RegRally Insights: Employment & Migration Law Updates, August 2026

Employment law is moving beyond traditional HR compliance. Recent developments show a clear shift towards closer scrutiny of how employers manage disputes, remote and cross-border work, workplace risks, and increasingly technology-driven employment practices.

This edition of RegRally Insights: Employment & Migration brings together the key developments that employers, HR professionals, and in-house legal teams should be aware of as they review employment practices, workforce planning, and restructuring decisions.

In Lithuania, recent changes to unemployment insurance are affecting the labour market, while labour dispute statistics indicate a significant increase in employment-related claims. At the EU level, the CJEU has provided important guidance on governing law in cross-border remote work arrangements, while the European Commission is advancing the Quality Jobs Act, with AI and algorithmic management, workplace health and safety, subcontracting chains and enforcement among its priorities.

For employers, the overall direction is clear: employment compliance increasingly requires proactive risk management rather than simply reacting when a dispute or inspection arises.

Labour disputes are rising: VDI reports 17% more applications and 23% more claims

Source: State Labour Inspectorate (VDI) | Date: 30 July 2026
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The State Labour Inspectorate reported a significant increase in labour disputes during the first half of 2026. Labour Dispute Commissions received 5,142 applications — 17% more than in H1 2025 — and 13,074 claims, an increase of 23%.

Wage-related claims remained the largest category, accounting for approximately 71% of all claims. Claims relating to psychological violence at work also nearly doubled year on year.

The figures are particularly relevant for employers because they indicate where employment-related risks are increasingly materialising in practice.

Recommended actions

Employers should:

• Review internal anti-harassment and anti-bullying policies and reporting channels.
• Pay particular attention to payroll accuracy and timely settlement of employment-related payments.
• Consider early and constructive resolution of disputes, as 25% of claims were resolved through settlement agreements.

Unemployment insurance reform changes eligibility and benefits

Source: Ministry of Social Security and Labour | Date: 1 July 2026
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The Law on Unemployment Social Insurance has been substantially revised, changing both eligibility requirements and benefit calculations.

Among the key changes are a new minimum unemployment benefit of EUR 370 in 2026, changes to the earnings-related component of the benefit, and extended benefit periods for people approaching retirement age with a sufficiently long pension-insurance record. A new claim generally requires 12 months of insurance record within the previous 24 months.

Key changes include:
1. the benefit’s fixed component (independent of prior earnings) is reduced from 23.27% to 15% of the relevant base, while the earnings-linked variable component increases – to 45% of average insured income in months 1-3 (up from 38.79%), 35% in months 4-6 (up from 31.03%), and 25% in months 7-9 (up from 23.27%);

2. a minimum benefit is introduced, set at 5x the base social benefit (5 x EUR 74 = EUR 370 in 2026), and the maximum benefit is capped at 70% of the national average wage;

3. people within 5 years of old-age pension age who have at least 20 years of pension-insurance record get their benefit period extended from 2 to 6 months in total (an additional 4 months for people already receiving or resuming payments from 1 July);

4. a new unemployment benefit claim now requires a fresh 12-month insurance record within the last 24 months, and periods of receiving unemployment benefits no longer count toward that new qualifying record;

5. transitional rules apply to people who already had an unemployed status before 1 July 2026, including automatic recalculation where a continuing or resumed benefit would otherwise fall below EUR 370.

Recommended actions

HR teams handling redundancies and terminations should:

• Update employee-facing information concerning unemployment benefits.
• Take the new eligibility and benefit rules into account when planning redundancies and termination processes.
• Be aware that employees close to pension age with 20+ years of insurance record now have a materially longer benefit runway (6 months instead of 2), which may affect redundancy planning and severance discussions.

CJEU clarifies governing law in cross-border remote work

Case: Hortis GRC SA, C-768/24 | Date: 9 July 2026
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The CJEU provided important guidance on determining the applicable law in cross-border employment relationships involving remote work.

The Court confirmed that where the law chosen by the parties is also the law of the country most closely connected with the employment relationship, that chosen law may apply rather than the mandatory employment protections of the country where the employee habitually works.

Relevant factors may include the currency in which salary is paid, social insurance affiliation and tax residence. The choice-of-law clause itself, however, cannot establish the necessary connection.

The judgment is particularly relevant for employers managing international remote-working arrangements, where the employee, employer and employment-related obligations may be located in different jurisdictions.

Recommended actions

Employers should:

• Review governing-law clauses in cross-border employment contracts.
• Assess whether the practical arrangements genuinely support the chosen governing law.
• Review salary, tax and social insurance arrangements alongside the contractual framework.

Quality Jobs Act: EU consultation puts AI at work firmly on the agenda

Source: European Commission | Date: 20 July 2026
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The European Commission launched the second phase of consultation on the forthcoming Quality Jobs Act, which is expected later in 2026.

The consultation focuses on five areas:

• algorithmic management and AI at work;
• occupational health and safety;
• workers’ rights in subcontracting chains;
• fair digital and green transitions;
• enforcement and the role of social partners.

The AI-related proposals are particularly significant. They address transparency and human oversight of automated decisions, as well as protection against excessive workplace monitoring.

Recommended actions

Employers and HR/compliance teams should:

• Monitor developments relating to the Quality Jobs Act as a major upcoming EU initiative, given its likely impact on AI/algorithmic management, workplace heat and psychosocial risk rules, and subcontracting-chain liability.
• Review the use of AI in recruitment, scheduling, performance monitoring and employment decisions.
• Consider whether existing governance and human oversight mechanisms are adequate.
• Consider participating in the consultation before 28 September 2026, where relevant to the organisation.

European Commission renews focus on the future of work

Date: 22 July 2026

The European Commission has renewed its commitment to the European Pillar of Social Rights and identified several areas requiring further EU-level action.

One of the key priorities is harnessing AI for the future of work, including establishing a new high-level group to examine AI’s impact on the labour market.

The Commission also confirmed that a Quality Jobs Act will follow later in 2026, along with new indicators to measure job quality across the EU.

For employers, this reinforces the importance of treating AI governance as an emerging employment-law issue, not only a technology or data-protection issue.

Cross-border labour inspections: stronger cooperation between European authorities

Date: 21 July 2026

The Lithuanian State Labour Inspectorate participated in a European Labour Authority-coordinated inspection initiative involving authorities from eight European countries.

The inspections covered undeclared work, wage payments, posted workers’ rights, and other EU employment requirements. In total, 26 company sites were inspected and more than 150 workers interviewed.

The initiative demonstrates the growing capacity of national labour authorities to coordinate cross-border investigations.

Recommended actions

Employers using posted workers or cross-border staffing arrangements should:

• Keep posted-worker documentation, wage records and social insurance information accurate and readily available.
• Review compliance where third-country nationals are assigned to work in other EU jurisdictions.
• Treat recurring wage complaints as a potential regulatory risk, particularly where cross-border arrangements are involved.

Lithuania’s priorities for the EU employment agenda

Date: 6 July 2026

At the informal EPSCO Council meeting, Lithuania highlighted three priorities for the EU social agenda:

• continued focus on poverty reduction;
• ensuring that simplification of labour-market regulation does not weaken worker protection;
• improving labour-market inclusion for people with disabilities.

These priorities provide further context for the direction of EU employment policy and upcoming regulatory initiatives.

What should employers take away?

Recent developments point to several practical areas that deserve closer attention:

1. Employment disputes are increasing.
Wage issues and workplace conduct remain major sources of employment risk.

2. Cross-border work requires more than a well-drafted contract.
The actual economic and social circumstances of the employment relationship can determine which law applies.

3. AI is becoming an employment-law issue.
Employers should start considering governance, transparency and human oversight where AI is used to manage or evaluate workers.

4. Labour enforcement is becoming increasingly coordinated.
Cross-border employment arrangements can attract attention from multiple national authorities.

5. Proactive compliance matters.
Regular reviews of contracts, HR policies, payroll, workplace practices and employment-related technology can help identify risks before they become disputes or regulatory issues.

Need assistance?

Employment law is evolving rapidly, with new legislative requirements, court judgments and regulatory expectations affecting employers across sectors.

Our Employment & Migration Law specialists can assist with:

• Employment law compliance reviews and Labour Code gap assessments
• Employment contracts, internal policies and HR documentation
• Workplace investigations and disciplinary procedures
• Collective redundancies, restructurings and business transfers
• Executive employment, termination strategies and settlement agreements
• Working time, remuneration and employee benefits compliance
• Occupational health and safety obligations
• Employment disputes, regulatory investigations and labour inspections
• Employment-related GDPR and workplace privacy matters.

If you have any questions regarding the developments covered in this edition or would like to assess your organisation’s employment law compliance, our team will be happy to assist you.