The Employment Contracts Act determines when an employer has the right to terminate an employment contract.
An employment contract may terminate at the employer’s initiative either as a result of dismissal or cancellation of the employment. The employer has the right to terminate an indefinitely valid employment contract (permanent contract) only with proper and weighty reason. Reason for termination can be related either to the employee’s person or related to financial and production reasons.
The employee’s own proceeding entitles the employer to terminate the employment when the employee has seriously breached or neglected obligations that have essential impact on the employment relationship (Employment contracts act 7:2 §). The sphere of the regulation includes the worker’s delays, dishonesty and carelessness. Also, the fact that an employee can no longer cope with his or her assignments can justify dismissal. Termination of an employment contract requires that the employer has first issued a warning to the employee and allowed the employee to rectify its proceedings. No warning is required only if the case is particularly harmful.
The employer may terminate the employment contract if the work to be offered has diminished substantially and permanently for financial or production-related reasons or for reasons arising from the reorganization of the employer’s operations (Employment contracts act 7:3 §). The so-called collective ground may appear for example if the employer has a need to save costs or as a result of merging or termination of duties. The termination is permitted even if the employer’s business is profitable. However, if the employee can be placed in or trained for other job tasks the employer shall primarily offer that work.
Cancellation of the employment contract is much more severe and exceptional way of ending an employment contract. The employer is only upon an extremely weighty cause entitled to cancel an employment contract with an immediate effect regardless of the applicable period of notice or the duration of the employment contract (Employment contracts act 8:1§). Such a cause may be deemed to exist in case the employee commits a breach against or neglects duties in such a serious manner as to render it unreasonable to expect that the employer should continue the contractual relationship even for the period of notice.
Before ending an employment contract, the employer shall provide the employee with an opportunity to be heard regarding the grounds of the cancellation. The employee is entitled to use an assistant.
Several openly interpretable questions are connected with the ending of the employment. It is strongly recommendable to exercise due caution when terminating an employment contract as groundless termination or cancellation may lead to a notable liability for damages.
Law office Aasa-Law Oy have special expertise on all forms of termination of the employment. Aasa-Law oy advise clients on assignments relating to Finnish employment legislation.