The Employer’s Liability to Pay Compensation for Groundless Termination of the Employment Agreement

In addition to liability compensation the employer can be sentenced to pay compensation for e.g. neglecting the cooperation procedure provided by the Act on Co-operation within Undertakings, breaching the provisions of the Equality Act or the discrimination prohibition provided by the Non-Discrimination Act.

An employer is obliged to compensate an employee for the unlawful dismissal or cancellation of his/her employment relationship. The exclusive compensation should be an amount equivalent to a minimum of three months or a maximum of 24 months salary. If the dismissal has been made based on insufficient financial or production-related grounds, the compensation minimum of three months’ salary does not apply. On the other hand, the maximum compensation amount is 30 months’ salary regarding shop stewards and elected personnel representatives. If the termination or cancellation took place for a legitimate reason, the employer is not liable to pay compensation.

The following factors must be taken into account when determining the amount of compensation: the estimated unemployment time and estimated loss of earnings, the remaining employment term of a fixed term employment agreement, the duration of the employment relationship, the employee's age and chances of finding employment that corresponds to his/her vocation or education and training. Additionally, the following factors should be taken into consideration: the employer's procedure when terminating the agreement, any motive for termination originating for the employee, the general circumstances of the employee and the employer, and other herewith comparable matters.

In practice, if the employee co-causes the termination of his/her employment relationship, it diminishes the compensation. E.g. provocative behavior can lead to lower compensation. Correspondingly, the employer’s carelessness regarding his/her duties provided by the employment agreement or law, or actions that offend the employee can increase the compensation.