The Finnish Parliament has recently adopted amendments to the
Act on Contractor's Obligations and Liability when Work is
Contracted Out (FI: laki tilaajan selvitysvelvollisuudesta ja
vastuusta ulkopuolista työvoimaa
käytettäessä; 1233/2006) and to the Act on
Public Procurement (FI: laki julkisista hankinnoista;
348/2007). The amendments aim at preventing grey economy especially
in the construction industry and are expected to enter into force
on 1 July 2012.
Under the Contractor Liability Act, the contractor is obligated
to request certain documents from the its contracting party to
ascertain that this fulfills its employer obligations. Such
documents include e.g. an extract from the Trade Register,
certificates evidencing registration with the Prepayment Register,
Employer Register and Value-Added Tax Register, a certificate of
tax payment and pension insurances, and an account of the
applicable collective bargaining agreement or terms of employment.
According to the new sections of the Contractor Liability Act,
contractors within the construction industry are obligated to
request also a certificate of an accident insurance in order to
verify that the their contacting party has a valid accident
insurance for its employees.
The Contractor Liability Act contains also certain exceptions
where the contractor is not obligated to request the documents,
namely when its contacting party is a public authority
(e.g. the state, a municipality, a private company owned
by public authority) or when its contracting party's activities
or the parties' contract relationship can be considered as
established. The amendment to the Contractor Liability Act will now
remove the latter exception as regards the construction industry. A
contractor in the construction industry must, thus, always request
the documents when the other party is not a public authority.
Breach of the Contractor Liability Act is sanctioned with an
administrative fine, currently within a sliding scale of EUR 1,600
to 16,000. The level of the fine is now, however, increased
substantially in the construction industry in cases where the
contractor concluded an agreement with someone who is barred from
concluding business or if the contractor knew that the other party
is not intending to fulfill its statutory obligations. The
administrative fee in these cases will extend to EUR 16,000 to
50,000. The current level of fines continues to apply in case the
contractor fails to comply with its document collection
Under a new section of the Public Procurement Act, the
contracting authorities must add to their contracts a specific
clause, according to which the employment contracts relating to the
building contract shall comply with the Finnish minimum terms of
employment that must be applied to similar work pursuant to Finnish
law and collective agreements. Currently such requirement only
applies to public works contracts awarded by central government
authorities to private employers.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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