The grey economy
Contractor’s obligations and liability
The purpose of the Act on the Contractor’s Obligations and Liability when Work is Contracted Out is to promote equal competition among businesses and compliance with statutory terms and conditions of employment. The Act enables contractors to ensure that their partners comply with what is required of them by law. Contractors must obtain the reports specified in the Act on all partners before signing any agreements on subcontracting or temporary agency work.
Contractors are required to ensure that their partners comply with statutory requirements before signing a subcontracting or temporary agency work agreement. To fulfil this obligation, contractors must obtain all the reports and certificates specified in the Act, familiarise themselves with their contents and keep all the paperwork for at least two years after the work concerned has been completed.
A contractor may be any business required by law to submit a notification on starting business operations to the Trade Register. Thus, housing companies and property companies may also be contractors. Foreign enterprises operating in Finland may likewise be contractors.
The central government, local authorities, joint municipal authorities, the Province of Åland, a local authority or joint municipal authority in Åland, a parish, a parish union, any other religious community and any other corporation with legal personality may also be a contractor. By contrast, private entrepreneurs in agriculture and fishing and households are generally not considered contractors within the meaning of the Act on the Contractor’s Obligations and Liability when Work is Contracted Out.
The obligation to investigate always applies to a contractor using temporary agency work, and it applies in certain cases when a contractor signs a subcontracting agreement. In the case of subcontracting agreements, the contractor has an obligation to investigate if one or more employees of a subcontractor will be working on the contractor’s premises or on the contractor’s worksite and the work done under the subcontracting agreement is connected to ordinary duties in the contractor’s own operations.
‘Ordinary duties’ are defined as duties without which the contractor’s normal operations would be disrupted or duties that form a comprehensive entity or service chain in the contractor's operations. Ordinary duties thus include not only a company’s core business but also cleaning, maintenance and repairs. The obligation to investigate applies to transport services if those form an essential part of the contractor’s normal operations.
In the construction industry, the obligation to investigate applies to all contractors even if construction is not part of the contractor’s normal operations. Also, in the construction industry subcontractors do not have to be employers themselves; the law also applies to independent contractors.
Agreements of a minor significance, however, are exempt from the contractor’s obligation to investigate. The limits for ‘minor significance’ are defined differently for temporary agency work and subcontracting. For temporary agency work, a contractor is not required to obtain the reports described above if the employment of the hired employee(s) lasts for no more than ten working days altogether. For subcontracting agreements, the contractor is exempt from the obligation to investigate if the value of the agreement ex VAT is less than EUR 9,000.
The limits described above are calculated by taking into account the cumulative working time or value of consecutive agreements in the case of agreements that run back-to-back or with only brief interruptions. In other words, the limits are not assessed by calendar year or financial year.
Enforcement of the Act on the Contractor’s Obligations and Liability when Work is Contracted Out
The occupational safety and health division at AVI Southern Finland is responsible for enforcement of the Act on the Contractor’s Obligations and Liability when Work is Contracted Out nationwide. Inspectors monitoring compliance with the Act are stationed at the offices in Helsinki, Jyväskylä, Kouvola, Kuopio, Lahti, Lappeenranta, Mikkeli, Oulu, Tampere, Turku and Vaasa.
In 2018, monitoring is focused on primary production, services, logistics, construction industry, manufacturing and municipalities.