Managing the Employment Relationship in Finland

By Suvi Knaapila © 2017 Dittmar & Indrenius Apr 10, 2017
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Central provisions governing Finnish employment relationships are included in the Employment Contracts Act (55/2001), the Working Hours Act (605/1996) and the Annual Holidays Act (162/2005). The Act on Cooperation within Undertakings (334/2007) regulates employees' collective rights to information and consultation. The Act on Protection of Privacy in Working Life (759/2004) and the Personal Data Act (523/1999) regulate employment-related data protection issues.

The main acts prohibiting both direct and indirect discrimination in employment relationships are the Act on Equality between Women and Men (609/1986), the Non-discrimination Act (1325/2014), the Employment Contracts Act and the Penal Code (39/1889). Further, the Occupational Safety and Health Act (738/2002) places a duty on the employer to take care of the health and safety of employees while at work by taking the necessary measures.

Further, sector and company-specific collective bargaining agreements regulate Finnish working life.

European Union (EU) legislation is usually implemented in Finland through national legislation.

As well as legislation and employment contracts, certain legal principles, case law, legal preparatory works, (established) company practices and internal rules also govern employment relationships.

Who do these laws cover, including categories of worker?

As a starting point, employment legislation applies equally to all employees. Finnish employment law does not generally draw distinctions between different types of worker (e.g., blue-collar and white-collar workers). In addition, directors, with the exclusion of managing directors, are considered to be employees.

Misclassification

Are there specific rules regarding employee/contractor classification?

Certain principles and factors are applied to distinguish employees and independent contractors. However, an overall assessment of circumstances will determine whether an individual is considered to be an employee or an independent contractor.

The existence of employer direction and supervision is often considered important in borderline cases of employee/contractor classification. A self-employed person is economically independent and free to determine his or her activities, working hours and the place of work. Individuals are likely to be regarded as self-employed if they:

  • Use their own equipment.
  • Hire their own assistants.
  • Take financial risk for the work performed.
  • Have responsibility for their own activities.
  • Can arrange for a substitute to perform the work. 

Contracts

Must an employment contract be in writing?

No, there is no legal requirement to conclude a written employment contract. This also means that oral and electronic employment agreements are legally binding. However, it is recommended and customary in Finland to have employment contracts in writing.

In the absence of a written employment contract, the employer must provide an employee with a written statement including information on certain key terms of employment (e.g., the employee's principal duties and regular working hours) by the end of the employee's first payment period. 

Are any terms implied into employment contracts?

Yes. Even though Finnish employment relationships are extensively governed by statutory law and collective bargaining agreements, certain employment terms may also be implied. These terms are based on case law and legal principles. Further, an established practice may become binding for both parties of the employment relationship, even though it has not been agreed in writing.

The obligation of loyalty is an implied term of the employment contract. This means that the employee and the employer must act loyally towards each other.

Finnish employment law provides the employer with a right to direct the employee´s work. This means that the employer has the authority to give orders to the employee regarding his or her work and how it is arranged. The extent of the employer's right to direct work is determined on a case-by-case basis.

Are mandatory arbitration/dispute resolution agreements enforceable?

A dispute resolution clause cannot limit the employee's statutory rights. Arbitration clauses are typically deemed enforceable only in (managing) director agreements, not in ordinary employment contracts. The assessment of enforceability is carried out on a case-by-case basis.

How can employers make changes to existing employment agreements?

The parties to the employment relationship may agree on changes to the terms and conditions of employment contracts. However, employees are under no obligation to conclude new employment contracts or to amend the existing ones if their employer so requests.

An employer has the right to make unilateral changes to the binding terms and conditions of an employment contract only if there would be a valid ground for dismissal (i.e., the change is made as an alternative to dismissal). 

Foreign Workers

Is a distinction drawn between local and foreign workers?

As a general rule, employing foreign workers is not considerably different from employing domestic workers.

However, the employer has certain obligations when hiring foreign workers. These depend on the need for a work permit and whether the foreign employee is considered to be a posted employee.

The employer must ensure that all foreign workers either have or do not require a worker residence permit. Citizens of EU and European Economic Area member states do not need a special permit in order to undertake paid employment in Finland. Other foreign nationals must generally first obtain a visa and a worker residence permit to entitle them to work in Finland.

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Suvi Knaapila is an attorney with Dittmar & Indrenius in Helsinki. © 2017 Dittmar & Indrenius. All rights reserved. Reposted with permission of Lexology.


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