Employment Newsletter 1/2017
Contents of the newsletter:
New Government Measures in Attempt to Decrease Unemployment – Take Note When Entering Into or Terminating Employment Agreements
The Approach Taken by the Commercial Sector on the Execution of the So-Called Competitiveness Pact
Unilateral Amendment of Terms of Employment – The Importance of The Process
Closer Monitoring of The Foreign Employees’ Terms of Employment
Environment, Health, and Safety at Workplace – What to Consider Following a Transaction
How to Ensure Group Policies are Complied With and Applicable Within a Russian Organization
NEW GOVERNMENT MEASURES IN ATTEMPT TO DECREASE UNEMPLOYMENT – TAKE NOTE WHEN ENTERING INTO OR TERMINATING EMPLOYMENT AGREEMENTS
Amendments to the Employment Contracts Act (55/2001)
The amendments to the Employment Contracts Act entered into force on 1 January 2017 as proposed by the Government in June 2016. The implemented amendments include, for example, the right to enter into fixed-term employment contracts without specific grounds of so-called long-term unemployed jobseekers, the maximum duration of the trial period, and the re-employment obligation. The shortened re-employment obligation applies to all employment relationships ending on 1 January 2017 or later, regardless of whether the notice has been given before the new act entered into force.
For further information, please read our previous Hannes Snellman Employment Newsletter 3/2016.
The Finnish Government Introduces Amendments to the Act on Unemployment Benefits (1290/2002)
The amendment of the Act on Unemployment Benefits entered into force on 1 January 2017. The amendment includes three central modifications aimed at raising the employment rate by shortening the periods of unemployment and activating the unemployed to independently improve their employment status.
According to the amended act, an unemployed person must now apply for and accept a full-time position the paid salary of which is less than the unemployment benefit paid to them. In addition, since the beginning of January, an unemployed person has had to accept a position outside of the prevailing working area radius of 80 kilometres from their home. An unemployed person is also expected to use their own vehicle to commute to the offered job.
Furthermore, the amendment provides for consequences if an unemployed person declines a job offer. According to the act, an unemployed person loses the unemployment benefit for a fixed period after declining an individualised and certain job offer. The fixed period was previously 60 days but it has now been extended to 90 days. After declining a job offer, the unemployed person would, however, have 30 days within which to be employed before losing the benefit for the fixed period of 90 days.
With the new legislation, all unemployed, including integrating immigrants, must attend to any offered employment promoting services in order to maintain their unemployment benefit.
Amendments to Legislation to Extend Dismissed Employee’s Right for Occupational Health Care and Employment Promoting Training
In order to harmonise the employer obligations between employers bound by the Competitiveness Pact and the ones left out of its scope, the Government has adopted the following amendments. As of the beginning of the year, an employer is obliged to provide occupational health care for an employee dismissed for production-related and financial grounds for six months from the end of the employee’s obligation to work.
An employer must also offer an employee the opportunity to participate in employment promoting training at the employer’s expense. These obligations are applicable to all employers with more than 30 employees if the employee dismissed on production-related and financial grounds has worked for the employer for at least five years.
The Swedish Act on Unemployment Benefits (1997:238) ensures that an individual receives unemployment benefits for periods of unemployment. In order to be granted unemployment benefits, the individual must fulfil certain preconditions, for example that the applicant, during a period of twelve months immediately preceding the unemployment, must have been employed for at least six months with a minimum of 80 working hours per calendar month, or have been working continually for at least 480 hours during the past six months, amounting to at least 50 hours per month (the “Working Provision”). The individual applying for this benefit must take active steps to look for work in order to get back into the working life, and if they fail to do so, their benefits will be cancelled.
If the individual neglects their obligation to look for work by not applying for suitable jobs, by not taking active steps to look for work, by not participating in the drawing up of an action plan with the employment agency, by not delivering the activity report in time, or by not showing up at the employment agency when appointed, the individual will initially receive a warning. If the misconduct in these matters continues, the individual’s benefits will be cancelled for one day after the second occurrence of misconduct, for five days after the third occurrence, and for ten days after the fourth occurrence. After the fifth occurrence of misconduct, the individual will lose their right to the benefits.
If the term of the unemployment is prolonged by the individual’s own actions, e.g. by them not accepting an offered (and suitable) position, or if they create or actively contribute to a situation where no position is being offered, the benefits will immediately be cancelled for five days. If the actions are repeated for a third time, the unemployment benefits will be cancelled for 45 days, and after the fourth time the individual will lose their right to the benefits.
Furthermore, if the individual has caused their unemployment by e.g. terminating an employment without an acceptable reason, or by getting dismissed due to misconduct, no benefits will be granted for 45 days. If the situation reoccurs, the benefits will be lost for further 45 days. The maximum cancellation time is 112 calendar days. If the right to benefits is lost, the individual must again fulfil the conditions of the Working Provision in order to receive the benefits.
Russian unemployment legislation has not seen any significant changes recently, and, therefore, has remained quite stable.
In order to receive unemployment benefits, one must register with the Russian Government Center of Employment. It is important to note that in Russia, unemployment benefits are very limited and due to which it is quite common that unemployed persons do not even seek unemployment benefits. The typical amount granted is between RUB 800 – 4,900 (EUR 13 – 80) per month.
In Russia, there is not a similar system to Finland obliging employers to provide occupational health care, but many employers provide their employees with voluntary health insurance. When voluntary health insurance is tied to an employee’s employment contract, it terminates when the employment relations terminate. An employer and an employee may agree on an extended coverage period for a limited period, for example in an agreement on termination of the employment contract.
In the event of redundancies, Russian labour law does not create any obligations for an employer to provide employees employment-promoting training. Many years ago, before the Labour Code was established, employers were obliged to provide training at their expense but the state unemployment agency later replaced this providing these services exclusively to unemployed citizens.
THE APPROACH TAKEN BY THE COMMERCIAL SECTOR ON THE EXECUTION OF THE SO-CALLED COMPETITIVENESS PACT
The labour market organisations reached a mutual understanding on the so-called Competitiveness Pact (in Finnish: kilpailukykysopimus) in spring 2016. The Pact aims to improve the competitiveness of the labour force and business organisations in Finland. Moreover, the goal of the Pact is to increase the economic growth, create jobs, and improve the possibilities for the employer and employee representatives to agree locally on the collective terms of employment within a company. One of the most publicly discussed issues in the Competitiveness Pact is the extension of the annual working time by 24 hours. The trade unions and the employer’s associations of each industry have independently agreed on the concrete means of extending the working hours at the industry level.
In the commercial sector, the extension of the annual working time has been implemented by agreeing on some significant structural changes to the collective bargaining agreements. The former weekday public holiday system (in Finnish: arkipyhäjärjestelmä) has been replaced by the so-called annual free-time system (in Finnish: vuosivapaajärjestelmä, not to be confused with the so-called annual holiday system, in Finnish: vuosilomajärjestelmä). In short, the new system replaced the weekday public holidays and accrues less free days for the employees in the future. The changes have been agreed upon between the Federation of Finnish Commerce (in Finnish: Kaupan liitto ry) and Service Union United PAM. The new annual free-time system is part of all collective bargaining agreements in the commercial sector made between the above-mentioned parties.
The goal of the new annual free-time system is to be more motivating than the old system, as the accrual of the annual free time is dependent on the actual hours worked by each employee. The employees accrue one vacation day (7.5 hours) for each 220 hours worked. At the maximum, the employee may earn 6.5 vacation days (cf. 8.4 vacation days in the old system). A normal salary of the employee is paid during the annual free time. As regards employment relationships commencing on or after 1 January 2017, the accrual of the annual free-time vacation days shall commence only once a qualifying period of 6 months has passed. As an alternative to the new annual free-time system, the local units may locally agree on that, instead of implementing the annual free-time system, the weekly working hours of the employees working full-time will be extended from 37.5 hours to 38 hours.
The new annual free-time system has entered into force on 1 January 2017. Moreover, the new (extended) term of the collective bargaining agreements shall enter into force on 1 February 2017.
UNILATERAL AMENDMENT OF TERMS OF EMPLOYMENT – THE IMPORTANCE OF THE PROCESS
In its judgment of 11 November 2016 (KKO 2016:80), the Finnish Supreme Court specified the information to be provided to employees in situations where, based on the existence of legal grounds for termination, the employer unilaterally changes the material terms of employment. According to the Supreme Court, employees need to be clearly informed of the existence of the legal grounds for termination, the details of the unilateral amendment to the terms of employment, the time of execution of the unilateral amendment, as well as the consequences of the employee’s refusal to accept such a unilateral amendment.
The case concerned a company which, as a result of the co-operation negotiations, had informed its employees of the closure of the company’s place of business located in Espoo and of the transfer of the employees to another work location in Porvoo. However, one of the employees, whose employment contract expressly stated that the place of business was in Espoo Keilaranta, did not show up in Porvoo following the move to the new place of business. The employer therefore deemed the employment contract cancelled following a couple of weeks of unfounded absence in accordance with Section 3 of Chapter 8 of the Finnish Employment Contracts Act. The employee challenged the company’s actions and claimed, inter alia, compensation for not having complied with the applicable notice period, as well as damages for unlawful termination. The case reached the Supreme Court, which was asked whether the company had in fact followed the right procedure in respect of making the unilateral amendment to the employee’s material terms of employment.
Based on the well-established practice of the Supreme Court, an employer may, as an alternative to termination of employment, unilaterally amend the material terms of employment, such as duties, salary, or place of work, provided that there are legal and valid grounds for the termination. In such cases, the unilateral amendments must be implemented in accordance with the applicable notice periods. The Supreme Court took the view that, on the basis of the employment law and general principles of contract law, such an amendment may be made either by giving the employee a notice of termination and concluding a new employment contract, or by giving a notification to the employee concerning the unilateral amendment to the terms of employment made on the basis of the applicable grounds for termination. In both cases, the amendment must be made in accordance with the applicable notice periods.
In its ruling, the Supreme Court emphasised the fact that in order to fulfil the general principle of employee protection forming the basis of employment legislation, if the employer wishes to make a unilateral amendment to the terms of employment of the employees, it is imperative that the notification of the employer clearly states the following:
(i) the ground for termination,
(ii) the term of employment being unilaterally amended by the employer,
(iii) the timing of such unilateral amendment, and
(iv) the consequences of the employee’s refusal to accept the employer’s alternative to the termination of the employment relationship.
According to the Supreme Court, the employee must be allowed to deliberate the existing alternatives and if needed, have a chance to challenge the notified ground for termination.
Did You Know?
Section 3 of Chapter 8 of the Employment Contracts Act (TSL 8:3): The right of an employer to deem an employment contract cancelled from the date on which an employee’s absence has begun in situations where the employee has been absent from work for a minimum of seven days without notifying the employer of a valid reason for the absence for the such period. NB: The definition of “seven days” in the Act includes weekends (ordinary Saturdays and Sundays) even if the employee would normally work only during business days from Monday to Friday (KKO 2008:50), however, it excludes public holidays (KKO 2001:40).
The Supreme Court Case of KKO 2016:80 can be found in Finnish here.
The Swedish Employment Protection Act (1982:80) ensures employees protection for their employment, not for their position. A transfer of position within a company will therefore not result in any notice period, and contrary to the Finnish model, new salary and benefits will enter into force immediately when the new position is taken up (unless otherwise agreed between the parties).
The Swedish Labour Court (in Swedish: Arbetsdomstolen) recently gave its ruling on such a situation in matter AD 2016 nr 53. In this case, an employer had offered, due to a redundancy, an employee to be transferred to another position with a lower salary, and the matter in the court concerned the question of whether the employee should be entitled to keep the previous, higher salary during a notice period. As the employee accepted the offer, a termination was avoided and no notice period was required, wherefore the new salary came immediately into effect in conjunction with the beginning of the new position.
The Labour Code of the Russian Federation outlines strict rules for unilateral amendments to material terms of an employment contract, for example, relocation of the company. It provides guarantees to employees including the option for the employee to decline the amendments and the right to compensation.
For an employer to initiate any unilateral amendments to an employment contract, the employee must receive warning at least two months in advance before the employer amends the employment contract. As mentioned above, if an employee declines the amendments they are entitled to compensation if they leave or the employer may propose another position within the company.
Relocation of a company office is a straightforward process and rarely leads to disputes in court.
Unilateral amendments to other material terms of employment, e.g. a change in production technology, or a restructuring of work processes, can potentially create significant obstacles for HR specialists and lawyers due to the uncertainty in the interpretation of the set of criteria entitling the employer to amend employment terms.
CLOSER MONITORING OF THE FOREIGN EMPLOYEES’ TERMS OF EMPLOYMENT
The Finnish Regional State Administrative Agencies (hereinafter the “AVI”, in Finnish Aluehallintovirasto), as the occupational safety and health authority in Finland, monitors, inter alia, the terms of employment of foreign employees (including posted workers) working in companies operating in Finland. The authority supervises, inter alia, the fact that employers operating in Finland comply with mandatory Finnish employment legislation, organise the work performed by their employees in a safe and health-promoting manner, and do not discriminate against foreign employees. Based on the AVI’s recent activity, the authority has been increasing the monitoring of the terms of employment applicable to posted workers and other foreign workers working in Finland. Employers of all sectors (e.g. the ICT sector and hospitality industry) are nowadays being targeted by the authority’s increased supervision.
Following a complaint made by the AVI based on the discoveries made in an occupational safety and health inspection conducted at the workplace, the District Court of Helsinki ordered on 17 June 2016 the employer to pay 20 day fines as a sanction for discrimination at the workplace. The employer had paid its foreign employees a lower salary compared to the minimum level required under the applicable collective bargaining agreement. The decision to pay lower salary had been justified on the grounds of the foreign employees not having the required education, prior work experience, or language skills. Following the AVI’s inspection, the employer had not changed its practice nor complied with the occupational safety and health authority’s instructions to pay equal salary to foreign employees, and also continued to pay lower salary to newly-hired foreign employees. This non-compliance with the AVI’s requirements eventually resulted in the decision of the District Court.
The key points of focus for companies employing foreign employees or using posted workers in Finland include:
- Observing requirements related to minimum level of salary. The minimum salary payable to foreign employees or posted workers must comply with the applicable collective bargaining agreement’s provisions on the minimum level of salary payable to all employees covered by said collective bargaining agreement. If no collective bargaining agreement is applied by the employer in question, then the level of salary must correspond to the general level of salary paid to employees in the specific sector in question. In respect of posted workers, it should be noted that any supplements or allowances paid on top of the salary paid in the country of departure, which are intended to cover the actual costs incurred as a result of being a posted worker, are not considered part of the total minimum compensation. In order for the AVI to regard such supplements or allowances as part of the posted worker’s total salary, it should be clearly stated that these supplements or allowances are in fact covering the difference between the salary payable in the country of departure and the Finnish minimum salary requirements
- Keeping record of working hours. The employer must ensure that mandatory legislation regarding working hours is also applied to foreign employees and foreign posted workers. For example, foreign employees and posted workers must also receive equal supplements or compensations, for example, for overtime work or work performed during weekends.
- Ensuring a safe and health-promoting work environment. The employer must ensure that the working conditions of foreign employees are compliant with Finnish statutory occupational health and safety requirements. Moreover, employers must appoint a representative in Finland for posted workers, as well as organise occupational healthcare and take out all mandatory insurances for posted workers. The Posted Workers Act requires that companies inform the occupational safety authorities of all posted employees sent to work in Finland at the risk of a fine. However, the implementation of this obligation is currently pending due to certain technicalities related to the AVI’s data systems which remain unsolved.
- Ensuring and keeping record of foreign employees’ right to work in Finland. Employers must ensure that all foreign employees have a valid working permit or that no working permit is required. In addition, employers must keep data regarding foreign employees’ working permits in their records. The AVI also requires that employers keep a copy of foreign employees’ (including citizens of other EU Member States, Iceland, Liechtenstein, Norway, and Switzerland) passports in their records in order to be able to verify the nationality of such employees.
The Labour Code of the Russian Federation governs employment relations between foreign employees and employers. It also establishes equal employment rights for both foreign and Russian citizens.
There are a few differences in labour relations between foreign and Russian citizens, however, primarily concerning the requirement of foreign citizens to obtain documents allowing the right to work (e.g. work or residence permit). Before beginning work, all foreign employees must also obtain voluntary health insurance (generally, the employer provides this to the employee, however, there are exceptions). The labour code also stipulates additional grounds for termination of an employment contract with a foreign citizen (expiration of their work permit, voluntary health insurance, etc.)
ENVIRONMENT, HEALTH, AND SAFETY AT WORKPLACE – WHAT TO CONSIDER FOLLOWING A TRANSACTION
Hannes Snellman held an Environment, Health, and Safety Seminar at its Helsinki office on 10 November 2016. Johanna Haltia-Tapio, Anders Bygglin, and Jussi Talvitie of our Employment Law Team, together with Klaus Metsä-Simola of our Environment Law Team, introduced the subject from the point of view of cross-border transactions both pre and post closing by dealing with the subject in relation to the work environment in the context of labour and environmental legislation. The subject was dealt in more detail by Guest Speaker Tuula Gåpå, an environmental specialist at St1 Biofuels Oy, who dealt with the topic from the point of view of a Finnish company.
According to the Finnish legislation, employees are entitled to work in an environment where health and safety, as well as other risk factors, are properly controlled, and employers in Finland bear the primary responsibility to provide a safe workplace.
It is essential that both pre and post transaction process environmental, health, and safety matters are taken into close examination. In a judgment of the Court of Appeal of Turku (HO 15/146628), the Court found that the Occupational Safety Act requires that the acquiring company conduct a risk assessment on the current risk factors and control, as well as update, the safety instructions given to the employees. Such assessment of risks cannot be left to the company's employees and the Court confirmed that the new owner of the company could not rely on the know-how of the existing employees on safety matters. The employer must examine the conditions at the workplace and make sure that they conform to the applicable mandatory legislation.
Few key factors to be taken into consideration both pre and post transaction regarding the environment, health and safety:
Current risk factors? Analysis and assessment of risks;
Plans and guidelines? Are all the plans and guidelines implemented as required by the law and the industry and are such documents taken into practice? Any and all environmental, health and safety instructions should be in writing;
Group-wide assessment? How does the acquired company fit into the new group? The group-wide guidelines and plans for the new subsidiary should be updated accordingly.
Organisation? How does the organisation operate in connection with environmental, health and safety matters? How is the responsibility shared in the new organisation?
Authorities’ remarks? Any former inspections conducted by the authorities? Are these remarks and instructions taken into practice?
HOW TO ENSURE GROUP POLICIES ARE COMPLIED WITH AND APPLICABLE WITHIN A RUSSIAN ORGANIZATION
Group policies do not only reflect the business principles and values of an organisation, they also are used to ensure compliance with legislation and for the protection of interests of a whole company group. Typically the policies are applicable group-wide to all employees, including Russian personnel and are published in English in an electronic format in the group’s intranet. It should be noted that in Russia, no disciplinary measures may be taken against an employee, unless the policies are implemented in accordance with the procedure set out in the Russian Labour Code. Therefore, in order to ensure that your company group policies are complied with and applicable within your Russian organisation, the policies must be:
- in line with the applicable mandatory provisions of Russian law;
- executed in writing in Russian or bilingual format;
- approved by an order of the general director of the Russian subsidiary;
- acknowledged and signed by each affected employee.
The Russian Labour Code itself actually sets out a number of mandatory internal labour documents, including:
- Internal Labour Regulations;
- Personal Data Regulations;
- Regulations on Compensation and Bonuses;
- Trade Secret Regulations; and
- Work Safety Regulations.
Group policies, such as a code of conduct, could be incorporated as part of these mandatory documents. Sometimes, in order to achieve the goals set out by the group policies, we recommend adjusting the concepts to fit the Russian legal and business environment. For example, a standard confidentiality undertaking is not effective in Russia without properly established Trade Secret Regulations aimed at protecting commercial secrets.
Compliance with Russian labour law requires a considerable amount of paperwork, but at the same time, these properly executed internal documents can serve as a handbook for both the Russian personnel as well as the group HR department and enable the employer to protect its and the group’s interests.
Holding those in violation liable is not possible without having the mandatory documents in place and following the mandatory procedures prescribed by law. Are your group policies up to date and properly implemented in Russia?
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