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Employment Newsletter 1/2015

5 March 2015

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Content of the newsletter:

The CJEU interprets the concept of minimum wage for posted workers in an expansive ruling relating to Finland

Finland:
New duties for employers following amendments to non-discrimination legislation

New Act on Security Checks in force

Sweden:
Amendments to the Swedish Working Hours Act and the Swedish Work Environment Act - Sanction fees

Russia:
On 1 January 2015, amendments to the Code of Administrative Offences of the Russian Federation providing for stricter penalties for violations of labour legislation entered into force

The Labour Code of the Russian Federation was amended to include special provisions regulating the work of foreign employees

The CJEU interprets the concept of minimum wage for posted workers in an expansive ruling relating to Finland

On 12 February 2015, the Court of Justice of the European Union (the “CJEU”) rendered a preliminary ruling in a case brought by a Finnish district court regarding the scope of the concept of minimum wage as laid down in Directive 96/71/EC on posted workers (“the Directive”). The dispute related to an action brought by the Finnish Electrical Workers´ Union on behalf of posted Polish construction workers employed by a Polish company and posted to a nuclear power plant construction site in Finland.

The Polish company had argued in the national proceedings that due to the absence of provisions in Polish law granting labour unions the right to bring claims on behalf of members, the labour union lacked standing in the case. This claim was, however, quickly refuted by the CJEU which ruled that the issue is governed by the procedural rules of the host country,in this case Finland where labour unions have the right to bring such actions to court on behalf of their members.

The second part of the dispute related to the elements of salary which were to be included in the scope of minimum wage as defined in the Directive. The Directive requires employers who post workers in another member state to pay wages in accordance with the rules governing the minimum wage in the host country. However, the expenditures actually incurred on account of the posting, such as expenditure on travel, board, and lodging, are not included in the concept of minimum wage. The CJEU was asked whether certain allowances in use in Finland were part of the minimum wage and therefore payable by the Polish company to its posted workers.

The first issue related to the calculation of the minimum wage and whether the rules of the home or host state applied. In the case at hand, the rules of Finland for calculating the wage were more favourable to the employees. The CJEU held that the rules on the calculation of wages are determined by the rules of the host state, provided that they are binding and transparent. The Finnish rules on calculating wages based on hours worked, instead of piecework, and the calculation of wages in accordance with employee salary groups into which employees are divided based on skill and experience were included in the concept of calculation of wages. In other words, the rules laid down in the relevant Finnish collective agreement concerning the method of calculating the minimum wage as defined in the Directive were applicable.

Another issue related to daily allowances. According to Finnish law, daily allowances are paid out to posted workers. The CJEU held that as daily allowances under Finnish law are intended to function as a form of social protection making up for the disadvantages related to the posting and not as a reimbursement for the expenditure actually incurred as a result of the posting, daily allowances were part of the concept of minimum wage. Similarly, the CJEU ruled that compensation for daily travel time, a right based on the relevant Finnish collective agreement, was not an expenditure actually incurred from the posting and therefore part of the minimum wage.

However, the CJEU found that in accordance with the wording of the Directive, meal vouchers and accommodation were not to be included in the concept of minimum wage. In addition, the Court pointed out that the granting of meal vouchers had no basis in law or in any collective agreement, but it is an arrangement between the company and its employees. Lastly, the CJEU held that workers are entitled to be paid annual holidays with a salary corresponding to the salary of the reference period for the annual paid holiday. In other words, the salary paid out during annual leave must correspond to the salary paid out during the periods when the posted worker is not on leave.

Following this decision, employers must see to that the minimum requirements set by any generally applicable collective agreement in their field of business are complied with, also with regard to any employees posted to work in Finland.

FINLAND

New duties for employers following amendments to non-discrimination legislation

The new Finnish Non-Discrimination Act and certain other related acts became effective as of 1 January 2015. The new Act has widened the scope of application of the Non-Discrimination Act to all public and private activities, and only activities relating to private and family life as well as religious practice have been left outside the scope of the new Act. The new Act clarifies the definition of the non-discrimination obligation. According to the new Act, discrimination is forbidden irrespective of whether it is (i) based on a person directly or indirectly on the basis of e.g. reasons related to the discriminated person’s family member, or (ii) based on a fact or a mere assumption. Moreover, as of 1 January 2015, harassment may also be considered a means of discrimination.

The recent amendments include, inter alia:

  • The employer’s duty to draft a so-called non-discrimination plan with employee representatives in companies normally employing at least 30 employees. The plan shall include e.g. an evaluation on how non-discrimination is promoted in the workplace. The plan may be drafted as a separate document or it can be incorporated into another existing plan such as the occupational health and safety programme (in Finnish "työsuojelun toimintaohjelma"), the staff plan (in Finnish "henkilöstösuunnitelma"), or the equality plan (in Finnish "tasa-arvosuunnitelma").

  • The employer’s duty to execute reasonable adjustments in order to promote non-discrimination of handicapped employees has been emphasised. The adjustments can focus, for example, on the working conditions (such as installing ramps or adjusting the lighting and the acoustic of the workplace), the organisation of the work, the working methods, and on education.

  • The employer’s duty to draft a salary survey (in Finnish "palkkakartoitus") between male and female employees. The salary survey must include information on the classification, salaries, and salary differences. The salary survey may be included in the company’s equality plan.

  • The employer’s duty to draft an equality plan has been given some leeway. From now on the equality plan must be drafted at least every other year instead of the previously required yearly review.

  • The maximum amount of the indemnity payable as compensation to the discriminated person according to the Non-Discrimination Act has been removed.

New Act on Security Checks in force

The employer’s possibility to perform background checks for employees in Finland is limited due to the requirements of Finnish privacy legislation and legislation related to criminal record extracts. The right of an employer to ask to review an employee’s or candidate’s criminal record is limited to few professions which relate to working with the youth and children. The possibility to perform security checks via an official procedure related to specific positions is available and the legislation related to these security checks has been renewed and entered into force at the beginning of the year 2015.

The main purpose of the legislation is also to provide future protection of security interests related to the safety of the Finnish state and the international relations of the state, to the general security of the society, and other comparable general interests, e.g. airports, nuclear facilities, or security transports related to valuables. As in the past, a security clearance can, however, also be obtained with regard to employees in the private sector if specific and rather strict criteria are met.

A new requirement of the law is that a company must inform the applicants in advance either in the job posting or by other suitable means that due to the nature of the position, the candidate chosen for the position will have to undergo a security clearance. An advance consent must always be obtained from the employee / candidate for the security clearance.

The new law specifies the grounds based on which a security check can be obtained. There are three different levels of the check: Checks at the extensive level are reserved for positions with certain authorities or international organisations only, and checks at the concise level and at the normal level can be performed also with regard to employees in the private sector. In addition to the tasks listed in the law, a company can also apply for certain positions to be accepted as positions regarding which a security check should be performed. The application must be made to the Finnish Security Intelligence Service (in Finnish "Suojelupoliisi"). The conditions for granting the acceptance require that the employee chosen for the position

  • will get such user rights to the employer’s or client’s data systems that their unwarranted use could cause notable economic damage to the employer or to the client; or

  • will get access to trade and business secrets of the employer or the employer’s affiliate relating to results of technological developments or their use and the unwarranted use of which would cause the employer, its client, or its affiliate notable economic damage.

The information and data systems referred to in the application must be appropriately protected, technically and otherwise, and access to them needs to be limited. The company must also provide proof of this with a certificate or by other suitable means. Additionally, the company must also obtain a statement from a special new assessment board, stating that there is a risk of industrial espionage due to the sphere of activities of the company or that a security check is needed in order to protect very important private economic interests. The role of the new assessment board has been criticised by organisations looking after the interests of the private sector as this adds bureaucracy as well as poses challenges related to the confidentiality of data regarding business secrets. Thus, companies should evaluate well in advance which positions are such that a security clearance is needed.

SWEDEN

Amendments to the Swedish Working Hours Act and the Swedish Work Environment Act - Sanction fees

As of 1 July 2014, the Swedish Working Hours Act (in Swedish "Arbetstidslagen") and the Swedish Work Environment Act (in Swedish "Arbetsmiljölagen") (the “Acts”) have been amended in order to obtain a more effective sanction system should the employer not observe certain provisions of the Acts. Previously the employer could be subject to fines if it did not comply with certain provisions. The fines must be imposed by a court of law, and such procedure may take a considerable amount of time and lead to considerable administrative costs. However, as of 1 July 2014, the Swedish Work Environment Authority has been authorised to impose a sanction fee on employers who are not in compliance with the relevant provisions under the Acts. The employer’s obligation to pay the sanction fee is strict and, hence, does not depend on whether the breach was committed by intent or negligence. It should be further noted that the sanction fee has not replaced fine as a sanction with respect to all provisions under the Acts.

With regard to the Swedish Working Hours Act (in Swedish "Arbetstidslagen"), the relevant provisions that, following 1 July 2014, are subject to a sanction fee instead of a fine should they not be complied with, relate to e.g. the allowed amount of (i) regular working hours,(ii) on-call hours, (iii) overtime hours and additional working hours (in relation to part-time employment) as well as to (iv) the employee’s right to a weekly rest (in Swedish "veckovila"), and (v) the employee’s right to a certain amount of rest each 24 hours (in Swedish "dygnsvila"). Should the employer be non-compliant with any of said provisions, the employer may hence be subject to a sanction fee imposed by the Swedish Work Environment Authority. The amount of the sanction fee is calculated in the same way as the fine prior to 1 July 2014 (i.e. 1% of the applicable price base amount for each hour in breach). However, it should be noted that if the employer has agreed on regulations deviating from Swedish law through a collective bargaining agreement, such agreement supersedes Swedish law and the employer shall not be subject to sanction fees in accordance with the above.

With regard to the Swedish Work Environment Act (in Swedish "Arbetsmiljölagen"), the relevant provisions that, following 1 July 2014, are subject to a sanction fee should they not be complied with, relate to e.g. the protection of pregnant women and under-aged employees, the requirements of certain approvals, controls and inspections (elevators, lifting devices, etc.), and the handling of dangerous substances. The sanction fee may amount to a maximum of SEK 1,000,000.

COMMENT FINLAND:

The Finnish Working Hours Act (605/1996) applies to all employees, however, excluding e.g. employees in managerial positions and employees who work independently under such conditions that the employer cannot be expected to monitor the arrangement of the time spent on such work. The application of the Working Hours Act has proven challenging in certain situations due to the recent changes in the working environment and working methods. Lately, there has been an increasing amount of public discussion on the need to amend the Act, especially in order to clarify the legal situation of employees in expert positions as well as that of senior salaried employees.

Employers are required to keep record of the employees’ working hours as well as of the relevant remunerations separately (e.g. regular, additional, overtime, Sunday hours, etc.). A breach of keeping such record is sanctioned under the Finnish Penal Code as a working hours offence (in Finnish "työaikasuojelurikos") amounting to a fine or imprisonment for up to six months. Moreover, a breach of other mandatory provisions under the WHA may be subject to a fine for violation of the working hours regulations (in Finnish "työaikarikkomus"). The question of allocating liability between an employer and its representative is addressed in the Penal Code.

The Finnish occupational safety and health authorities supervise the compliance of inter alia, the Working Hours Act and other legislation relating to occupational health and safety. The authorities may, for example, conduct inspections at the work premises. Such inspections may be conducted routinely or on the basis of a tip-off from e.g. an employee or another authority. The inspection results in a report which may include procedural instructions (in Finnish "toimintaohje") or improvement notices (in Finnish "kehotus") instructing how to proceed with remedying any emerging issues. The occupational safety and health authorities may obligate an employer to remedy non-complying conditions within a specified time limit, and in order to emphasise any obligations, the authorities may also impose a default fine (in Finnish "uhkasakko") or threat that the non-complying conditions will be ordered to be remedied or eliminated at the employer’s expense or the concerned activity will be stopped (in Finnish "teettämis- ja keskeyttämisuhka"). The non-compliance of any improvement notices, orders, or prohibitions from the occupational safety authorities regarding the application of the Working Hours Act may also be sanctioned as a working hours offence and result in a fine or imprisonment up to 6 months.

COMMENT RUSSIA:

In Russia, the Russian Labour Inspectorate imposes fines on employers not observing applicable working hours regulations

In Russia, in the event of a violation of applicable working hours regulations, the employer will be subject to a fine in accordance with the Russian Code of Administrative Offences which provides for an employer’s liability for violating labour safety requirements. The Russian Labour Inspectorate, or in certain cases the Prosecutor’s Office, is the entity that imposes the fines for violations of working hours regulations on the employer. In the event that the employer does not agree with the imposed fines, the employer is entitled to appeal to a court.

In the event of a violation of the relevant working hours regulations by the employer, the employer (company) may be subject to a fine of up to RUB 80,000 (approximately EUR 1,100) and/or the company official (e.g. general director) may be subject to a fine of up to RUB 5,000 (approximately EUR 67). In the event of a repeat violation of working hours regulations by the employer, the employer (company) may be subject to a fine of up to RUB 200,000 (approximately EUR 2,600) or the company’s activities may be suspended for up to 90 days and/or the company official (e.g. general director) may be subject to a fine of up to RUB 40,000 (approximately EUR 565) or disqualified for a term of up to 3 years.

RUSSIA

On 1 January 2015, amendments to the Code of Administrative Offences of the Russian Federation providing for stricter penalties for violations of labour legislation entered into force

The amendments differentiate the amount of fines according to the type of violation. The possible maximum sanction has been increased from RUB 50,000 (approximately EUR 650) to RUB 200,000 (approximately EUR 2,600). A warning, which had not been previously established for such types of violations, was also introduced in the list of possible penalties.

Not complying with an order from a labour inspector, or committing an administrative violation similar to one that has previously resulted in an administrative penalty may serve as grounds for disqualifying the company official for a term up to 3 years.

In addition, new types of liability for violations of labour legislation have also been introduced:

  • the employer’s liability for absence of an employment contract or for refusing to execute or improperly executing an employment contract with an employee or for concluding another civil law agreement (instead of an employment contract) that actually regulates the labour relations between the employee and the employer.

  • liability for violating labour safety requirements;

  • an employee’s liability for permitting a person to work when the employer has not permitted the employee to do so.

COMMENT FINLAND:

The Finnish Penal Code (39/1889) deals with matters regarding the allocation of liability for certain breaches of employment legislation, e.g. breaches of work safety and health regulations. Under the Penal Code, the employer or its representative who intentionally or negligently violates work safety regulations or causes a fault or risks the continuation of a situation contrary to work safety regulations by failing to monitor the compliance with them in work that he/she supervises, or by failing to provide for the financial, organisational, or other prerequisites for work safety, shall be sentenced for a work safety offence to a fine or imprisonment for at most a year.

Under the Penal Code, a company may be sentenced to a corporate fine if a person who is part of its statutory organ or other management or who exercises actual decision-making authority therein has been an accomplice in an offence or allowed the commission of the offence or if the care and diligence necessary for the prevention of the offence have not been observed in the operations of the corporation. A corporate fine is imposed as a lump sum. The amount of the corporate fine is at least EUR 850 and at most EUR 850,000.

COMMENT SWEDEN:

A Swedish employer’s obligations in relation to work environment, as well as the liability for breaches of such obligations, are set out in the Swedish Work Environment Act and the Swedish Penal Code. In the event of a breach of the work environment provisions, the employer may be subject to a fine, sanction fee, or a corporate fine. Furthermore, if an employer intentionally or negligently violates work safety regulations and should for example a person become injured, ill or subject to severe danger due to the breach, the employer may be sentenced to imprisonment for at a most six years.

The Labour Code of the Russian Federation was amended to include special provisions regulating the work of foreign employees

The amendments entered into force on 13 December 2014, and they establish the special aspects concerning the employment relationship between a foreign employee and the employer.

Employment contracts with foreign employees should be concluded for an indefinite term. The conclusion of a fixed-term employment contract with a foreign employee is possible only in those cases specifically provided for in the Labour Code.

Employment contracts with foreign employees should include information concerning the document on the basis of which the foreign employee is performing the work activities in Russia (work permit, temporary residence permit, etc.), and in certain instances, it is mandatory to indicate the details of a voluntary medical insurance agreement (policy) or a medical treatment agreement.

The new legislative provisions render it possible to temporarily transfer a foreign employee to a different task (position) for a term of up to one month, but not more than once in a calendar year, irrespective of the task (position) for which the work permit or license was issued.

Additional grounds have also been established for the termination of an employment contract with a foreign employee. These include, inter alia, the expiration of the term of validity of the work permit and the expiration of the term of validity of the voluntary medical insurance agreement (policy).