Ambitious Labour Market Reforms on the Horizon

Employment, Pensions & Benefits

Posted on

27 Oct


Dittmar & Indrenius > Insight > Ambitious Labour Market Reforms on the Horizon

It cannot have escaped anyone following Finnish daily news lately that the Finnish government is planning significant labour market reforms. The government’s plans have already sparked a lively public discussion and protests by trade unions, and we probably have only seen the beginning.

While the trade unions are calling for negotiations and more balanced measures, the government seems undeterred in its resolve to enact the reforms which would amount to the most significant changes in Finnish employment law in decades. The purpose of the reforms is to boost the labour market participation rate, which in Finland has been lagging in comparison to other countries. The government also maintains that similar reforms have been successfully implemented by the main economies competing with Finland.

We have summarised here some of the planned changes with a direct impact on Finnish employers and employees:

The scope of application of the Finnish private sector employee consultation law will be raised from 20 to 50 employees.
The minimum periods for change negotiations (the employee consultations required for downsizing of staff) will be reduced by half. The current minimum periods are 14 days and six weeks.
The re-employment obligation following termination of employment on collective grounds will be abolished for employers with fewer than 50 employees. The proposed rule would also override any conflicting provision in a collective agreement.
The first day of sick leave will be unpaid for absences shorter than five days. Sick leave resulting from occupational accidents or diseases would be exempt. The proposed rule would apply if the applicable collective agreement does not provide otherwise. The impact of the planned change would be limited, as collective agreements typically have provisions on sick pay.
It will be possible to conclude a fixed-term employment contract for up to one year without special grounds.
The furlough notice will be shortened from 14 to seven days. The proposed rule would set aside any conflicting provisions in collective agreements.
Dismissing an employee for cause will be made easier for the employer.

This is the most far-reaching and important item on the government’s reform list, at least with regard to employment law. Currently, dismissal on individual grounds requires proper and weighty grounds. Case-law has set the bar high for satisfying that requirement. The government wants to replace the current standard with a ‘proper reason’ justification. While it remains to be seen what the proposed standard will mean in practice, it seems clear that the government intends to make it substantially easier to fire employees on individual grounds. The change would sweep existing case-law and legal doctrine on termination grounds into the history books.

A number of measures restricting industrial action.

Sympathy actions will be made subject to a proportionality rule which would allow only actions that are proportional to the objectives pursued and that are not directed outside the parties to the industrial dispute which the sympathy action aims to support. There will also be an obligation to notify sympathy measures. Political industrial actions will be permitted but are not allowed to last longer than one day.

In addition, sanctions for unlawful industrial action will be increased by raising the minimum fine to EUR 10,000 and the maximum to EUR 150,000. For the first time, an individual employee could be fined for continuing industrial action which has been ruled unlawful by the Labour Court.

Local bargaining will be possible for employers applying a generally binding collective agreement to the same extent as for employers that are bound by a collective agreement due to their membership in an employers’ association. The government also intends to allow employers applying a generally binding collective agreement to conclude a local bargaining agreement with other employee representatives than those authorised to do so under the collective agreement. Local bargaining would thus be possible even if the personnel have not elected a representative according to the collective agreement.
Company-specific collective agreements will be allowed to derogate from legislation in the same way as industry-specific collective agreements currently are.

The preparatory work on the labour market reforms is already underway. The reforms are being prepared in a tripartite process, but the new legislation will not be subject to the approval of the tripartite constituents.

For HR professionals and employment law experts, the coming months and years will be interesting times. We recommend staying alert to the state of the legislative process and anticipating the reforms by updating HR processes, when needed.

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