Employee Rights When an Undertaking is Transferred in Finland

1. Employees’ Rights

As a member of the European Union, Finland is required to comply with the Council Directive 2001/23/EC on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses, and observe the rulings of the European Court of Justice (“ECJ”) regarding interpretation of the directive in situations that are considered as transfer of business. The minimum standards of the Directive have been implemented into the Finnish Employment Contracts Act.

The employees within the part of business being transferred will automatically transfer to the new owner with their old terms of employment, unless otherwise agreed with the employees. All the rights and duties regarding the existing employment agreements are transferred to the transferee, and there is no need to make new employment contracts. Thus, the terms and conditions of the employment relationship may not be changed due to the transfer of business and the salaries, vacations and other benefits that the employees were entitled to when employed by the transferor will remain in force unchanged after the transfer. Moreover, the transfer of business does not in itself constitute grounds for dismissal by the transferor or the transferee.

The transfer of business may lead to weaker terms of employment if the collective bargaining agreement changes after the business transfer. The Supreme Court has ruled that the transferee may apply the terms of the collective bargaining agreement that the transferee is required to observe, but if this weakens the terms of employment, the employee may terminate the employment due to the change in terms of employment and is entitled to his/her salary for the notice period to be observed by the employer.

2. Requirements for Predecessor and Successor Parties

The Finnish Act on Co-operation within Undertakings includes an information obligation for the transferor and the transferee in connection with a transfer of business. The Act is applicable if the employer regularly employs at least 20 employees.

Both the transferor and the transferee have an obligation to inform the representatives of the employees on the transfer date or the planned transfer date; including grounds for the transfer, the legal, economic and social consequences of the transfer and planned measures that concern the employees.

The transferor and the transferee are jointly liable for any employment-based compensation to the employees due prior to the transfer date. Unless otherwise agreed, the transferor is liable towards the transferee for claims that have fallen due before the transfer. The transferee is solely liable for any employment-related compensation or claim due after the transfer date.

If the transferor is bound by a collective bargaining agreement pursuant to the Finnish Collective Agreements Act, the transferee shall apply the terms of the collective bargaining agreement binding the transferor until the end of the term of the collective bargaining agreement. However, the applicable collective bargaining agreement may change upon the transfer date e.g. if the transferee is a member of an employer organisation and the transferor had only been complying with the rules of a generally binding collective bargaining agreement.

For more information, please contact L&E Global.
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