Finland

The most significant law considering employment in Finland is the Employment Contracts Act, which regulates in 14 chapters all types of matters involving the relationship between the employee and employer.

At the same time national collective agreements are an important factor. The Collective Agreements Act lays down that the individual norms of a collective agreement have an automatic and obligatory effect on employment relationships. Any term of an employment contract that conflicts with an equivalent term in the generally applicable collective agreement shall be observed instead.

Regulation of employment contracts

The scope of an Employment contract:

The basic agreement is contract of employment. It is form free and it is a contract in which the other party, the employee, obliges to perform work under the control and supervision of the other party, the employer, in exchange for remuneration.

If the contract is not written the principal terms of work must be given in written form at request. Such information may be given in one or several documents or by a reference to legislation or a collective agreement applicable to the employment relations. The law includes the list of minimum information which shall be given.

The definition of an employee is broad. The Act does not apply to employment relation or service obligations subject to public law or ordinary hobby activities or such contract on work to be performed which are governed by separate provisions by law.

The Act includes the general obligations of employers and employees and regulation of their relations. Besides this it includes other duties like working time, free time, annual vacation, health and safety, employer’s responsibility to observe the general collective agreement, non-discrimination and payment of salary. Employee has the responsibility to comply with the employer’s orders and to keep business and professional secrets. Other acts related to Employment Contracts Act provide an employee social guarantees and services like health care, pensions, and job-time.

The Employment Contracts Act includes mandatory provisions. “Any agreement reducing the rights of and benefits due to employees under this Act shall be null and void unless otherwise provided in this Act”. This means that any kind of arrangement which is made in order to evade the law is void.

Prohibition of discrimination, and equal treatment

The employer shall not exercise any unjustified discrimination against employees on the basis of age, health, national or ethnic origin, sexual preference, language, religion, opinion, family ties, trade union activity, political activity or any other comparable circumstance. This is regulated by the Act but also by the new Constitution of Finland. Provisions on the prohibition of gender-based discrimination are laid down in the Act of Equality between Women and Men.

Employer must treat employees equally. Prohibition of discrimination involves also when recruiting employees.

The equality Act obliges employer to ensure that no employee is subjected to sexual harassment. If he fails to fulfil this duty he is likewise guilty of discrimination. In this cases employee has right to compensation. If the employer himself is guilty of discrimination shall in addition to this compensation compensate the actual damages. Punishment might be a fine or prison term maximum six months.

The employee has the right to get a written report if he or she considers that has been subject to discrimination. The Equality Ombudsman and the Equality Board have been established as authorities to monitor and take measures to ensure that the law is observed. There are different sanctions for different kinds of violations. The employee has right to get compensation at least 2.600 euros and 17.400 at most. The demand for compensation has to be brought to a local court of employer’s domicile.

Employer’s obligations

The employee is entitled to remuneration for work performed. Wages are regulated on general level but the amount is not fixed by law. Usually the minimum wage is determined by a collective agreement. Significant is that even when an employer is not a member of an employer organization and not a party to a collective agreement, that employer is still obliged to follow the terms of the relevant collective agreement.

The Act guarantees employees also the right to holidays, maternity, paternity, and child-care leave.

Employees’ obligations

An employee is responsible for carrying out the assigned tasks carefully and observing the instruction concerning performance. In addition the employee is to observe the safety precautions at work. Employees are forbidden to work for another party or utilize or divulge to third party the employer’s trade or business secrets. Competing activities after finishing the employment are also regulated.

Indefinitely or fixed term contact

Employment contract can be made for an indefinitely or fixed term. Contract is valid indefinitely unless it has been made for a specific fixed term. In this case there has to be a justified reason for using a fixed term contract. Contracts made for a fixed term on the employer’s initiative without a justified reason shall be considered to be valid indefinitely.

Fixed-term contact will continue until the termination day.

Termination of an Employment Contract

Fixed time contract terminates when the time period has expired, or it the agreed work has been completed.

An indefinite period contract may be terminated by notification. The agreed notice period may not exceed six months. If a longer period has been agreed on, a six-month notice period shall be observed instead. It is possible to agree that employer’s period of notification is longer than the employee’s period of notification.

The grounds for termination

The grounds for termination are regulated in Employment Contracts Act. An employer might have reason to terminate the employment contract for two main grounds; collective or individual. The employer may terminate the employment contract if the work to be offered has diminished substantially and permanently for financial or production-related reason or for reasons arising from reorganization of the employer’s operation. This reason is called collective. The employment contract shall not be terminated however, if the employee can be placed in or trained to other duties. Individual grounds relates to employee’s person or behaviour for example absence from the work.

If the employer has extremely weighty cause, he is entitled to finish the contract with immediate effect. Such may be the case, if the employee for example breaches or neglects duties based on the contract and this has an essential impact on the employment relationship.

The employer shall not terminate an indefinitely valid employment contract without proper and weighty reason. There is a list about individual grounds which at least cannot be regarded to proper and weighty reasons. If an employer has neglected his duties he must be warned and given a chance to amend his conduct.

An essential and long-term reduction of work is usually a sufficient ground for termination. This is not the case if an employee with appropriate work skills and capacities could reasonably be relocated or retrained for other work.

The Act includes different situations where the employer is not considered to have a proper and weighty reason for dismissal. Background for this is that individual reasons can not be used or hide by a reference to economic reasons. The employer has also duty to re-employ an employee during a nine-month period from the date of the termination of the employment relationship if the employer shall increase his labour force.

If the employer has the right to terminate the employment, the notice periods has to be observed. If he does not, as a consequence to unlawful dismissal, the employer shall pay the employee an amount equivalent to his pay for the notice period as compensation.

Procedure for terminating an employment contract

When the employer is informed about the existence of the individual grounds, he must effect termination within a reasonable time. He has to provide the employee with an opportunity to be heard about the grounds for termination.

If the reason for terminating the contract is collective the employer must as early as possible explain the grounds and alternatives to termination.

Delivery of notice has to given in person. At the employee’s request, the employer has to notify the employee in wring the date of termination and the grounds for it.

Compensation for groundless termination

Consequence about the unlawful dismissal is that the employer is to be ordered to pay compensation. The exclusive compensation must be equivalent to the pay due for a minimum of three months or a maximum of 24 months.

Termination on assignment of the enterprise

In the case on sale or a purchase of a business the assignee may not terminate en employees’ contract only because of assignment. Rights and obligations under employment which are valid at the time of the assignment follow to the new employer. The grounds for the termination are the same as above.

Other regulation

Besides regulation mentioned above, the Act regulates invalidity of labour contract and excessive conditions, labour contracts of international character, liability to pay damages and miscellaneous provisions.

Other important laws relating employment contracts are

the Annual holidays Act

Hours of Work Act

Alternation Leave Act

the Protection of Labour Act

Collective agreements Act

Foreign workers

A foreigner who wishes to work in Finland must have a work permit. This does not apply to citizens of EU or EEA countries. The freedom of movement enables EU and EEA citizens to move freely within the territory if the propose is to work or look for work. If the work lasts no more time than three months they need no even residence permit. If the employment is for a longer period residence permit must be applied. The person who wants to apply for a residence permit must have valid passport or identity card, photograph, and contract of employment (or other evidence of employment). Nordic citizens are entitled to work in Finland without specific permits. Information about residence permit is given by abroad Finnish missions and in Finland local police.

A foreigner must apply for a work permit before arriving in Finland. Permit can be applied as soon as the person has found a job in Finland. The employer must find out from the local employment office for an opinion on whether a permit can be granted. Work permit application should be addressed to the Finnish diplomatic mission in person residence country. More information about work permits is given by the Directorate of Immigration and the police.

Tax position for a foreign employee

Employee is taxed on income derived from Finland. Finland has several tax treaties which are based on the OECD model treaty. Tax treaties are based on prevention of international double taxation.

Agents and Salesmen

Finland has implemented the Directive of the Council on the coordination of the laws of the Member states relating to self-employed commercial agents. Commercial representative is an entrepreneur who, in a representation contract concluded with another, the principal, has undertaken continuously to promote the sale or purchase of goods on behalf of the principal or by concluding sales or purchase contracts in the name of principal.

Salesman is an employee who, under a representation contract concluded with the employer, has undertaken on behalf of the employer, to promote the sale of goods in the manner referred to in section 1 by travelling from place to place or by visiting clients at the place where the business of the employer is located. A salesman does not carry the goods to be sold with him.

Juha Manner

Asianajotoimisto Brander & Manner Oy/Attorneys at Law

Finland