Finland

    1.1 In what circumstances does the employee transfer law apply?

    The employee transfer rules apply, broadly, to the transfer of a business or a part of one to another employer. The business to be assigned must remain the same or similar after the transfer. The factors, to be assessed as a whole, are:

    • the legal relationship between the transferor and the transferee;
    • whether it is the transfer of an operative entity;
    • whether the identity of the entity is retained;
    • whether operations continue without interruption after the transfer; and
    • the change of employer.
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    Author: Dittmar & Indrenius

    Date: September 2016

    1.2 Does the employee transfer law apply to (a) a sale of a business or (b) outsourcing?

    (a) Sale of a business

    The employee transfer rules apply to the transfer of an economic entity which retains its identity. This includes sales, mergers and de-mergers. Whether the rules apply depends on the significance of the business to be transferred, in terms of, for example, customers, staff and premises. If staff are significant in the business but do not transfer, there is probably no transfer of the business. The sale or acquisition of shares, insolvency or the death of an employer do not qualify as transfers. The transfer of service contracts may be covered by the rules and rental agreements may also sometimes constitute transfers.

    (b) Outsourcing

    The employee transfer rules may apply to outsourcing and the same applies to changes to subcontractors. However, outsourcing is not normally considered as a transfer because the general conditions necessary for a transfer are not usually fulfilled.

    However, for example, if certain tangible property is important for a business, its transfer from a subcontractor to another might constitute a business transfer. If a substantial part of the staff are transferred to a service provider, this alone might constitute a business transfer in sectors where staff are a company’s most valuable asset.

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    Author: Dittmar & Indrenius

    Date: September 2016

    1.3 In outline, what are the implications of the employee transfer law?

    If the employee transfer law applies:

    • The terms of the employment relationship transfer to the new owner of the business. This includes all employment benefits.
    • The transferor and the transferee are jointly and severally liable for the employee's pay or other claims deriving from the employment relationship that have fallen due before the transfer.
    • The transferee must comply with the collective agreements that applied to the transferor at the moment of transfer.
    • The transferee may not terminate an employee's employment contract merely because of the transfer.
    • If an employment contract is terminated because the employee's employment terms have weakened substantially as a result of the transfer of the business, the employer will be deemed responsible for the termination of the employment relationship.
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    Author: Dittmar & Indrenius

    Date: September 2016

    2.1 Who transfers?

    Employees who work permanently for the business to be transferred, will transfer. In addition, employees on parental or other leave will transfer, along with employees who have been laid off.

    When only part of the transferor’s business is transferred, it is often difficult to determine which employees belong to which part.  Generally, employees whose main duties fall outside of the assigned business do not transfer. The same goes for employees who are performing only temporary duties for the transferred business. By contrast, those workers who are necessary to keep the transferring business operational will transfer. The department in which an employee works may also influence the assessment.

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    Author: Dittmar & Indrenius

    Date: September 2016

    2.2 Can employees object to transferring?

    A transferred employee has no right to continue his or her employment with the transferor without the transferor’s specific consent. However, an employee may terminate the employment contract as a result of the transfer. The termination will be effective as of the date of the transfer, regardless of the notice period which would otherwise apply. If the employee was informed of the transfer less than one month before its completion, he or she may terminate the agreement within one month of being informed of the transfer.

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    Author: Dittmar & Indrenius

    Date: September 2016

    2.3 What happens to terms of employment contracts?

    When a business is transferred the rights and obligations relating to the employment relationship transfer to the new owner of the business on existing terms. The same applies to collective agreements. Thus, the transferee must comply with the same collective agreements as the transferor.

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    Author: Dittmar & Indrenius

    Date: September 2016

    2.4 What about other employee benefits?

    The transferee must provide the same benefits to the transferred employees as the transferor. The general rule is that all benefits based on the employment contract will transfer. The employment of transferred employees counts as ‘continuous employment’, i.e. their employment history within the transferor will be taken into account when determining benefits based on length of service (e.g. holiday entitlement). Benefits that the transferee is not able to provide (e.g. subsidised lunch at a staff canteen, if the transferee does not have a staff canteen) are not transferable and the transferee is not obliged to compensate transferring employees.

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    Author: Dittmar & Indrenius

    Date: September 2016

    2.5 What happens to pension rights?

    The mandatory employment pension (so-called TyEL-pension) can be regarded as a ‘defined benefit’, as the Finnish pension system provides that future pension liabilities are covered by pension insurance companies and the state. The employer is not liable to cover any future pension liabilities or to ensure the availability of the required funds. Consequently, the employer’s only responsibility is to pay the costs of the mandatory TyEL-pension insurance to the insurance company for the term of the employment.

    In the case of a transfer, the transferee is obliged to take the mandatory TyEL-pension insurance with a pension insurance company for the benefit of the transferred employees. The transferee must also comply with any additional pension provision made by the transferor if this has been incorporated into the employment contracts of the transferring employees.

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    Author: Dittmar & Indrenius

    Date: September 2016

    2.6 What liabilities transfer?

    All of the employer's liabilities transfer automatically to the transferee at the moment of the transfer. Generally, the transferor and transferee are jointly and severally liable for the employees’ pay and any other claims that derive from the employment relationships if they fall due before the date of the transfer. However, the transferor is liable to compensate the transferee for any claims of employees falling due before the transfer, unless otherwise agreed.

    Employment contracts terminated before the moment of the transfer do not transfer, but the employer’s so-called re-employment obligation does transfer to the transferee. This means that the transferee may be liable to re-employ an employee made redundant by the transferor on financial or production-related grounds before the transfer. This is the case if the transferee needs a new employee to do a job similar to that of the redundant employee within nine months of his or her termination.

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    Author: Dittmar & Indrenius

    Date: September 2016

    2.7 Do collective agreements transfer?

    The transferee must comply with the collective agreements which the transferor was bound to on the date of transfer, until the date of their termination or expiry or the entry into force of another collective agreement (e.g. by the agreement of the parties to the collective agreement). Thus, the transferee may have to apply two or more collective agreements, i.e. one to its old employees and another (or others) to the transferred employees, and it must observe the provisions of national collective agreements applicable in the sector, whether or not it is a member of an employers' organisation bound by them.

    However, note that clauses referring to collective agreements negotiated and adopted after the date of transfer are not enforceable against the transferee and neither is the transferee bound by any subsequent amendments to them if the transferee was not able to participate in the negotiations.

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    Author: Dittmar & Indrenius

    Date: September 2016

    2.8 How does the transferee obtain information on transferring employees?

    There are mandatory co-operation procedures in connection with business transfers. The transferor and transferee must inform the employee representatives of those affected by the transfer. The information must include the time of the transfer, the reasons for it, the consequences to employees and the planned measures regarding the employees.

    The transferor and transferee may both be party to the co-operation procedures. The employee representatives will receive the relevant information from both parties if both have at least 20 employees.

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    Author: Dittmar & Indrenius

    Date: September 2016

    3.1 Can employers make changes to employment contracts?

    The employer is not allowed to change the terms of an employment contract to the detriment of the employee. Therefore, as a general rule, the terms of an employment contract as well as other terms of an employment relationship which have been specifically agreed, may not be amended or revised without the consent of the employee.

    However, employment terms may change, for example, through amendments to the law. An employer may also direct employees' work, which enables the (new) employer to give orders regarding the way work is done, along with the time or place of employees' performance. The employment terms might also change as a result of changes to the transferee's structure or working methods.

    If grounds for termination exist, this will enable greater changes to be made to the contract in lieu of termination. These may include changes to the employee's salary or other essential working terms. In such cases, the same procedure must be followed as for termination of the employment contract and therefore, for example, the relevant notice period must be followed. Detrimental changes can be made, provided that they are not contrary to mandatory legal provisions or a binding collective agreement and the employee gives his or her consent. Such changes can be made at any time.

    Harmonisation with the terms of existing employees may not be done by means of worsening the terms of the transferred employees, but only by enhancing the terms of the existing employees.

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    Author: Dittmar & Indrenius

    Date: September 2016

    3.2 When can employers safely dismiss employees before or after a transfer?

    The transfer of an undertaking as such does not constitute a legal reason to terminate an employment contract. Consequently, dismissal must be based on the normal grounds for termination, that is, a proper and significant reason. This might include, for example financial or production-related reasons or reasons arising from reorganisation of the employer's business.

    If an employee terminates his or her employment contract because the terms of employment have been weakened substantially as a result of the transfer, the transferee is deemed responsible for terminating the employment. This is because the transfer itself does not qualify as acceptable grounds for termination of an employment contract.

    There is no specific provision that determines when the employer can safely dismiss employees before or after a transfer. However, if the termination occurs near the time of the transfer, it will appear more likely that it has been done by reason of the transfer.

    If an employer has terminated an employment contract without sufficient grounds, the employer may be required to compensate the employee. In terminations on individual grounds (i.e. grounds deriving from the employee), the compensation will be equivalent to between 3 and 24 months’ salary. In terminations for financial or production-related reasons, there is no statutory minimum compensation. In most cases the dismissal will be effective despite the compensation, but in some situations the court might find the dismissal was ineffective. However, a dismissed employee cannot claim reinstatement and the court cannot reinstate the employee with the employer.

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    Author: Dittmar & Indrenius

    Date: September 2016

    4.1 Who must employers consult?

    If the number of people employed by the transferee, including the acquired business, is at least 20, the transferee must comply with the information and consultation rules. The affected employees may be represented e.g. by a shop steward, specifically elected employee representative(s) or the works council. Both the transferor and transferee must provide the employee representatives with information about the transfer. There is no requirement for union participation if the applicable provisions are followed.

    Generally, the employer will have organised elections for the employee representatives, unless there are between 20 and 30 employees, in which case, there are certain exceptions.

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    Author: Dittmar & Indrenius

    Date: September 2016

    4.2	What information must they provide?

    The transferor and the transferee must inform the employees affected by the transfer of the following:

    • the time, or the estimated time, of the transfer;
    • the reasons for the transfer;
    • the legal, economic and social consequences of the transfer for the employees; and
    • any contemplated measures which will affect the employees.

    The transferor must provide the above information to the employees in good time before completion of the transfer, whereas the transferee must provide the same information within one week after the transfer has been completed.

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    Author: Dittmar & Indrenius

    Date: September 2016

    4.3	What does consultation involve?

    The employer is obliged to inform employees about the grounds for and effects of the transfer, but this does not constitute a negotiation, as long as there are no redundancies, given that the employees will be transferred on the same terms to the transferee.

    After having provided the above information to the employees or their representatives, the transferee is obliged to provide them with an opportunity to ask further questions and answer the questions posed.

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    Author: Dittmar & Indrenius

    Date: September 2016

    4.4	How long does consultation last?

    Information about the transfer must be provided in good time before completion of the transfer by the transferor and within a week after the transfer by the transferee. There is no consultation period.

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    Author: Dittmar & Indrenius

    Date: September 2016

    4.5	What happens if an employer fails properly to inform or consult?

    The transfer may not be declared ineffective because of breaches of the rules on information-sharing. However, if the employer deliberately or carelessly fails to observe the obligation to inform the employees about the transfer, it may be subject to an administrative fine. Criminal penalties could also be imposed in theory, but in practice, these are rarely imposed for breaches of the information obligations.

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    Author: Dittmar & Indrenius

    Date: September 2016

    5.1	Identify up to three issues in this country of which employers should be aware?

    The employer may be liable to re-employ an employee who has been made redundant on financial or production-related grounds if the employer needs a new employee for tasks similar to those performed by the redundant employee within nine months of the expiry of the employment contract. This obligation transfers from the transferor to the transferee.

    The transferee must follow the provisions of any collective agreement covering the transferring employees until its expiry. In practice this can mean that the transferee must simultaneously apply different collective bargaining agreements to its employees.

    The main areas of uncertainty are:

    • the identification of the existence of a transfer of a business; and
    • the special termination right of an employee in connection with the transfer of a business, as this right means that the transferee may not necessarily obtain all the employees it wishes to obtain.
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    Author: Dittmar & Indrenius

    Date: September 2016

    5.2	Would the employee transfer law apply on a cross-border transfer into or out of this country?

    The employee transfer rules apply generally to all work performed in Finland. Therefore, if a transfer of a business is made into Finland, the employees would be entitled to protection under Finnish law as soon as the undertaking has relocated to Finland. The only exception would be for employees sent to Finland only on a temporary assignment.

    In some cases the rules may also apply to work performed abroad (e.g. to an employee sent by his or her Finnish employer on a temporary assignment abroad). However, if the employees do not wish to transfer abroad they would have to terminate their employment contracts with the company. Given the uncertainty of the legal position, it can be advisable for the parties to negotiate suitable indemnities.

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    Author: Dittmar & Indrenius

    Date: September 2016

    6.1	What are the main national laws protecting employees upon transfers of businesses?

    The statutes implementing the EU acquired rights legislation in Finland are the Employment Contracts Act (55/2001, as amended) and the Act on Co-operation within Enterprises (334/2007, as amended).

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    Author: Dittmar & Indrenius

    Date: September 2016

     

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