Authored by employment law expert, lawyer Brigida Bacienė, and associate Domas Adolfas Gylys.
Authored by employment law expert, lawyer Brigida Bacienė, and associate Domas Adolfas Gylys.
In 2025, the Supreme Court of Lithuania (LAT) issued rulings providing significant interpretations of the Labour Code norms, relevant to both employers and employees in their daily practice. The most important rulings are presented below.
Legal consequences of the end of a fixed-term tenure for a unit head
In its ruling of 27 March 2025, No. e3K-3-70-684/2025, the LAT examined the issue regarding the consequences of the expiry of the term of office (tenure) for a head of a unit within a municipal public healthcare institution.
The case addressed whether, upon the expiry of a five-year tenure to which an employee was appointed via a public competition, the employment relationship with the same employer terminates automatically if the employee held other, open-ended (indefinite) positions prior to the appointment as head.
The LAT noted that although heads of units in public healthcare institutions are appointed for a fixed tenure, the end of the management period alone does not automatically signify the termination of all previously existing employment relations. The tenure of a head and the employment relationship must be assessed systemically, taking into account the provisions of the Labour Code that ensure the continuity of employment and the protection of employee rights.
The Court emphasised that in cases where the employee held an open-ended position prior to the public competition, the content of the parties’ agreement regarding the amendment of the employment contract is of essential importance. It must be determined whether the employment contract was amended temporarily – only for the period of management – or permanently. The mere fact that an employee is appointed to a managerial position for a fixed tenure does not constitute grounds to automatically assume that the previous position was lost definitively.
The LAT also stressed that when deciding on the nature of the amendment to the employment contract, one cannot limit the assessment to formal documents or a change in the job title. The true will of the parties, their conduct, the evolution of the employment relationship, and the totality of other significant circumstances must be evaluated.
Furthermore, it was noted that the specificities of the termination of employment for managerial staff established in the Labour Code cannot be interpreted in a way that would negate the employee’s right to continuity of employment when a legal basis for it exists. Following the expiry of a head’s tenure, the employee’s right to return to their previously held position cannot be dismissed without evaluating all circumstances related to the employment relationship.
Significance for practice
With this ruling, the LAT established a clear practice that the end of a fixed-term tenure for a head is not, in itself, sufficient grounds to consider the employment relationship terminated. In each case, it is mandatory to assess whether the amendment of the employment contract was temporary and whether the employee retains the right to continue the employment relationship under the previous conditions after the management period ends.
Breach of conflict of interest as grounds for termination of an employment contract
In its ruling of 10 April 2025, No. e3K-3-49-1120/2025, the LAT addressed the employee’s duty to avoid conflicts of interest and the employer’s right to terminate the employment contract for a gross breach of employment duties when the employee, before the termination of the employment relationship, begins activities in a competing company.
In this case, the employee contested the lawfulness of the termination, arguing that no non-compete agreement had been concluded with the employer; therefore, she had the right to freely choose her employer and work for any company, including a competitor. According to the employee, the mere fact of employment at a competing company could not be considered a breach of employment duties.
The LAT rejected these arguments and emphasised that the situation must be examined through the employee’s duty to avoid conflicts of interest and to maintain loyalty to the employer. The Court explained that a conflict of interest in employment relations is understood as a situation where the employee’s personal interests, connections, or activities may conflict with the interests of the employer. To establish such a situation, it is not necessary to prove actual damage to the employer – an objective threat to their interests is sufficient.
The Court highlighted that the duty to avoid conflicts of interest covers both actual and potential conflicts and can be detailed in the employment contract or internal legal acts. This is particularly important for managerial staff who have access to confidential information. In the case at hand, the employee, while holding a managerial position and possessing significant knowledge, began working for a competitor before the existing employment relationship had ended; the LAT recognised that this was incompatible with the duty of loyalty and posed an objective threat to the employer’s interests.
Significance for practice
The LAT clearly confirmed that the absence of a non-compete agreement does not, in itself, grant the right to act contrary to the employer’s interests. The deliberate creation of a conflict of interest, even in the absence of a contractual restriction, can be considered a gross breach of employment duties and constitute grounds for termination of the employment contract without the need to prove actual damage.
Prohibition of discrimination in determining remuneration
In its ruling of 21 May 2025, No. 3K-3-93-1120/2025, the LAT examined a dispute regarding unequal remuneration following a reorganisation.
The LAT noted that a difference in salary alone does not prove discrimination; what matters is whether the unequal pay is based on objective reasons and whether the employer takes consistent actions to equalise conditions in the long term.
In the case at hand, it was established that the differences in remuneration arose during a reorganisation, the employees were properly informed about the changes, and they agreed to continue the employment relationship under the same conditions. The employer sought to gradually equalise the remuneration by applying temporary compensatory bonuses. The LAT recognised that temporarily unequal pay can be compatible with the prohibition of discrimination if it pursues a legitimate aim and is proportionate.
Significance for practice
The LAT confirmed that temporarily unequal remuneration during a reorganisation does not constitute discrimination if the employer acts consistently, informs the employees, and strives for the long-term equalisation of salaries.
Termination of an employment contract due to surplus functions
In its ruling of 5 June 2025, No. e3K-3-95-1249/2025, the LAT assessed whether an employer had the right to terminate employment contracts due to surplus functions during changes in work organisation, and whether such a situation could be considered a “disguised dismissal” due to the employees’ refusal to accept a proposed salary reduction.
The case established that the employer first proposed a salary reduction, the employee disagreed, and subsequently, the work functions were restructured, some became surplus, and the employee was warned about the termination of the employment contract.
The LAT clarified that the grounds for termination established in Article 57, Paragraph 1, Point 1 of the Labour Code apply in cases where the employer realistically changes the work organisation and, as a result, the need for a specific work function disappears. Such decisions must be objective, justified, and non-formal in nature. The mere circumstance that employees do not agree to work under amended remuneration conditions does not, in itself, negate the employer’s right to cease a certain activity or part thereof if this results in the elimination of the respective positions.
The Court noted that the guarantee in Article 45, Paragraph 2 of the Labour Code, which prohibits dismissal for refusing to work for a lower salary, cannot be interpreted as an absolute prohibition on changing the business model. The LAT also explained that the mere purchasing of services or the discontinuation of an activity does not constitute a transfer of business under Article 51 of the Labour Code.
Significance for practice
The LAT confirmed that the termination of an employment contract is determined not by the employees’ disagreement with proposed working conditions, but by real changes in work organisation that render functions redundant. The employer’s decisions can be lawful even after a proposal for a salary reduction, provided that the emergence of surplus functions is not formal or intended to circumvent the guarantees of Article 45, Paragraph 2.
Establishing the fact of the conclusion of an employment contract
In its ruling of 16 June 2025, No. 3K-3-108-1120/2025, the LAT decided whether an employer’s actions related to the selection of a prospective employee and the preparation of documents for a residence permit in Lithuania confirm the conclusion of an employment contract.
The cassation court noted that an employment contract can be established even without a written agreement; however, mere communication, negotiation of terms, or preparatory actions are insufficient. It is crucial whether the parties actually agreed on the essential working conditions and whether such an agreement was final and no longer subject to additional checks. Pre-contractual actions, including applications to the Migration Department, are considered preparations for employment, not the commencement of an employment relationship. The employer has the right to verify the employee’s suitability and refuse to conclude the contract if the facts do not meet the requirements.
Significance for practice
The LAT confirmed that pre-contractual actions do not, in themselves, constitute an employment relationship. An employment contract arises only when there is a final and clear agreement between the parties on essential conditions, regardless of additional checks or the employer’s discretion in assessing the employee’s suitability. Until such an agreement exists, the employer may terminate the selection process without violating the law.
Application of double remuneration for work on rest days
In its ruling of 25 September 2025, No. e3K-3-128-1120/2025, the LAT examined when an employee is entitled to no less than double remuneration for work on rest days not according to the work schedule, and how to evaluate the initiative for changing the work schedule.
The Court noted that the obligation to pay double remuneration established in Article 144 of the Labour Code applies only when work on a rest day is performed by the employer’s decision or in their interests, regardless of whether the working time was exceeded. A mere deviation from the schedule does not, in itself, create a right to double pay. The essential criterion is the initiative for changing the work schedule: if the change is initiated by the employee themselves for their own interests, the protective provisions do not apply. The burden of proof lies with the employer to show that the schedule was changed at the employee’s request, and a formal failure to follow procedures does not grant an automatic right to double remuneration.
Significance for practice
The LAT confirmed that the decisive factor is on whose initiative the work was performed on a rest day. Employers must clearly record the motives for schedule changes, and employees cannot expect double pay based solely on a formal deviation from the schedule if they initiated the change themselves.
