Supreme Court of Lithuania makes first ruling on practical application of dismissal at the employer’s behest

The Labour Code, which entered into force 3 years ago, established a new basis in Lithuanian labour law for dismissal at the will of the employer by notifying the employee three working days in advance and paying a severance pay in the amount of 6 months’ average salary. This provision has raised many questions in practice, which have been interpreted differently by both lawyers and courts.

The answers to most of these questions were provided by the Supreme Court of Lithuania^[i], which for the first time examined the case in cassation regarding this new ground for termination of employment.

In the case in question, it was found that the employee had been dismissed for her behaviour, which created tension between the company’s employees and had a negative impact on the working environment. The manager and colleagues described the laid-off employee as needing excessive admiration, selfish, arrogant personality, unwillingly accepting the given tasks, making negative comments about the work of other employees or about clients, and using profanity towards other employees, which led to the division of the team.

The dismissal of the employee on the basis of Article 59 of the Labour Code was declared lawful by the Court in the case in question. At the same time, the Court has provided a number of important clarifications that have answered the questions that have arisen in practice so far.

The Supreme Court of Lithuania, on the one hand, reiterated the interpretations of the lower courts that, according to Article 59 of the Labour Code, employers have the flexibility to terminate the employment contract and to decide more broadly on the termination of the employment relationship. At the same time, the Supreme Court of Lithuania examined in detail and commented on the procedural and other requirements for dismissal on the basis of this article.

The key interpretations of the Supreme Court of Lithuania regarding Article 59 of the Labour Code

An employment contract may be terminated on this basis on the initiative of the employer, expressed in accordance with the procedure established in Article 64 of the Labour Code.

• The employer must grant the employee a written notice of termination of the employment contract, stating the specific reason for the termination of the employment contract, the legal norm (Article 59 of the Labour Code) and the date of termination of the employment relationship.
• Termination of the employment contract may not be based on a reason other than that specified in the notice. If the reason for termination of employment specified in the notice has disappeared or was changed, the employer should again give notice to the employee if the dismissal procedure is intended to be continued.

There must be a reason that should meet the following requirements.

• The reason may be related to the employee’s personality, their conduct at work, their qualifications, their employer’s situation and other circumstances, the list of which is not exhaustive in principle.
• The employer should choose a reason in a particular case at their discretion, but the reason must be real (i.e. not implied and not artificially created)
• The reason may be one or more, but it must be lawful and sufficient to determine the need for a particular employer to terminate the employment contract.
• Dismissal on the basis of Article 59 of the Labour Code cannot be based on the fact that the employee’s job becomes redundant for the employer, that the employee does not achieve the agreed performance results according to the result improvement plan, that the employee refuses to work when the compulsory or other provisions of the employment contract are changed, that the employee does not agree with the continuity of the employment relationship in the event of a transfer of the business or part of it, as well as the fact that the employer is being liquidated.
•  Dismissal cannot be based on discriminatory grounds.

Upon expiry of the notice period, the employer must duly formalize the termination of the employment contract.

The employer must make a decision in writing stating the grounds for the termination of the employment contract, the legal norm (Article 59 of the Labour Code) and the date of termination of the employment relationship.

Upon termination of the employment contract on the grounds specified in Article 59(1) of the Labour Code and when the employee initiates an employment dispute regarding the legality of the dismissal, the employer must prove the legality of the dismissal.

Correspondingly, the body settling a dispute must examine and determine whether the reason on which the employer based the termination of the employment contract was real and lawful, and must assess whether the employer had grounds for concluding that there was a sufficient reason for the termination of the employment contract. The actions and decisions of the employer in a concrete situation should be assessed based on the behaviour that is prudent, careful, attentive, i.e. a standard for the behaviour of a rational, intelligent person (Latin bonus pater familias) in an adequate situation.

Therefore, in cases where the termination of the employment contract was based on the employee’s illegal or improper conduct, the burden of proof lies with the employer.

It can be concluded from the case under discussion that although Article 59 of the Labour Code provides for a liberal ground for termination of the employment contract, the employer’s right to apply this ground for dismissal is not absolute.

The employer must follow an established procedure and base the dismissal on a legitimate, non-discriminatory, real and sufficient reason and prove these circumstances in the event of a dispute. The reason for the dismissal does not have to be objectively relevant, but it should lead to the conclusion that the employer had sufficient grounds to conclude that there was a sufficient reason to terminate the employment contract.

The authors of the comment – Aušra Maliauskaitė-Embrektė, Partner of the law firm Glimstedt, head of Company and Commercial and Employment law practice groups, and Artūras Tukleris, Senior Associate of the law firm Glimstedt, labour law expert