Terminating and cancelling an employment contract in Finland

25.9.2013

Terminating and cancelling an employment contract in Finland

An employment relationship can end in different ways: a fixed-term employment contract normally ends at the end of the fixed period or on completion of the agreed job, whereas an indefinitely valid employment contract (permanent contract) ends when it is terminated by either party. Both fixed-term and indefinitely valid employment contracts may also end by cancellation.

Trial period (FI:Koeaika)

In Finland, the employer and the employee can agree on a trial period, during which the employer may, i.a., assess if the employee has the professional skills required for the job, whether the employee fits into the work community etc. Likewise, the employee may, for example, see whether the job tasks and the job conditions meet the job description. The maximum length of the trial period is four months (in some exceptional cases six months). In fixed-term employment relationships shorter than eight months, the trial period may not exceed fifty percent of the duration of the agreed employment period. If a collective agreement applicable to the employer contains a provision on a trial period, the employer must still explicitly inform the employee that a trial period is applied to the employment relationship.

During the trial period, the employment contract may be cancelled with immediate effect by either party. The employment contract may, however, not be cancelled on so-called inappropriate grounds. Cancellation of the employment contract during the trial period because on the basis of, for example, the employee’s age, health, disability, national or ethnic origin, nationality, sexual orientation, language, opinion, belief, family ties, trade union activity, political activity or any other comparable circumstance does not constitute an appropriate ground.

Termination of the employment contract (FI:Työsopimuksen irtisanominen)

An employee may at any time terminate an indefinitely valid employment contract by giving notice to the employer. The notice period shall naturally be respected, if not otherwise agreed. However, an employer shall not, according to the Finnish Employment Contracts Act (FI: Työsopimuslaki), terminate an indefinitely valid employment contract without proper and weighty reason.

The termination ground may either be connected to the employee’s person (a so-called individual ground) or to financial and production-related grounds (a so-called collective ground).

According to the Employment Contracts Act, a serious breach or neglect of obligations arising from the employment contract or the law and having essential impact on the employment relationship, as well as such essential changes in the employee’s conditions, which are necessary for the work and leading to that the employee no longer can cope with his or her work duties, can be considered a proper and weighty reason for terminating the employment contract on the basis of the employee’s person. The law stipulates that the employer’s and the employee’s overall circumstances must be taken into account when assessing the proper and weighty nature of the termination ground.

For example, the following reasons, can generally not be regarded as proper and weighty reasons: illness, disability or accident affecting the employee, participation of the employee in industrial action arranged by an employee organization or in accordance with the Collective Agreements Act, the employee’s political, religious or other opinions or participation in social activity or associations or the employee resorting to means of legal protection available to employees.

The employer may generally not terminate an employment contract on individual grounds before it has issued a warning to the employee. The purpose of the warning is to give the employee a possibility to amend his or her conduct. Further, before the employer terminates an employment contract, the employer shall provide the employee with an opportunity to be heard concerning the grounds for the termination, in addition to which the employer shall find out whether it is possible to avoid giving notice by placing the employee in other work.

The employer may also terminate an employment contract if the work to be offered has diminished substantially and permanently for financial or production-related reasons or for reasons arising from reorganization of the employer’s operations. The work to be offered must thus have decreased both substantially and permanently in order to able to use the so-called collective ground as a termination ground. The work to be offered may have decreased due to external factors or due to arrangements carried out by the employer.

The requirement of a decrease in the work to be offered generally means a decrease in the amount of work of the person whose employment contract is about to be terminated. However, a decrease in the amount of the work does not necessarily need to mean that the work to be offered has factually diminished, but also that the conditions of offering work have changed. For example, the company’s unprofitable activities may entitle the employer to terminate employment contracts, even if the amount of work of the employees has factually not decreased.

An employment contract may, however, not be terminated on the basis of the collective ground if the employee can be placed in or trained for other job tasks. In these circumstances, the employee shall primarily be offered work that corresponds to that of his or her original employment contract. If no such work is available, the employee shall be offered other work equivalent to their training, professional skill or experience. Further, the employer shall – within the limits of what can be considered reasonable – arrange such training for the employee, which the new tasks require.

Cancellation of the employment contract (FI:Työsopimuksen purkaminen)

Besides termination there is also another way of ending an employment contract by a one-sided decision: cancelling the employment contract. This way of ending an employment relationship is much more severe than the above described termination, meaning that the employment relationship is terminated with immediate effect and that the obligations arising from the employment relationship cease to exist once the cancellation comes to the knowledge of the other party.

Cancellation of an employment contract requires that the other party is found to be in breach of the contract, in a way that is deemed to be serious. According to the law, the employer is only entitled to cancel an employment contract (dismiss the employee) with an immediate effect, regardless of the applicable period of notice or the duration of the employment contract, upon an extremely weighty cause. Thus, the employer may only cancel an employment agreement when the conditions for continuing the contract no longer exist because the employee has seriously breached or neglected its duties based on the employment contract or the law. For example, if the employee misuses alcohol or drugs or steals from the workplace, the employer may be entitled to cancel the employment contract with immediate effect. Noteworthy is that the employee’s blameworthy conduct may also take place outside the workplace and the working hours.

Likewise, the employee is, according to the law, entitled to cancel the employment contract with immediate effect if the employer commits a breach against or neglects its duties based on the employment contract or the law in a way which has an essential impact on the employment relationship in such a serious manner resulting to it being unreasonable to expect that the employee should continue the contractual relationship even for the period of notice. For example, gross negligence in connection with occupational safety or the payment of salaries may entitle the employee to cancel the employment contract with immediate effect.

Before cancelling an employment contract, the employer shall provide the employee with an opportunity to be heard regarding the grounds of the cancellation. Correspondingly, before an employee cancels an employment agreement he or she shall provide the employer with an opportunity to be heard.

It is also worth noting that 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 this period, the employer may be entitled to consider the employment contract cancelled from the date on which the absence began. The same principle also applies to the employee, in the event that the employer is absent for a minimum of seven days without notifying the employee of a valid reason for this absence.

It is always strongly recommendable to exercise due caution when terminating an employment relationship – groundless termination or cancellation leads to a liability for damages. We at MK-Law are happy to advise you in all matters related to Finnish employment legislation. Please do not hesitate to contact us!