RegRally Insights: Labour and migration law – May 2026

Welcome to the May 2026 edition of RegRally Insights: Labour and Migration Law, where we examine the most recent legislative proposals, court developments, and enforcement trends shaping employment relations across Lithuania and the wider EU.

This month’s update highlights a clear regulatory direction: stronger employee protections, increased scrutiny of employer practices, and a growing emphasis on substance over form in labour arrangements. From proposed Labour Code reforms and the implementation of pay transparency to landmark court rulings on liability, harassment, and workplace practices, both regulators and courts are actively redefining compliance expectations for employers.

At the same time, enforcement authorities continue to focus on practical workplace issues—ranging from misclassification of per diem and business trip expenses to labour dispute procedures and construction site compliance obligations—underscoring the importance of properly structured HR, payroll, and governance frameworks.
For employers, the key message is consistent: compliance in 2026 is no longer about formal documentation alone, but about ensuring that day-to-day practices align with the legal and factual substance of employment relationships.

Lithuania Proposes Major Labour Code Reform from 1 November 2026

A package of amendments to the Lithuanian Labour Code, currently under review by the Seimas of the Republic of Lithuania and expected to enter into force on 1 November 2026, would introduce significant changes to employment relations.

Key proposed changes and practical impact: https://ecovis.lt/lithuania-proposes-major-labour-code-reform-from-1-november-2026/

Lithuania Advances Implementation of EU Pay Transparency Directive

Lithuania has transposed the EU Pay Transparency Directive into national law, introducing a comprehensive framework to strengthen equal pay enforcement, salary transparency, and employee rights.

The Directive came into force on 7 June 2026.

The requirements of the Directive are expected to apply in the near future; all employers should start preparing without delay. It is important to emphasise that the obligation to have a transparent and structured pay system applies regardless of company size. Employers are encouraged to assess their current practices and ensure alignment with the upcoming requirements, particularly those related to pay transparency and equal pay for work of equal value.

Key recommendations include:
• Review the recruitment process to ensure compliance with transparency requirements during hiring.
• Conduct an assessment of the gender pay gap within the organisation.
• Review or develop a pay structure system if one is not already in place, taking into account the upcoming requirements.
• Prepare clear information for employees regarding how pay is determined and how the remuneration system operates.
• Review confidentiality policies and agreements to ensure they are aligned with transparency obligations.

More on the EU Pay Transparency Directive:
https://ecovis.lt/implementation-of-the-eu-pay-transparency-directive-in-lithuania/
https://ecovis.lt/es-darbo-uzmokescio-skaidrumo-direktyvos-igyvendinimas-lietuvoje-planai-ir-kaip-pasiruosti/

Lithuanian Supreme Court: Limits on “Damage Compensation” Agreements in Employment Relations

The Supreme Court of Lithuania clarified how agreements between employers and employees on compensation for the employer’s damages must be assessed under labour law.

Case background

An employee received a salary higher than agreed in the employment contract but, under a separate agreement, undertook to repay the “overpaid” amounts to the employer over time.

Key legal findings

The Court held that such arrangements must be carefully assessed under mandatory labour law rules:
• Novation requirements: a valid novation requires clear identification of both the original and the new obligation, as well as clear intent to replace the original obligation.
• Labour law priority: agreements arising from employment relations must comply with mandatory provisions of the Labour Code.
• Employee protection principle: courts must assess whether the agreement effectively imposes liability on the employee in a way that worsens their position compared to statutory protections.

Core takeaway

Even if an employee agrees to repay amounts to an employer, such agreements cannot circumvent labour law safeguards on employee liability and protection standards. The actual substance of the arrangement prevails over its contractual form.

• Employers should clearly identify the legal basis of the employee’s obligation before concluding any agreement;
• Employers must ensure that any agreement fully complies with mandatory labour law provisions;
• Agreements cannot worsen the employee’s position compared to the protections guaranteed under the Labour Code. This includes compliance with statutory limits on employee liability and ensuring that the employee’s rights are not restricted.

Source: https://liteko.teismai.lt/viesasprendimupaieska/tekstas.aspx?id=db5bd9da-7a99-430a-a395-a63c6e1aeaab

CJEU Clarifies the Legal Concept of Psychological Harassment

The Court of Justice of the European Union (CJEU) issued important guidance on what legally constitutes psychological harassment in the workplace.

Core definition

Psychological harassment involves improper conduct that:
• takes the form of behaviour, spoken or written language, gestures, or other acts;
• occurs over a period of time;
• is repetitive or systematic rather than accidental;
• is intentional; and
• has the effect of undermining a person’s personality, dignity, or physical/psychological integrity.

Collective harassment

The Court confirmed that harassment may be committed collectively by several persons, but the alleged victim must provide prima facie evidence of:
• each person’s individual conduct; and
• some level of coordination or concerted action between them.

Mere failure to intervene against another person’s abusive conduct does not automatically amount to harassment.

Passive conduct can qualify

The CJEU also confirmed that harassment is not limited to overt acts. It may include passive behaviour, such as:
• deliberate exclusion;
• refusal to communicate;
• ignoring a person;
• intentional isolation at work.

However, passive conduct must still be intentional, repeated over time, and harmful to dignity or integrity.

Practical significance

The ruling confirms that workplace harassment can arise not only from aggressive acts, but also from systematic exclusion, silence, or marginalisation, where intentional and sustained.

• Employers should focus on patterns and intent, not isolated incidents. Psychological harassment requires repetitive, systematic, and intentional conduct over time. Employers should ensure policies and investigations assess behaviour as a pattern, not one-off events.
• Employers should include passive conduct (e.g., exclusion, silence) in policies. Harassment can arise from intentional marginalisation, such as ignoring or isolating an employee. Policies should clearly address both active and passive behaviours that undermine dignity.
• Strengthen documentation and early reporting. Because harassment is established through repetition over time, employers should encourage early reporting and ensure proper documentation (timelines, frequency, evidence) to identify and address issues before they escalate.

Source: https://infocuria.curia.europa.eu/tabs/document/C/2023/C-0343-23-00000000PV-01-P-01/ARRET/319276-EN-1-html

Lithuania Supreme Administrative Court: Developer Liable for Monitoring Workers’ Identification in Construction Sites

The Supreme Administrative Court of Lithuania clarified the scope of a developer’s obligations under Article 221(4) of the Construction Law concerning the monitoring of workers at construction sites.

Key ruling
The Court held that the developer’s duty to ensure proper worker identification is independent of employment relationships and applies regardless of whether workers are employed or insured by the developer.

Specifically:
• Developers must ensure that all persons performing construction work have valid employee identification codes.
• This obligation applies regardless of who employs or insures the workers.
• Liability cannot be avoided by arguing that workers are engaged by contractors or third parties.

Delegation of responsibility
The Court confirmed that:

• the supervision duty arises directly from law;
• it may be transferred to a contractor only through a clear and explicit delegation agreement;
• in the absence of such delegation, the developer remains fully responsible.

Practical implication
The ruling reinforces a strict compliance standard in construction projects: developers must implement effective site-level controls over worker identification unless they have formally and explicitly transferred that responsibility to a contractor.

• Companies should establish clear internal procedures to verify that all individuals entering the construction site have valid identification codes.
• Regular on-site inspections and documented compliance checks are essential.
• Companies should ensure that project managers and site supervisors are properly trained and informed about these legal requirements.

Source: https://liteko.teismai.lt/viesasprendimupaieska/tekstas.aspx?id=dcf9778a-2cb9-4d68-bf2a-a6dea9dccf19

Lithuania: Authorities Warn Against Misuse of One-Day Business Trips and Per Diem Payments

The State Labour Inspectorate (VDI) and the State Tax Inspectorate (VMI) have clarified the correct application of per diem allowances under the Labour Code and warned against their use as a substitute for abolished mobile work compensation.

Legal framework

Under the Labour Code, per diems are payable only when:

a business trip within Lithuania lasts longer than one working day (shift), or

an employee is sent on a business trip abroad.

Key issue identified

Following the abolition of mobile work compensation in 2023, some employers have begun:

• formally designating one-day domestic work assignments as “business trips”, and
• paying per diems instead of salary-related compensation.

Authorities consider this practice problematic.

Why is this practice not acceptable

VDI and VMI highlight three main concerns:
• Loss of employee protections:
  Per diems are not wages, are not taxed, and are excluded from average salary calculations, which can reduce:
  holiday pay
  severance payments
  sickness, parental, unemployment benefits
  pension contributions

• Shift of fiscal burden:
  The structure may artificially reduce taxable income and social contributions, effectively shifting costs to the state social security system.

• Established case law principle:
  The Supreme Court of Lithuania has consistently held that mobile work cannot be artificially reclassified as business travel if mobility is inherent in the job function defined in the employment contract.

Employers should:
• Ensure that business trips are assigned only in cases that genuinely meet the criteria set out in the Labour Code of the Republic of Lithuania.
• Properly define the nature of work in employment contracts, especially where work is inherently mobile or performed in different locations.
• Avoid replacing former compensation schemes with per diems where the substance of the work has not changed.
• Consider increasing base salary or introducing taxable supplements, bonuses, or allowances that qualify as remuneration and contribute to employees’ social security coverage.
• Regularly review internal policies to ensure compliance with guidance provided by the State Labour Inspectorate of Lithuania and the State Tax Inspectorate of Lithuania.

Taking a transparent and compliant approach not only reduces legal and tax risks but also helps ensure fair and sustainable working conditions for employees.

Source: https://vdi.lrv.lt/lt/naujienos/vienos-dienos-komandiruote-lietuvoje-ir-dienpinigiai-kur-baigiasi-teise-ir-prasideda-piktnaudziavimas-HID

Lithuania: Guidance on Where to Report Labour Law Issues (VDI vs Labour Disputes Commission)

The State Labour Inspectorate (Valstybinė darbo inspekcija, VDI) has clarified how employees and employers should choose the appropriate channel for addressing potential labour law violations or disputes.

When to contact VDI

VDI handles supervisory and enforcement matters related to possible breaches of labour law, including:
• undeclared or illegal work
• violations of working time and rest requirements
• excessive working hours
• failure to provide wage-related information
• psychological harassment
• unsafe working conditions

Complaints can be submitted electronically, by email, post, or in person. Reporting persons’ confidentiality is protected, and anonymous complaints are also possible (though may limit investigation effectiveness).

Where violations are confirmed, VDI may:
• require remediation by the employer
• impose administrative liability

When to apply to the Labour Disputes Commission
Individual employment disputes concerning rights are handled by the Darbo ginčų komisija, including:

• unpaid wages
• unlawful dismissal
• disputes over annual leave
• changes to employment contract terms
• compensation for damages

This mechanism is:

• • free of charge
  • relatively fast (typically within 1 month)
    • subject to strict limitation periods:
    • 1 month for dismissal/suspension disputes
    • 3 months for other claims

VDI consultations

• VDI also provides

pre-dispute consultations

via phone, email, or official channels to help parties:
• assess legal situations
• understand obligations
• select the correct procedural route

Key takeaway and our recommendations

Lithuanian labour dispute resolution is dual-track:
• VDI → enforcement and compliance control
• Labour Disputes Commission → individual rights disputes

To ensure effective handling of labour law issues and avoid unnecessary disputes, both employers and employees are encouraged to adopt a proactive, informed approach.

• Act in a timely manner. Be mindful of statutory deadlines, especially in cases related to dismissal or financial claims.
• Ensure proper documentation. Clearly documented facts, agreements, and evidence significantly improve the chances of a smooth, effective resolution.
• Promote transparent communication. Open dialogue between employers and employees can often resolve issues without the need for formal proceedings.

Taking the right approach not only helps resolve issues more efficiently but also helps build a compliant, transparent, and sustainable working environment.

Source: https://vdi.lrv.lt/lt/naujienos/skundai-konsultacijos-ir-gincai-kada-kuris-kelias-tinkamiausias-myh/

Collective Labour Disputes in Lithuania: Procedure, Deadlines, and Resolution Mechanism

Collective labour disputes over rights arise between employee representatives and employers regarding compliance with labour law or collective agreements, most commonly regarding working conditions and contractual obligations. In Lithuania, such disputes are primarily resolved by the Labour Disputes Commission (DGK) of the State Labour Inspectorate, which provides a fast, free administrative dispute-resolution mechanism.

Strict procedural deadlines apply (generally three months, one month for collective agreement breaches), and missing them may bar the claim.
Proceedings are free of charge, and the Commission may order remedies and impose fines up to EUR 3,000. Its decisions can be challenged in court within one month.

Overall, the system is designed to ensure efficient, accessible enforcement of labour rights, encourage early resolution, and maintain social dialogue between parties.

To ensure effective handling of collective labour disputes on rights and to avoid escalation, the following steps are recommended:

• Act promptly and monitor deadlines. Applications to the Labour Disputes Commission of Lithuania must be submitted within the prescribed time limits, particularly in cases involving collective agreements.
• Assess the nature of the dispute carefully. Determine whether the issue concerns the application of existing rights (appropriate for the DGK) or other types of collective disputes that may fall under different procedures.
• Maintain proper documentation. Keep clear records of collective agreements, internal policies, and communications, as these are essential when substantiating claims.
• Promote constructive dialogue. Early communication between employers and employee representatives can often help resolve disagreements before formal proceedings are initiated.
• Prepare thoroughly for proceedings. Clearly formulated claims and supporting evidence increase the likelihood of an efficient and favourable outcome.
• Consider legal and procedural implications. Decisions of the DGK may include obligations to remedy violations or financial penalties, and may be further reviewed by courts if challenged.

A proactive, well-prepared approach helps ensure faster dispute resolution, reduces legal risks, and contributes to stable and transparent labour relations.

Source: https://vdi.lrv.lt/lt/naujienos/dgk-kolektyviniu-darbo-gincu-del-teises-nagrinejimas-ka-butina-zinoti-7tE/