Lower threshold for terminating employment

The Government aims to remove barriers to hiring employees and to improve the operating environment, especially for small and medium-sized enterprises. Small enterprises, in particular, consider the legal risks associated with dismissals as significant barriers to hiring employees.

According to the working group’s report, the amendments that have now been prepared could increase labour turnover as there is the possibility that both dismissals and recruitments could increase. This could increase the productivity of companies as employees could move faster to jobs that are better suited for them, taking into account the changing needs of the labour market.

The report also points out that making it easier to dismiss unsuitable employees will increase the companies’ willingness to recruit people. Thus, the amendments could increase recruitments in companies.

The impacts are expected to be quite moderate.

At present, an employer can terminate an open-ended employment contract if there is a proper and weighty reason related to the employee for this. This could mean e.g. serious violation or neglect of obligations that have a material impact on the employment relationship. 

The prohibited grounds for terminating employment have been specified in the Employment Contracts Act. For example, illness, disability or accident are not considered to constitute proper and weighty grounds unless working capacity is substantially reduced for such a long term that it cannot be considered reasonable to require the employer to continue the employment relationship.

A comprehensive view is always adopted when considering the sufficiency of the grounds for terminating employment. The employer must assess whether terminating the employment relationship is a reasonable consequence from reprehensible conduct or weaker working capacity. At the same time, it must be assessed whether there are other means to avoid dismissal, such as offering another job or other kinds of working conditions. The comprehensive assessment must consider the number of employees in the employer’s service and the overall circumstances of the employer and the employee.

The employee must have the right to contest the termination of employment by the employer. In this case, the grounds for terminating employment will be assessed by a court of law.

“Proper and weighty” are two words in the legislation where the meaning of the individual words has not been specified. They describe the circumstances in which the grounds for terminating employment can be considered appropriate.

According to the working group’s report, in future, the criteria for terminating employment would be fulfilled if the reason for this is a proper one. This means that weightiness of the reason would no longer be assessed when considering the grounds for terminating employment. The existence of the grounds would still include an assessment of whether the employer can reasonably be expected to continue the employment relationship.

This requirement means that an employer should have proper grounds related to the employee’s reprehensible conduct or inadequate work performance for terminating employment. Any kind of reprehensible conduct or inadequate work performance would not as such be considered to constitute sufficient grounds for terminating employment but in future, too, all circumstances of the employer and employee would have to be taken into account. As before, the employer should also take into account other obligations concerning employers and employees and the grounds for terminating employment that are prohibited.

Termination of employment contracts on arbitrary grounds or without grounds will not be allowed.

In future, the key issue in assessing the grounds for terminating employment is whether an employer can reasonably be required to continue the employment relationship under the circumstances. The fact that weightiness of the reasons will no longer be assessed could in some cases make it possible to terminate an employment relationship in circumstances where this is not allowed at present.

According to the working group’s report, the amendments that have been prepared could clarify dismissals in situations such as the following:

• An employee’s earlier conduct has been reprehensible and a new violation indicates similar indifference in respect of compliance with obligations related to the employment relationship.
• An employee’s violations that are minor in nature occur repeatedly. 
• An employee does not perform adequately in the work in spite of appropriate induction and guidance.

In addition, an employer would no longer have the obligation to explore the possibility of offering another job or other kinds of work to the employee. Situations where employees’ capacity to work changes in a way that they can no longer cope with their tasks due to long-term illness or a similar reason would form an exception to this. In these situations, an employer should explore the possibilities of offering another job or other kinds of work to the employee.

Työsopimuslaissa säädettyä varoitusmenettelyä selkeytettäisiin.

The warnings procedure laid down in the Employment Contracts Act would be clarified. According to the working group’s report, when issuing a warning, the essential content of the warning and the fact that the employer can terminate the employment contract if the employee continues the conduct that led to the warning must be made clear to the employee.

A new warning would not be required if a warning has already been issued to the employee and a new violation indicates similar indifference in respect of compliance with obligations related to the employment relationship. The conduct that leads to dismissal need not be exactly the same kind of violation or defect as the conduct that led to the earlier warning. 

Employment could be terminated without a warning if the violation by the employee that is the reason for the dismissal is such that they should have understood its gravity and reprehensibility even without a warning.

Finland is committed to international agreements that contain requirements restricting the right to terminate employment. Both the ILO Convention and Article 24 of the European Social Charter require a valid reason for terminating employment. Both documents also mention reasons that do not constitute valid reasons for terminating employment.

Even after the proposed amendments, the provisions of the Employment Contracts Act concerning grounds for terminating employment would still fulfil the requirements arising from these documents. The list of prohibited grounds for terminating employment would be the same as before, except that a provision on the position of shop stewards would be included in the list.

The Ministry of Economic Affairs and Employment appointed a tripartite working group on 2 September 2024 to prepare legislative amendments to implement the Government Programme. Besides the Ministry of Economic Affairs and Employment, the working group was composed of representatives of the Confederation of Finnish Industries EK, the Federation of Finnish Enterprises, the Local Government and County Employers KT, the Office for the Government as Employer, the Central Organisation of Finnish Trade Unions SAK, the Finnish Confederation of Professionals STTK and the Confederation of Unions for Professional and Managerial Staff in Finland Akava, and a joint representative of the employee confederations. 

The working group was not unanimous. The Confederation of Finnish Industries EK, Federation of Finnish Enterprises and the Local Government and County Employers KT submitted supplementary opinions to the working group’s report. The Central Organisation of Finnish Trade Unions SAK, Finnish Confederation of Professionals STTK and Confederation of Unions for Professional and Managerial Staff in Finland Akava, in turn, submitted a joint dissenting opinion.

The Ministry of Economic Affairs and Employment requests comments on the working group's report to be submitted in spring 2025. After that, the work will continue as part of official duties. The government proposal should be ready to be submitted to Parliament in June 2025.

According to the working group’s report, the acts should enter into force on 1 January 2026.