Lower court decisions
Supreme Court decision
The Supreme Court recently issued a judgment on the use of fixed-term employment contracts for temporary work.(1) The court found that the termination of the user company's assignment did not constitute justified grounds for concluding a fixed-term employment contract with the leased employee. Consequently, the employment contract was deemed to be in force until further notice, and to have been terminated without justification by the leasing company.
Finnish employment legislation does not include separate provisions on employment agreements for temporary work; rather, the general rule that employment contracts are in force until further notice applies to leased employees. However, established business practice in a given sector may constitute a justified reason for concluding a fixed-term contract. In the field of leased employment, for example, such reasons may derive from a need to employ an employee for the duration of a certain assignment.
In the case at hand, the employer (ie, the leasing company) and the employee had concluded a fixed-term employment contract for the duration of the performance of an assignment. After the assignment was completed, the employee's contract was terminated. However, the employee did not accept the decision, arguing that the user company had a permanent need for workers and that there was no legal justification for the conclusion of a fixed-term contract. The employee also claimed that the contract had been concluded for a fixed term in order to evade mandatory provisions on employment security.
At the time that the employment contract was concluded, neither employee nor employer knew exactly when the assignment would end. Once it had received this information from the user company, the employer informed the employee of the said date and of the employee's termination date.
Both the district court and the appeal court dismissed the case on the grounds that the employment contract had been concluded for a fixed term. When assessing the justification of the fixed-term contract, the district court found the decisive factor to be whether the user company would have been able to re-employ the employee after the assignment, based on an ex ante assessment at the time that the assignment-specific contract was concluded with the leasing company. However, both lower courts ultimately found that the user company could not reasonably have foreseen and anticipated its future possibilities to employ the employee; therefore, they dismissed the case.
The employee was granted leave to appeal. The Supreme Court stated that only such employment contracts, under which termination is based on objective grounds (eg, a date, the completion of a certain assignment or the occurrence of a certain event), can be defined as 'fixed-term contracts'. In addition, the court stated that the fact that the termination date was not known at the time of concluding the contract indicated a permanent need for working capacity, and that employment contracts concluded in such circumstances shall be deemed to be in force until further notice.
Contrary to the lower courts, the Supreme Court found that the justified reasons should be assessed primarily from the perspective of the employer (ie, the leasing company). The agreement between the employer and the user company was irrelevant to an assessment of whether the employment contract between the employer and the employee was in force until further notice. The exact termination date of the employment contract depended on notification from the user company – which was not a party to the employment contract. Therefore, the fixed duration of the employment contract was not based on objective grounds.
On this basis, the court found that the employment contract between the employer and the employee had been concluded for a fixed term without a justified reason, whereas it was deemed to be in force until further notice. The employee was therefore entitled to compensation for unjustified termination. Even the dissenting members of the court found the employment contract to be in force until further notice.
The judgment can be expected to improve the status of temporary workers and to increase the number of employment contracts that are deemed to be in force until further notice in the field of temporary work. In future, a leasing company must individually assess the grounds for concluding a fixed-term contract, regardless of the substance of the agreement with the user company.
For further information on this topic please contact Seppo Havia at Dittmar & Indrenius by telephone (+358 9 68 1700), fax (+358 9 65 2406) or email ([email protected]).