The Supreme Court of Lithuania ruled on reimbursement to the employer of overcompensation for unused annual leave

05/12/2019

The Supreme Court of Lithuania (SCL) has clarified when overcompensation for unused annual leave must not be refunded upon termination of the employment contract. The Judicial Panel of the Division of Civil Cases of the SCL decided, the error in the labor accounting system did not constitute an accounting error and that there was no reason to claim reimbursement of overpaid annual leave from the employee.

In the order of 2019 November 21, the Supreme Court of Lithuania addressed the issue of the reimbursement of overpaid leave from an employee where such overpayment was due to an error in the work accounting system.

In this case, the employee was mistakenly assigned the wrong type of leave, i.e. although the employee was on parental leave, she was classified as a holiday accrual, although in practice the employee was not required to accumulate leave for this period. This implied that the employees had been wrongly calculated and compensated for unused annual leave.

The Supreme Court of Lithuania pointed out that, in addressing the issue of the repayment of wages or other payments related to wages without justification, a distinction must be drawn between an error in the application of the law and an accounting error. In the case-law of the Supreme Court of Lithuania, the notion of an accounting mistake is interpreted as a “calculation error” that may be due to an arithmetic calculation error or other factors related to related to payroll accounting and payout. The court stated that in this case, the employer had to prove that there had been an accounting error, and not an error in application of the law.

The Supreme Court of Lithuania ruled in this case that assigning a misclassification cannot be considered an accounting error in itself, because the employer has failed to demonstrate when the human factor influenced the error (in the design of the accounting software itself or in its use, i.e. in the marking of the relevant sites), whether the error is of a technical nature or is not a deliberate mistake by any entity (employee) resulting from the misapplication of the law.