Legal Alerts / 10 Mar 2016

Legal Alert – You Can Pick Your Redundancies If You Pick the Right Ones

The Supreme Court has issued a ruling (KKO 2016:15) concerning the requirements to be taken into account when selecting which employees are let go when an employer has valid reasons for the termination of employment contracts.

Summary of the ruling

An employer may terminate an employment contract if the work to be offered has diminished substantially and permanently for financial or production-related reasons or for reasons arising from reorganization of the employer’s operations under Chapter 7, section 3 of the Finnish Employment Contracts Act. Nevertheless, an employer must also have proper and weighty reasons for the dismissal as laid out in the general provision in Chapter 7, section 1 of the Act.

In the case before the Supreme Court an employee’s contract had been terminated for financial and production-related reasons. The employer stated that this employee had been chosen for redundancy due to the fact that she had months earlier stated that she would not mind if she is the one whose employment will be terminated. This was not the case, however, since the employee had not intended to express her willingness to be dismissed.

The Supreme Court held that the employer’s failure to verify the employee’s statement before the dismissal had been improper and in contradiction with the employer’s obligation of loyalty. Therefore, the employer did not have proper and weighty reasons for the dismissal under Chapter 7 Section 1 of the Act even though the employer was entitled to perform one unspecified redundancy based on Chapter 7, section 3 of the Act.

Implications to your company

This precedent is important to take into account when selecting redundancies. The Supreme Court has earlier held (KKO 2010:43) that an employer is entitled to choose the employees to be dismissed when there are financial and production-related reasons for redundancies as long as the employer does not act in an improper or discriminatory manner. However, the ruling at hand links the discretion to Chapter 7, section 1 of the Act, the requirements which an employer must fulfil when performing redundancies. The decision on which employees are to be made redundant must therefore be made taking into account the requirement of proper and weighty reasons which have to be evaluated on a case by case basis.

We are happy to discuss the outcome of the ruling with you if you have any further questions.

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