufficient number (50%) of jobs on the payroll. Yet, the manner which the newly adopted rules will be applied and interpreted will only become known in the future.

Procedure for making an application for a grant:

An application for a grant should be made to a department of the Employment Services which covers the employer’s registered address, by submitting the required documents via email or post. The first application for a grant may be made by the end of the month (for March, by 30 April 2020). At other times, an application for a grant in respect of the previous month will have to be made no later than by the 15th day of the next month. Information on what specific documents are required to be submitted and how they should be completed is available on the Employment Services’ website.

Paying salaries where grants have been rejected:

During a quarantine, any salaries should be paid in the usual manner (as laid down in Article 146(1) of the Labour Code, the employment contract or the regulations of the employment law). The fact that part of the salary costs may be reimbursed to the employer does not invalidate the employer’s duty to make proper settlement with the employee. In other words, an application for and/or a pending grant is not a reason for delaying any salaries due to the employees for their work and/or lay-off (furlough leave). Furthermore, it is not fully clear when the grants will reach employers. Where it is objectively impossible to settle the accounts with an employee, the settlement arrangements should be changed either by a written agreement with the employee (where the payment procedure is established in the employment contract) or by amending the local legislation (where the payment procedure is provided in such local legislation). Otherwise, where a payment is delayed, there may be an issue of the penalties to be paid to the employee. In any case, when making an application for a grant, at least some of the salary (10% or 30% accordingly) must be paid for last month’s lay-off (furlough leave), and this should be confirmed in the referral to be submitted to the Employment Services.

It should be noted that the detailed procedure and arrangements for a grant, payment deadlines and other issues have been outlined in an implementing piece of legislation, i.e. the schedule of procedures passed (amended) by the Director of the Employment Services, which may be accessed via this link. The most recent amendments to the schedule of procedures have been effective since 15 April 2020. Additionally, the said procedure and arrangements may be accessed on the Employment Services’ website.

We keep a close eye on the legislative amendments, and we are here to lend you a helping hand.

Aušra Maliauskaitė-Embrektė, Partner and Head of the Labour and Company Law Practice

Artūras Tukleris, Senior Associate and expert in labour law

Laura Tunkevičiūtė, Associate

Dominykas Sereika, Junior Associate

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