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 obligations.
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.
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