Expansion of Contractor’s Liability in Construction Activity
The Government proposes amendments to the Act on the Contractor’s Obligations and Liability When Work Is Contracted Out and the Act on Public Contracts. These will provide contractors and contracting units with enhanced opportunities for ensuring that the contracting parties are reliable and comply with the basic terms of employment. The amendments would boost efforts to prevent a grey economy. They are expected to enter into force on 1 July 2012.
In accordance with the proposal concerning the Act on the Contractor’s Obligations and Liability When Work Is Contracted Out, a contractor in the construction industry shall, in future, request accounts and certificates from the subcontractor in most situations in accordance with said act. These include information related to the entry of the enterprise into various registries, pension insurance, tax payment, and the collective agreement or other principal terms of employment applicable. As a new matter, a certificate of accident insurance will be added to the list of items to be clarified.
These accounts would have to be requested also from companies with established operations, even when the contractual relationship between the contractor and the subcontractor can be held to be established. Under the current legislation, accounts do not need to be requested in such cases, an exception that has been considered problematic in the construction industry since it is difficult to determine how established operations actually are and this is an easy excuse to invoke if problems should arise.
Efficiency in law enforcement will be improved through adoption of a higher fine for negligence in construction activity. The minimum fine would be 16,000 euros and the maximum 50,000 euros. This fine could be levied if the contractor either has made an agreement with a party that is barred from conducting business or is aware that the contracting party has no intention of fulfilling its legal obligations.
The proposed amendment to the Act on Public Contracts would change the act in such a manner that, in future, all contracting units referred to in the act should require in the terms of the construction contract that the building contractor comply with the minimum terms of employment. The minimum terms of employment, which are defined by legislation and collective agreements, address, for example, pay, working hours, and holidays.
These legislative proposals are part of the Government’s action plan for elimination of the grey economy and financial crime for 2012–2015. The purpose of the action plan is to achieve an annual increase of 300–400 million euros in tax and social security contributions during this electoral term.
For further information, please contact:
Jan Hjelt, Senior Officer, Legal Affairs, MEE, at tel. +358 10 604 8640
Further information on MEE measures for prevention of a grey economy is available at: http://www.tem.fi/greyeconomy