Finland: New Dismissal Rules Are Due to Take Effect in July

The Finnish government has presented its widely debated proposed amendment to its dismissal provisions. From next summer onwards, the size of an organization’s workforce will have to be taken into account in a dismissal assessment.

According to the Employment Contracts Act in its current form, when assessing the appropriateness and seriousness of the grounds for termination, “the employer’s and the employee’s overall circumstances must be taken into account.”

If the proposed reform takes effect, as of next July the wording of the provision will change to “the number of employees employed by the employer and the employer’s and the employee’s overall circumstances must be taken into account.” The purpose of the reform is to make dismissal easier for small companies.

The grounds for dismissal remain unchanged

The reform does not mean that any minor offense would justify the dismissal of an employee in a small company. A dismissal must still be based on an appropriate and serious reason that has an essential impact on the employment relationship. The obligation to give a warning before termination of employment will also remain intact — even for small companies.

The validity of grounds for termination is a matter of an overall assessment. This assessment is based on the nature and gravity of the employee’s breach, the position of the employee, the employee’s attitude toward the misconduct, the nature of the work, the special characteristics of the work, and the position of the employer, among other things.

The proposed reform does not affect the importance of the overall assessment and does not mean that in the future only the number of employees would be of significance in the assessment. Instead, the overall assessment would focus more on the small size of the employer and the number of employees. In short, a small employer may be “cut more slack” than a larger one when making the assessment.

The future case law defines the margin of interpretation

The size of the employer is already a part of the overall assessment based on current dismissal provisions. Nevertheless, the reasoning behind the proposed reform is that for small companies the consequences of an employee’s misconduct is a heavier burden both when it comes to financial realities and the effects on the function of the personnel. Based on established practice regarding current legislation, large employers are deemed to have better means to place an employee in other work to avoid terminating the employment, especially when it comes to underperformance.

Litigation involving the reform will show how significant the reform actually is and how a small company will be defined. In the preparatory phase of the amendment, small employers were considered to be those with 20 employees. Later, they were defined as having 10 employees, and finally an exact number of employees was abandoned. Ultimately, it will be up to the courts to determine on a case-by-case basis when the number of employees will be given weight in the assessment and where the limit will be set for defining a small employer.

Written by Tomi Kemppainen and Mats Forsius of Castrén & Snellman and Roger James of Ogletree Deakins

© 2019 Castrén & Snellman and Ogletree, Deakins, Nash, Smoak and Stewart, P.C.