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Reform: The Act on the Contractor’s Obligations and Liability when Work is Contracted Out
The Finnish Act on the Contractor’s Obligations and Liability when Work is Contracted Out (1233/2006, as amended (the Act) has been amended.
The Act applies to companies (contractors) that use agency workers or sub-contracted labour in Finland. Under the Act, before concluding a contract on sub-contracted labour or the use of agency workers, the contractor must collect certain information and documents from or relating to its contractual party (so called obligation to check).
The amendments to the Act may be summarised as follows:
The threshold value of the sub-contract for the Act to apply is increased to EUR 9,000 excluding VAT (the threshold for temporary agency workers remains 10 working days that they are hired for).
The contractor is obliged to check that the contractual party has occupational health care in Finland.
The contractor may use the Public Tax Debt Register (PTDR) to check the contractual party’s outstanding tax liabilities. If the PTDR shows tax debt, the contractor has to ascertain its exact amount and evaluate, if the contractual party is intending to pay the debt. The contractor may become subject to a raised negligence fee, if it enters into an agreement despite realising that the contractual party is not intending to discharge its obligations.
If a foreign contractual party has a Finnish business identity code, the contractor has an obligation to request clarification that the contractual party is entered into the Prepayment Register, the Employer Register and the Value Added Tax Register in Finland as well as to request information on the contractual party’s possible tax debt as described above. The contractor has the above-mentioned obligations in addition to collecting corresponding information with respect to the contractual party from registers or other reliable sources in the contractual party’s country of establishment.
The contractual party is obliged to give the contractor written information on the posted workers’ social security arrangements before the agreed work begins. Correspondingly, the contractor has to ensure that it obtains the information. This is a continuous obligation in the construction sector for all new workers sent to Finland after the agreed work has begun.
The contractor must require in the agreement between the parties that the contractual party delivers information on the social security arrangements of posted workers sent to Finland after the agreed work has begun before such employees start working in Finland.
Penalties for breach of the Act have increased and now vary between EUR 2,000 and EUR 65,000.
Some provisions of the Finnish Posted Workers Act (1146/1999, as amended) (the PWA) have also been amended and the amendments have come into force in tandem with the Act. Under the revised PWA, the contractor must, before the agreed work begins, inform the posting company in writing about the authority that supervises compliance with and gives advice on the PWA.
The amendments have entered into force on 1 September 2015.
Employees’ representative’s protection against termination of employment agreement assessed by the Labour Court (TT 2015-17)
In its judgement of March 2015 the Labour Court of Finland assessed the enhanced protection against termination applicable to employment agreements of employee representatives.
Under Finnish law, an employer is entitled to terminate the employment agreement of a shop steward or an elected representative of the employees on grounds related to the employee’s person only if the majority of the employees whom the shop steward or elected representative represents give their consent to the termination.
In the case at hand, the employer had dismissed a shop steward due to his behaviour, which, according to the employer, had to be considered as harassment and bullying. Additionally, it was suspected that the shop steward had infringed copyrights by downloading copyrighted material into an internal website.
According to the employer, getting consent for the termination from the employees was impossible, as the trade union refused to provide the employer with information on which employees the shop steward represented.
The Labour Court held that the employer had terminated the employment agreement of the shop steward without the consent of the employees the shop steward represented. The employer had not actively investigated whom the shop steward represented and neglected its obligation to get their consent for termination. Thus, the termination was considered groundless, and the employer became liable to pay the shop steward 24-months’ salary as damages. When assessing the amount of the damages, the Labour Court held that, under the circumstances, there would have been no legal grounds for termination even if the employer had received the consent of the employees the shop steward represented.
The outcome of the case emphasises the enhanced protection against termination enjoyed by employee representatives and the employer’s obligation to actively seek the employees’ consent for terminating a shop steward’s employment agreement on grounds related to the shop steward’s person, regardless of the reason behind the termination.
The matter has also been subject to a criminal investigation, and the employer’s representatives have been charged with a violation of the rights of an employee representative, which is a criminal offence under the Criminal Code of Finland. The District Court has found the employer’s representative guilty of a violation of the rights of an employee representative, but the decision is not yet final.
It is important to note that employees’ representatives also have enhanced protection against termination on collective grounds. Therefore, it is essential to identify employees’ representatives before making any decisions on terminating employment agreements.
Judgement in a work discrimination case issued by the Finnish Supreme Court (KKO: 2015:41)
In June 2015, the Finnish Supreme Court issued a precedent in which the CEO of a company was sentenced to 40 unit fines, totalling EUR 18,040, for work discrimination due to the CEO having put X in an inferior position because of her family status and sexual orientation without an important and justifiable reason as prescribed in the Criminal Code of Finland (39/1889, as amended).
In the beginning of September 2008, a female candidate, X, was chosen as the editor-in-chief of a Finnish independent newspaper owned by the company. In the work interview, the CEO inquired if X or her spouse were politically active. X responded negatively to this inquiry. During the interview, the CEO got the erroneous impression that the spouse of X was male. After concluding the director agreement, the parties agreed that the company will publish a stock exchange release announcing X as the new editor-in-chief of the independent newspaper.
A day before the stock exchange release was published, X gave an interview to a competing newspaper and revealed her appointment. Later, some directors of the company received an anonymous text message stating that the spouse of X is female and that she had been a candidate in municipal elections. The company cancelled the director agreement of X due to lack of confidence and due to X having published a press release earlier on the same day.
The Finnish Supreme Court stated that the purpose of the job interview was not to employ the spouse of X. The spouse had no obligations towards the company, and the company no rights or obligations towards the spouse. According to the Supreme Court, an editor-in-chief is independently responsible for the contents of the publications in the independent newspaper. Correspondingly, the political activity of the editor-in-chief’s spouse should not affect the image or credibility of the independent newspaper. According to the Supreme Court, the sexual orientation and the family status of X had affected the cancellation of her director agreement. The Supreme Court held that no weighty and appropriate reason existed that would have justified the company’s actions. Thus, the company’s actions were to be considered as work discrimination.
The outcome of the case emphasises the extensive non-discrimination obligation set for employers and their representatives. The Criminal Code of Finland prohibits all kind of work discrimination based on race, national or ethnic origin, nationality, skin colour, language, sex, age, family status, sexual preference, inheritance, disability or state of health, religion, political opinion, political or industrial activity or comparable circumstances. Further, it should be noticed that, if a job applicant gives untruthful answers to discriminatory inquiries made by the employer e.g. in a job interview, the employer does not have an automatic right to terminate the employment based on the untruthful answers.