Employment case law update 2024

In this newsletter, we take a look at selected relevant employment law cases from 2024 and examine what employers should learn from them in practice. Through these cases, we discuss, for example, discrimination based on membership in employees' union, harmonization of salaries, and the employer's obligation to offer alternative work.

Employer's right to choose alternative work to be offered

In its precedent KKO 2024:24, the Supreme Court ruled that an employer had not breached the obligation to offer alternative work when choosing to not offer a position that the employee was suitable for. In the case, the employee was employed as an air traffic controller at Helsinki Malmi airport on a permanent employment contract. The employer had announced that the employment contracts of all employees working at the Helsinki Malmi airport will be terminated on redundancy grounds due to closure of operations at the airport. Subsequently, the employee had applied to eight different positions for air traffic controller at Helsinki-Vantaa airport but was not selected for these positions. However, the employer offered the employee alternative work at Tampere-Pirkkala airport, which the employee accepted before expiry of the notice period.

The employee argued that the employer had breached its obligations by not offering work at Helsinki-Vantaa airport that the employee was suitable for. The employer's view was that it had appropriately examined the employee's suitability for the positions at Helsinki-Vantaa airport and offered alternative work at Tampere-Pirkkala airport, thus fulfilling its obligations.

The Supreme Court found that despite not offering the employee a position at Helsinki-Vantaa, to which the employee was first found suitable for, the employer had not breached its obligations. A determining factor in the assessment was that the employer had acceptable grounds to offer the work at Helsinki-Vantaa to other candidates. Although the employee fulfilled the minimum requirements for the work, other candidates had fared better in tests performed to determine suitability, and therefore it was acceptable for the employer to not offer the employee work at Helsinki-Vantaa as the employer offered alternative work at Tampere-Pirkkala airport which was considered to be an appropriate offer.

Key takeaways for employers:

An employer's duty to offer a suitable position for the employee does not automatically mean that the employee would have a right to the first suitable job.
As a starting point, the employer must offer work that corresponds to the employment contract. If no such work exists, the employer must offer other work that corresponds to the employee's education, skills and experience. If the employer has several different positions to offer to the employee, all of which are suitable but not corresponding to the employment contract, the employer has the right to choose which position to offer as an alternative to termination as long as this is done on appropriate grounds.
The employer has a loyalty obligation to the employee, due to which it must have objectively acceptable grounds for not offering the employee work that the employee is suitable for and that would objectively be more favourable for the employee.
Although an employee under threat of termination generally has priority entitlement to a position over an employee that is not under threat of termination, the employer in this case had acceptable grounds related to flight safety, based on which the employer was entitled to hire other employees for the position that the employee under threat of termination would have been suitable for, when the employer was able to offer other suitable work.

Discrimination based on membership in employees' union

In a recent precedent KKO 2024:47, the Supreme Court ruled that an employer had granted an additional benefit to employees who had agreed to perform overtime during an overtime ban mandated by a trade union, and subsequently discriminated against employees that were members of the relevant union. The employer was ordered to pay a compensation in accordance with the Non-discrimination Act.

In the case, a union had, in addition to a political strike, declared a lawful overtime ban in which the union-member claimants had participated. During the overtime ban, the employer had offered its employees in one location overtime to be conducted on Saturday and Sunday with extra compensation exceeding the normal overtime compensation. The employees argued that the employer had granted an additional financial benefit to the employees who had agreed to perform overtime during the overtime ban and that this was discrimination based on trade union membership.

The Supreme Court favoured the employees' view. Even though overtime was offered to all employees regardless of their membership in the relevant union, employees belonging to the union were effectively placed in a less favourable position, as those employees were not able to participate in the overtime without consequences from the union. Thus, the Supreme Court found that an assumption of discrimination exists, and even though the employer was able to prove that acceptable business-related reasons for offering overtime existed, the Supreme Court found the employer to have discriminated against employees who were union members. The employer was not able to prove that an acceptable objective existed for paying an additional compensation or that paying such a compensation was based on a need so great that unequal treatment would be justified.

Key takeaways for employers:

The case serves as a reminder for employers to carefully analyse the benefit policy to ensure that it is in line with the equality rules before offering the benefit to the employees.
Discrimination is based on circumstances of each employee (in this case membership in an employees' union) and therefore offering all employees the same opportunity may not always be sufficient, if some employees are placed in a less favourable position due to their individual circumstances.

Harmonization of salaries following a transfer of business

Supreme Court precedent KKO:2024:9 concerned the harmonization of employees' salaries following a transfer of business. The Supreme Court ruled that the employer had not breached the obligation to treat employees equally despite paying different compensations to different employees conducting the same work, as it had implemented a plan to harmonize salaries.

In the case, the employer had paid different salaries to employees for the same or similar work from 1 January 2014 to 16 August 2019. The employees with higher salaries had transferred to the employer at the beginning of 2014. At the time of the transfer of business in January 2014, the two transferring employees were granted an additional compensation corresponding to the difference between their old salary and their new salary, in order to maintain their existing salary level. As of 1 May 2014, the employer had changed their applicable collective bargaining agreement, and the job-specific salary level was determined in a harmonised way. The pay differences between the transferred employees and the other employees were based on the additional compensation granted to the transferred employees in connection with the transfer. In 2016-2019, the employer had taken measures to eliminate the pay gap as of 1 January 2019.

The Supreme Court stated that the employer was obligated to maintain the previous levels of compensation for the transferring employees, and thus the transfer of business was originally an acceptable reason for differences in compensation for employees performing the same work, but that an employer should within its capabilities and within a reasonable time take action to harmonize salaries. The Supreme Court concluded that the timing is always subject to individual circumstances and no specific timeline can be constructed from previous precedents. In the case at hand, the employer had first accepted a harmonization plan in June 2016, and subsequent negotiations have resulted in the implementation of the plan starting 1 January 2019. The employer's attempt to close the pay gap by negotiating in intervals parallel to the negotiations of collective bargaining agreements, was deemed understandable in light of the limited resources available to the employer. The Supreme Court ultimately ruled that despite no conclusive timeline for the full removal of the pay gap being existent, the employer had taken sufficient action to close the pay gap because the employer had taken measures to harmonize the salaries and the gap had systematically been closed starting in January 2019. Thus, the employer had not breached the obligation to treat employees equally.

Key takeaways for employers:

Finnish law does not define a specific time limit, within which salaries must be harmonized following a transfer of business as this is assessed case-by-case.
In this case, it was acceptable that the pay gap could be removed within five and half years.
An employer must take actions to remove the pay gaps. An employer should construct a credible plan for removing the pay gaps, as well as make efforts to implement it.
A plan for the harmonization should be put in place as early as possible.

Termination of employment and written warning

In the Labour Court ruling TT:2024:33, the Labour Court found that an employer who terminated an employment based on lack of trust, did not have a proper and weighty reason for terminating the employment and that the employer had breached its obligation to reserve the employee an opportunity to be heard prior to termination of employment.

The employment contract was terminated by the employer due to the employee's failure to follow instructions. However, the Labour Court deemed that the employer's instructions had been unclear. The Labour Court heard multiple witnesses and concluded that instructions regarding particular situations had not been clear at the company and thus it was not conclusive that the employee had acted in a way that should be considered as a breach of the employee's instructions. The employee had previously been given three written warnings concerning, among other things, the employee's neglect to follow the employer's instructions. As one of the warnings had expired and two of the warnings did not have justifiable grounds, and as the instructions that the employer claimed the employee to have breached were unclear, the Labour Court ultimately ruled that the employer did not have legal grounds for termination.

Additionally, the Labour Court ruled that the employer had neglected their obligation to provide the employee with the opportunity to be heard. The employer had without prior notice been called into a meeting with the managing director. Although an employees' representative had been present at the meeting, the employee had not been able to prepare for the meeting in order to present their views of the grounds for termination and in the meeting, the matter was not addressed further and the managing director merely informed the employee of the termination. Therefore, the employer had not, in the Labour Court's view appropriately provided the employee with a chance to be heard and this was taken into account in the amount of compensation the employer was ordered to pay the employee.

Key takeaways for employers:

Employers should carefully analyse the sufficiency of previous written warnings when invoking them as grounds for termination. Written warnings should concern the same kind of conduct and must not be expired when invoked by the employer. In this case, a written warning was considered expired after two years and four months.
Clear written instructions regarding an employee's tasks should be drafted, in order to avoid unclarity. It can be challenging to prove a breach of instructions if no written instructions or policies exist.
An employee must be given an actual chance to be heard in connection with a termination of employment and the opportunity to prepare to present their views. Despite arranging a formal meeting, the employer's conduct can be deemed unlawful, if the situation is not properly addressed when meeting with the employee prior to a termination.

Obligation to offer alternative work for an employees' representative

The obligation to offer alternative work was also evaluated in Labour Court ruling TT 2024:35, where the Labour Court ruled that an employer had fulfilled their obligation to offer alternative work to an employees' representative, in connection with terminations of employment on financial and production related grounds due to a closure of operations at one of the employer's locations. The union argued that the employee was not offered a service advisor's position that the employee was suitable for or offered any other specified work, while the employer's union argued that a service advisor's position was in fact offered and the obligation to offer alternative work fulfilled.

In the case, the Labour Court first evaluated whether or not the employer had offered alternative work in the right manner. The employer had informed the employee of alternative work available in person, as well as provided the employee with a listing of available positions. Additionally, the employer had sent the employee a listing of positions weekly, where it was stated that the positions are being offered to the employee. Positions most relevant to the employee were at the top of each listing. The Labour Court ruled that as the positions corresponding with the employee's current position clearly stood out from each listing and as the employee's interest towards the positions was discussed in person with the employee, the employer had acted in a manner that fulfils its obligations when offering alternative work. Additionally, the Labour Court found that the employee would have had priority for the service advisor's position, but was not hired to the position, as the employee had, during a meeting regarding the termination, expressed that they were not interested in the position.

It was further evaluated whether the employee should have been offered another open position as service manager. The employer had not, after an interview, offered the position to the employee due to a lack of skills, knowledge, experience and suitability for the position, as the employee had no previous experience or skills in leadership. The Labour Court found that the requirements for the position set by the employer were reasonable, and that the employee had not presented evidence or demonstrated that they would fulfil the requirements for the position. Further, it was not possible to reasonably train the employee for the position. Thus, the Labour Court concluded that the employer had not breached their obligation to offer alternative employment.

Key takeaways for employers:

The manner in which work must be offered to an employees' representative is evaluated based on the same criteria as for other employees.
In order for the employer's obligation to offer alternative work to be fulfilled, the positions suitable for the employee must be clearly presented in the offer and a general listing of open positions may not fulfil the obligation. The employer cannot delegate to the employee its own obligation to actively offer alternative employment.
An employees' representative's suitability for a position is determined in the same way as for other employees, and an employees' representative's priority entitlement to a position is only relevant when the representative is in fact suitable for the position.

Additional salary component based on the collective bargaining agreement

In a recent case (14.10.2024/1435) the Helsinki Court of Appeals ruled that salary components that had been paid to employees based on a collective bargaining agreement had not formed a binding term of employment for employees and the employer had no obligation to offer such remuneration after the expiry of the provisions of the collective bargaining agreement.

In the case, an employee had been paid two different additional salary components since 2006 and 2012 respectively. The payment of such components seized in 2017. The Court of Appeals viewed the salary components as part of the collective bargaining agreement that had not been agreed individually with the employee in question and further evaluated whether the salary components had formed binding terms of employment based on the employer's unilateral commitment, through consolidation or as a result of a unilateral change of terms of employment done previously by the employer. Additionally, it was evaluated whether seizing the payment of additional salary components was a breach of the employer's loyalty obligation.

Both salary components were first introduced in connection with unilateral changes of terms of employment, and the employee claimed that the components had become a binding term of employment in connection with such changes, as they had understood that the components were offered to them as new terms of employment rather than automatically derived from the collective bargaining agreement. A key factor was whether or not the employee had understood or should have understood that the salary component was solely based on the applicable collective bargaining agreement. Therefore, the evaluation was based on what information had been given to the employee regarding the salary components. The Court of Appeals found that the employee could not have reasonably been under the impression that the salary components were based on other arrangements than the collective bargaining agreement. Further, the court found that there was no evidence supporting the employer having made a unilateral commitment to paying such a component.

Despite the fact that the salary components had been paid for a long time and they had formed a substantial part of the employee's compensation, the court also found that the salary components had not consolidated as binding terms of employment through an established practice. Additionally, the court ruled that the employer had not breached its loyalty obligation by seizing to pay the salary components, as it had informed the employee of the grounds of the salary components accordingly and had paid the additional components for four months following the expiry of the provisions of the collective bargaining agreement.

Key takeaways for employers:

Remuneration based on a collective bargaining agreement does not necessarily form a binding term of employment, provided that it is clearly only based on the provisions of a collective bargaining agreement in force from time to time.
Case specific circumstances are relevant when assessing whether or not a binding term of employment has been formed.
Despite having been paid for a relatively long period, salary components do not automatically form binding terms of employment, provided that the parties' intention has not been to agree on the benefit individually.
The grounds for any remuneration should always be clearly communicated to the employee in order to avoid any misunderstandings.

Additional information

Should you have any questions regarding the employment law cases presented in this article or their implications, please contact our Employment & Benefits practice.