R. Didikė. Rights of employers and employees: in whose favor scales are tipped during pandemic?

Rūta Didikė

Business is currently under enormous pressure: a number of companies are fighting for their survival due to the economic recession, and misunderstandings are abundant in an attempt to find solutions concerning employees. This emergency situation has revealed that the employee does not have many instruments for optimising costs when facing such crisis as all the possible options are in fact restricted by the employee’s consent. How can business representatives avoid hasty decisions, mistakes and misunderstandings with respect to their employees? Some answers are provided by Rūta Didikė, the employment law expert of law firm Magnusson.

The news media are already full of stories how employees are being pushed to take unpaid leave although the employer cannot decide this unilaterally.

“As regards the employer’s chances to lower the pressure for its business by forcing employees to go on unpaid leave is certainly not the best option. First of all, it will be entirely up to the employee whether he/she will agree with such offer of the employer. We’ve heard quite a few stories about employers threatening to dismiss employees if the latter do not agree to take unpaid leave. In such situation, the dismissal is much more beneficial for the employee as he/she loses all social guarantees during the unpaid leave. If the employee strongly disagreed, the employer would think twice and go ahead with Plan B as everybody has one,” says the attorney-at-law.

Human factor to be taken into account

Even if the employer is looking for a solution by consulting the work council or trade union, there’s always a chance that at least one employee would be against the proposed plan. According to the attorney-at-law, the human factor should not be underestimated but there is one way to save the company for which the employees’ consent is not required. Idle time.
During idle time the employment contract implementation is suspended at the employer’s initiative without any fault on the part of the employee. It may be declared in the event of an emergency situation or quarantine when the employee cannot be provided with the work agreed in the employment contract.

“Before declaring idle time, I suggest analysing the situation first to identify which employees indeed do not have work, and whose work load has decreased only in part. This will help to determine whether idle time should be declared for all or only some of the employees, and whether full idle time or partial idle time is required. It is very important to remember that idle time is the situation when the employer cannot provide the employee with the work agreed in the employment contract. If work is available, but the employer is unwilling to give it to the employee due to other reasons, those are not essential conditions for idle time. In such case the employer should do its homework and assess the criteria based on which idle time will be declared so that the employer could justify the inevitability of idle time later when applying for subsidies,” the employment law specialist advises.

Belated subsidies?

The employer which has declared idle time during the emergency situation and quarantine, but did not dismiss employees and did not give them unpaid leave will be refunded a part of its costs for work pay during idle time. It will be done by assigning a subsidy, but its amount is still unclear as the final resolution of the Government has not been adopted.

“The support allocated by the Government for business in the amount of EUR 2.5 billion is a welcome step, but it will not happen overnight. Analysis of the situation and assessment of eligibility of companies based on the criteria for support are just starting. The aid would have come sooner and would have been more efficient if the companies experiencing difficulties were assisted to borrow funds which they need now. Some of them might not have the money to pay salaries after the first weeks of the quarantine. We should not have high hopes for subsidies as it is still unclear how the support can be obtained,” says Ms Didikė.

Liquidation might be mission impossible

An extreme measure is dismissals, but the government representatives are encouraging employers not to do it.

“Such step is in fact very costly. The employer must give one-month notice to the employee and pay the latter a severance grant of two average monthly salaries if the person worked at the company longer than one year. If the company has accumulated a financial reserve to survive, it is all very well. Yet as regards smaller companies which have a reserve for salaries only for one month, it means that they will still be forced to let their employees go as the quarantine continues. Moreover, let’s not forget that under the Labour Code, pregnant women and the employees raising children under three years of age cannot be dismissed,” says Ms Didikė.

According to the employment law specialist, the worst scenario for business is liquidation of the company. It is inevitable where, taking into consideration the budget and the extended quarantine, the employer understands that recovery is unfeasible. In such case, the employer must also give notice to employees, pay them salaries and severance grants. If people whose dismissal is prohibited are employed at the company, the entrepreneur cannot even wind up the company.

“The ludicrous situation can be illustrated by the fact that even when a court adopts a ruling to liquidate the company, it could not be done if a pregnant woman or an employee with a child under three years of age works at the company as based on the formal reading of the Labour Code, a general rule prohibits from dismissing such people. When facing the crisis, such companies will be forced to exist on “paper” without actually operating, but also unable to terminate their activities officially,” emphasises the attorney-at-law.

According to Ms Didikė, the balance between rights of the employer and employee can be achieved with the understanding that the law doesn’t always work in emergency situations. That is why, the most important thing here is a sincere communication with employees built on a trust and the mutual wish of parties to the employment relationship to solve an issue. If trust is abused, even legal measures may be of no help.