Legal Alerts / 4 Dec 2014

Legal Alert – Amendments to Contractors’ Obligations and Liabilities When Using External Labour

The Finnish government has proposed amendments to the Finnish Act on the Contractor’s Obligations and Liability when Work is Contracted Out (1233/2006). The aim of the amendments is to clarify the application of the law and to facilitate the fulfilment of contractors’ obligations in the battle against the black economy. If the government bill is approved, the proposed amendments will enter into force on 1 January 2015.

Contractors are under an obligation to obtain information relating to their subcontracted labour or temporary agency workers before concluding a contract. Under present law, such information includes an account of whether the contracting partner is registered in the tax register, extract from the trade register, a certificate of tax payments, the applicable collective agreement, a certificate of pension insurance taken out and payments thereof as well as a certificate of an accident insurance taken out. The government bill would extend the contractor’s obligation to obtaining information of the contracting partner’s tax debt and occupational health care. Contractors would also need to gain knowledge of the determination of any posted workers’ social security before the initiation of the agreed work. In future, the Act would apply to subcontracts whose value is over EUR 9,000 excluding VAT.

The government bill implies certain facilitations to the contractors’ information retrieval process. For example, contractors would be entitled to make use of the public tax debt register in retrieving the contracting partner’s tax debt information. In addition, the government bill proposes higher negligence fees for contractors neglecting their obligation to check. The minimum and maximum amounts of negligence fee would be raised to EUR 2,000 and 20,000, respectively, and the minimum and maximum amounts of the elevated negligence fee to EUR 20,000 and 65,000. The elevated negligence fee would cover all industries that fall in the Act’s scope of application.

It should be noted that ‘contractor’ refers to all companies regardless of their field of operation, and thus the contractor’s obligations apply to all companies concluding a subcontract. It is therefore recommendable for all companies to have up-to-date instructions on complying with the obligations set out in the Act.

It remains uncertain as to when the proposed amendments will finally be approved by the parliament. However, companies covered by the Act should prepare for their revised obligations well in advance.

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