The new Public Procurement Act that entered into force at the start of 2017 aims, among other things, to weed out the grey economy from public contracts. In pursuit of this goal, employment law violations have been highlighted. A company that fumbles its employer obligations could in future find itself excluded from competitive tender processes.
4.5.2017
New Public Procurement Act Comes Down Hard on Employment Law Violations
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Mandatory Exclusion Grounds
Certain employment law violations are mandatory exclusion grounds in public procurement procedures. This means that they force public contracting authorities to exclude companies where such a violation has occurred from the tendering process. These kinds of mandatory exclusion grounds include work safety offences, working hours offences and work discrimination.
Under the previous act, mandatory exclusion grounds mainly concerned things like money laundering and the financing of terrorism. The new act brings mandatory exclusion grounds much closer to everyday business.
Discretionary Exclusion Grounds
In addition to mandatory exclusion grounds, the Public Procurement Act defines other kinds of employment law violations as discretionary exclusion grounds. The Public Procurement Act allows public contracting authorities to exclude companies from tender processes that have committed serious errors that cast doubt on their reliability or that have violated their employment law obligations under either legislation or collective bargaining agreements. However, the contracting authority must be able to prove that the violations occurred.
Discretionary grounds can include all kinds of violations, from groundless termination of employment to violations of cooperation negotiation obligations or failures to pay salaries. Discretionary grounds are not limited to violations punishable under the Criminal Code or even to acts tried in court. In practice, contracting authorities have extensive discretion to apply these exclusion grounds, but do have the obligation to abide by the principle of proportionality.
Extensive Group of Relevant Individuals
The group of individuals relevant to both mandatory and discretionary exclusion grounds, i.e. individuals who could commit an act leading to exclusion, is extensive. It includes:
Interpretations vary as to just how wide a group of people is covered by the above expressions. They are highly likely to include at least the managing director and deputy managing director, the members of the board and holders of procuration rights. In the case of discretionary exclusion grounds, the company itself may be the party that committed the violation.
Fix Your Mistakes
On the other side of the coin, the Public Procurement Act does take into account efforts by companies to fix their mistakes. A company can carry out remedial measures and submit proof of its reliability to the contracting authority despite having being subject to grounds for exclusion. If the contracting authority considers the evidence of reliability to be sufficient, it cannot exclude the company from the tender process.
We highly recommend that companies expand their compliance processes to include ensuring that the necessary remedial measures are carried out if employment law violations occur. Doing so will allow companies to significantly reduce the risks these violation can pose in public tender processes. Companies whose core customer base is made up of public contracting authorities should in any case pay closer attention to their employment law obligations.
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Latest references
VR – Supreme Court decision clarifies working time practices
We successfully represented VR Group before the Supreme Court in a case concerning the meal break practice of commuter train drivers. On 6 February 2026, the Supreme Court ruled in VR’s favour (decision KKO:2026:12), confirming that VR had the right to amend the commuter train drivers’ meal break practice in 2021 by rendering the break unpaid in accordance with the applicable collective agreement. This decision clarifies the interpretation of collective agreements and employment legislation as well as the limits of the employer’s right to direct work. Over 250 commuter train drivers challenged the unpaid meal break practice which VR introduced in April 2021. Before the change, meal breaks had a long history of being paid. The change was based on the train drivers’ collective agreement, which allows for meal breaks to be organised either as paid or unpaid time. The Supreme Court ruled that the scheduling and managing of breaks falls within the core area of the employer’s right to direct work. This increases the threshold for an established practice becoming a binding condition for the parties. Merely following a practice consistently and over a long period of time does not make the practice binding; instead, the employer’s intent to commit to the practice must be clearly evident from the employer’s conduct or other circumstances. As both alternatives – paid and unpaid – for organising meal breaks had been retained in the collective agreement despite other amendments over the years, it could not be considered that VR had intended to commit to the paid break practice and waive its right to direct work as regards break scheduling. It was also significant that the employment contracts explicitly referred only to the collective agreement as regards working time. The Supreme Court deemed that the employees’ paid meal break was not an established term of employment and that VR was entitled to change the practice based on the collective agreement. The employer had the right, by virtue of its right to direct work, to unilaterally change the meal break practice by choosing to apply the other arrangement permitted by the collective agreement.
Case published 3.3.2026
Life Finland – Administration of bankruptcy estate
Life Finland Oy, a retailer of natural products, other health-related products and cosmetics, filed for bankruptcy on its own initiative in June 2025, and our attorney, counsel Elina Pesonen was appointed administrator of the bankruptcy estate. Life Finland Oy was part of the international Life Group, and its parent company Life Europe AB was declared bankrupt in Sweden in June 2025. When declared bankrupt, Life Finland Oy had over 30 operational stores and almost 170 employees across Finland. In addition to the premises of the operational stores, the company had several other leased premises, such as retail premises it was vacating as well as office and warehouse spaces. The bankruptcy estate organised clearance sales in all of the company’s stores. The shutdown of the stores and the clearance sales were efficiently carried out in approximately two weeks in cooperation with the company’s country manager, regional managers and sales staff. The clearance sales yielded a significant liquidation result, and consumers bought nearly the entire inventory. The administration of the bankruptcy estate has required expertise in many areas. The proceedings have dealt with specialised issues such as cash pooling arrangements, intellectual property, franchising agreements, employment relationships and consumer creditors. In addition, the proceedings are notably international, as the estate administrator has organised the shutdown of operations and the liquidation of assets in close cooperation with the estate administrators of the Swedish Group companies. The cooperation has included, among other things, exploring opportunities for selling the business, the sale of intangible rights and the coordination of intra-group agreements.
Case published 9.12.2025
Merger of Oomi and Lumme Energia
We are acting as the joint legal advisor to Oomi Oy and Lumme Energia Oy in a transaction whereby Lumme Energia will merge with Oomi. As from the completion of the merger, the combined entity will be the largest electricity retail and service company in the Finnish market. In 2024, Oomi reported a turnover of EUR 373.9 million and had approximately 110 employees. Lumme Energia’s turnover for the same year was approximately EUR 314.6 million and it had approximately 50 employees. The transaction is primarily driven by the recent developments in the electricity market and the strategic goal to develop competitive products and services. Another key objective is to further enhance the customer experience, which is a shared value between the two companies. As a result of the merger, Lumme Energia’s customers will transfer to Oomi, and Lumme Energia will become one of Oomi’s shareholders. The completion of the transaction is subject to an approval by the Finnish Competition and Consumer Authority.
Case published 29.8.2025
HANZA – Acquisition of Milectria
We acted as Finnish legal advisor to HANZA AB in connection with its acquisition of the contract manufacturing division of Milectria, a group of companies specialising in electrical systems for the defence industry. The transaction comprises 100% of the shares in Milectria Oy (Finland), Milectria OÜ (Estonia), and the real estate company Kiinteistö Oy Kanungin Karhu. The transaction is expected to close in September 2025, subject to customary closing conditions, including regulatory approvals. Founded in 2008, HANZA is a Swedish mechanical engineering and electronics contract manufacturing company listed on the Nasdaq Stockholm main list. The company operating in seven countries currently has annual sales of approximately SEK 6 billion and approximately 3,100 employees. Milectria is a Finnish contract manufacturer of electrical systems for the defence industry.
Case published 21.7.2025