Originally published February 2010
The Supreme Court 2009:83 - Buyer Of A Business Was Responsible For The Supplementary Pension Security Arranged For The Employee By The Seller
Following the sale of a business, an employee entered into the buyer's service as a result of this sale. When working for the seller, the employee had come under the seller's supplementary retirement pension insurance. However, the buyer subsequently insured the employee only at the level of normal pension security with a higher retirement age and lower pension level than the supplementary pension security. The employee claimed that the benefits concerning the pension security should have remained the same following the sale. The question before the Supreme Court was whether the requirement to continue supplying the employee with the benefits of the supplementary retirement pension insurance had passed to the buyer upon the sale of the business. The Supreme Court decided that it should firstly be determined whether the supplementary pension security belonged to those employer's duties which passed to the buyer. Secondly, it had to be determined whether the supplementary pension security had actually passed to the buyer in the employment relationship in question.
The Supreme Court found that the purpose of Chapter 2, Section 10 of the Finnish Employment Contracts Act concerning the sale of businesses is that all the rights and benefits under the employment relationship transfer to the new owner.
The employee's right to the supplementary pension security formed a term of his employment relationship. The fact that buyer and seller had agreed that in principle the buyer was to insure the employees according to the statutory minimum pension security, did not affect the employee's right to the supplementary pension security. Thus the Supreme Court held that, in accordance with Chapter 2, Section 10 of the Finnish Employment Contracts Act, the responsibility for the benefits deriving from the supplementary retirement pension insurance had passed to the buyer.
As a result of this judgment, employers should take the potential liabilities to employees arising from pension security into account when planning an assignment of business.
The Supreme Court 2010:5 – Bonus Payment For Older Employees Was Against The Employer's Requirement To Treat Employees Equally
In this case, employees who had begun working for their employer on 17 October 1996 or earlier had been entitled to benefits under the terms of a collective agreement they were party to. Due to Working Time reforms, the employees lost their entitlement to these benefits. Their employer decided to offer these employees a bonus payment. This bonus payment was not offered to employees who started working there after 17 October 1996, although their salary benefits were otherwise based on the same terms as those of the older employees. The question before the Court was whether the bonus payment complied with the equal treatment requirement set out in the Finnish Employment Contracts Act (the "Act). According to Chapter 2, Section 2, Paragraph 3 of the Act, the employer must treat employees equally unless there is an acceptable cause for derogation deriving from the duties and position of the employees.
The Supreme Court found that the bonus payment constituted a permanent difference relating to the way in which the employees' salaries were determined. The employer had not claimed that it would gradually try to balance the difference. The Court held that there was no acceptable cause for that derogation deriving from the duties and position of the employees. Thus the bonus payment breached the employer's requirement to treat employees equally as set out in the Act.
On the grounds of this decision, employers should check their practices concerning the way they determine employees' salaries.
The Supreme Court 2009:65 – Two Private Individuals Performing Retail Sales Were Not Employees For The Purposes Of The Sale Of A Business
A company carrying on an unprofitable business in the retail sale of furnishings concluded an agreement to sell the business. The buyers of the business were two private individuals who planned to establish a new company to buy the business. Under the sale agreement, the buyers would carry on the retail sale business as independent contractors and not as employees. Their salaries and other costs were to be paid by the company incorporated by the buyers. However, it was also agreed that the seller would still be responsible for liabilities arising from termination of their contracts if they were employees. When their contractual relationship was subsequently terminated, the individuals claimed that they had in fact been employees and were not independent contractors.
The Supreme Court found that the business of retail sales could be carried out by either employees or independent contractors. In this case it was the clear intention of the parties that they had agreed to act as independent contractors. However, for the purposes of the Finnish Employment Contracts Act, this agreement between the parties was not determinative of the legal position, meaning that it was necessary to look at what the parties did in practice to ascertain whether it corresponded to what had been agreed by the parties.
In the present case, the Supreme Court found that the seller of the business had limited opportunity to supervise the sales activities. The seller had agreed to assume the relevant liabilities and, although there were certain limitations on what the individuals could do, they had a certain amount of leeway in deciding the range of products, the organisation of the business and the extent of the design services it offered. In other words, the ultimate success of the business depended on their input. Accordingly, the Supreme Court found that the individuals did not have an employment relationship with the company.
The upshot of the decision is that employers should pay careful attention to the details of business sale agreements to ensure that the provisions put in place for employees post-completion accurately reflect the intention of the parties.
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.