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According to the National Employment Service’s study on foreign workers, at the end of 2023, there were a total of 87,661 work permits in force, a figure that has increased significantly in the last two years, with only 34,000 valid permits at the end of 2021 and slightly more than 51,000 in 2022.

 In this labor market environment, the Act on General Rules for the Admission and Right of Residence of Third-Country Nationals came into force at the beginning of 2024, which is much more complex than the previous legislation and addresses the residence and employment of third-country nationals in a single streamlined law.

The New Law

The preamble to the act clearly states that it tightens and clarifies the legal titles and conditions of residence and employment of foreign nationals in Hungary. All third-country nationals may reside in Hungary only as long as and in a manner permitted by the Hungarian state, and, as long as there is a Hungarian workforce, jobs must be filled by Hungarian workers. 

The legislation introduces new concepts and distinguishes between separate permanent residence titles. It differentiates long-term residence for business or investment purposes (as a guest investor), for employment purposes as a migrant worker (e.g., holding a residence permit issued for the purpose of taking up employment for the implementation of an investment), for the purpose of employment as a highly qualified worker or as an experienced professional in a field of particular importance for the country (e.g., a holder of a Hungarian card, the holder of an EU Blue Card, or an intra-corporate transferee), or for any other reason specified by law (e.g., for study purposes, for medical treatment, or for family reunification).

The time limit for the procedural administration of these residence permits is 21 days from the submission of a complete application. However, the time period for correcting deficiencies (e.g., submitting missing documents) and for carrying out various other procedural actions is not included in this time period. Nevertheless, the new time limit is significantly shorter than in the previous procedure, considering that procedures were at least two months long in the past.

Perhaps one of the most important changes compared to previous legislation is a more vigorous crackdown on illegal migration as well as tightening up rules on asylum seekers. In addition, regulated and rigorous labor market support for large investments is also implemented.

Golden Visa Program

The main condition for obtaining a residence permit for a guest investor, in addition to meeting other, mainly technical and (national) security requirements, is that the guest investor makes one of the following investments in Hungary: (a) the acquisition of a share in an investment fund issued by a real estate fund registered by the Hungarian National Bank in the amount of at least EUR 250,000, (b) acquiring the ownership interest over a property (a residential property with a value of at least EUR 500,000 located and duly registered in the territory of Hungary and free and clear of all liens, claims, and encumbrances with respect to properties acquired after January 1, 2025), or (c) a financial donation in the amount of at least EUR 1 million for a purpose of educational, scientific research, or artistic creation activities to a higher education institution maintained by a public trust with a public-service mission.

The details of the scheme that requires an investment of EUR 250,000 are still being finalized at the time of writing as the legislator and the relevant certification bodies still have a lot of work to do to get the product on the market. In addition, the fact that the residential option will only be available as of January 1, 2025, means that third-country investors will have to wait. They might also face FDI regulations still in force when the programs are in full swing. If the transfer involves real estate indispensable for the exercise of activities in sectors specified in the related government decree also determining the term for the foreign investor (i.e., a national of a state outside the European Union or the European Economic Area) acquiring such real estate, a notification to the minister and approval of the notification might also be required.

Conclusion

Some of the goals set (e.g., creating a clearer and more comprehensible legal environment, and reducing the burden on the authorities) may be achieved by the introduction of the new regulation, but it is questionable whether Hungary will not lose its competitive advantage in the region in the competition for guest workers.

By Ilona Boros, Partner, Szabo Kelemen & Partners Andersen Attorneys

This article was originally published in Issue 11.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

In recent years, accelerated by the COVID-19 crisis, the Austrian landscape of work has shifted, with remote working becoming a staple in the modern employment environment. In Austria, this development is reflected in the so-called 2021 “Home Office Act” which formalizes fundamental aspects of labor, tax, and social security law. However, the Home Office Act applies only to work performed from home.

Although the term “home” is to be interpreted broadly, co-working spaces or other public places – for instance, parks, coffee houses, and others such as hotels – are not covered, leading to legal uncertainty. To address several issues, the new Mobile Working Act was passed and will come into force on January 1, 2025, in response to the growing demand for flexibility. The following provides a brief overview of mobile working as well as a few of the legal pitfalls that employers and employees should consider when “working from anywhere.”

Definition of Mobile Work

Contrary to the already existing Home Office Act, the new Mobile Working Act creates a framework for “teleworking.” According to the new act’s legal definition, teleworking is when employees regularly perform work using communication technology either at their home or at another location of their choice outside the employer’s premises – including public spaces such as parks, coffee houses, co-working spaces, hotel rooms, public means of transportation, libraries, open-air swimming pools, resorts, etc. Such flexibility does not only raise questions regarding social security issues in particular but also imposes data security and data protection risks upon the employer. Thus, not pushing the legal limits and excluding certain places to work may be appropriate.

Right to Mobile Working

Neither employees nor employers have the right to mobile working – nor does either side have the right to unilaterally enforce this flexibility. Similar to the previous legal situation, working outside of the employer’s premises must be strictly voluntary, with an agreement between the employer and the employee being imperative and setting out the conditions of mobile working. This agreement does not have to be in writing unless otherwise specified in the applicable collective agreement or employment contract. However, for evidentiary purposes, particularly with regard to data protection and data security, the agreement should appear in writing.

Conditions of Mobile Working

In addition to rules on the provision of equipment such as laptops and mobile phones, the agreement should especially include provisions on the exclusion of certain remote working places, the termination of mobile working, the recording of working hours, duration and extent of mobile working, and the reimbursement of associated costs – however, tax rules currently in force for working from home, according to which up to EUR 300 per year can be paid out free of any taxes and deductions, are to be extended to mobile working.

Social Security Aspects – Pitfall for Employees

The new Mobile Working Act distinguishes between “telework in the narrower sense” and “telework in the broader sense.” This distinction has a significant impact on employees and their accident insurance coverage. For telework in the narrower sense, which includes the main or secondary residence of the employee, the home of close relatives, or co-working spaces rented by the employee, accident insurance coverage applies to the work performance and to the commute to these work locations. All other places are considered as telework in the broader sense and employees are only covered by accident insurance while they are actually working, but not while they are traveling to and from these places. An accident would be categorized as a “leisure accident,” which, among other issues, can have significant financial impacts on the employee.

Data Protection and Security – Pitfall for Employers

Privacy regulations apply at all times for teleworking as well – employers bear the risk of privacy violations and remain liable for their employees even when they “work from anywhere.” Since mobile working can also take place in public places, unless contractually excluded, special attention needs to be paid to data protection and security. Guidelines for the safe handling of data as well as technical and organizational measures that can guarantee data security at all times during teleworking should be implemented – or, if already existing, updated – as teleworkers usually do not have access to lockable rooms, unlike those who work from home.

Summary

Even if the new law meets the demand for flexibility and also reflects the situation as it actually is, there are still some legal pitfalls for employees and employers that should be prevented by an agreement wherever possible.

By Stephan Nitzl, Partner, DLA Piper

This article was originally published in Issue 11.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The topic of violence and harassment at work has become increasingly important in Greek employment law. In recent years, Greece has made significant steps by adopting legislative measures aiming at ensuring an equal and healthy working environment for all employees. However, the new framework raises certain complex legal concerns regarding the implementation of the legislation on violence and harassment by the employer.  This article provides an overview of these issues within the context of Greek employment law.

Legal Framework on Violence and Harassment in Workplaces

Greek law, namely Law 4808/2021, as specified by Decision No. 82063/22-10-2021 of the Minister of Labor and Social Affairs and Decision DIDA/F.64/946/858 of the Minister of Interior, has introduced significant provisions to combat violence and harassment in the workplace.

The law is aligned with the International Labor Organization’s (ILO) Convention No. 190 and provides comprehensive protection for employees by prohibiting all forms of violence and harassment, including physical and psychological violence, mobbing, gender-based violence, and harassment and sexual harassment.

Key Provisions of Law 4808/2021

One of the core elements of the law is the obligation placed on employers to take active measures to prevent and address incidents of harassment and violence. Namely, employers with more than 20 employees are obliged to adopt policies to prevent and combat work-related violence and harassment and establish internal procedures for receiving and processing complaints. The relevant policies must take a zero-tolerance approach and set out the rights and obligations of employees and employers in preventing and responding to relevant incidents or behavior. The policies may be part of or accompanied by a policy to promote equal opportunities and combat discrimination.

According to the provisions of Law 4808/2021, a person aggrieved by an incident of harassment at work has the right, apart from judicial protection and filing the complaint internally, to report the incident to the Ombudsman and request for an employment dispute procedure with the Labor Inspectorate. Law 4808/2021 in fact establishes an independent department with the Labor Inspection Body (SEPE), which monitors the progress of complaints and prepares annual reports on complaints of violence and harassment.

Victims of work-related violence and harassment also have the right to leave the workplace for a reasonable period of time, without adverse consequences, if there is an imminent and serious danger to their life, health, or safety.

Confidentiality and Data Protection – Adopting Measures in Harassment Cases

Internal complaints of harassment or violence should be investigated with impartiality, confidentiality, and compliance with GDPR principles. Confidentiality is key when handling cases of violence and harassment at work, as it ensures that victims and witnesses feel secure when reporting or testifying on misconduct. However, ensuring confidentiality within internal complaints processes presents several challenges for employers in Greece. The law also provides that the employer is required to take the necessary appropriate and proportionate measures on a case-by-case basis against the person concerned in order to prevent and not allow the recurrence of similar incidents or behavior. Such measures may include compliance recommendations, changing their position, hours, place, or manner of work, or terminating the employment or cooperation relationship, subject to not abusing rights and disciplinary measures.

Disciplinary measures can be taken if the employer has in place a work regulation providing for a disciplinary legal framework. One of the basic provisions of the disciplinary law is the right of access of the employee to the data collected. It is argued that in cases of harassment, the confidentiality principle prevails, and the rights of the accused may be restricted.

Reverse of the Burden of Proof in Judicial Procedures

One of the most significant changes introduced by Law 4808/2021 is the reverse of the burden of proof to the employer in cases of violence or harassment at work. If employers cannot prove that they acted responsibly in preventing harassment, they may face significant liability in terms of monetary claims and labor disputes.

Conclusion

Greek employment law has made significant progress in addressing workplace violence and harassment, with Law 4808/2021 offering comprehensive protections for employees. However, this evolving legal landscape brings new challenges related to confidentiality, data protection under GDPR, and the reverse of the burden of proof.

By adopting best practices and procedures, offering training, and ensuring that proper policies are in place, employers in Greece will be able to address the legal complexities and create a safer, more respectful workplace for all employees.

By Betty Smyrniou, Head of Labor, and Danai Manousopoulou, Junior Associate, Bahas, Gramatidis & Partners

This article was originally published in Issue 11.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Non-competition (non-compete) clauses came into the spotlight this year as the US Federal Trade Commission (FTC) decided to impose a broad ban on their use. The underlying motive for this is the perception that the non-compete clauses, in the words of FTC Chair Lina Khan, keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new start-ups that would be created a year once non-competes are banned. However, this rule quickly faced challenges, including a lawsuit from the US Chamber of Commerce, which argued that it was unfounded and that the FTC exceeded its authority.

Non-compete clauses have enabled companies to protect their competitive advantages by preventing the “leakage” of valuable information through (former) employees. Employees often obtain specific knowledge and skills while working for a company, and businesses frequently invest in developing these capabilities. To incentivize and justify these investments in its employees and trust that companies vest in their employees, non-compete clauses serve as contractual protection for the employer and its business interests.

The Serbian legal system also recognizes non-compete clauses under its Labor Act. These clauses are typically part of the employment agreement but can also be subject to an independent contract. Many factors must be considered when incorporating this clause into an employment agreement, as it can have legal implications during and after the employment relationship.

Non-compete clauses specify the activities (works) that an employee cannot perform on their own behalf or for their own account, nor on behalf and account of another legal or natural person, without their employer’s consent. Additionally, non-competes can only be established if the employee gains new, important technological knowledge, access to a broad network of business partners, or access to critical information and secrets. Another essential element is the territory of application.

Non-competes can be effective during the employment period but may also extend beyond the termination of employment for a maximum of two years. If the non-compete survives the employment, the (ex) employee is entitled to compensation.

Therefore, to have an enforceable non-compete per Serbian law, it must meet the following conditions: (a) it is agreed between the employer and the employee, (b) it sets out activities that the employee cannot work without the employer’s consent, (c) the employee has access to new, technological knowledge, access to a wide network of business partners, as well as access to important information and secrets, (d) it has a defined territory, and (e) it includes compensation in case of surviving non-competes.

Although the Serbian non-compete rules seem relatively straightforward, they raise many questions. For instance, can the employer broadly prohibit “any activity,” or must the specific activities be carefully enlisted? Regarding territorial scope, can an employer stipulate worldwide applicability and use general terms such as “territories where the employer conducts business,” or must specific countries be listed? The law does not provide clear guidelines, and case law has yet to develop clear answers.

Another issue is compensation in case of surviving non-compete. The law only refers to an “agreed amount” without setting any additional requirements or rules on the compensation. In that situation, it is not uncommon for employees in Serbia (the weaker side in negotiating employment contracts) to agree to relatively low amounts, such as EUR 100 or even less. In Serbia, the available case law is limited in this matter and there is no generally accepted approach to non-compete compensation. By looking at international practice, we observe different models.

There are jurisdictions where the law does not mandate compensation (e.g., Switzerland), and regular salary may be considered as compensation for the non-compete. However, in the Swiss case, the courts are cautious about when and how they enforce non-compete clauses.

Other jurisdictions provide more clarity. German law prescribes remuneration of 50% of an employee’s salary. Overall, German law offers more detailed regulations on non-compete clauses.

Given Serbian courts’ general pro-employee stance, the general principles of equality in contracts, and Serbian rules on damages, employers who wish to enforce a non-compete should consider offering reasonable compensation, such as the German (50%) or Slovenian (one-third) model. Nevertheless, the law does not prohibit offering less, and such practice and enforceability could be achieved.

Non-compete clauses are valuable in protecting an employer’s interests and preventing conflicts of interest. However, it is essential to balance limiting employees’ labor rights and safeguarding the employer’s interests. When drafting such clauses, diligent care is needed to tailor the agreement to the specific circumstances. With proper drafting, enforcing a non-compete clause should not pose significant challenges.

By Nemanja Sladakovic, Head of Labor, and Marko Jovic, Associate, Gecic Law

This article was originally published in Issue 11.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Competition clauses are found in a number of European jurisdictions. Slovak legislation on post-employment non-compete clauses is characterized by: the obligation to agree on a non-compete clause in an employment contract, the possibility to agree on it only with a certain type of employee, time limitation, and remuneration.

Competition Clauses in an Employment Contract

After the amendment of the Labor Code in 2022, it is possible to conclude a simple employment contract with an employee with basic details and only inform the employee of other terms and conditions of employment by means of a so-called “information letter.” Within the limits of the Labor Code, the content of the information letter can be unilaterally changed and the employee’s consent is not required for the change. Many employers make use of the possibility of combining an employment contract with an information letter. However, the competition clause must be agreed upon in the employment contract with the employee directly – it is not sufficient to include it in the information sheet. 

Acquired Knowledge

A competition clause cannot be concluded with any employee – it can only be with those who, during the course of employment, have the opportunity to acquire information or knowledge that is not normally available, and the use of which could cause the employer substantial detriment.

Time Limitation and Remuneration

The maximum duration of a non-compete clause is one year from the end of employment, but it can be agreed for a shorter period of time (there is no lower limit). The employer is obliged to provide the employee with reasonable monetary compensation of at least 50% of the employee’s average monthly earnings for each month of performance of the obligation. Compensation is normally payable on the employer’s monthly wages payday, but the employer and the employee may agree otherwise.

Withdrawal

According to the Labor Code, withdrawal by the employer is only possible during the duration of the employee’s employment.

There is little case law in Slovakia dealing with the competition clause or its withdrawal. However, a 2023 judgment of the County Court in Bratislava confirmed that an employer is entitled to withdraw from a non-compete clause at any time during the employment relationship, even on the last day of the employment relationship, and, importantly, without giving any reason. In the dispute, the employee challenged the invalidity of such withdrawal for failure to state a reason, for breach of good morals, and for breach of the principle of legal certainty. However, a competition clause is meant to allow an employer to protect itself against possible leaks of information to competitors. It is up to the employer whether or not to make use of this tool. Indeed, from an employee’s point of view, the possibility of resigning without giving a reason, even on the last day of their employment, may seem unfair if the employee, knowing of the existence of the competition clause, has adapted their search for a new job accordingly. The court held that the possibility to withdraw from the non-compete clause during the duration of the employment relationship could not be regarded as an abuse of rights. Interestingly, the employee also argued and referred to the case law of the Supreme Court of the Czech Republic, arguing that the withdrawal from the competition clause was invalid as it did not contain a reason for withdrawal. The County Court in Bratislava notes that it is not necessary to take into account the decisions of authorities of other states. The decision of the County Court in Bratislava is in accordance with the ruling of the Constitutional Court of the Slovak Republic No. 1/2012 where it stated that a competition clause can be withdrawn without a reason.

In contrast stands practice in the Czech Republic – e.g., a decision of the Supreme Court of the Czech Republic from 2020, in which a contract clause for withdrawal stated the employer could  “if, in its discretion, it concludes that, in view of the value of the information, knowledge of working and technological procedures acquired by the employee in the course of employment with the employer or otherwise, it would not be reasonable or expedient for the employer to enforce the agreed non-compete against the employee.” The Czech court held that the agreed clause and the subsequent withdrawal based on it were absolutely void as contrary to law.          

Conclusion

Competition clauses must be agreed upon in the employment contract and meet the legal requirements. It cannot be agreed gratuitously. In the Slovak Republic, competition clauses are primarily meant to protect the employer against competitors, and the employer is entitled to withdraw from the competition clause at any time during the employment relationship without giving any reason. In practice, it is not advisable to state a reason for withdrawal even if one exists.

By Jana Sapakova, Partner, Eversheds Sutherland

This article was originally published in Issue 11.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The Transfer of Undertakings (Protection of Employment) Regulations (TUPE Regulations) were incorporated in their current form into the laws of the European Union (EU) with Directive 2001/23/EC of March 12, 2001 (TUPE Directive), with Croatia ensuring its transposition in its legal system via the Labor Act (albeit with a few missed opportunities). Although TUPE Regulations are relatively simple to comprehend, with the main goal being the protection of employee rights in the event of a transfer of an undertaking, business, or part of an undertaking or business as a result of a legal transfer or merger, their application in practice raises many questions to which statutory provisions of Croatian law do not provide an answer.

For example, there is no provision answering the question of how long the new employer must uphold the rights of transferring employees after the transfer (the TUPE Directive envisages the possibility for member states to regulate this question), nor answering the question of employees’ right to object to the transfer of their employment. Therefore, court practice of the ECJ, and Croatian courts especially, is essential for understanding all the fine details of TUPE Regulations and for finding the answers to these questions.

With this in mind, on May 4, 2023, the Croatian Supreme Court adopted a decision in a revision procedure regarding the transfer of employees under TUPE Regulations. A civil law revision is a court procedure in which the Supreme Court has the power to answer questions important for the development of law through judicial practice, especially when there is no court practice related to a certain question, or if the practice differs between courts. As such, it is always interesting to monitor the Supreme Court’s revision decisions. In this case, the question was raised as to whether employees who are transferred to a new employer based on the fact that an undertaking or part of an undertaking in which they are employed is transferred under TUPE Regulations must consent to the transfer of their employment contract (i.e., whether the transferring employees have a right to object to the transfer of their employment to the new employer).

Interestingly, the Supreme Court made a differentiation between situations in which the transfer of an undertaking or part of an undertaking occurs in a way that (i) the original employer (i.e., the transferring employer) continues to operate after the transfer and (ii) the original employer ceases to exist.

The Supreme Court argued that in situations where the original employer ceases to operate, the transferred employees do not have a legal interest to object to the transfer and therefore cannot object to the transfer of their employment. However, if the original employer continues to operate, its employees have the right to object to the transfer of their employment contracts to the new employer, irrespective of their legal interest to object to the transfer. In other words, the employee can have a legal interest/reason to object to the transfer, but it is not a necessary condition. The court argued that employees cannot influence the decision of the transfer of the undertaking or part of the undertaking in which they are employed, since this is (in most cases) an autonomous decision of the original employer. However, employees have the right to choose their employer. Therefore, when the original employer continues to operate, its employees have the right to stay employed with the original employer. This opinion is also in line with the court practice of the ECJ. Furthermore, the Supreme Court indirectly confirmed the stance that when transferring employees object to the transfer of their employment, they lose their protection under the TUPE Regulations. This does not mean that the original employer would have the right to terminate their employment simply based on the fact that they objected to the transfer of their employment. However, if the original employer does not have a need for the work of the employees post-transfer, this could represent a valid, business-related termination reason.

The decision of the Supreme Court is logical and in line with the court practice of the ECJ. Its adoption has certainly added an additional (and much-needed) dimension toward understanding the practical implications of the transfer of employees under Croatian law. Although there are many unanswered questions still left, this is certainly a step in the right direction for the development of Croatian court practice and law.

By Mia Kalajdzic, Partner, and Antonio Sabljic, Attorney at Law, CMS

This article was originally published in Issue 11.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Over the summer, numerous major employers in Lithuania had either terminated or tightened their hybrid work policies, mandating employees to be present in the office for at least three days per week. This shift is in line with global trends, particularly among technology companies, which have largely abandoned remote work arrangements. Since the pandemic ended, many companies have gradually moved their workforce back to the office, citing decreased productivity and employee engagement as primary reasons for this shift.

A significant complication with this approach arises from the amendment to the Lithuanian Labor Code adopted in 2022, which grants specific categories of employees the right to request full-time remote work. These categories include pregnant or breastfeeding employees, employees raising at least one child under eight years old, employees raising a child under 14 or a disabled child under 18 as a single parent, disabled employees, those with a medical recommendation to work remotely, and employees responsible for caring for family members with illness or disability. Before this amendment, employees in these categories could request remote work for only 20% of their working hours, and the categories themselves were more limited (e.g., parents of children under three).

As a result of this legislative change, a substantial portion of the workforce now falls within these protected categories, entitling them to request full-time remote work. The Labor Code allows employers to refuse such requests, provided they can demonstrate that accommodating remote work would create excessive costs due to production needs or specific organizational requirements. Despite this provision, financial concerns are rarely the main issue raised by employers. Instead, they typically cite issues related to poor employee performance, weakened company culture, and low engagement as reasons for reducing remote work opportunities. Employers also highlight the challenges of providing effective leadership and mentoring when teams are dispersed. Moreover, some employees reportedly exploit the flexibility of remote work, taking extended lunch breaks or completing their work earlier than expected. Unfortunately, under the current legislation, these reasons are insufficient to mandate an employee’s return to the office unless it can be proven that financial or operational harm will result.

This legal framework has led to problematic and, at times, absurd situations. For instance, when an employee commits a serious breach of job duties, losing the trust of the employer, they may still be allowed to work remotely, as the law does not allow for mandatory office attendance under such circumstances. Furthermore, the Labor Code lacks specific provisions regarding when employees in protected categories may be required to come into the office, even if they are working remotely full-time. For example, situations such as team training, teambuilding events, or meetings with clients or business partners are not explicitly addressed in the legislation. Consequently, employees are free to decide whether to attend such activities without the risk of facing disciplinary action. This is especially concerning given that the EU Framework Agreement on Telework emphasizes the voluntary nature of remote work, whereas Lithuanian legislation effectively obliges employers to allow remote work, even when it may not be a feasible or practical solution.

Faced with these challenges, employers are increasingly inclined to interpret the Labor Code’s provisions loosely. They often argue that excessive costs would arise, even in cases where this is highly debatable (e.g., in cases of poor performance or ineffective team management). Such broad interpretations have resulted in a growing number of legal disputes, with employees challenging what they view as unreasonable demands to return to the office. This has given rise to a new category of employment disputes, centered on conflicts over remote work arrangements and demands for in-office presence. At present, the decisions handed down by Labor Dispute Commissions (pre-trial dispute resolution bodies) and courts on these issues are inconsistent, creating further uncertainty for both employers and employees.

The tension between employer-driven policies and the rights established under the Lithuanian Labor Code underscores the complexities of balancing productivity with employee autonomy in the evolving post-pandemic work environment. As hybrid and remote work arrangements continue to develop, the need for clearer legal guidelines becomes increasingly urgent. This will help to prevent the escalation of disputes and ensure greater stability for both employers and employees.

Without further legislative refinement or more consistent judicial decisions, the conflict between business needs and employee entitlements is likely to persist, potentially reshaping Lithuania’s labor landscape for years to come.

By Jovita Valatkaite, Associate Partner, Cobalt

This article was originally published in Issue 11.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The question of who owns intellectual property (IP) rights in the workplace has gained significant relevance, especially given that employees are involved in extensive creative activity nowadays. The Moldovan legal framework has well-defined rules on this subject, providing insight into the important question: who holds the rights over the creations, inventions, industrial designs, and utility models created by employees?

While recent amendments have established clear guidelines, some ambiguities still remain, potentially leading to disputes between employers and employees. Given the value of employee-generated IP in the professional realm, defining the ownership over such IP is of utmost importance.

The New Legal Framework

Under the current framework, both patrimonial and moral rights to IP objects are vested in the employee, while the employer retains a default right to use the creation in its regular business activities. This marks a departure from the previous regime, where patrimonial rights were automatically assigned to the employer, with moral rights remaining with the employee.

The recently enacted Moldovan Law on Copyright and Related Rights (Copyright Law) of July 28, 2022, grants employers an automatic right to use employee-created IP objects without requiring additional consent from employees. Notably, even for works made for hire, the default rule attributes patrimonial rights to employees.

Thus, unless explicitly agreed otherwise, employees retain patrimonial rights over IP objects thereby created and can make use of such rights as they see fit. However, granting the right to use an IP object to third parties requires the employer’s consent and involves special compensation to be granted by the employee to the employer. Such compensation serves as an acknowledgment and reward of the employer’s contribution to the costs associated with the creation of the IP object.

Contractual Adjustments to IP Ownership

However, the above-mentioned framework can be overridden through a contractual agreement between the employee and employer, allowing flexibility in determining IP ownership.

To deviate from the default rule and assign patrimonial rights over IP objects to the employer, a special setup shall be provided in the employment agreement. Alternatively, an internal IP policy approved by the employer can establish clear guidelines on the ownership and usage of employee-created IP objects.

The contractual framework shall explicitly establish the employer’s default ownership of the patrimonial rights to the IP objects created by employees. Provisions regarding the official registration of IP objects shall also be addressed in the contractual arrangement of the parties.

Thus, the novelties of the Copyright Law require companies to draft employment agreements with additional precaution.

Special Remuneration of the Employees

Another important issue to be considered is the remuneration of employees for the IP objects developed. While the Copyright Law does not provide explicit guidance, the Government Regulation on IP objects created during employment by employees (Regulation) dated December 31, 2003, offers comprehensive rules.

The Regulation stipulates that employees are entitled to special remuneration for IP objects in addition to their regular salary. Remuneration amount and payment terms are to be negotiated between the parties. Nonetheless, the recent legal amendments allow employment agreements to specify that such remuneration is included in the salary, relieving the employer of any further payment obligations.

Thus, it became of utmost significance to address the ownership of the patrimonial rights over the employees-generated IP objects, as well as the special remuneration thereby applicable. Employment contracts or internal policies approved by employers play a crucial role in defining such aspects.

Software Ownership

Another important amendment introduced by the Copyright Law refers to ownership of the IP rights over software developed by the employee. As opposed to the default rule of patrimonial rights over IP objects being vested with the employees, creations such as software follow a different arrangement. Under the Copyright Law, patrimonial rights over software created by one or more employees as part of their duties or following the employer’s instructions are per se held by the employer.

Thus, the current legislation of the Republic of Moldova sets up straightforward rules as to the ownership of IP rights over creations developed by employees. However, these rules may be adjusted and tailored through employment contracts or internal policies to meet the specific needs of both employers and employees. Awareness of such provisions and proactive management of these rights are essential for fostering a mutually beneficial working relationship.

By Doina Doga, Head of Labor, ACI Partners

This article was originally published in Issue 11.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Recent rulings of the Slovenian Supreme Court on the permissibility of including contractual penalties in employment contracts highlight that when assessing the permissibility of applying the concept of a contractual penalty, one must consider the subordinate and dependent position of the employee relative to the employer both when concluding the employment contract and during the employment relationship.

A contractual penalty is a civil law concept aimed at securing obligations agreed upon by the contracting parties. The Employment Relationships Act (ERA-1) does not regulate contractual penalties, but it stipulates that general rules of civil law apply mutatis mutandis to the conclusion, validity, termination, and other aspects of employment contracts. However, in assessing the permissibility of applying civil law rules, it must be taken into account that the purpose of mandatory provisions of labor law is to mitigate the subordinate and dependent position of the employee vis-à-vis the employer. Allowing contractual penalties could, therefore, worsen the employee’s position or further strengthen the employer’s position.

The Supreme Court’s judgment VIII Ips 18/2023 adopted the position that a provision in an employment contract imposing a contractual penalty for breach of a notice period is null and void because, unlike liability for damages caused, it represents an excessive intrusion into the employee’s rights and obligations. The existence of damage is not a prerequisite for the right to a contractual penalty to arise.

Similarly, in judgment Ips 25/2023, the Supreme Court ruled that a provision on a contractual penalty agreed upon between the parties if the employee fails to commence work after signing the employment contract or if the contract is terminated at the employee’s will or fault before the start of work or within one month of commencing work as void. An employee enters into an employment relationship voluntarily and freely, and such a contract can be terminated by the employee at any time after its conclusion without legal consequences. This right cannot be limited by time or content conditions. The exercise of the right to terminate an employment contract must be voluntary, depending solely on the free will of the employee.

It is important to add that as early as 2017, the Supreme Court allowed the use of contractual penalties in cases of violating a non-compete clause, which applies to the period after the termination of employment. The court permitted this contractual penalty primarily because the clause deters the employee from violating competition rules after the termination of employment, i.e., when the employee is no longer employed by the employer, and the rules of labor law, including those on employee liability for damages, no longer apply. In this decision, the court also considered that following the termination of the employment relationship, the employee and employer are no longer in a subordinate/superior relationship, and the employer’s position in asserting liability for damages against the former employee is more difficult, especially in terms of proving the damage and its extent.

Finally, let me point out that Slovenian labor law, generally to the benefit of the employee, recognizes the concept of contractual penalties in certain collective agreements, even without an explicit provision in the law, in cases of unlawful termination of employment determined by a final court decision. The purpose of this contractual penalty is to compensate for the general damage caused by the unlawful termination of the employment relationship. Case law is clear about the permissible option to agree on a so-called lump-sum compensation or a contractual penalty in a collective agreement if a court finds the termination of the employment relationship unlawful.

A review of case law shows that the autonomy of contractual parties in labor law is limited, as both the employee and employer must comply with the provisions of the ERA-1 and other laws, ratified and published international treaties, other regulations, collective agreements, and general acts of the employer. With an employment or collective agreement, rights more favorable to the employee than those provided by law can be agreed upon. However, the focus in this matter is not on the limitation of autonomy as it relates to those institutes already regulated by labor law, which also defines possible exceptions. The emphasis is on whether the principles and rules of labor law allow for the (appropriate) application of the rules on contractual penalties.

By Maja Skorupan, Co-Head of Labor and Employment, Law Firm Senica & Partners

This article was originally published in Issue 11.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Private employment agencies in North Macedonia emerged relatively recently, beginning in 2006. These agencies play a key role in two primary areas: facilitating temporary employment in the labor market and acting as intermediaries in the hiring process. By connecting employers seeking workers with job seekers, these agencies help streamline employment coordination, leading to a more efficient labor market.

The establishment of private employment agencies has had a notable positive impact on North Macedonia’s labor market. Before their creation, the labor market faced years of disorder, insecurity, and uncertainty, which prevented many employees from fully exercising their rights or accessing benefits. Private employment agencies have since addressed these issues, bringing structure and security to employment practices across the country.

One of the major historical challenges in the labor market was the precarious status of individuals temporarily engaged by institutions. Although these workers performed roles similar to regularly employed staff, they often lacked formal recognition, proper compensation, and regular social contributions. This created disparities between temporary and permanent employees. The introduction of private employment agencies aimed to formalize the status of temporary employees and those engaged as consultants, ensuring they received appropriate compensation and social benefits. In effect, these agencies played a regulatory role by ensuring regular salary payments and contributions for temporary employees. Since the enactment of relevant legislation, temporary workers have been treated equally to permanent employees, which marked a significant shift from past practices where they were marginalized.

The legal framework governing private employment agencies was first established in 2006. This framework guarantees that individuals employed through these agencies receive full social contributions, recognized work experience, and access to all employee rights and benefits. Employers are legally required to treat temporary workers the same as their permanent staff, effectively equalizing the status of employees hired through agencies with those directly employed by companies.

At the international level, the Private Employment Agencies Convention No. 181 has been instrumental in protecting employees from exploitation while promoting their rights to association, collective bargaining, and social dialogue. These international standards are mirrored in North Macedonia’s legal system, which places a strong emphasis on the fair treatment and protection of employees.

The operation of private employment agencies in North Macedonia is governed by the Law on Private Employment Agencies. This law outlines the conditions for establishing such agencies. Both natural and legal persons can create private employment agencies as long as they meet the legal requirements, which include having at least a secondary education and being free from legal restrictions or bans on conducting business. To operate, agencies must be registered with the ministry responsible for labor matters. Additionally, the law defines the scope of activities permitted for private employment agencies, which includes providing temporary employment services and job placements both domestically and internationally. While these agencies are allowed to charge fees for their services, these fees can only be charged to employers, not to individuals seeking employment. This provision ensures that workers are not burdened with additional financial costs when searching for jobs.

In terms of regulation, private employment agencies must obtain a valid license from the relevant ministry to operate legally. Their activities, including both temporary employment services and job placements, are subject to oversight by the State Labor Inspectorate, which ensures compliance with the law. The ministry responsible for labor matters issues several types of licenses, distinguishing whether they pertain to temporary employment activities, mediation for employment within the country, mediation for employment abroad, or simultaneous mediation for employment both domestically and internationally. Each license is valid for two years, with the option for renewal. It is worth noting that the license for temporary employment has various subtypes, which are directly related to the number of temporary employment contracts concluded.

In conclusion, private employment agencies have successfully integrated into North Macedonia’s labor market, playing a crucial role in connecting job seekers with employers while ensuring fair treatment for temporary workers. Some agencies have distinguished themselves through their professionalism and adherence to legal obligations, significantly contributing to a more structured and equitable employment system. Strengthening the legal framework will help safeguard the rights of workers and enhance the overall effectiveness of private employment agencies in North Macedonia.

By Ana Tosic Chubrinovski, Managing Partner, JPM Partners North Macedonia

This article was originally published in Issue 11.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.