Protection of the interests of employees during the reorganisation of an enterprise

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An employment contract is one of the main ways to implement a human right to work. Therefore it is extremely important to establish legal safeguards, which help to maintain the stability of the employment relations. Often common offenses are noticed during the reorganisation of an enterprise.

 

Article 138 of the Lithuanian Labour Code prohibits the termination of the employment contract during the reorganisation of the enterprise or during the transfer of business. The reorganisation means that legal person‘s rights, obligations and property are assigned to other legal person, which becomes a successor to those rights, obligations and property of reorganised legal person. As a result, it must be formalized the succession of the employment relations, preserved the continuity of service, other guarantees and privileges provided by law for the employees.

 

It should be mentioned that employer is not required to give written notice to employees about the reorganisation of legal person. In accordance with Paragraphes 4 and 10 of 47 Article of the Lithuanian Labour Code, prior to taking a decision on the reorganisation of the enterprise, the employer must inform the employees’ representatives and hold consultations with them about the reasons for such a decision, the legal, economic and social implications for the employees, as well as about any measures envisaged to avoid or mitigate the expected consequences. In the absence of employees' representatives in the undertaking, the employer must inform the employees in advance directly or at a general staff meeting about the date of the execution of decisions taken, the reasons for such decisions, their legal, economic and social implications, as well as about any measures envisaged in respect of employees.

 

Secondly, the employees of reorganised legal person are not required to give written consent for the succession of the employment relations in legal person, which becomes a successor to rights and obligations of reorganised legal person.

 

Thirdly, it is not required a written agreement between employers concerning the transfer of employees to another workplace. A new employer does not have a right to refuse the rights and obligations, which arise from the employment relations. The latter relations continue automatically.

 

It is important to distinguish the reorganisation of the enterprise of the restructuring of the workplace. The latter could be regarded as a valid reason for termination of the employment contract (Paragraph 2 Article 129 of the Lithuanian Labour Code). This requires two conditions: (1) the competent body must make a decision of the restructuring of the workplace and this decision should be realistic and implemented; (2) concerning the restructuring of the workplace the employee is unfit to perform his job functions, because they have been removed or because they might be performed by less employees. It is also relevant to determine whether the restructuring of the workplace is not fictitious.

 

According to the Lithuanian Labour Code and case law, it could be concluded that just the reorganisation of legal person could not affect the succession of the employment relations and could not be a legitimate reason for termination of the employment contracts.


 

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Attorney at Law Mindaugas Gedeikis
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