Health care services and outplacement services for redundant employees

Finnish employers will be obliged to provide outplacement services and occupational health care for employees who are made redundant.

As part of the implementation of the long-negotiated cost competitiveness contract, the Finnish Parliament has approved amendments to the employment legislation in respect of outplacement services and occupational health care (HE 211/2016). The amendments are intended to enter into force on 1 January 2017. The intention of the reform is to help employees dismissed for financial or production-related reasons to find employment and to support them in maintaining their working capacity. The changes will only apply to employers that regularly employ at least 30 employees and, more specifically, to those of their employees with at least five years of continuous work history with the employer.

Obligation to promote re-employment

Following the reform, employers will be obliged to offer employees who are made redundant the opportunity to participate in re-employment coaching or training paid for by the employer. The value of the coaching or training should be equivalent to one month's salary earned by the relevant employee or the average monthly income at the workplace, whichever is higher. Any employer failing to comply with this obligation must pay the employee compensation in the form of a lump sum equivalent to the value of the coaching or training.In addition, employers will be obliged to update their personnel and training plan during 2017 by including the principles for providing the employees with the required coaching or training.

Health care obligations

Employers will also need to provide occupational health care services for employees made redundant for six months after their obligation to work has ended. However, this obligation no longer applies if the employee who is made redundant finds employment for an indefinite period or for a fixed term of at least six months.

Comments from a Swedish perspective: There are no obligations under Swedish employment legislation for employers to provide re-employment assistance, health care benefits or similar benefits to dismissed employees. However, such obligations may exist for companies that are bound by collective bargaining agreements. Many employers are bound by the so called Adaptation Agreement (Sw: Omställningsavtalet) in relation to their white-collar employees. Under the Adaptation Agreement, qualifying employees are entitled to severance pay and re-employment assistance if they are dismissed on the grounds of redundancy. Employers guarantee these benefits by making payments to the organization TRR Trygghetsrådet. Employers are advised to keep themselves informed of the redundancy benefits to which their employees will be entitled to in the case of redundancy.

Employee consultations extended to branches in Finland

Branches will be obliged to consult with their employees in the same way as other employers in Finland.

In connection with other employment law changes (HE 211/2016), the scope of application of the Finnish Codetermination Act (334/2007, the "Act") is being extended to include branches of foreign undertakings that regularly employ at least 20 employees in Finland. The reform is intended to enter into force on 1 January 2017.

Currently, branches of foreign undertakings are not obliged to comply with the Act. Branches are not considered legal entities under Finnish law and, accordingly, are not regarded as undertakings within the meaning of the Act. The question of whether branches of foreign undertakings should be subject to the Act has been under discussion in Finland for several years, but it is only now that the scope appears to be about to be extended.

Following the reform, branches of foreign undertakings will have information and consultation obligations towards employees as well as an obligation to draft certain general plans and principles.

The Act also sets out procedural rules which the employer is required to observe when contemplating reducing its workforce. In the event the employer fails to comply with the consultation procedure set forth in the Act, an employee affected by the reduction will be entitled to compensation. The maximum amount of compensation is EUR 34,519 per employee.

It is thus advisable for branches as well their foreign undertakings to become acquainted with the Act and its requirements.

Comments from a Swedish perspective: Just as in Finland, branches are not considered legal entities under Swedish law and, accordingly, are not formally regarded as employers within the meaning of the Swedish Co-Determination Act (Sw: Medbestämmandelagen). Instead, the foreign company to which the branch is related will be regarded as an employer under Swedish employment law. Foreign companies that employ personnel in Sweden may therefore be obliged to conduct trade union consultations in accordance with the Act. No changes similar to the Finnish suggestion are currently being contemplated in Sweden.

Employer's right to make unilateral changes clarified by the Supreme Court

In November 2016, the Supreme Court confirmed (in its judgment in KKO 2016:80) that if an employer has grounds for dismissing an employee, it is entitled to unilaterally change the material terms of employment as an alternative to dismissal after having observed the notice period. However, in order to do so, the employer must communicate clearly to the employee the grounds for dismissal, the terms to be changed and the date on which the new terms will come into effect, as well as the consequences of not accepting the change.

In the case at hand, following codetermination negotiations the employer had informed the employees about closing down its current office and moving the operations (including all of its employees) to another location. An employee whose employment contract expressly stipulated the old location as the fixed place of work refused to transfer and did not show up at the new office. The employer dismissed the employee with immediate effect on the grounds of unjustified absence from work.

The Supreme Court stated that the employer indisputably had grounds for dismissing the employee on the grounds of the company's operational changes. Hence, in principle, the employer was entitled to change the material terms of employment unilaterally after the notice period. In this case, however, the employer had failed to expressly invoke the grounds for dismissal as the reason for the unilateral change in the place of work. Accordingly, the Supreme Court found that the employer had not communicated to the employee sufficiently clearly and comprehensibly that the unilateral change was being made as an alternative to dismissal and that the employee's failure to comply with the new terms would lead to dismissal.

The Supreme Court upheld the Court of Appeal's ruling that the employer did not have grounds to dismiss the employee with immediate effect. Accordingly, the employer was liable to pay the employee compensation for unlawful dismissal and salary for the notice period.

The case confirms the preconditions and procedure the employer is obliged to follow when proposing material changes to an employee's employment as an alternative to dismissal. It further emphasizes the importance of the employer being comprehensible and clear when communicating the matter to the employee. It is thus advisable to provide the employee with a written notice setting out all of the requisite information when proposing a unilateral change of this nature instead of dismissing the employee.

Comments from a Swedish perspective: Under Swedish employment law, the general rule is that employers may not unilaterally change the contractually agreed terms and conditions of employment. Nevertheless, Swedish law allows some possibilities for an employer to enforce changes to the contractually agreed terms and conditions of employment. Case law from the Swedish Labour Court shows that an employer may terminate an employment agreement and thereafter offer new employment, on changed terms and conditions in the case of redundancy. Further, under the Swedish Employment Protection Act (Sw: Lagen om anställningsskydd), if there is an open position available for which the employee is qualified, an employer must offer the employee the open position as an alternative to dismissal on the grounds of redundancy and the employer may offer the open position on changed terms and conditions of employment. Recent case law clarifies that such offers are not considered to be unlawful unilateral changes to the employment agreement. That said, enforcing changed contractually agreed terms and conditions of employment in a Swedish context is complicated and companies seeking to do so are encouraged to seek legal expertise.