Increase in cases against employers for consecutive use of fixed-term contracts

In recent years, an increasing number of employees on fixed-term employment contracts have been taking their employers to court. Under existing Finnish law, employers must provide concrete reasons if they want to retain workers on consecutive fixed-term contracts. Of those workers who have taken a case against their employer, most have won their case. In general, the public sector has a high incidence of workers on fixed-term contracts.

Problem of fixed-term contracts

The use of fixed-term employment contracts when the employer’s activity is permanent or the employer needs a permanent workforce has emerged as a significant problem in the Finnish labour market.

The recently revised Employment Contracts Act (Työsopimuslaki 2001/55) requires that employers have to provide concrete reasons if they want to keep workers on consecutive fixed-term contracts. Chapter 1, section 3, of the act states:

An employment contract is valid indefinitely unless it has, for a justified reason, been made for a specific fixed term. Contracts made for a fixed term on the employer’s initiative without a justified reason, and consecutive fixed-term contracts concluded without a justified reason, shall be considered valid indefinitely.

However, employers often find grey areas in the legislation allowing them to argue their case for hiring employees on a temporary basis.

Employees mostly win legal action

For many years, most employees have not been willing to contest consecutive fixed-term contracts, despite the existence of rather prohibitive legislation. The main reason for this was fear among workers of what might happen to their careers if they decided to take action.

However, over the last number of years, an increasing number of employees on fixed-term contracts have been taking their employers to court. Increasingly, more employees are demanding job security and turning to the courts to settle the matter.

Almost all of the workers who have taken legal action in such circumstances have won their case. Meanwhile, over half of Finland’s universities have had to pay compensation for continuously misleading workers with temporary contracts.

Lack of permanent contracts in public sector

Universities and other higher education institutions are also rated poorly in terms of offering permanent employment contracts. For instance, a third of all university employees have fixed-term agreements guaranteeing them work for about a year.

On the whole, the state also has a poor reputation as a fixed-term employer. Despite promises by the Office for the Government as Employer, employees on fixed-term contracts have not seen many improvements regarding the number of fixed-term contracts (FI0704059I).

Commentary

Fixed-term contracts represent the main problem faced by young employees in the Finnish labour market, and are particularly problematic for young female employees in the public sector. Many studies show that fixed-term contracts often have far-reaching consequences for employees, including weakened career development and poorer wages compared with those of employees on permanent employment contracts.

Temporary work contracts are not a bad idea as such, and if there is a real need for temporary contracts and legal ground for their creation, their use is reasonable. At the beginning of an individual’s working career, a fixed-term contract often acts as a gateway to a permanent employment relationship. Sometimes, this may be the preferred choice of the employee, particularly among students as fixed-term contracts offer more possibilities to work while studying. Moreover, relevant use of temporary contracts increases flexibility at work.

Thus, not all fixed-term contracts should be eliminated. However, if an employer’s need for labour is constant, an employer must employ workers on permanent contracts or regularise employees working on temporary contracts.

Pertti Jokivuori, Statistics Finland