New Requirement to Set up Works Council

The new Labor Code of the Republic of Lithuania introduced in 2017 required companies with 20 or more employees to commence elections for their works councils by January 1, 2018.

Some employers may have had a valid reason not to complete works council elections (e.g., employees refused to be works council candidates or did not participate in the elections), but most employers likely have their works councils elected.

There has been a change to the long-standing principle that either a trade union or works council represents all a company’s employees in collective bargaining negotiations and information and consultation procedures.

The functions of a trade union and a works council have now been made distinct. A trade union represents its members only, and only a trade union is allowed to negotiate and execute a collective bargaining agreement (which is also applicable only to the members of the trade union).

Meanwhile, a works council has the right to represent all of a company’s employees during information and consultation procedures, such as in relation to group redundancies, approval of various internal work procedures, and business transfers. There are, however, some notable exceptions:

1. If more than one-third of all employees are members of a trade union, then the trade union acquires all authorities and functions of the works council; i.e., a works council is not elected, and the trade union represents all employees during the information and consultation procedures as well.
2. Where a collective bargaining agreement was concluded prior to July 1, 2017, such agreement will still apply to all employees, but only until January 1, 2019.
3. A company and trade union can agree that a new collective bargaining agreement shall apply to all employees (not only to members of the trade union), but employees must accept such collective agreement through a vote at their general meeting.

Failure to inform and consult can result in the annulment of a company’s decisions in important areas such as restructuring or the sale of a business. Therefore, employers should consider these consequences when cooperating with the company’s works council.

Comment

There are two documents that are advisable for a works council: (1) its internal rules governing how the works council should operate, and (2) a cooperation agreement with the employer specifying how information and consultation procedures will be performed, methods of communication, expected response times, etc.

Many works council members do not have experience drafting such documents, so helping the works council with this task could lead to better trust and cooperation. Moreover, having the rules approved is beneficial to the employer, as it clarifies what procedures must be followed at the works council to make its decisions valid.

Written by Vytautas Šilinskas of TGS Baltic and Roger James of Ogletree Deakins