The Labour Law must be read

Publication in magazine Bilances Juridiskie Padomi 


Issues related to employment relationships have always been a hot topic because in practice conflicts between employers and employees are not rare. The labour market has recently undergone some substantial changes – relatively rapid wage growth, increasing shortage of qualified workers, and changes in the regulatory framework – several significant amendments to the Labour Law have come into effect. Julija Jerneva, attorney-at-law, employment law expert, and a partner at VILGERTS, talked to us about what employers should definitely keep in mind in connection with these changes. Julija is also a visiting lecturer at the Riga Graduate School of Law.

Julija represents clients in both individual and collective disputes before courts and the State Employment Inspectorate, consults companies on a variety of employment law matters, including those related to overtime and rest period calculations, employee non-competition and confidentiality obligations, etc. During her practice, the attorney has had to deal with disputes concerning the amount of compensation that employees may claim in the case of business trips or official work trips, discrimination against employees, and psychological mobbing, including employment restrictions and legal requirements with respect to third-country nationals, etc.

Despite the existence of the Labour Law, which is updated from time to time, employment law is an area in which lawyers and attorneys do not lack clients because employment relationships constantly change and evolve. But why do conflicts that call for employment experts arise?

The Labour Law in Latvia is indeed being constantly refined and is even very flexible with respect to workers who are considered to be the weaker side of any employment relationship. In turn, legal issues related to the interpretation of employers' rights and obligations remain quite complex. In order to avoid conflict situations, an employer should strive to comply with all of the legal requirements, even if at times they appear to be too formal. Therefore, the law must be read and the changes should be kept up with!

The established case law and practice confirm that new situations that need to be addressed not only in accordance with the provisions of the Labour Law, but also in accordance with the legal framework regulating other areas that are related to employment relationships, emerge on a daily basis. For example, this summer the Constitutional Court initiated a case regarding the provisions of the Law on Higher Education Institutions that cover the language of study programmes and thus also the employment relationships with potential foreign lecturers.

However, it is not the constitutional law that determines employment relationships – in order to develop fair relationships with workers also the provisions of the European Union law must be understood. On 7 June of this year, the Constitutional Court decided to declare the provisions of the Law on Higher Education Institutions regarding associate professors and professors incompatible with the Constitution insofar as the law did not provide protection against abuse of successive fixed-term employment agreements. In this case, the Constitutional Court invited me to submit my opinion on the compliance of the Law on Higher Education Institutions with the provisions of the European Union law.

Likewise, the recently adopted Whistleblowing Law imposes new obligations on employers which at first glance appear to be burdensome, for example, the requirement for companies to implement an internal control system and inform the employees about it before starting employment relationships. However, this burden can also be approached from a different perspective – such control systems can help employers detect breaches of safety regulations at the work place and find out about the atmosphere at work which they may not have been previously aware of, such as possible signs of mobbing or psychological harassment among employees. The implementation of a control system has helped our clients to identify a number of shortcomings in the operation of their companies and to prevent potential conflicts and accidents at work.

The legal framework on personal data protection may also have an impact on employment relationships, for example, with respect to employee video surveillance or the collection and storage of personal data. An employer shall always keep up with the requirements he or she has to comply with in relation to his or her employees. Companies that don't have their own legal department can easily overlook many of the changes that are introduced in the national legislation.

The new provisions of the Labour Law – how well do they actually work? The amendments adopted last autumn determine what employers should do before they even start looking for employees.

These amendments raised the issue of  language requirements, which is often misunderstood by employers. Discussions whether job advertisements may include a requirement to know other languages besides the official language arose due to an often unjustified desire on the part of the employers to find employees with good command of foreign languages, often several, even though the foreign languages the employees speak are not necessary to perform their job duties (for example, if the job does not involve dealing with foreign clients or tourists). The changes in the Labour Law provide that an employer is no longer entitled to require a particular foreign language skill from an employee if its use is outside the scope of his or her job duties. Likewise, if an employee does not need to know a foreign language to perform his or her job duties, the employer must not prevent the employee from using the official language to perform such duties. Respectively, job advertisements for a specific vacancy should not contain the aforementioned language requirements, unless there will be an objective necessity for the employee to communicate in a foreign language to perform his or her job duties.

The law also provides that in the event of a dispute as to whether an employee has suffered direct or indirect discrimination on the basis of his or her language skills at the workplace, it is the employer's obligation to prove that the different treatment of the particular employee was based on other objective factors beyond the employee's language skills. Even if there has been a requirement to know certain languages, the employer must be able to demonstrate that knowledge of those languages was objectively necessary to perform the job duties in question. Consequently, merchants are no longer allowed to impose disproportionate requirements on employees with respect to knowledge of certain foreign languages.

As of 1 May of this year, a job advertisement has to additionally indicate the salary range for the position in question.

Not everybody understands the salary range the same way... I recently started to notice that job advertisements of several companies now indicate the annual salary rather than the monthly salary, perhaps they do it to make the numbers more attractive to potential candidates.

It is permitted under the law – the employer must specify the potential gross salary as a monthly or yearly salary, or as an hourly rate.

On the one hand, these amendments allow job applicants to assess in advance whether a job offer is sufficiently attractive in terms of pay. However, from an employer's perspective, this requirement may affect his commercial interests. By disclosing the salary a company is offering its employees, it gives its competitors the opportunity to "snatch up" the most capable employees by offering them an even higher salary. We must bear in mind that our neighbouring countries are also seeking manpower. Especially when it comes to skilled professionals and high-profile professionals seeking management-level positions the competition for which in the labour market is fierce. Therefore, many employers often offer benefits other than pay, such as health insurance, contributions to private pension funds, staff meals, etc. This is also a good time for recruitment agencies, because by using the services of a recruitment agency employers might be able to avoid public job advertisements in which salary amounts must be indicated.

Another downside is that the employment agreement often states that the employee's salary amount is confidential. Having learnt what salary a company promises to a newcomer, an employee in a similar position may request that his or her salary be adjusted accordingly.

When preparing an advertisement on open job positions, it should not be forgotten that the law requires that it contains information about the employer. If the employer is a natural person, the advertisement must indicate his or her name and surname, but if the employer is a legal person, the company name and registration number must be indicated. When outsourcing a recruitment agency that screens and evaluates the candidates on behalf of the employer, the job advertisement must mention the name and registration number of the recruitment agency.

What other recent and significant changes in the Labour law should company managers be aware of?

With the amendments adopted on 1 November 2018, the framework for the termination of an employment agreement with a trade union member has been modified. This issue has long been the reason for disagreements between organisations representing employers and leaders of trade unions, but a compromise has finally been reached. In the past, to terminate a trade union member, an employer had to go to court because often the trade unions did not agree with dismissing their members. The framework has been supplemented with the condition that an employer does not require the consent of a trade union to dismiss a trade union member if the employee has been a member of the trade union for less than six months. This is a major step forward, as many workers abused the regulatory framework by joining trade unions only when the threat of dismissal was real. As a result, the trade unions also had to defend the interests of employees who were not aware of or interested in the work of the trade unions or the developments in the industry and, immediately after receiving the necessary assistance, terminated their trade union membership. However, the purpose of a trade union is not to assess the grounds for employee dismissals, its purpose is much greater. In my opinion, these amendments will inevitably strengthen the position of trade unions and encourage greater employee interest in the work of trade unions beyond individual dispute resolution.

For a very long time, it was impossible to negotiate overtime pay with trade unions. The previous Saeima adopted amendments to the law, which Raimonds Vējonis, the President at the time, did not publish, but asked to be reviewed one more time by the current Saeima. Is the battle regarding overtime pay over?

The amendments to the Labour Law adopted by the Saeima in the second reading on 28 March of this year came into force on 1 May of this year. The amendments stipulate that in sectors where there is a general agreement on a significant increase of the minimum wage or the hourly rate, the overtime pay will be lower, but not less than 50 percent of the employee's hourly rate, but in case of an agreed piecework salary – not less than 50 percent of the piece rate pay for the amount of work carried out. A wage increase that is at least 50 percent above the national minimum wage or the hourly wage rate is considered to be a significant wage increase. In all other cases the overtime pay will not change – the premium must be 100 percent of the salary or the agreed pay. Similarly, the condition that overtime is permissible only if the employee and the employer have agreed on it in writing has remained unchanged.

It is currently known that a general agreement has been reached in the construction sector. It should be noted that the general agreement is binding to all employers in the construction sector and applies to all employees in the sector.

Previously, the President’s objection was that the introduction of such a provision would be unfair – that there are occupations and professions with respect to which it is impossible to conclude a general agreement.

Similarly, the legal framework governing the reimbursement of business trip or official work trip expenses may be clarified in the near future. Many still don't understand the difference between these two types of travel, including the legal community in which confusion can be witnessed and discussions are still taking place. The existing case law on these issues is limited and mainly addresses specific circumstances. In addition, practice shows that the regulatory approach should be more flexible and explicit, allowing the employees and employers to adapt to real-life circumstances and qualify for the relevant tax incentives.

Changes are also likely to be made to the Labour Dispute Law, respectively, the section on disputes regarding collective interests and rights and their resolution might be refined. At present, the Labour Dispute Law is very concise and the parties involved in a dispute don't always  have a complete understanding of the statutory procedure, as well as the consequences for exercising or failing to exercise their rights. In my opinion, it is important for the legislator to establish a procedure for trade unions under which they could adopt a common position before commencing a collective dispute with an employer. Situations where employees of a company are represented by several trade unions at the same time, each having its own fundamentally different position, lead to unnecessary disputes, cause confusion at the negotiating table, and do not facilitate reaching an agreement with the employer.


A merchant should always keep the Labour Law handy, even if it is kept in his or her desk drawer, to make sure that the company, for its part, always complies with the law with respect to its employees. However, in practice this is not always the case – many legal provisions give rise to confusion, in particular the ones regarding the recording of working time and rest periods. Fortunately, since the amendments adopted in 2017, at least the accountants know how the hourly wage rate should be calculated.

Even if employers read the law carefully, many nuances can remain hidden to them. Debates on the application of the provisions of the law are also taking place in the legal community. Positive decisions made by employers usually don't result in disputes in the workplace – disputes arise due to negative decisions, such as disciplinary sanctions or reorganisation procedures, which the law does not describe clearly and unambiguously. I believe that the concise text of the Labour Law is inefficient, the law should contain more extensive explanations. The Labour Law is not a typical normative act, it has been written for employees and employers, not for their lawyers.

One of the most obvious stumbling blocks is the failure to meet the statutory deadlines. If, for example, a dispute over the dismissal of an employee arises, the law requires the employee to file a lawsuit within a month. For many, this wording is not very clear, for example, if the dismissal notice is received on 1 February, when exactly does the one-month deadline expire? Practice shows that it does not occur to people to review the existing case law or read the commentary on the law, and they assume that the one-month deadline would expire on 1 March. However, the law stipulates that a term to be calculated in months shall expire on the respective date of the final month of the term. If a term to be calculated in months terminates on a month that does not have the respective date, it shall expire on the last day of such month. Consequently, in February it will be the 28th or the 29th of February.

Claims that were brought after the expiry of the term used to remain pending before the courts for several years before they were finally declared inadmissible, and the Senate recently decided that such overdue claims would have to be dismissed without opening the case to be reviewed on the merits. The aim for doing so is to simplify and expedite the way cases are handled. Unfortunately, many labour disputes remain unresolved due to claims being brought after their deadline. Therefore, the consequences for not respecting the time limits may be severe – the court may declare the action time-barred and close the case. This and other specific examples demonstrate that parties regularly misunderstand the regulatory framework, therefore it should be improved by refining the concise text and making sure that at least the basic provisions of the law could be understood without consulting a lawyer or studying the case law of the Senate.

Businesses should keep in mind that when a conflict reaches the court, the employer, being the strongest party in the employment relationship, has to provide evidence to prove his or her truth. Often no evidence has been collected at all. Therefore, any decision or action with respect to staff taken by an employer which may lead to a conflict situation shall be justified and documented in writing. Let's remember that upon the termination of an employment agreement, it is the employer’s obligation to inform the employee in writing of the circumstances that were the basis for the termination of the agreement, it is not enough to just refer to a clause in the Labour Law. The same applies to any disciplinary measures. A company's documentation about its staff must be as flawless as if the company had to present it at a court hearing the following morning!

It is also advisable to keep up with the case law to see how cases in seemingly atypical conflict situations are handled. Mobbing and bossing are considered to be a serious abuse of an employee, especially if it is done with the intent to get the employee to voluntarily leave the job. For example, it is the employer's duty to not only pay the employee a salary or a wage, but to also provide the employee with a job to do. A number of cases regarding similar restrictions of employee rights have been brought before the courts. If a person feels ignored in the workplace or humiliated in the presence of other employees, the court may also review a claim seeking compensation for non-pecuniary damage. Therefore, in order to get an idea of how labour disputes are resolved, it is advisable to keep up with the court rulings published on the Senate website, including the ones that have been recognised as case law – these rulings are binding in similar cases.

Julija Jerneva was interviewed by Vineta Vizule



by Jūlija Jerņeva, Partner, Latvia


Related Experience

VILGERTS assisted Summus Capital OÜ with the issue of unsecured bonds in the amount of EUR 10 million, arranged by Signet bank.  Summus Capital OÜ, established in 2013, is an Estonian-based investment company which has diversified commercial real estate portfolio in the Baltics. The group possesses a portfolio of cashflow generating commercial real estate properties in the retail, office, logistics and medical segments. The VILGERTS team included managing partner, Gints Vilgerts and senior associate, Kristīne Mora.  Other lawyers involved, included Kaido Loor.

Sale of shopping mall “Riga Plaza” to Summus Capital OU and Ivar Vendelin by LSREF3 Latvia Investments S.à r.l. where Vilgerts acted for the buyers.

Assistance to BPM Capital with exit from financing of DEAC and Smiltenes piens with mezzanine loans.

Provision of legal assistance and representing property development company that focuses its operations in Riga in court proceedings and arbitration proceedings concerning non-performance of contractual obligations by a bank and liability thereof.