Recently there have been some liberal tendencies in many countries' labor law, including Lithuania's, and parties to an employment contract are allowed to decide upon many various aspects. However, it is not always true that the freedom given to the contracting parties is sufficient and that absence of legislative control in certain areas is beneficial to the parties.
According to subparagraph 1 of Article 34 of the Labor Code, labor rights and obligations may arise, change or expire not only under legal acts, employment contracts, collective agreements, but also under other covenants that, though not stipulated by laws, do not contradict them. Thus when not prohibited by the Labor Code and other laws and when needed, other covenants are permitted between parties in a labor relationship.
An additional covenant between an employer and an employee is an agreement signed in order to protect the interests of either of the parties, to provide additional guarantees, etc. In other words, it is an agreement not directly related to work performance, remuneration for work or working conditions, as such, all of which as a rule are considered matters of a labor agreement.
Additional covenants between employers and employees may be of different nature, as the name itself presupposes freedom of both parties. In Lithuania, additional covenants may be incorporated into employment agreements or concluded separately; however, its major principle is laid down in Paragraph 2 of Article 94 of the Labor Code 's that is, parties may not establish working conditions that are less favorable to the employee than those provided for in the Labor Code, legal acts, other regulatory acts and the collective agreement.
However, one must agree that in order to determine whether a particular covenant between an employer and employee establishes less favorable conditions to the employee than those provided for by laws and other regulatory acts is a rather complicated task since the concept of "less favourable" is disputable. On the other hand, some uncertainties can arise while applying this principle to particular additional covenants between employers and employees.
Most popular covenants in Lithuania are those aimed to protect employers' property 's e.g., covenants protecting employers' investment into employee training, confidential information non-disclosure covenants, non-competition covenants, etc. Lately, covenants promoting loyalty have become more common. They aim at offering various additional guarantees and privileges to employees 's e.g., employee insurance at the employer's expense, health insurance, pension insurance, coverage of employee education expenses, etc.
Remarkably, the Labor Code does not specifically regulate any of the previously mentioned covenants. On the positive side, the parties are given the right to agree on the content of the covenant by themselves. However, as already mentioned, working conditions may not be made less favorable to the employee, so there is always a risk that the covenant can be acknowledged as null and void.
The increasing case law of Lithuanian courts helps more clearly define the content of such additional covenants as those regulating non-competition, confidentiality or the procedures of compensation of employee training expenses incurred by the employer.
In sum, Lithuanian legislation does not prohibit additional covenants in labor relations. However, since labor laws prohibit establishing less favorable working conditions to the employee compared to those provided for by laws or regulations, there is always a risk that such a covenant (or its provision) can be annulled in case of a dispute. Only when the case law is clear and consistent is it possible to make a decision on the possibility to sign a particular additional covenant or on its content.
Ieva Povilaitiene is senior consultant at Jurevicius, Balciunas & Bartkus, a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms including Glikman & Partnerid in Estonia and Kronbergs & Cukste in Latvia, dedicated to providing a quality "one-stop shop" approach to clients' needs in the Baltics.
