In business practice, situations often arise where employment relationships end not by mutual agreement but at the employer’s initiative. We frequently receive inquiries from clients regarding the proper way to terminate an employment contract when an employee’s job function becomes redundant.
Article 57 of the Labour Code of the Republic of Lithuania (hereinafter – LC) outlines the grounds that allow the employer to initiate the termination of an employment contract without employee fault. This article also details situations where the employment relationship is terminated due to the redundant nature of the employee’s function, which results from changes in the employer’s operations or optimization.
Below, we will discuss the main requirements of this process and the key aspects that the employer should pay attention to.
Termination of Employment Contracts Due to Redundant Functions: Requirements and Case Law
According to Part 2 of Article 57 of the LC, changes in work organization or other reasons related to the employer’s activities can serve as grounds for terminating an employment contract only when they are real and lead to the redundancy of a specific employee’s or group of employees’ job functions. In this case, the employment contract can only be terminated if, from the notice period to its end, there are no vacant positions that the employee could be transferred to with their consent.
Supreme Court of Lithuania (hereinafter – LAT) Case Law:
The LAT assesses the reality of the grounds for dismissal and considers whether they have been artificially created by looking at the following requirements:
| Requirements | Explanation |
| Real reason | The employer must prove that the functions became redundant due to changes in work organization or other objective reasons. |
| Causal link | There must be a direct connection between the stated reason and the employee’s functions becoming unnecessary. |
LAT case law also emphasizes that it is necessary to evaluate whether the reasons for dismissal are fictitious. This means that the employer cannot artificially create situations that would justify terminating the employment contract.
| Examples of when reasons may be considered fictitious: |
| If an employee is dismissed under Article 57 of the LC and later a new employee is hired to perform the same functions. |
| If a new position is created in the company, whose functions match those of the dismissed employee. |
Priority Right to Stay in Employment
When positions are eliminated, and multiple employees perform the same job functions, the LC (Article 57) establishes an employee selection procedure to ensure fairness and objectivity in the process of terminating employment relationships. This process helps determine which employees have the right to remain employed based on legal grounds and criteria set by the employer.
Priority rights are first granted to employees who meet the priorities specified in the law. This includes employees who raise children or care for dependents requiring special care, employees with long service, and those nearing retirement age. Priority may also be granted to union representatives or employees whose rights are established in a collective agreement.
Additionally, the employer may establish criteria tailored to the company’s specific needs. This may include knowledge of foreign languages, specific job skills, or longer service within the company.
The selection process begins by coordinating the criteria with the works council or trade union. A selection committee is then formed, with a representative of the employees participating. The committee evaluates the employees’ situation based on the established criteria and submits recommendations to the employer. The employer makes the final decision, taking into account the committee’s suggestions.
Clearly established selection procedures help ensure fairness and protect employees’ interests, thus preventing potential disputes or discrimination.
Selection Procedure in Employment Relationships Involving Foreign Elements
Termination of employment due to job redundancy caused by reorganization or other employer-related reasons also raises specific issues, when foreign elements are involved in the employment relationship. When determining the applicability of the selection process, we recommend considering the following aspects:
| Applicable Law | Whether the employment contract specifies the application of Lithuanian law or foreign labour regulations (except for mandatory legal provisions). |
| Work Location | Whether the employee works within Lithuanian territory and how closely their employment relationship is connected to Lithuania. |
The selection process applies only to employees whose employment relationships are closely linked to Lithuania. Employees working abroad who are not subject to Lithuanian labor law regulations are not included in the selection process, even if they work for the same company or its subsidiary.
Conclusion
The termination process due to job redundancy must be carried out according to a clearly defined plan while adhering to all the above-mentioned conditions to minimize the risk of potential disputes with employees.
Leinonen’s legal team is always ready to provide personalized legal consultation on this or other employment termination matters and to prepare the necessary documents. You can contact us via email at lithuania.legal@leinonen.eu.
