News – 12.08.2021

Procopé & Hornborg Employment blog: Timing of the employer’s decision to hire new employees is crucial to the application of re-employment obligation

Employees smiling on the balcony

The Supreme Court of Finland gave an important ruling (KKO 2021:47) concerning whether the employer had breached its obligation to re-employ its former employee by hiring a new employee to perform similar work shortly after the claimant’s re-employment period had ended. The employee’s claim was based on the allegation that the employer was aware of the need for new labor already during the re-employment period. In addition, the employee claimed that he had privilege over the other employees to the work in question compared to other laid off employees. The Supreme Court ultimately ruled that the employer had not breached its re-employment obligation. A defining factor was the timing when the employer became aware of the need of new labor and decided to hire new employees.

Re-employment obligation according to the Employment Contracts Act

According to Chapter 6, Section 6 of the Finnish Employment Contracts Act, an employer shall offer work to its former employee still seeking work via the unemployment office if this employee’s employment relationship has been terminated for financial or production related reasons and the employer need new employees within four months of the termination of employment to perform same or similar work that the redundant employee had been performing.

Background of the case

The claimant had been laid off for financial and production related reasons. Following the end of the re-employment period, the employer had hired new employees to perform similar work. The case concerned if the employer had circumvented its re-employment obligation by taking on new employees right after the re-employment and whether the employer knew about the need for labor already during the re-employment period.

The District Court held that the employer had not breached its re-employment obligation. Accordingly, an employer does not breach its re-employment obligation by concluding fixed-term employment contracts during the re-employment period if it simultaneously still employs the claimant. In addition, the mere fact that another employee chooses to resign during other’s re-employment period does not constitute an obligation for the employer to enter a new contract with anyone. The employer violates its re-employment obligation only when it chooses to hire an employee and, in taking on recruitment activities during the re-employment period, fails to provide work to the employees dismissed.

The Court of Appeal revised and obliged the employer to pay damages to the employee for breaching its re-employment obligation. The Court of Appeal held that the employer had known about the need for labor already during the re-employment period, and the mere fact that the actual decision-making was postponed to the time after the re-employment period, did not relieve the employer from its obligation to provide work. Accordingly, the employer should have reacted to the changes in workforce as soon as they came to the employer’s knowledge, despite the company’s management being on their summer holidays at the time.

The Supreme Court’s judgement

The Supreme Court held that an employer has the right to decide whether and when it reacts to the changes in workforce by hiring new employees. A mere need or alleged need for workforce does not oblige the employer to hire new employees. In this case, the employer could effectively react to the need for labor only after the claimant’s re-employment period. The fact that certain changes came to the employer’s attention already during the claimant’s re-employment period did not preclude the employer from postponing the decision-making process. Accordingly, the employer has the right to use sufficient time to ensure that it has reasonable grounds for terminating an employment relationship before acting on it. In addition, the Supreme Court held that, compared to other laid off employees, the claimant did not have privilege over the open positions with the employer, and the employer could effectively transfer another employee to this position without violating the provisions of re-employment.

The take-away

KKO 2021:47 is an important ruling for determining the dimensions of re-employment obligation. Accordingly, an employer’s hypothetic capability to predict the continuation of the need for labor is insufficient to indicate that an employer is circumventing its re-employment obligation. The judgement also reaffirmed the view already adopted by the Supreme Court that transferring an employee in connection with other business restructuring procedures can also be carried out during the re-employment period without violating the re-employment obligation as the employer has stronger obligation to provide work for its current employees (see also KKO 2010:43).

The judgement also reaffirmed that there is no order of preference between employees in the context of re-employment. Instead, the employer is allowed to decide which employee is to be re-employed if the decision is in line with equal treatment and non-discriminatory. However, the employer may not artificially postpone hiring new employees to the period after the re-employment period. This may be the case if the need for new employees is clear already at the time of the re-employment period, although practical arrangements for hiring new employees are made only after the time of re-employment period. The right to be re-employed is a compelling right, i.e., it cannot be agreed upon to the detriment of the employee.