Article 15 November 2023

Employment case law update 2023

In this newsletter, we examine a selection of relevant employment law cases from this year and analyse what employers should learn from them in practice.

Changing contractual term of employment

The Supreme Court ruled in its recent precedent KKO 2023:76 that the employer (municipality) was not entitled to change employees' working time system from a period-based working time (where the hours may vary within the period) to general working time (where the hours are fixed a daily and weekly basis). In the case, the so-called formal period-based working time was included in most employment contracts. In practice, the formal period-based working time was based on the applicable collective bargaining agreement (CBA). However, the CBA was amended, and the formal period-based working time system was removed from the CBA. As a result, the employer changed the employees' working time to general working time. The employees argued that the working time clause in their employment contracts was an essential term of employment which the employer could not unilaterally change. The District Court and the Court of Appeal dismissed the employees' claim and considered that the working time was not agreed explicitly in the employment contracts, and therefore, the employer had a unilateral right to change the working time system based on its managerial prerogatives. The Supreme Court, however, took the opposite view. It found that the working time clause did not explicitly refer to the CBA, as the CBA was not mentioned in the working time clauses. Further, the Supreme Court stated that the employees' employment contracts did not contain any indications that the working time clause was intended to only be an informative reference to the CBA and not an explicit contractual term of employment.

It is to be noted that in this case changing the working time system did not affect the employees' salaries or working time as such. However, because of the unpaid lunch break linked to the new general working time, the employees had, in practice, worked 15–20 minutes more per day than in the previous working time system. Therefore, the Supreme Court found that the working time clause in the employment contracts was to be regarded as an essential term of employment which could not be changed by the employer unilaterally. The case serves as a reminder of the importance of the wording of employment contracts, as this is the key element when assessing the employer's right to change the employees' terms of employment.

Clarification to the employer's right to select the employees made redundant

In a precedent given in the beginning of the year, the Supreme Court clarified the employer's right to determine the selection criteria when selecting employees being made redundant. The selection must be made on objective justifiable grounds, which are not discriminatory, and the principle of equal treatment must be followed. In the case KKO 2023:1, the university was forced to downsize due to cuts in its funding. The university abolished plant ecology professorship which meant that the said professor ("A") was made redundant. At the time of A's termination, the university launched a hiring process for tenure track deputy professorship in plants evolutionary biology and hired ("B") who was at the same time a university lecturer in the same university. The Supreme Court based its ruling on the fact that A and B were both under the same pool from which the university selected employees made redundant. The Supreme Court stated that hiring B for the tenure track deputy professorship was a separate case from A's termination, meaning that B was not "a hired new employee" for the same or similar duties that A had previously been performing. Therefore, the university had justifiable grounds for termination of employment.

Sufficiently specific warning and clear reasoning for termination of employment

An interesting case from the Supreme Administrative Court highlights the importance of ensuring that the warning given to the employee is drafted clearly and that the description of unacceptable behavior included in the warning should be specified sufficiently. Further the case underlines that the cause to terminate an employment must be clear and not only a subjective point of view.

In the case KHO 2023:72, municipal council had terminated municipal manager's contract on individual grounds which related to inappropriate behavior and breach of civil servant's obligations. Although the case concerned a dismissal of a civil servant which is governed by Civil Servant law and not by the Employment Contracts Act, similar principles related to warnings and dismissals apply generally to civil service and employment relationships. The Supreme Administrative Court concluded that the documents and the explanation provided by the municipality did not sufficiently identify the inappropriate behavior on which the warning was based. Therefore, the warning was not justified. Further, the Court found that even though the documents and the hearing of witnesses showed that the witnesses subjectively perceived the municipal manager's conduct as inappropriate, the municipality failed to establish specific evidence of such inappropriate conduct.

The burden of proof in dismissal cases lies on the employers. Therefore, when termination of employment is considered, it must be ensured that the decision to terminate an employment is based on sufficient, objective and reliable facts which can also be proved to exist in court.

Pay transparency and equal treatment when hiring new employees

Pay transparency has been a hot topic in the recent years also in Finland. During the previous government term, the Finnish Government prepared a legislation reform regarding pay transparency. The legislation reform generated a lot of debate, but the parties were not able to reach consensus and as a result the reform collapsed. Despite the failed legislation reform, changes regarding pay transparency will be introduced when the new EU's Pay Transparency Directive is implemented. The Pay Transparency Directive entered into force on 6 June 2023, and the member states must implement the Directive on 7 June 2026 at the latest. For a deeper dive into the topic, Krogerus is organising an employment breakfast seminar soon in November, concentrating on the Pay Transparency Directive, as well as equal treatment and discrimination.

The judgment from the Helsinki Court of Appeal from last April (case No. 548) is a good example relating to the above-mentioned topic. A male applicant filed a claim for gender-based discrimination against the company to which the employee had applied for a job in. The employer had received 12 applications and invited 3 female applicants and 3 male applicants to interviews, but the claimant was not invited to an interview. A female applicant was hired. The male applicant had presented a salary request in his application letter, which was relevant since the employer based its decision not to interview the candidate mainly on the high salary request. The Court of Appeal ruled that excluding the applicant based on the salary requirement was not considered acceptable and that the employer was not able to prove that there was a justified reason not to invite the male applicant to an interview. Consequently, the employer had to pay compensation for gender-based discrimination in addition to compensation for legal fees. An application for leave to appeal is pending in the Supreme Court.

Working for another employer during sick leave

Lastly, we will take a look at a case demonstrating the importance of clarity of company policies on sick leaves and external activities which shall be brought to attention. In a Labour Court case TT 2023:1, an employer terminated an employee's employment contract because the employee had worked for another employer during their sick leave. Before terminating the contract, the employer had given two warnings to the employee for neglecting their duties. However, there were no factual connection between the warnings and the reason for termination of employment (the employee had not received a warning for similar conduct before). In its ruling the Labour Court stated that there was no evidence that working for another employer during sick leave would have had a detrimental effect on the employee's ability to return to work. Further, the evidence in the case showed that the employee had not deliberately sought to deceive his employer or otherwise acted dishonestly in such a way that a lack of trust between the parties would have existed, even though the Labour Court stated that the employee's conduct was not entirely appropriate as the employee failed to inform the employer of the work during sick leave. Therefore, the court found that the employer did not have legal grounds for dismissal.

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