Termination of employment contract: key options

1. Option I. “Everything depends on the agreement”
(Mutual agreement between employer and employee; Article 54 of the Lithuanian Labour Code)

Any conditions may be agreed upon, including termination date and severance payment.
An employee should be presented with an offer to terminate employment agreement and the details of the offer (last day of employment, compensation, terms for payment of compensation, etc.). An offer should be presented in writing.

An employee has 5 business days to consider whether to accept or decline an offer. If an employee does not respond within 5 business days, it means that he/she rejected the offer.

2. Option II. “Quick but expensive”
(Termination under employer’s will; Article 59 of the Lithuanian Labour Code)

Lithuanian labour law establishes a possibility for employer to terminate employment contract quickly but at a higher costs:
• Notice period of 3 business days; and
• Severance pay of at least 6 average monthly salaries.

The Labour Code establishes that employer has the right to terminate employment contract under Article 59 for the reasons other than those set out in Article 57(1) of the Code, i.e. other than redundancies due to organizational changes, failure to meet the set goals etc. (for more information, please see below in Option III). It also means that if the reasons for termination are actually the ones indicated in Article 57 (1), dismissal is not possible under Article 59. Important to note that employer must indicate the reasons for termination in all cases.

An employment contract may not be terminated on the basis of this Article 59 for submitting information about a violation in accordance with the Whistleblower Protection Act, for participating in a case against an employer accused of violating the law, or for addressing administrative bodies on the grounds of sex, race, nationality, citizenship, language, origin, social status, or religion, age, sexual orientation, disability, ethnic origin, religion, marital and family status, intention to have a child, membership of political parties, trade unions and associations, the fact that an employee exercises or has exercised the rights provided for in this Code, or any other discriminatory motives.

In our practice, the reasons in many cases under the Article 59 are as follows: a divergent attitude towards job performance and professional communication, or similar.

3. Option III. “Not so expensive, but rather long and complicated”
(Termination due to specific reasons without fault of the employee; Article 57 of Lithuanian Labour Code)

Termination of employment contract under the Article 57 is possible only when specific reasons for termination exist and certain procedure is strictly followed.

• Notice period varies from 1-3 months* depending on personal circumstances of the employee (pregnancy, children under 14 years old, disabled kids under 18, disabilities of employee, severe illness, pension age, etc.); and
• Severance pay of at least 2 months* average monthly salary.

*If employment relations last less than 12 months, notice period is shorter and severance pay is lower.

Reasons for termination:
1) the work function performed by the employee becomes redundant for the employer due to changes in the organization of work or other reasons related to the employer's activities (specific rules for selection of employees and right of first refusal apply);
2) employee fails to achieve the agreed performance in accordance with the performance improvement plan (plan should be approved for at least 2 months)
3) employee refuses to work under modified terms and conditions of employment or to change the type of working time or the location of work;
4) employee does not accept the continuity of the employment relationship in the event of a transfer of the business or part of it;
5) a court or an organ of the employer takes a decision which results in the termination of the employer.