Lithuania Update: Contractors will become responsible for the salaries of subcontractor’s employees

From 01-11-2011, the amendments to the Labor Code prepared by the Ministry of Social Security and Labor will enter into force. These amendments have disappointed the Lithuanian Builders’ Association and caused a lot of discussions in the construction sector.

What’s new?

The amendments provide that the contractor is subsidiarily liable for the payment of the subcontractor’s wages (including increased pay for overtime, night work, holidays, and public holidays) to the employees performing the contract. After the entry into force of the amendments, if the employer improperly fulfills the obligation to pay wages, the employee will be able to sue both the employer and the contractor to the Labor Dispute Commission.

How was it before?

Until now, such subsidiary liability has only been provided only in the case the posted worker is employed and the subcontracting services are provided by a foreign service provider. The provisions of construction contracts concluded after 01-11-2021 will apply in all cases and to all employers when construction work is carried out and the employee’s employer is a subcontractor to his contractor.

What is important?

To manage potential risks, contractors should review existing contracts, make additions/amendments to them, establish additional rights for contractors (e.g. control the process of remuneration paid by the subcontractor to their employees) and/or obligations to subcontractors (e.g. periodically provide the contractor with data on a settlement with employees).

What’s the purpose?

Although constructors are confused by their responsibility for contractors, the main reason for this change is the need to properly transpose the European Union Directive (on the enforcement of the posting of workers in the framework of the provision of services) and to ensure workers’ right to transparent and fair pay. This change also aims to encourage contractors to choose subcontractors more carefully, introduce additional selection criteria, and assess potential risks.

By Rimantė Valiulienė & Jonas Platelis, Primus, Lithuania, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance please contact Lithuania@transatlanticlaw.com

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