There is no existing employee board-level representation in Lithuania and the transposition of the directive evoked little interest.
There is no existing board-level representation for employees in companies in Lithuania. The draft legislation on the transposition of the directive on employee involvement in European companies was presented to the Tripartite Council (LRTT), in which both unions and employers are represented, where a text was agreed in January 2005 before being sent back to the government. Although there was some comment on the process in specialist newsletters, there was no public debate.
Directive was transposed by law in May 2005 more than seven months after the October 2004 deadline
The directive on employee involvement in European companies was transposed through the following legislation passed on 12 May 2005: Law of the Republic of Lithuania on the involvement of employees in decision making in European companies (Lietuvos Respublikos Įstatymas dėl darbuotojų dalyvavimo priimant sprendimus Europos bendrovėse).
Separate legislation adapting Lithuanian company legislation to the Regulation on European companies was passed in April 2004.
Special negotiating body (SNB)
Lithuanian SNB members are in the first instance chosen by the existing employee representatives – either unions or, if there are no unions, works councils. Only if there are no employee representatives or they cannot agree, are the SNB members chosen by a general meeting of all the employees. Similar arrangements apply where several Lithuanian companies are involved, if there are no existing employee representatives or they cannot agree, although this time a delegate conference elects the SNB members.
The legislation states, as a starting point, that Lithuanian members of the SNB should be appointed by employees or their representatives and that, if there are several companies and/or workplaces involved in Lithuania, the employees or their representatives should reach a joint agreement on Lithuanian SNB members. Employee representatives in Lithuania are either the unions at the workplace or – if there are no unions – a works council elected by all employees.
The legislation implicitly gives the employee representatives the first chance to choose the SNB members. It is only if the employee representatives fail to appoint SNB members within 30 days of being informed of management’s intention to set up a European company, that Lithuanian SNB members are elected through a secret ballot at a general meeting of all employees. This general meeting may be called by any employee representative. Half of the employees must be present for the decision of the general meeting to be valid, although this quorum is reduced to a quarter at a second meeting if too few attend the first one.
The same procedure also applies if there are no employee representatives, when Lithuanian SNB members are again elected at a general meeting of all employees. However, in this case the general meeting is called by management.
If there are several companies or workplaces involved and they all have workplace representatives, then their workplace representatives should agree on the Lithuanian SNB. However, if they cannot agree, or there are some companies/workplaces without employee representatives, then a delegate conference is called by management, with each delegate representing 10 employees. This delegate conference then elects the Lithuanian SNB members in a secret ballot. Two-thirds of the delegates must be present for the decision of the conference to be valid, although this quorum is reduced to a half if the first conference is too small (Article 11).
The presence of external union representatives on the SNB is neither specifically prohibited nor specifically permitted by the Lithuanian legislation.
The section of the Lithuanian legislation on the choice of the Lithuanian members of the SNB does not refer to the issue as to whether or not they may be external union representatives (Article 11).
Funding limited to a single expert.
The section of the Lithuanian legislation on funding limits the expenses covered by the participating companies to “only one expert”. It also states that the costs of travel, insurance, accommodation and subsistence of SNB members, and “the procedure for its reimbursement” should be set by national rules (Article 14).
Standard rules under the fallback procedure
Lithuanian members of the SE representative body are chosen in the same way as Lithuanian members of the SNB – by the existing employee representatives, with elections – either at a general meeting or a delegate conference – only if there are no existing employee representatives, or they cannot agree.
Lithuanian members of the SE representative body, known in the Lithuanian legislation as the works council of the European Company (Europos bendrovės darbo tarybos) are chosen in the same way as Lithuanian members of the SNB. The consequence of this is that in the first instance they are chosen by the existing employee representatives – either unions or, if there are no unions, works councils. Only if there are no employee representatives, or they cannot agree, are the representative body members chosen by a general meeting of all the employees. Similar arrangements apply where several Lithuanian companies are involved, if there are no existing employee representatives or they cannot agree, although this time a delegate conference elects the members of the representative body (see section on SNB). As with the SNB members, the legislation does not state that members of the representative body must be employees of the company (Article 21).
The company should bear the costs of the representative body, including one expert.
The company is obliged to bear the costs of the representative body. However, as with the SNB, the Lithuanian legislation states that the amount of the expenditure relating to travel, insurance, accommodation and subsistence of representative body members should be set by national rules, as should the procedure for its reimbursement. The costs to be borne by the company include the expenses of “only one expert”, unless a larger number has been agreed (Article 28).
Employee representatives at board level from Lithuania are chosen in the same way as Lithuanian members of the SE representative body.
The Lithuanian legislation states simply that the same rules which apply for the choice of Lithuanian representative body members also apply to the choice of Lithuanian employee board-level representatives under the fallback procedure (see section on national seats on SE representative body). They are chosen in the first instance by the existing employee representatives and are elected, either by all employees or by delegates of all employees, only if there are no existing employee representatives, or they cannot agree (Article 31).
Misuse of procedures and structural change
There should be new negotiations if changes shortly after an SE has been established show that the purpose of the SE was to deprive employees of their rights.
The Lithuanian legislation requires that there should be new negotiations if “shortly after the establishment of a European company, essential changes take place … which clearly show that the purpose of the establishment of the European company was to deprive the employees of the right to be involved in decision making”. Essential changes are defined as changes in the number of employees or the way the European company is incorporated “which would have extended the rights of the employees to be involved in the management of the company”, if they had happened beforehand. Shortly is not defined more precisely (Article 6).
The Lithuanian legislation does not provide for renegotiation after structural change, other than shortly after the establishment of the European company, where structural changes are intended to deprive employees of their rights.
There is no automatic right to renegotiate the agreement if there are changes in the structure of the SE, except where “shortly after the establishment” of the company, it is clear that the procedures were misused. This means where it is clear that the purpose of establishing the SE was to deprive employees of their rights to be involved in company decision making.
Unions and employers were consulted on the introduction of the legislation and they were broadly supportive of the proposals.
Unions and employers were involved in the discussions on the transposition of the directive on employee involvement in European companies into Lithuanian law as a draft of the legislation was submitted to the tripartite council (LRTT). There were no major clashes on the issue with both sides broadly supporting the proposals.
L. Fulton (2008) Anchoring the European Company in National Law - Country Overviews (online publication, prepared for worker-participation.eu)
Dr Tomas Davulis (Vilnius University Law Faculty)
On 12 May, the Lithuanian Parliament adopted the transposition law on workers' involvement in European Companies (SE). The law came into effect from 28 May 2005. The transposition of the SE Regulation and of the SE Directive took separate paths. The Ministry of the Economy, which is usually responsible for issues of company law, was designated to prepare the necessary legal acts for transposition of the SE Regulation, while the Ministry of Social Security and Labour was made responsible for transposition of the SE Directive on workers’ involvement. Preparation of the necessary national legislation was not coordinated and the two acts do not seem connected.
The Parliament (Seimas) adopted the Law on SEs on 29 April 2004. This law concerns the Regulation on the SE Statute only and contains very few articles which deal explicitly with European Companies from an administrative point of view. The separate Law on employee involvement in SEs should have been adopted before October 2004 but the deadline was not met.
The first draft of the Law on employee involvement in European Companies was prepared by the Ministry of Social Security and Labour in April 2004, agreed with other Ministries and the subject of consultation with the social partners, who expressed no dissent. However, before sending the draft law to the government and Parliament for adoption, the Ministry asked for academic legal commentary in September 2004. This turned up many technical obstacles and the Ministry prepared a second draft, starting another consultation process in December 2004. Due to disagreements with the Ministry of Finance regarding the regulations on the financing of SNBs and European Works Councils, as well as the reimbursement of travel and living costs, the Ministry of Social Security and Labour could submit the draft to the Tripartite Council only after a delay of several months. The Tripartite Council approved the draft on 25 January 2005, as did the government on 9 March 2005 before forwarding it to the Parliament for adoption.
Adoption of the Law on employee involvement in European Companies passed smoothly through the Parliament. The Law was adopted on 12 May 2005 and came into force from 28 May 2005, after promulgation by the President and publication in the State Gazette (Valstybes Zinios).
The law is divided into five titles. Title I contains aims and definitions; Title II deals with setting-up or general provisions on workers’ involvement; Title III deals with negotiation processes; Title IV contains provisions (standard rules) on statutorily established works councils at European Companies; and Title V contains final provisions
The Law on employee involvement in European Companies relied heavily on the rules established by transposition of the EWC Directive in 2004. Both national laws have the same structure, as well as similar definitions, content of established procedures and wording. There are a few exceptions worth mentioning, however.
First, the appointment/election of Lithuanian members of the SNB (mutatis mutandis, members of the works council of a European Company – hereafter, EWC). The SE Law takes the existing principle that Lithuanian members of the SNB shall be appointed by the “workers’ representative” in a given company or establishment (Art. 11 (1) SE Law), and, if there are several companies or establishments operating in Lithuania, by mutual agreement of the “workers’ representatives” of all companies or establishments. According to Art. 19 (1) Labour Code, “workers’ representatives” in an enterprise or establishment shall be, first, the enterprise-level trade union, or, where there is no functioning trade union and if the employee general meeting has not transferred the function of representation to the sectoral-level trade union, a works council elected by secret ballot at the general meeting of employees.
If no agreement is reached among workers’ representatives within 30 days, or one or more companies or establishments have no workers’ representatives in place, the workers’ representatives in other companies lose the competence to appoint their members and all the members of the SNB shall be elected by secret ballot at the conference of the ad hoc elected employees’ representatives (at the conference 10 employees are represented by one delegate) (Art. 11 (3) SE-Law). This novelty seems to constitute an obstacle for workers’ representatives (trade unions or works councils) in expressing their legitimate will and, second, would make it difficult to proceed quickly in forming an SNB or EWC).
Another interesting anomaly, hopefully temporary and merely theoretical, concerns the formal foundation of the whole system of workers’ involvement in the Labour Code. Art. 47 Labour Code contains clear reference to a special law on EWCs with regard to workers’ information and consultation. However, there is as yet no analogous reference to European Companies. Since the Labour Code establishes the principle primus inter pares , rights and obligations of the parties to employment and industrial relations beyond the statutory regulations of the Labour Code may be challenged with regard to their conformity with the Labour Code. This situation is very unlikely, but may give rise to some tensions.
As in the Law on EWCs, in the SE Law the Lithuanian legislator has adopted a rather minimalist approach. It does not provide national, sectoral or regional trade unions, nor their representatives (if they are not a separately functioning trade union in an enterprise), with rights of participation in the setting up or operation of SNBs and EWCs. Furthermore, works councils are limited to consulting one expert. The issue of confidentiality is solved in the same manner as in the EWC Law: the employer has the right to withhold confidential information but the SNB, EWC or its committee have the right to dispute this withholding of information in a court (Art. 7 SE Law).
Art. 8 of the SE Law deals with the protection of the Lithuanian members of SNBs and EWCs. The Article prohibits the dismissal of members of the said bodies on the initiative of the employer without the prior consent of the body by which the employee was appointed (in case of election at a conference, without the prior consent of the Labour Inspectorate). This guarantee is broader than was established for members of the representative body of national workers’ representatives, who are protected only in the case of dismissal with notice (Art. 134 Labour Code). Also, the members enjoy rights to paid leave for meetings of SNBs, EWCs or their committees and to full compensation of expenses. If compensation is not paid, Lithuanian workers may claim compensation directly from their employer (Art. 14, 28 SE Law).
Dr Tomas Davulis (Vilnius University Law Faculty)
The draft Law on Employee Involvement in European Companies was prepared by the Ministry of Social Security and Labour in October 2004. Due to some disagreements with the Ministry of Finance regarding the rules on the financing of SNBs and European Works Councils, as well as the reimbursement of travel and living costs, the Ministry of Social Security and Labour was able to present the draft to the Tripartite Council only after a delay of several months. After the Tripartite Council reached agreement on the draft on 25 January, the Government approved it on 9 March and sent it to the Parliament (Seimas) for final adoption. The Law is likely to be adopted before June.
Dr Tomas Davulis (Vilnius University Law Faculty)
The Parliament of the Republic of Lithuania (Seimas) adopted the Law on SEs on 29 April 2004. This law concerns the Regulation on the SE Statute. The separate Law on employee involvement (Transposition law) will be adopted for the purpose of transposing Directive 2001/86/EC. The Ministry of Social Security and Labour has not presented a draft of the transposition law to the Government. Such a draft will appear in September 2004. Supposedly the Transposition law will be adopted without any significant social partner involvement. So far, the social partners have not been involved in the working group on the drafting of the transposition law. The Tripartite Council that, according to the relevant Government Regulation, must discuss draft labour legislation will not meet until November. However, the social partners are not particularly concerned by this state of affairs since in their view the Transposition law does not really affect their activities. The Ministry of Social Security and Labour intends to have the legislation in force by 8 October 2004.