News – 07.09.2021

The Supreme Court made a strong alignment of the re-employment obligation

The employer’s moment of decision on hiring new personnel is a critical moment for assessing whether the employer has an obligation to re-employ employees who have previously been made redundant. A recent preliminary ruling clarifies the hiring situations of new personnel. However, in everyday life, individual situations still require case-by-case consideration, ponders Tomi Haapman.

The employer is obliged to offer work for former employees who have been made redundant based on production-related or financial grounds if the employer is hiring new employees for the same or similar positions. Re-employment obligation lasts four months after the termination of employment. However, if the terminated employment relationship lasted at least 12 years, the re-employment obligation period is six months.

Even though the section of the Employment Contracts Act concerning re-employment obligation appears to be clear, it is open to various interpretations. Its content has been a controversial issue in court practice lately. One contentious question has been when can the employer recruit a new employee without violating the obligation to re-employ.

The Supreme Court cleared the issue with the decision it gave in the summer. What is significant regarding the duty to comply with the re-employment obligation is the moment when the employ-er genuinely decides to recruit a new person. The obligation does not arise, for example, just be-cause the company unexpectedly receives a spate of orders, which itself could signal the need for recruitment.

“In a new situation, the employer can for example evaluate spate of orders effect on the need for hiring new personnel. However, the decision if there should be a need to recruit new personnel does not need to be done immediately after the employer discovers preliminary signs for a need for new workforce”, says Tomi Haapman, a lawyer specializing in employment law at Procopé & Hornborg.

The obligation to re-employ starts when the company has properly evaluated the need for extra workforce and decided to recruit more employees. That is the decisive moment while assessing whether there is an obligation to re-employ those employees who have been made redundant.

For example, the appearance of a spate of orders or resignation of an employee itself does not create an obligation to re-employ because the employer can genuinely conclude that the workload can be managed with less and with already existing personnel.

There will be room for controversy also in future

Despite the Supreme Court ruling the re-employment obligation has been and will continue to be controversial. In its decision in the summer, the Supreme Court ended up siding with the employer as the District Court had previously done. Instead, the Court of Appeal resulted in siding with the employee. Both judgements explicitly set the decision moment for recruitment to be established as crucial to the emergence of the re-employment obligation.

According to the Court of Appeal, the employer should have had expected the upcoming need for workforce. In turn, the Supreme Court stated that the emergence of a circumstance that may indi-cate the need for additional workforce is not conclusive.

“The Supreme Court’s decision clarified the situation and created explicit principles, but presumably these will continue to cause disagreements because each situation is different”, considers Haap-man.

While pointing up the importance of the employer’s moment of decision, the Supreme Court em-phasized the fact that the decision cannot be unnecessarily transposed away on an ostensible ba-sis. The Supreme Court took a stand on the fact when the re-employment obligation is being cir-cumvented or neglected. The employer is guilty of circumvention or neglection if it decides to hire a new employee but has postponed the concerned formal decision-making to the time after the re-employment period to avoid the obligation to re-employ. Thus, the formal decisive moment is not essential. Instead, the moment when the employer can be considered as genuinely decided to re-employ is.

Making the processes clear
Especially in large companies, there is the risk that an employer accidentally violates the obligation to re-employ. For example, if a company makes redundant dozens of persons in Helsinki, it may have violated the re-employment obligation in Rovaniemi if new employees are recruited there to same or similar positions. The re-employment obligation applies to the whole of Finland.

“It can often be difficult to evaluate whether new tasks are similar to those from which people have been laid off. Therefore, even in a bit larger company it makes sense to centralize recruitment decision-making in one place. That is the only way to ensure that the employer does not violate the re-employment obligation while recruiting new persons”, says Haapman.

Similarly, it may be justified to issue a general ban on recruitment to different offices or business entities in a situation where employees have been made redundant. For example, the ban could be deviated only by a centralized decision after the need for additional labor has been defined.

Clear processes are altogether important because they allow the employer to prove when the need for a new workforce has been recognized and the decision to recruit has in fact been made.

The employer is ultimately obliged to prove that the decision to recruit new personnel has been made after the obligation period to re-employ has passed. That is the reason why the recruitment processes and documentation of the following decision-making are important”, says Haapman.