RegRally Insights: Employment and Labour Law

The newest monthly employment law update by ECOVIS explores the latest developments in employment law and looks at the issues that matter to employers.

Lithuanian Supreme Court: Conflict of Interest Can Justify Dismissal Without Non-Compete Agreement

The Lithuanian Supreme Court (LAT) ruled that an employee may be lawfully dismissed for a gross breach of duties due to a conflict of interest, even without a non-compete agreement.

Key Findings:

A conflict of interest arises from contractual terms and when an employee’s actions risk undermining the employer’s interests.
Under Article 24 of the Labour Code (DK), actual harm is not required—potential risk to legitimate interests suffices.
The senior tech executive claimant joined a direct competitor in a similar role, creating a high risk of conflict despite no formal non-compete clause.
Her failure to acknowledge this risk justified the employer’s decision to terminate employment under Article 58(3)(7) DK.
The Court clarified that any restriction on employee activity must be proportionate and based on legitimate interests, such as trade secret protection, not economic motives alone.

Recommendations of ECOVIS ProventusLaw

Even without a non-compete agreement, employers can enforce duties to avoid conflicts of interest where legitimate business interests are threatened.
Include clear internal conflict-of-interest policies in job descriptions and handbooks, especially for employees in strategic or sensitive roles.
Review dismissal procedures to ensure decisions are based on objective risk to the employer’s interests, not simply the existence of outside employment.

CJEU Declares Malta’s Investor Citizenship Scheme Incompatible with EU Law

The Court of Justice of the European Union (CJEU) has ruled that Malta’s 2020 investor citizenship scheme—granting EU citizenship in exchange for financial contributions—violates EU law.

Key Points:

National Sovereignty vs. EU Obligations: While Member States control their nationality laws, the CJEU emphasised that this power must align with EU principles, particularly the duty of sincere cooperation under Article 4(3) TEU.
No Genuine Link: Citizenship-for-sale schemes that lack a real connection between the applicant and the country undermine the integrity of EU citizenship based on solidarity and mutual obligations.
Commission’s Legal Challenge: The European Commission initiated infringement proceedings, arguing that the scheme eroded mutual trust among Member States—an argument the Court upheld.
Consequences and Precedent: Malta must comply immediately or face further enforcement, including financial penalties. The ruling sets a firm precedent against similar “golden passport” schemes across the EU.

The judgment sends a clear message: EU citizenship is not a commodity, and programs granting it without substantive integration or ties to the country breach fundamental EU values.