Company liability
Under Finnish law, the employer is liable to compensate any third party for the loss or damage caused by an employee’s mistake or omission. The employer’s liability covers all employees, as well as independent contractors who work in similar positions to employees. The employer is liable even if the offender is never identified. It is sufficient to prove that damage was caused by a mistake or an omission by an employee and the employer would be liable to pay compensation.
The employer may not avoid the liability even by demonstrating that they:
- had given the employee proper instructions;
- supervised the employee’s work; and
- in all other respects fulfilled its obligations.
Even if the employee had intentionally breached direct orders from the employer, the employer is liable to pay compensation to the third parties that have suffered loss due to employee’s actions. For example, if an employee handles dangerous chemicals carelessly and the resulting spill causes damage, the employer is liable for the damage even if the employer had taken all potential precautions to avoid these types of accidents.
The employer avoids liability if the employee’s actions have no connection with the employee’s work duties. If a process engineer makes a mistake and wastewater ends up in the water course, the employer would be liable. But if an office worker sabotages the plant causing a similar leak, the employer would not be automatically liable for the damages as the accident is not related to the employee’s work tasks.
The victim will always claim compensation from the employer first. The employee responsible for the act is only liable to pay compensation if the employee has caused the loss intentionally, by criminal act or if the victim has not been able to receive compensation from the employer. In practice, this means that unless the employee has intentionally caused the damage, the victim will turn to the employee only once the claim against the employer has proven to be unsuccessful. If the victim files a claim against the employee before the employer, the claim shall be dismissed as premature. If the employee has intentionally caused the damage, the victim is advised to file claims against both the employer and the employee as the employer is also liable for the compensation and is often more capable to pay the compensation.
Employer claiming compensation
If the employer has to pay compensation because an employee made a mistake, the employee is not necessarily absolved. The employer may be entitled to reclaim the loss from the employee.
The employee’s liability towards the employer varies depending on the degree of the employee’s negligence. If the employee has caused the damage intentionally or by gross negligence, the employee is liable to compensate the employer in full for all losses incurred.
If the employee has acted negligently, the employee is liable to compensate the employer for the losses incurred, but the employee is liable only to an amount deemed reasonable in view of certain factors, and typically the employee would end up liable for only part of the damage actually caused. If the employee can only be faulted for slight negligence, the employee is not liable to pay any compensation to the employer.
Potential criminal charges
The Finnish criminal code recognises various environmental crimes. A common aspect of these crimes is wilful neglect. Criminal liability does not require that the person has acted intentionally, but gross negligence is equally incriminating and may result in punishment.
The starting point for criminal liability is that the liable party is the person or persons who were responsible for the act or omission. For example, whoever should have destroyed the dangerous substance, closed the valve so that oil flows to the correct container or ensured that the company has carried out the environmental risk assessment properly commits the crime if the task has not been handled with due care resulting in damage to the environment.
The perpetrator is identified based on their position within the organisation, responsibilities and authorities. Management may be liable for environmental damage if the company has not allocated sufficient resources for the hazardous activity or failed to ensure that the risks have been properly assessed. But the management may have properly delegated the responsibility to middle management and even to individual employees. If the management has designed and organised everything carefully, they may avoid criminal liability while the operator who forgot one crucial step in the process is charged for the crime.
Employer conviction
The Finnish legislation recognises that some crimes are so closely connected to the operations of a legal entity that, in addition to natural persons, the legal entity should also be punished for such acts. There are some 90 different crimes or offences that could result in penalty to a legal entity, most importantly various white-collar crimes, labour offences and environmental crimes.
The only penalty that may be imposed on a legal entity is a corporate fine. The minimum fine is €850 and maximum is €850,000. The value of the fine is determined by the nature and extent of the legal person’s omission, the involvement of the management and the legal entity’s solvency. A higher fine is typically given if the criminal acts have been committed intentionally, while negligence usually results in a lower penalty. But even negligence can result in high penalties.
In the decision where the Supreme Court issued one of the highest corporate fines to a legal entity (amounting to €500 000) the court reasoned that the company had not acted recklessly but merely indifferently. The court noted that the company had not installed a system that would have prevented accidents but a human error by the operator was able to result in massive environmental damage even though similar accidents had happened before and, therefore the company was also responsible for the accident.
A legal entity’s criminal liability requires that the management of the legal entity has either been accomplice in an offence, allowed the offence to be committed or the legal entity has failed to act in due care and take the necessary actions to prevent the crime from happening. The legal entity may be held criminally liable even if no individual would be sentenced to a punishment or the perpetrator is never identified. However, in most cases, the legal entity will face the potential fines where one or more employees or managers are simultaneously charged for the underlying crimes.