Employment law update: The year 2023 in the rear-view mirror and 2024 appearing on the horizon
The beginning of the new year 2024 is a good time to look back to 2023 and to have a look at upcoming changes within the field of employment law. In this article, we will wrap up the previous year by examining two relevant employment law precedents issued during the last months of 2023 and discuss some of the legislative reforms that are expected during 2024.
In terms of employment and labour law changes, Prime Minister Petteri Orpo's Government Programme and its contents related to working life reforms and labour relations have been a hot topic in public discussions. Significant reforms are planned and some of these legislative changes have already taken place in the beginning of 2024.
A foretaste of the response to the Government's plans was seen at the end of 2023 when a widespread one-day political strike took place in Finland. New strikes have also been announced. It remains to be seen whether the strikes will affect the implementation of the Government's programme.
As the new year has started, employers should be aware that private and public sector organisations with 50 or more employees now have an obligation to have internal whistleblowing channels in place.
Precedents from the Supreme Court during the end of 2023
1. Calculating time limits for claims related to working hours
The Supreme Court ruled in its precedent KKO 2023:92 that claims regarding compensation for working time reduction are not considered to be claims deriving from the Working Hours Act and therefore, they are subject to the five-year limitation period applicable to claims deriving from the employment contract.
For working time related claims deriving from a collective bargaining agreement, the applicable limitation period has been unclear as the Supreme Court and the Labour Court have adopted different views on the limitation period for payments related to working time. In its recent precedent, the Supreme Court held that the limitation period was to be determined in accordance with the Employment Contracts Act (five-year limitation period), despite the fact that the claim was based on the working hours (the limitation period is two years in the Working Hours Act). In 2018, the Supreme Court ruled that the limitation period for shift work payments were to be considered as claims under the Working Hours Act which suggested that the Supreme Court's view was that all working time-based claims would be subject to the limitation period under the Working Hours Act.
The Supreme Court has recently granted another leave to appeal in a similar case, and it remains to be seen how the Supreme Court will interpret the limitation periods in the future.
2. Preventive measures when employees breach non-competition clauses
In the precedent KKO 2023:83, the Supreme Court confirmed that preliminary injunctions could be used to intervene and stop the employee's breach of non-competition clauses. In this case, the employee's employment contract contained a post-employment non-competition clause. After the employee had resigned, the employee immediately started working for a competitor. The employee's former employer applied for a preliminary injunction from the court, prohibiting the employee from working for the competitor under threat of a fine. The district court rejected the application on the basis that under the Employment Contracts Act the employer can claim compensation for damages or if so agreed, liquidated damages, and that a court order prohibiting working for a new employer would not be possible.
Preliminary injunctions are frequently used when non-compete and confidentiality clauses are breached as they can be imposed on a provisional basis, which means that the injunction remains in force until the court's judgment.
Legislative reforms and amendments in force from the beginning of 2024
Changes in unemployment security
Legislative amendments to the unemployment security entered into force on 1 January 2024. The Government aims to improve incentives for work and to balance general government finances. With the amendment, the waiting period, which is the unpaid period at the beginning of the unemployment, was restored to seven working days from five days.
Further, the phasing of holiday compensation was also restored by the amendment. If an employee has untaken holiday at the end of the employment, the holiday compensation will postpone the beginning of entitlement to earnings-related daily allowance from here on.
The restoration of the waiting period and the phasing of holiday compensation may have an impact on separation agreements.
What to expect in 2024 and thereafter
Several employment law-related government proposals are already expected in the coming spring session such as the legislative reforms on industrial peace and local agreements. The Government aims to extend the scope of local agreements by allowing companies that are not members of an employer's organisation but covered by a generally applicable collective bargaining agreement to enter into local agreements in the same way as member employers. A governmental working group was set in July 2023 and the government bill is estimated to be presented in the spring of 2024.
Improving industrial peace is one of the Government’s key labour market reforms. A tripartite working group was set up last year to draft a report on the reform. It is proposed that disproportionate solidarity action or political industrial action lasting more than 24 hours would not be allowed during industrial peace. The government bill regarding the reform on industrial peace is estimated to be presented in February.
Further, Prime Minister Petteri Orpo's Government Programme lists the following reforms on work-life legislation which are planned to be brought to Parliament by spring 2025:
- A special reason would not be needed for fixed term employment contracts of a maximum of one year.
- The notice period for temporary layoffs (furloughs) would be shortened to seven days from 14 days.
- An employee's first sick leave day would be unpaid unless otherwise agreed in the collective bargaining agreement or employment contract, with the exception of sick leaves of five days or longer and sick leaves resulted from an occupational accident or occupational disease.
- The scope of application threshold of the Co-operation Act (consultation obligation) would be raised to companies regularly employing at least 50 employees (currently 20).
- The re-employment obligation will be abolished in companies regularly employing fewer than 50 employees.