Establishment of employment terms – tips for employers

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An established practice may become just as binding as an essential term of employment written into an employment contract. Therefore, established practices can change and supplement the terms applicable to the employment relationship. It is important to pay attention to these practices, because an employer cannot unilaterally change an essential term of the employment relationship without grounds for termination. We have compiled what employers need to know about the establishment of terms of employment and how to avoid pitfalls.

In certain situations, a term of employment can become a binding obligation for both parties, even if it has not been expressly agreed upon in writing or otherwise. When assessing whether a term has become established, the actual actions and behaviour of the parties are considered. The establishment of the employment term is examined not only through the principles of employment law but also through the general principles of contract law. As a general rule, for a practice to become an established term of employment, it must have been in place for a long time, and its content must be clear and unambiguous. In addition, the practice must have been followed without significant exceptions, and the parties must have considered the practice to be binding. The need to protect employees and the principles of good faith and legitimate expectations also influence the assessment of whether the practice has become established. (See, for example, Supreme Court 1990:103 and Supreme Court 1995:52; cf. Supreme Court 1989:92).

What kind of terms may be established?

It is not entirely straightforward to determine what kind of terms can become established as terms of employment, nor is this matter regulated by legislation. However, based on case law, it can be concluded that at least the matters that can be agreed upon in an employment contract can also become established terms of employment.

Based on case law, the following terms, for example, have become established:

  • Entitlement to holiday pay (Helsinki Court of Appeal, 28 April 2015, S 14/1846)
  • Salary (Supreme Court 1984-II-23)
  • Christmas bonus (Supreme Court 1990:103, Supreme Court 1995:52)
  • Work responsibilities (Vaasa Court of Appeal 21 June 2005, S 03/1032, Helsinki Court of Appeal, 21 September 2011, S 11/599)
  • Paid break (Supreme Court 2021:76)
  • Place of work (Helsinki Court of Appeal 21 September 2011, S 11/599)

Therefore, at least the financial benefits directly related to the employment relationship, such as salary and annual leave benefits, as well as the content of the work itself or its place, may become binding terms of the employment relationship as they become established.

Establishment requires a relatively long period of time, although it is not possible to define a specific timeframe based on case law. Legal literature, on the other hand, states that the practice should have continued for at least two years. However, this is always a matter of overall assessment, and establishment may also require a longer period of time. In addition, establishment is considered to require that the parties can be deemed to have tacitly accepted the practice in accordance with the general principles of contract law. (e.g. Labour Court of Finland 2012-140, Labour Court of Finland 2002-43, Labour Court of Finland 2007-77 and Labour Court of Finland 2012-2)

Employers should also keep in mind that even if a term is not established as part of a specific employment relationship, it may have become established as a company practice to the extent that it must be applied to the employment relationships of all employees. For example, paid parental leave may have become established as a company practice, in which case it must also be applied to employees who are on parental leave for the first time. Company practices are established largely in accordance with the same principles as other terms of employment.

According to case law, a practice may also become established as a term of employment if its content is linked to a circumstance outside the employment relationship. If the external circumstance changes, the employer may unilaterally change the established practice in accordance with the change. For example, in the Labor Court’s decision 2012-2, the amount of meal allowance paid by the employer was linked to the amount of the full daily allowance set by the Tax Administration, and the meal allowance could therefore have been reduced as a result of changes in the full daily allowance without the contracting parties having separately agreed on the reduction. In  the Supreme Court decision 1995:184, the pension benefits forming part of the employees’ terms of employment could also be unilaterally reduced following a lawful change to the rules of the pension foundation.

When do terms not become established?

In general, a practice does not become established as a term of employment when it is always renegotiated separately or when it is based on a collective agreement. For example, in a recent Supreme Court ruling (2026:12), it was found that working hours in employees’ written employment contracts were determined based on the Working Time Act and the collective agreement in force at the time. The provisions of the applicable collective agreement on daily rest periods allowed meals to be taken either during paid working hours or as a separate unpaid rest period. For years, the employer had followed a practice whereby employees had their meals during working hours. The decision concerned whether the employer had the right to change the meal break to unpaid. The Supreme Court considered that the paid meal break was not an established term of employment in respect of which the employer had relinquished its right to direct and to which the employer was bound. The ruling emphasised that the collective agreement allowed for two different ways of organising meals.

When assessing whether a practice has become established, it is also important to consider whether the practice or benefit has otherwise been handled in accordance with the collective agreement, for example, whether the requirement to agree on the matter in writing has been complied with. In particular, if the collective agreement requires a written agreement, the lack of one will often suggest that no terms more favourable than those in the collective agreement were intended to apply.

Certain practices also never become established as terms of employment. For example, actions taken by employees on their own initiative, without the employer’s tacit approval, do not constitute terms of employment (e.g. Vaasa Court of Appeal, 21 May 2014, S 13/252 and Labour Court of Finland 1989-18).

Furthermore, establishment can, in principle, only apply to former or current employees. For example, in its decision S 08/346 on 15 October 2008, the Vaasa Court of Appeal ruled that the right of spouses of retired former employees to free tickets could be unilaterally revoked because the recipients of the free tickets had never been employed by the company.

Additionally, a practice is not binding when it is based on an employer’s mistake.

Tips for employers

  • Monitor and review the tacit practices that exist in the company.
  • React to undesirable silent practices in the workplace, such as extra breaks, if they are not acceptable.
  • Remember that many different circumstances can become established as terms of employment.
  • If an error related to an employment benefit occurs, correct it as soon as possible to prevent it from becoming an established practice.
  • Inform employees about the practices followed in the workplace.
  • Clearly indicate when the benefit is onetime or discretionary, such as a one-time performance bonus.
  • Make regularly decisions on the content of the benefit or practice, for example annually, if you do not want it to become established.

The establishment of the term of employment must be assessed on a case-by-case basis and the final decision will be made by the court based on an overall assessment.

If you have any questions regarding this topic or if we can assist you in, for example, drafting or updating your organisation’s labour law guidelines, please contact us. We can also assist you in matters related to the establishment of employment terms and other employment law issues.

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