Establishing compliant employment relationships in Latvia requires a thorough understanding of the country's Labour Law. A properly drafted employment agreement is the cornerstone of this relationship, clearly defining the rights and obligations of both the employer and the employee. Ensuring that these contracts adhere to local regulations is crucial for smooth operations and avoiding potential legal disputes.
Latvian law mandates specific requirements for employment agreements, covering everything from the type of contract used to essential clauses that must be included. Navigating these requirements is key for companies hiring in the country, whether they are establishing a local entity or utilizing an Employer of Record service.
Types of Employment Agreements
In Latvia, employment agreements are primarily categorized based on their duration. The Labour Law favors indefinite-term contracts as the standard form of employment. Fixed-term contracts are permitted only under specific circumstances defined by law.
| Contract Type | Description | Conditions for Use |
|---|---|---|
| Indefinite | Employment for an unspecified period, considered the standard contract type. | Applies to all employment relationships unless a fixed-term contract is explicitly justified by law. |
| Fixed-Term | Employment for a specified period or the duration of a specific task. | Permitted only for temporary work, seasonal work, replacement of a temporarily absent employee, or specific projects with a defined completion date. Cannot exceed 5 years. |
Fixed-term contracts cannot be used to circumvent the rights associated with indefinite employment. If a fixed-term contract is concluded without legal justification or if the employee continues working after the term expires without objection from the employer, it is generally considered an indefinite contract.
Essential Clauses
Latvian Labour Law requires that an employment agreement be in writing and include several mandatory clauses to be legally valid and comprehensive. These clauses ensure clarity on the fundamental terms of employment.
Mandatory information to be included:
- Identification of the employer and the employee (names, registration numbers/personal codes).
- Date of commencement of employment.
- Place of work (specific location or indication that work is mobile).
- Employee's position, profession, or type of work.
- Amount of remuneration (salary, bonuses, allowances) and payment schedule.
- Working time (daily or weekly working hours).
- Duration of annual paid leave.
- Term of notice for termination of the agreement.
- Reference to the collective agreement, if applicable.
- Duration of the fixed-term contract, if applicable.
Any changes to these essential terms must be agreed upon in writing by both parties.
Probationary Period
A probationary period can be included in the employment agreement to assess the employee's suitability for the position and for the employee to evaluate the work and the employer.
- The maximum duration of a probationary period is three months.
- A shorter period can be agreed upon by the parties.
- The probationary period must be explicitly stated in the employment agreement.
- During the probationary period, both the employer and the employee have the right to terminate the agreement with three days' written notice, without stating a specific reason.
- If the employee continues working after the probationary period expires without the employer expressing dissatisfaction, the employee is considered to have successfully completed the probation.
The probationary period cannot be extended beyond the initial agreed term (maximum three months).
Confidentiality and Non-Compete Clauses
Employers often seek to protect their business interests through confidentiality and non-compete clauses.
- Confidentiality Clauses: Agreements on the protection of confidential information and trade secrets are generally enforceable in Latvia. These clauses typically define what constitutes confidential information and the employee's obligations regarding its use and disclosure during and after employment.
- Non-Compete Clauses: Agreements restricting an employee from working for a competitor or starting a competing business after the termination of employment are permissible but subject to strict conditions for enforceability. A non-compete agreement must:
- Be in writing.
- Specify the scope of the restriction (type of activity, geographical area).
- Have a reasonable duration (typically limited, often up to two years).
- Provide adequate compensation to the employee for the duration of the restriction. Without reasonable compensation, the non-compete clause is unlikely to be enforceable.
The enforceability of a non-compete clause is assessed based on its reasonableness and whether it unduly restricts the employee's ability to earn a living, balanced against the employer's legitimate business interests.
Contract Modification and Termination
Modifying the terms of an employment agreement in Latvia generally requires the mutual written consent of both the employer and the employee. Unilateral changes by the employer are typically not permitted unless specifically allowed by law or the original contract under defined circumstances (e.g., changes due to organizational restructuring, following specific legal procedures).
Termination of an employment agreement can occur based on several grounds:
- Mutual Agreement: The employer and employee agree in writing to terminate the contract.
- Employee's Initiative: The employee resigns, usually with a notice period (typically one month, unless otherwise agreed or specified by law).
- Employer's Initiative: The employer can terminate the contract only based on specific grounds listed in the Labour Law, such as:
- Liquidation of the employer.
- Reduction of the number of employees (redundancy).
- Employee's inability to perform the agreed work due to health reasons.
- Employee's insufficient professional competence.
- Employee's violation of work discipline or legal obligations.
- Employee's violation of the employment agreement or internal rules.
- Other Grounds: Termination upon expiry of a fixed-term contract, or other specific circumstances defined by law.
Specific procedures, including written notice periods (which vary depending on the termination ground and length of service) and potential severance pay obligations (especially in cases of redundancy), must be strictly followed by the employer when terminating an agreement. Failure to adhere to these procedures can result in the termination being deemed unlawful.
