Furloughing an employee means that the employer temporarily suspends work and wage payments when the conditions defined in the Employment Contracts Act are met, and the employee, in turn, stops working, even though the employment relationship remains in force. The basis for furloughing is, firstly, grounds for dismissal. An employer can furlough an employee by unilateral order if the employer has the right to terminate the employment contract on economic and production-related grounds.
Furloughing can occur either for a fixed term or indefinitely, and either part-time or full-time. In full-time furloughing, work and pay for the period of furlough are completely suspended, and in part-time furloughing, the employee works reduced hours during the furlough period. No minimum or maximum duration is specified for furloughing. In principle, a furlough can be implemented even for a single day.
The Act on Co-operation within Undertakings applies to companies and communities where more than 20 employees regularly work. Thus, an employer employing at least 20 employees must initiate co-operation negotiations when considering the dismissal, lay-off or part-time employment of one or more employees. The application of the Act on Co-operation within Undertakings has been discussed in a separate article. Co-operation Act and change negotiations.
Regulations concerning procedures and deadlines related to temporary lay-offs are included in the Employment Contracts Act and collective agreements. For instance, the redundancy protection agreements for employees in the technology and construction industries contain provisions on the grounds and procedures for temporary lay-offs. Employers must therefore ascertain any applicable provisions regarding temporary lay-offs in the relevant collective agreement before implementing a lay-off.
GROUNDS FOR SECESSION
Grounds for dismissal on grounds of production and economy
The basis for a lay-off is, firstly, a ground for dismissal. An employer may lay off an employee by unilateral order if the employer has the right termination of employment contract on economic and production grounds. The employer therefore cannot use a reason attributable to the employee as grounds for a layoff, although the parties to the employment relationship can agree on a temporary suspension of work and wage payments as a disciplinary measure.
Temporary reduction in work
An employer may also lay off an employee if the work or the employer's ability to provide work has temporarily decreased. In this case, it is also required that the employer cannot reasonably arrange other suitable work for the employee or training that meets the employer's needs. Laying off due to a temporary decrease in work is less demanding in terms of requirements than laying off based on termination of the employment contract.
There are no specific legal requirements for the extent of a reduction in work that would justify a layoff. A relatively minor reduction in work does not entitle an employee to a layoff. Work is considered to be temporarily reduced if it is estimated to last no more than 90 days.
Lay-offs can also be based on a temporary decrease in the conditions for offering work. Lay-offs made on this basis are solely due to the employer's economic reasons. Examples of such economic reasons include the employer's need for savings, which require a reduction in salary costs through lay-offs.
Indefinite and fixed-term employment relationship
Only employees whose employment contract is for an indefinite period can be laid off. However, fixed-term employees who are acting as replacements for permanent employees can also be laid off, provided that the employer would have the right to lay off the permanent employee if they were working.
The employer cannot lay off an employee after the employee's employment has been terminated by the employer. Therefore, the employer cannot thus relieve itself of the obligation to pay wages for the notice period.
Agreement on temporary lay-off between employer and employee
An employer and an employee can agree on a temporary layoff, which can only concern the specific layoff situation in question. For example, a clause for less stringent layoff grounds than usual cannot be included in an employment contract.
An agreement on temporary layoffs must be initiated by the employer. Temporary layoffs can only be agreed upon when they are necessary due to the employer's operations or financial situation. However, when agreeing on temporary layoffs, the grounds for temporary layoff do not need to meet the conditions required for a unilateral decision by the employer to implement temporary layoffs.
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WITHDRAWAL PROCEDURES
Employer's preliminary assessment and employee's hearing
Based on the information available to the employer, the employee must be provided with a preliminary statement regarding the grounds for temporary layoff, as well as its estimated scope, method of implementation, commencement date, and duration. If the temporary layoff affects several employees, the statement may be provided to the employees' representative or to the employees jointly.
The notification must be presented without delay once the need for a layoff becomes known to the employer. It can be given orally or in writing. The purpose of this advance notification is to inform employees of the layoff as early as possible.
After the report has been presented, before issuing notice of redundancy, the employer must give the employees or their representative an opportunity to be heard regarding the report presented. In companies where the employer is required to comply with the provisions of the Co-operation Act or a contractual provision regarding the presentation of a report to employees or negotiation regarding redundancy (see collective agreement), no advance report to employees is necessary. An advance report is therefore only required in companies where the employer is not obliged to comply with the provisions of the Co-operation Act or to consult employees by virtue of a collective agreement.
Layoff notice
The employer must personally inform the employee being laid off about the layoff. If it is not possible to give the layoff notice in person, it may be delivered by post or electronically. In addition, the layoff notice must be provided to the representatives of the employees being laid off.
The notice must be given no later than 14 days before the commencement of the lay-off. Collective bargaining agreements may specify a longer notice period, so the employer must check the terms relating to lay-offs in their sector's collective bargaining agreement before taking action.
The notice of layoff must include the grounds for layoff, the commencement date of the layoff, and the duration of the layoff or an estimate of its duration. The employer must provide the employee with written confirmation of the layoff if the employee requests it.
Proof of furlough
The employer must, at the employee's request, provide a written certificate of the layoff, stating at least the reason for the layoff, the start date, and its duration or estimated duration.
Returning to work
When a temporary layoff ends, the employee is obliged to return to work seven days after notification. The employee has the right to take other work during the layoff period.
Employer's advance ruling and employee's hearingn
During a layoff, an employee may terminate their employment contract without notice. If the end date of the layoff is known to the employee, this right does not apply during the seven days preceding the end of the layoff.
If an employer wishes to terminate an employment during a layoff, they must pay the employee their full notice period pay. If the layoff has occurred according to a provision in law or a collective agreement with a notice period of more than 14 days, 14 days' pay can be deducted from the notice period pay.
When a temporary layoff has lasted for 200 calendar days, the employee has the right to terminate their employment relationship with immediate effect and receive pay for the notice period as if the employer had terminated the employment relationship. The employee is not obliged to work during the notice period when terminating the employment relationship on this basis.
EMPLOYER'S CHECKLIST
- Remember to check the collective agreement provisions regarding layoffs.,
- layoffs can be made based on grounds for dismissal or a temporary reduction in work,
- Employees who work under an indefinite-term employment contract can, in principle, be temporarily laid off.
- Preliminary investigation into whether the employer is exempt from complying with the provisions of the Co-operation Act or from consulting employees under a collective agreement
- Notice of lay-off to employees 14 days before the start of the lay-off
- In matters relating to layoffs, we recommend consulting a lawyer.
Jari Sotka
Lawyer, MBA
Tel. 040 544 0610
[email protected]
Amos Attorneys at Law Oy
www.amoslaki.fi
The author has worked as a lawyer and advocate for more than 25 years, focusing throughout his career on preventing and solving legal problems for small and medium-sized enterprises.