Targeting employment regulations

In exploring different areas of economic policy, LFMI came across a domain which is still a taboo subject in our society. This is employment regulation, an area almost untouched by the changes that have swept the country over the past years. Western champions of a free market have long challenged planned economy, calling for the removal of privileges of trade union and preposterous regulations (e.g., shorter working hours, a ban on shops being open at weekends, etc.).
Lithuania is faced with similar problems. Some employment regulations are stricter and others looser relative to those in the West. Many of today’s problems – troubled companies, delayed wages, growing unemployment – are the outcomes of ill-considered employment regulations.
Most provisions of labour law were adopted after the restoration of independence. But we are still living according to the Labour Code of the Soviet era, with only minor changes effected over the past years. The functioning labour laws seem to have been created in the spirit of full employment. They sanction extensive, ill-judged employment regulations which impede the development of a market economy and reduce its effectiveness.
LFMI analysed employment regulations applicable in Lithuania and formulated guidelines for their revision.
  • Many aspects of employment are regulated in an excessively minute detail. The goals of such regulations are in many cases unattainable. Established norms are frequently dodged or adhered to as a mere formality. Labour law should define only fundamental principles of employment, without prescribing petty details.
  • Freedom of contract is a key principle of employment. Its suppression has damaging effects on employees, employers and competitiveness of Lithuanian companies.
  • Labour law should not be used to regulate all forms of human labour. The object of labour law should be limited to employment in a narrow sense of the word.
  • The concept of labour contract should be limited to reflect the specific nature of employment. The norms of labour law should not be used to regulate other relationships.
  • Employment regulations should not be used to deal with the problems of tax collection, as this undermines employment opportunities and inhibits civil relationships.
  • Overly stringent forms of protection of employee interests have deleterious effects on the operation of enterprises. In many cases they turn against employees themselves. It is therefore important to define only minimum standards and leave more room for mutual agreements between parties involved.
  • Labour law should not be used to address problems of selected segments of society, as this imposes excessive and economically unjustified costs on employers. Social problems should be handled through social programmes.
  • Labour safety regulations should be limited to dangerouos jobs. Better safety at work may be achieved by lifting bureaucracy and promoting internal control.
  • Labour law has become infinitely fragmented and contradictory. The codification of labour laws should be an important step towards developing a more harmonious labour legislation.
  • Most employment regulations were adopted not by the parliament but by executive authorities. Many requirements are of doubtful legitimacy. Employment legislation has become casuistic. The laws should spell out the rights and duties of parties to labour agreements or define explicitly the principles of employment. The government’s power to establish legal norms should be curtailed.
To promote these changes, LFMI submitted to the Economic Ministry a package of amendments to the Laws on Labour Contracts, Support of the Unemployed, Remuneration for Labour, Collective Agreements, and Regulations of Collective Disputes. LFMI thus spurred discussion and initiated work to revise labour policy and employment regulations.