Legal Alerts/5 Mar 2012

Legal Alert – Finnish Supreme Court rules on fixed-term employment contracts of hired employees

The Finnish Supreme Court issued a precedent ruling (KKO 2012:10) concerning sufficient reasons for the use of a fixed term employment agreement for hired employees. The Supreme Court ruled that the duration of the assignment of the user enterprise regarding a certain employee as such shall not always be deemed as a sufficient reason for using a fixed term employment agreement.

In the case at hand, after the user enterprise notified the staff service provider of the termination of the assignment relationship, the staff service provider informed the hired employee about the expiry of the employment agreement due to the lapse of the agreed fixed term. The Supreme Court stated, however, that the contractual practice commonly applied in the staff hiring business alone may not override mandatory legislative provisions.

The Supreme Court found that sufficient reasons for a fixed term employment relationship take place, also with regard to hired employees, only when the work assignments of the hired employee are available for a restricted time period. Thus, if the hired employee works on assignments which is of a permanent nature the employment agreement may be deemed to be open ended.

The agreement between the staff service provider and the user enterprise regarding the duration of the assignment was not as such relevant when evaluating whether the employment agreement between the employee and the staff service provider is deemed to be of a fixed term nature or open ended.

In the respective case the termination of the employment agreement (to be precise: lapse of fixed term) had been made solely based on the decision by a party outside the employment relationship, i.e. the user enterprise and was thus not based on any objective grounds.

The precedent ruling raised large scale of public discussion about whether staff service provides can or can not use fixed term employment agreements in future. However, this was not the lesson of the case. The precedent ruling of the Supreme Court only clarifies some of the reasons that are deemed to be sufficient when a staff services provider is using fixed term employment agreements with its hired employees.

Finally, it is worthwhile to note that the Supreme Court indirectly confirmed the already commonly accepted interpretation that the user enterprise is not liable for any consequences in case where a fixed term employment of a hired employee it is using is deemed to be against the Employment Contracts Act.

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