In Latvia, the termination of employment relationships for labor union members is specifically regulated to protect their rights. However, in practice, this regulation creates significant challenges for employers, as labor unions almost always refuse to grant consent for dismissal.
To address these issues, significant amendments to the Labor Law are being planned, which could shift the balance of power between employers and labor unions. At the same time, the Supreme Court has issued a ruling on this matter, which impacts future practice.
Current Regulation and Practical Issues
Under Article 110 of the Labor Law, an employer requires a labor union’s consent to dismiss an employee who has been a member of a labor union for at least six months. Exceptions apply in specific cases, such as termination during probation, intoxication at work, health-related incapacity, and company liquidation. However, these exceptions do not cover common reasons like misconduct or redundancy. In practice, labor unions almost always reject termination requests, even when the employer provides justified reasons. Furthermore, labor unions are not required to provide any explanation for their refusal. As a result, the only option to terminate the employment agreement is to file a lawsuit within a month of receiving the labor union’s response. This leads to prolonged litigation, during which the employee may continue to receive their salary, imposing a financial burden on businesses.
This system, intended to ensure oversight and find the most beneficial solution in an out-of-court procedure, often fails, as some labor unions misuse their authority to block termination, even when justified.
Planned Amendments to the Labor Law
The Ministry of Welfare, in collaboration with social partners, has drafted amendments to the Labor Law to improve employment regulations, trying to ensure a fair and adaptable response to labor market changes. Among other things, the changes would allow employers to terminate an employment contract with a labor union member without union consent in redundancy cases. Additionally, labor unions would be required to provide a reasoned explanation if they object to a termination in those instances where consent would be required.
In our view, the current regulations are disproportionately restrictive and may discourage foreign investors from establishing operations in Latvia. Therefore, such regulatory changes could have positively impacted investment attraction, as foreign investors tend to prefer countries with more flexible labor law regulations. Compared to Estonia and Lithuania, Latvia has the strictest dismissal regulations, as highlighted by the International Monetary Fund in its 2024 report and the OECD.
At present, the draft law has only completed the public consultation stage. We also contributed to the initiative through the Latvian Chamber of Commerce and Industry, which actively participates in legislative processes, representing the interests of businesses.
Case Law
The Supreme Court issued a decision on June 17, 2024 (case No. SKC-410/2024), assessing a labor union’s refusal to grant termination consent while inviting dialogue. Among other things, the Court ruled that an employer engaging in good-faith dialogue with labor unions within a reasonable timeframe not be deprived of the right to seek legal protection in court once discussions fail.
The ruling clarifies that an employer’s lawsuit deadline begins only after a union’s absolute refusal, not merely from initial communication. This ensures protection for employers acting in good faith while preserving their ability to seek legal recourse if negotiations prove unproductive.
Conclusion
The current requirements for labor union consent complicate dismissals, making the process lengthy and costly while often failing to achieve its original purpose. The Supreme Court’s ruling reinforces the importance of fair dialogue while providing legal clarity on dismissal procedures.
The proposed amendments could improve the situation by ensuring a more balanced approach between employer and employee interests, allowing employers to effectively exercise their rights to implement urgent and necessary company changes. Additionally, these amendments would help employers understand labor union refusal reasons and adjust their actions accordingly. Such changes would also make Latvia more attractive to foreign investors seeking to establish business operations in the country.
As legislative discussions continue, these developments could lead to a more effective and equitable labor market framework in Latvia.
By Liene Pommere, Head of Labor, and Kristine Pulkstene, Senior Lawyer, Widen
This article was originally published in Issue 12.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.