Labour Law examined

Since 2002, the Labour Law has been Latvia's main item of legislation regulating individual and collective relations at work. It transposes many aspects of EU employment law, thus removing the need for major further changes since Latvia joined the Union in May 2004. This article summarises the Law's main provisions, perceived problems with its content and amendments introduced up until April 2004.

Employment relations in Latvia are essentially based on the employment contract. A set of legal acts provide for mutual employment relations between an employer and an employee established by such a contract. These include the Latvian Constitution (Satversme), the Labour Law (Darba likums) - the main law regulating individual and collective employment and industrial relations - international laws applicable to Latvia, other national legal acts, collective agreements and procedural work rules.

The Latvian parliament (Saeima) enacted the current Labour Law on 20 June 2001, and it came into force after a year-long preparation period on 1 June 2002. It took the place of the Labour Code that had been effective since 1972. In the mid-1990s, the Labour Code came to be seen as outdated and not corresponding to the actual situation in the world of work. Therefore, in 1997 the Ministry of Welfare started drafting the new Labour Law that was adopted four years later.

The Labour Law includes provisions transposing many EU employment and social policy Directives, such as those relating to equal treatment, collective redundancies, working time and rest, the protection of young workers and posting employees to work abroad. The Law also incorporates principles of the Council of Europe's European Social Charter and various International Labour Organisation (ILO) Conventions. The main purpose of the Law is to ensure the equality of the relationship between the employer and the employee.

The key provisions of the Labour Law are summarised below.

General provisions

The first part of the Law establishes the main principles and terms of the system of labour law. It establishes important principles such as the invalidity of provisions in collective agreements or employment contracts that might undermine the legal status of employees as laid down in legislation. It also sets our an order of priority of international treaties in the event of a clash of legal norms. The Law sets out minimum requirements that employers must observe, but does not prohibit employers from granting more favourable working conditions to employees.

Equal rights

Parts A and C of the Law set out the principle of equal rights. It is stated that everyone has an equal right to work, to fair, safe and healthy working conditions, and to fair work remuneration, without any direct or indirect discrimination on grounds of race, skin colour, gender, age, disability, religious, political or other conviction, ethnic or social origin, property or marital status or other circumstances. Discrimination on these grounds is prohibited in recruitment and employment, including in terms of promotion, working conditions, remuneration, training and notice of termination of an employment contract. If an employee claims discrimination, it is up to the employer to prove that this is not the case (the Law does not set out what documents are required to prove that discrimination does not exist, and employers have developed approaches to proving that they have observed the principle of equality).

The Law also lays down the employer’s duty to provide equal remuneration for men and women for the same kind of work or work of equal value.

Employment of young people

The Law prohibits the employment of children in permanent work except in some strictly regulated cases. Children are defined as people under the age of 15 years, or up to the age of 18 years if continuing their basic education. Adolescents - those aged 15-18 who are not deemed children in terms of the above definition - may be employed, but not for work in conditions which are associated with increased risk to their safety, health, morals and development. According to cabinet Regulation No.10 of 8 January 2002, which cane into effect simultaneously with the Labour Law, it is permitted to employ children over the age of 13 in certain types of light work with the written consent of one of the parents (or a guardian), during their out-of-school time.

Freedom of association and representation

In its general part, the Labour Law ensures the freedom of association for employees and employers in order to defend their social, economic and occupational rights and interests.

Employees may exercise the defence of their social, economic and occupational rights and interests directly, or indirectly through the mediation of employee representatives. According to the Law, employee representatives are: a trade union on behalf of which a trade union institution or an official authorised by the union's articles of association acts; or authorised employee representatives elected by the workforce in accordance with the Law in enterprises with five or more employees (including employees on fixed-term contracts).

Collective agreements

The entire second part of the Labour Law is dedicated to the regulation of collective agreements. The matter was previously regulated by the Law on collective agreements enacted in 1991. The current Labour Law incorporates and improves on the provisions of the old law and is now the basic legislation regulating in detail the procedure for concluding and amending collective agreements. It covers: the content and form of collective agreements; the parties; the effects; and the procedures to be followed.

The Law provides that disputes regarding rights and interests that arise from a collective agreement or are related to such an agreement shall be settled by a conciliation commission, established jointly by the parties to the agreement. If the conciliation commission does not reach agreement on a dispute regarding rights, the dispute is to be settled by a court or an arbitration board. If the conciliation commission does not reach agreement on a dispute regarding interests, the dispute is to be settled in accordance with the procedures prescribed by the collective agreement in question.

Employment contracts

Regulations concerning employment contracts are contained in the third part of the Labour Law. According to the Ministry of Welfare, there are many innovations in this part of the Labour Law in comparison with the previous Labour Code, for example in the areas of job advertisements and job interviews.

According to the Law, an employer and an employee shall establish mutual employment legal relationships by an employment contract. Through the employment contract (which should be in writing) the employee undertakes to perform specific work, subject to specified working procedures and orders of the employer, while the employer undertakes to pay the agreed work remuneration and to ensure fair and safe working conditions that are not harmful to health.

The Law provides detailed regulation of employment relationships, from job advertisements to employment termination. It covers matters such as: recruitment; preparation of contracts; form of the contract; duration (contracts should be open-ended, with fixed-term contracts permitted in specific circumstances); probation periods; the employee's obligations; working procedures; and termination of contract (including redundancies etc).

The old Labour Code required a 'work record book' (or employment contract record book). In its place the Law imposes a duty on employer - at the request of an employee or of a state or local government institution in the performance of its legal functions - to provide a substantiated written statement of the length of the employment relationship, the work performed by the employee, and the taxes deducted and state social security mandatory payments made.

The Law provides that individual disputes regarding rights between an employee and an employer, if they are not settled within the undertaking, shall be settled in court. In addition to the Labour Law, which stipulates the main principles for resolving individual and collective labour disputes, there is also a special Industrial Disputes Law.

Remuneration

The Labour Law regulates remuneration for work in some detail, covering matters such as: the minimum wage (the minimum wages set out in employment contracts may not be lower than the minimum stipulated by the state - LV0310101N); equal pay; the organisation of remuneration - allowing either working time-related pay or piecework pay; special pay provisions for workers under the age 18; pay supplements - for additional work, work in specific conditions, night work, overtime, and work on weekends or holidays; timing, type and calculation of remuneration; and deductions

Working time and rest periods

The fourth part of the Labour Law (part D) regulates working and rest time.

The Law stipulates that an employee’s normal working day may not exceed eight hours (within a 24-hour period), and the normal working week must not exceed 40 hours. There are shorter work time maxima for employees subject to special risks and those under 18 years of age. An employer and an employee may agree in the employment contract on part-time work - ie shorter than the regular daily or weekly working time.

A five-day working week is set as the norm. If a five-day working week is not possible due to the nature of the job, following consultations with employee representatives the employer may set a six-day week, but in this case the duration of the working day cannot exceed seven hours. The Law also regulates: the length of working days prior to public holidays; overtime work; night work; shiftwork; 'aggregated working time' schemes, which are possible, following consultation with employee representatives, where the nature of the work means that is not possible to comply with the regular daily or weekly working time - such 'aggregated' working time may not exceed 56 hours a week and 160 hours within a four-week period unless otherwise provided for by a collective agreement or an employment contract; and work on public holidays.

The Law stipulates that the period of rest during any 24-hour period may not be less than 12 consecutive hours, or 14 hours for adolescents. In each seven-day period, the rest period must not be less than 42 consecutive hours. The daily and weekly rest provisions need not be applied where an aggregated working time scheme is used. Employees have the right to a 30-minute break, not included in working time, after every four hours worked.

Annual paid leave must be at least four calendar weeks. This includes both working days and days off, but does not public holidays. The payment for annual leave is calculated by multiplying average daily earnings by the number of working days during the leave period. Subject to agreement between the parties, the paid annual leave may be granted in two or more parts, but one of the parts must be at least two unbroken calendar weeks. The law provides additional paid leave for employees with three or more children aged up to 16 years or a child with a disability (an extra three days' leave), and employees subject to special risks (at least three days extra). Other cases in which employees are to be granted additional paid leave may be stipulated in collective agreements or employment contracts.

Employment protection

The Labour Law provides more employment protection for employees than the previous Labour Code. For example, employers have less scope than before to dismiss employees who are sick for long periods. The Labour Code stipulated that an employer could terminate the employment contract if an employee did not work due to sickness for more than four consecutive months. Now, however, extended failure to work due to sickness cannot be grounds for terminating an employment contract. Such an employee can be dismissed only if, after returning to work, they cannot continue working in their previous position due to their health condition, but even in such cases employers are obliged to examine the possibility of offering employees other more suitable positions in the same enterprise. According to the State Labour Inspectorate (Valsts Darba inspekcija, VDI), it does receive not many complaints regarding unjustified termination due to extended sickness.

Even if an employee becomes sick after receiving notification of termination of their contract, the Labour Law provides protection. If an employer is certain that an employee cannot continue working due to health reasons, it can ask the Quality Control Inspection for Medical Care and Labour Capacity Expertise (Medicīniskās aprūpes un darbspējas ekspertīzes kvalitātes kontroles inspekcija) to investigate the grounds for the medical certificate, or to request a doctor’s certificate regarding the employee’s inability to perform their contracted job due to health reasons. If an employer wants to dismiss an employee following extended sickness because a doctor states that the employee is no longer able to perform their duties, notice must be given one month in advance. In this case, the employer is obliged to pay the employee 'termination support' and compensation for unused holidays. Labour law experts have suggested that these rules are unfair to the employer because the employee must be paid for time during which it is known that he or she will not be able to perform the contracted job. These experts recommend reducing the period of payment to 10 days, but this proposal has not been implemented

In all cases of termination of the employment contract, if an employee is a trade union member the employer must obtain the agreement of the relevant union to the termination. However, the details of this procedure are somewhat unclear in the Law.

An employer may not dismiss a pregnant woman or the mother of a child up to one year of age. If the woman breastfeeds her child, the employer may not dismiss her during the entire breastfeeding period, if this is confirmed by a doctor’s certificate. Several other special provisions for mothers of young children are also stipulated in the law.

Problems with the Labour Law

About six months after the Labour Law came into force in June 2002, a study was conducted (by AS Product Hazard Assessment Laboratory) to evaluate the conditions for its implementation and operation. A majority of 69 employers surveyed admitted that they were unclear about the objectives of the Law, and over 80% admitted that they were unclear about the implementation of the Law in their enterprise. The survey also found that out of six main areas of change identified, employers said that only two were understandable - employment of new employees and payment for work on public holidays (an area where the rules were amended immediately after the law came into force). Only 3% of those surveyed were satisfied with the adopted version of the Labour Law.

An example of the perceived problems with the Labour Law is that it permits several combinations for paid annual leave, as a result of which the number of paid days during the four-week annual leave period stipulated by the law may range from 10 to 28 days. It is therefore often impossible accurately to determine the number of days for which an employee is eligible to receive compensation for unused holiday time upon the termination of the employment relationship. Problems also arise when calculating employee compensation where employees work under 'aggregated working time' schemes (see above), because there is no precise indication of how many working days make up a working week for such an employee (the law permits both five- and six-day working weeks).

Furthermore, the Law does not precisely define the term 'termination' in relation to employment relationships and it is unclear at what point employers must reach agreement with trade unions regarding decisions to terminate employment relationships - eg prior to notification of termination, or prior to the termination itself.

Difficulties are caused by the reporting of working time under aggregation schemes and separation of such working time from shift work. The Law, according to some commentators, permits an excessively liberal interpretation of the maximum weekly and monthly limits for working time under such schemes. Under these schemes, employers and employees can agree through a collective agreement to set shorter or longer working times over a week or month if the employees want to work more and earn more. Retailing and constructions are examples of industries where such agreements can be found.

The setting of longer reference periods for aggregated working time schemes is important for enterprises whose operations have a seasonal character, and is therefore is in the interests of these employers. To some extent, longer working hours and higher payments for work are also in the interests of employees, but excessively long working hours are detrimental to their safety and health. There is a view that the current Labour Law permits employers, through employment contracts, to agree on longer reference periods, or to manipulate the reporting of employees' work and rest periods to company with the rules. The law stipulates a 160-hour limit on working time over a four-week work under aggregation schemes, but this must be adjusted for the number of days in the particular month (because there are usually more than four weeks in a month.)

Latest amendments

The Labour Law is still being improved and expanded, but notwithstanding the negative comments during the initial implementation period, the amendments so far have not been very significant. A series of amendments have been made or proposed between December 2003 and April 2004, covering matters such as the following:

  • the rights of employers to dismiss employees who do not possess sufficient skills to perform their contracted jobs have been restricted. Prior to termination of employment, employers are obliged to assess whether such employees are able to work in another job in the same enterprise;
  • employers are now financially responsible for health checks for employees initiated by the employer. This means that employers must cover costs connected with mandatory health checks or health checks in cases where it is suspected that an employee has contracted a dangerous illness, if these checks are initiated by the employer;
  • when sending an employee to work in Latvia, employers located in other countries must inform the State Border Guards (Valsts Robežsardze) and the VDI - previously only the State Employment Agency (Nodarbinātības Valsts aģentūra, NVA) had to be informed;
  • the sentencing of an employee to imprisonment for a period of more than 30 calendar days is now a valid grounds for termination of the employment relationship (from the day the sentence comes into force);
  • the rights of workers with disabilities may be reduced, allowing them to be dismissed during probationary periods. The context is that only around 5% of people with disabilities and able to work (out of 120,000 registered in the country) are in employment. It is thought that many of these people would like to work, but are afraid of losing their disabled status and pensions. The social organisation, Apeirons, which has recently increased its efforts to integrate people with disabilities into society, believes that it is difficult for these people to find work because employers are guided by stereotypes, doubt the ability of disabled employees to perform jobs, and are afraid of special regulations connected with employing people with disabilities (for example adaptations of the workplace for which the employer has to pay);
  • overtime work must not exceed 144 hours over a four-month period. Previously, overtime could not exceed 48 hours over a four-week period - ie 192 hours per four month period. However, at the same time a rule that overtime could not exceed 200 hours per year has been abolished;
  • regulations on night work, daily rest periods and work breaks no longer apply to mobile employees of passenger and cargo transportation enterprises. However, employers must observe workplace safety and health protection principles and ensure adequate rest for these employees;
  • where the Law's anti-discrimination provisions are infringed, and the discrimination may have negative consequences, employees have the right to demand compensation for losses affecting them due to the employer’s infringement of these provisions. Employees can also demand compensation for 'moral harm', with the amount to be determined by a court in the event of a dispute; and
  • actions of a sexual nature will be interpreted as 'personal violations' if the intention or result of such actions is the violation of a person’s dignity and the creation of a threatening, hostile, humiliating, degrading or violating environment

Experts also believe that it would be useful to amend Article 104 of the Labour Law, which regulates employers’ responsibilities in the event of termination of employment. It provides that employers are obliged to provide written notification of job losses at least 60 days in advance to the State Employment Service and the relevant local government. This procedure must be followed even in cases where only a few people lose their jobs.

Commentary

Latvia’s Labour Law is the main legal instrument for regulating employment relationships and industrial relations. Employers, employees and their representatives must base their activities on it.

Although the new Labour Law has been in force for almost two years, many of its rules are still unclear; they are not understood and not applied. Employers say that the biggest difficulties in applying the law are in the areas of calculating annual paid leave and holiday pay, termination of employment contracts, and aggregated working time.

The main problems with the Law emerge during industrial disputes. These uncover unresolved questions with regard to the rights of employees and employers. However, there are not that many industrial disputes in Latvia. This is because economic difficulties make it difficult for both employers and employees to observe correct and lawful industrial relations. However, the situation with regard to observing industrial relations legislation is improving, and supervisory institutions, chiefly the State Labour Inspectorate, are involved in the issue. The Labour Law is not dogma - it is being amended and improved. A key point is that it conforms to EU legislation and that reforms in this area are not required now that Latvia has joined the Union. (Raita Karnite, Institute of Economics, Latvian Academy of Sciences)

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