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Legal alerts / 17 Feb 2015

Legal Alert – New Court Ruling on Foreign Employers’ Obligation to Comply With Finnish Collective Agreements

The Court of Justice of the European Union has on 12 February 2015 ruled that employees posted from one EU Member State to another EU Member State are subject to the labour laws of the host State including applicable collective agreements. This decision has a direct effect on EU-based employers posting employees to work in Finland.

For foreign employers posting employees to Finland this ruling means in practice that they should review whether there is a generally binding collective agreement in their field of business and whether the terms and conditions of the posted employees comply with the provisions of these collective agreements. Otherwise there is a risk of the employees filing a claim for compensation of the difference between the applied and the mandatory minimum terms.

The case stemmed from a minimum salary dispute between a Polish company and employees it sent to Finland for electrical installation work on a nuclear power plant. According to the employees, the Company had an obligation to pay them according to the collective agreements for Finland’s electricity and building technology sectors, not salary according to the employees’ pay scales in Poland, under the EU’s Posting of Workers Directive.

The Court of Justice ruled that the question is governed by Finnish law as the host Member State, and that Polish labour law in this case is irrelevant. The Court also decided that the Finnish trade union had a right to file a claim on the matter on behalf of the foreign employees despite of Polish law prohibiting an assignment of such right.

According to the Court, questions concerning minimum salary within the meaning of the Directive are governed, regardless of the law applicable otherwise to the employment relationship, by the law of the Member State where the employees are posted, which in this case is Finland. In addition to the law, the minimum salary provisions of the collective agreements including categorisation of employees into pay groups must be applied to posted employees. This obligation is not linked to all collective agreements, only the ones that have been declared generally applicable in certain fields of business. The Court also defined that these provisions must be binding, clear and accessible for the posting company.

The Court ruled that daily allowances and compensation for travelling time must be considered part of the posted employees’ minimum salary as well. If the employer provides the employees with accommodation and meals while they are posted, those items do not apply to the collective minimum salary guarantee. Additionally, since all employees in the EU are entitled to paid annual holidays, the posted employees’ holiday pay must be at the same rate they receive while working.

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