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Castren & Snellman Employment Law Newsletter 2/2016

By: Any Waaralinna and Suvi Kettunen

Submitted by Firm:
Castrén & Snellman
Firm Contacts:
Tomi Kemppainen
Article Type:
Legal Update
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Annual Holidays Act Revised as of 1 April 2016: Holiday Accrual during Family Leave Limited and the Waiting Period Restored

The Finnish Annual Holidays Act (162/2005) has been amended effective from 1 April 2016. Prior to the amendments, annual holidays accrued during the employee’s maternity, paternity and parental leaves as if the employee had been working normally during the whole period of the aforementioned family leaves.
 
As of 1 April 2016, annual holidays will only accrue during a maximum of 156 days (approximately six months) of the aforementioned types of family leave.
 
Further, a waiting period related to postponing annual holiday due to incapacity to work has been restored into legislation. Previously, an employee was entitled to postpone his or her annual holiday if falling ill or becoming unable to work due to an accident prior to or while on holiday. Following the amendment, a waiting period of six days is applied before the annual holiday can be postponed due to incapacity to work. Consequently, the employee cannot postpone his or her annual holiday until he or she has been unable to work for a total of six days. The six-day waiting period can be accumulated from several separate sick leaves falling on the employee’s annual holiday. However, the waiting period applies only if the employee has accrued at least 24 days of annual holiday. Further, the waiting period is applied in full only to annual holidays of 30 days. If the employee’s holiday accrual exceeds 24 days but remains below 30 days, the duration of the waiting period equals the number of days exceeding the 24 days’ holiday accrual.
 
The amendments are likely to decrease the costs of both the Finnish State and employers and simplify employers’ substitute arrangements. However, since the waiting period of six days can be accumulated from separate days instead of six consecutive days of sick leave, employers should require the employees to inform their sick leaves immediately during annual holiday and carefully record the number of days of sick leaves falling on the employee’s annual holiday.

Employer’s Obligation to Observe Collective Bargaining Agreement Re-assessed by the Finnish Supreme Court (KKO:2016:18)

In its recent judgment, the Finnish Supreme Court has evaluated an employer’s obligation to observe a generally binding collective bargaining agreement.
 
In Finland, an employer’s primary field of business typically defines which collective bargaining agreement (CBA) should be observed, if any. CBAs applicable to a particular sector or industry bind all employers that are members of the employers' association that is a party to the CBA.  Some CBAs are declared generally binding on the basis of their widespread applicability and due to them being considered representative of particular business sector. According to the Employment Contracts Act (55/2001), an employer operating in the respective sector or industry must comply with such generally binding CBAs, regardless of whether or not the employer is a member of an employers' association. If the employer is not a member of any employers’ association and no generally binding CBA exists in the employer’s business sector or industry, the employer has usually not been obligated to observe any CBA.
 
In the case at hand, Employee A, who had worked as a journalist for a newspaper published by a student union, had claimed pay receivables from the student union. According to Employee A, he was entitled to salary accordant with a generally binding CBA for the press based on his duties and profession. The student union as an employer was not a member of any employer’s association, and no generally binding CBA existed in the employer’s business sector. The Labour Court had earlier rendered a decision that the CBA for press was not applicable to Employee A’s employment relationship.
 
The Supreme Court held that the fact that the student union’s field of business was defined by a special enactment was irrelevant. The Supreme Court further stated that the CBA for press is not an applicable CBA in the student union’s business sector. Regardless of this, the student union should have applied the generally binding CBA for press to Employee A’s employment, since the work it had authorised Employee A to do was work accordant with the CBA for press.
 
The outcome of the case is inconsistent with previous interpretation of law and the general perception of an employer’s obligation to observe collective bargaining agreements. Whether this precedent will change the established interpretation of law will be determined by the future case law. 

Finnish Supreme Court: Employer Could not Invoke Employee’s Previous Notification of His Willingness to Resign When Selecting Employees to be Dismissed (KKO:2016:15)

In March 2016, the Finnish Supreme Court issued a precedent in which a company was sentenced to pay 5 months’ salary to an employee as compensation for unjustified termination of the employment agreement.  The Supreme Court held that the company did not have a proper and weighty reason for the termination of the employment agreement even though it had financial and production-related grounds to terminate the employment agreement of one employee.

Under Finnish law, an employer may terminate an employment agreement if the work to be offered has diminished substantially and permanently for financial or production-related reasons or for reasons arising from the reorganisation of the employer's operations. In addition to financial and production-related grounds, the termination of an employment agreement also requires a proper and weighty reason, which must be taken into account when considering the grounds for termination in each individual case. When financial and production-related grounds exist, the employer is allowed to choose the employees to be dismissed quite freely as long as the selection is not made on discriminative or otherwise inappropriate grounds.

In the case at hand, the company had terminated Employee A’s employment agreement for financial and production-related grounds on the same day as Employee A had returned to work after a long sick leave. The company argued that Employee A was selected to be dismissed due to Employee A’s own request, since he had expressed 7 months earlier his willingness to resign. However, according to Employee A he did not want the employment agreement to be terminated, but had rather expressed his opinion in a difficult working environment.

The Supreme Court held that the company had financial and production-related grounds for the termination of one out of three employment agreements with the same job description. According to the Supreme Court, the requirement of a proper reason for the grounds for termination of an employment agreement means, among other things, that the grounds should be actual and not in contradiction with the employer’s contractual loyalty obligation. The fact that the company had terminated Employee A’s employment agreement because of a general request that Employee A had expressed 7 months earlier without checking Employee A’s current view was unjustified and violated the employer’s loyalty obligation.

The outcome of the case emphasises the importance of the general provision on having a proper and weighty reason when terminating an employment agreement, even when financial and production-related grounds are at hand. Further, the case highlights the fact that even though the employer may choose the employees to be dismissed rather freely, careful attention must be paid to the selection, and even an employee’s own previous expression on their willingness to resign may be considered irrelevant from a legal perspective.

Finnish Company Sentenced to Pay Damages to an Employee Due to Temporary Suspension of Work (KKO:2016:13)

In March 2016, the Finnish Supreme Court sentenced a company to pay an employee EUR 3,914 as damages for the loss of income caused by a temporary suspension of work due to a lack of preconditions for working related to the employee’s person. The Supreme Court held that the company had breached its obligations arising from the employment relationship when it had not found out whether it would have been possible to avoid the suspension of work by placing the employee in other duties or offered the employee other work.
 
Under Finnish law, the employer is liable for the loss caused to the employee if it intentionally or through negligence commits a breach against its obligations arising from the employment relationship or the law. However, there are no provisions in law regarding a temporary suspension of work in such circumstances. On the other hand, employers have a contractual loyalty obligation towards their employees, which obligates the employer to take into account the employee’s interests.
 
In the case at hand, the airport operator had requested that Employee K, who worked as a security screener at the airport’s security check, to return his identification card temporarily for the duration of a pre-trial investigation where Employee K was being questioned as a suspect. Because the validity of the identification card was a prerequisite for the security screener’s work, the company decided to temporarily suspend Employee K from work and interrupt the payment of salary. Later on, the investigation concluded that Employee K had not committed a crime and Employee K returned to work.
 
According to the Supreme Court, even though there are no provisions regarding a temporary suspension of work in the circumstances at hand in the case, given corresponding provisions regulating termination of employment agreement and temporary lay-offs and the contractual loyalty obligation, employers have an obligation to find out whether the temporary suspension of work could be avoided by placing the employee in other duties.
 
The Supreme Court held that, although the removal of the identification card had prevented Employee K from working as a security screener, it had not affected Employee K’s ability to carry out other duties. Uncertainty of the duration of the suspension did not remove the requirement to find out if Employee K could be reassigned to other duties. 
 
The outcome of the case emphasises the employer’s obligation to find out whether the employee could be placed in other duties instead of suspending the employee’s work and salary payment even in situations where the employee is temporarily unable to take care of his or her duties. In situations where the employer has the obligation to offer other work, the employer must prove whether and under what conditions such work was offered.