Establishing compliant employment relationships in Lithuania requires a thorough understanding of the country's Labor Code and the specific requirements for employment agreements. A well-drafted contract is fundamental, outlining the rights and obligations of both the employer and the employee, and ensuring adherence to local regulations regarding working conditions, compensation, and termination procedures.
Navigating these legal requirements is crucial for businesses operating or employing individuals in Lithuania, whether they are local entities or foreign companies hiring remotely. Ensuring each employment agreement meets the mandatory criteria set forth by Lithuanian law is the first step towards building a secure and legally sound workforce.
Types of Employment Agreements
Lithuanian law primarily distinguishes between two main types of employment agreements: indefinite-term and fixed-term. The indefinite-term contract is the standard form, implying continuous employment without a predetermined end date. Fixed-term contracts are the exception and can only be concluded under specific circumstances where the nature of the work or its performance conditions justify a temporary relationship.
Other specific types of employment agreements exist for particular situations, such as seasonal work, project-based work, or temporary agency work, each with its own set of regulations and limitations.
| Agreement Type | Description | Typical Use Cases |
|---|---|---|
| Indefinite-Term | Standard contract without a specified end date. | Permanent positions, ongoing roles within a company. |
| Fixed-Term | Contract with a predetermined end date or duration. | Project-based work, temporary increase in workload, replacement of a temporarily absent employee, seasonal work. |
| Seasonal | Specific type of fixed-term contract for work dependent on natural conditions. | Agriculture, tourism, certain construction activities. |
| Project-Based | Fixed-term contract for a specific project with a defined outcome. | R&D projects, specific consulting engagements. |
| Temporary Agency | Employee is formally employed by an agency and assigned to a client company. | Covering short-term staffing needs, specialized skills for limited periods. |
Fixed-term contracts for permanent roles are generally prohibited unless justified by the specific nature of the work or its conditions. The maximum duration for a fixed-term contract is typically limited, and repeated fixed-term contracts for the same role can lead to the contract being considered indefinite.
Essential Clauses in Employment Agreements
Lithuanian law mandates the inclusion of several key clauses in every employment agreement to ensure clarity and legal compliance. These essential terms must be clearly defined in the written contract signed by both parties.
| Clause | Requirement |
|---|---|
| Parties | Full legal names and details of both the employer and the employee. |
| Start Date | The date when the employment relationship commences. |
| Workplace | The specific location where the employee will perform their duties. Can be a fixed address or remote work. |
| Job Function/Position | A clear description of the employee's role, duties, and responsibilities. |
| Remuneration | Specification of the base salary, any bonuses, allowances, and the payment schedule. |
| Working Time | Details on standard working hours, work schedule, and any provisions for overtime. |
| Duration | Whether the contract is indefinite or fixed-term (and its end date/condition if fixed-term). |
| Annual Leave | Entitlement to annual paid leave as per legal minimums. |
| Social Insurance | Confirmation of the employer's obligation to pay social insurance contributions. |
| Confidentiality | Basic obligation to protect employer's confidential information (more detailed clauses can be added). |
Beyond these mandatory clauses, contracts often include provisions on probationary periods, intellectual property rights, training, and specific company policies.
Probationary Period
A probationary period can be agreed upon in the employment contract to assess the employee's suitability for the role and the employer's suitability for the employee. The maximum duration for a probationary period is generally three months. For certain positions requiring specific qualifications or involving increased material responsibility, a longer period might be permissible under specific conditions, but the standard remains three months.
During the probationary period, both the employer and the employee have the right to terminate the employment agreement with shorter notice than usual. Typically, a three working day notice is required to terminate the contract during probation, unless the contract specifies a longer notice period (not exceeding the standard notice period for termination without fault). Termination during probation does not require stating a specific reason, but it cannot be discriminatory or based on unlawful grounds.
Confidentiality and Non-Compete Clauses
Confidentiality clauses are standard in Lithuanian employment agreements and are generally enforceable. They obligate the employee to protect the employer's confidential information and trade secrets both during and after employment. The scope and duration of post-employment confidentiality obligations should be reasonable.
Non-compete clauses, which restrict an employee from working for a competitor or starting a competing business after leaving the company, are subject to stricter requirements to be enforceable in Lithuania. A post-termination non-compete agreement must:
- Be in writing.
- Specify the scope of the restriction (e.g., geographical area, specific activities).
- Have a limited duration (typically not exceeding two years).
- Provide for adequate compensation to the employee for the duration of the restriction. Without compensation, a post-termination non-compete clause is generally not enforceable.
The compensation amount must be reasonable and is often a percentage of the employee's average salary. The enforceability of such clauses depends heavily on meeting all these legal requirements and the reasonableness of the terms.
Contract Modification and Termination
Employment agreements in Lithuania can be modified only by mutual written agreement between the employer and the employee. Any changes to the essential terms of the contract, such as salary, working hours, or job function, require a formal amendment signed by both parties. Unilateral changes by the employer are generally not permitted unless specifically allowed by law under certain circumstances (e.g., changes due to production necessity, but even then, specific procedures and potential compensation apply).
Termination of an employment agreement can occur under various grounds stipulated in the Labor Code, including:
- Mutual Agreement: Both parties agree in writing to terminate the contract.
- Employee's Initiative: The employee resigns, typically requiring a notice period (usually 20 working days, unless a shorter period is agreed or the employee has a valid reason for immediate termination).
- Employer's Initiative (Without Employee's Fault): Termination due to reasons such as redundancy, changes in work organization, or the employee's inability to perform the work due to health reasons. This requires specific procedures, notice periods (varying based on seniority, typically 1 to 4 months), and often severance pay.
- Employer's Initiative (With Employee's Fault): Termination due to the employee's serious breach of work duties or repeated minor breaches. This requires investigation and adherence to disciplinary procedures.
- Expiry of Fixed Term: The contract automatically terminates on the agreed end date.
- Other Grounds: Including circumstances beyond the parties' control, court decisions, etc.
Notice periods and severance pay obligations vary significantly depending on the grounds for termination and the employee's length of service. Strict adherence to the legal procedures for termination is essential to avoid potential disputes and legal challenges.
