New Finnish Government Announces Ambitious Labour Market Reforms

Employment Alert

Posted on

21 Jun

2023

Dittmar & Indrenius > Insight > New Finnish Government Announces Ambitious Labour Market Reforms

The new Finnish Government under the leadership of Petteri Orpo, leader of the National Coalition Party, has announced wide-reaching measures which amount to the most ambitious reform of the Finnish labour market in decades. The measures, published recently after several weeks of negotiations and consultations since the parliamentary election earlier this year, are intended to be implemented during the Government’s four-year term in office. 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 planned reforms concern employment legislation, unemployment benefits and work permits for foreign employees.

We have collected here the most important changes to employment legislation the Government aims at introducing:

The scope of application of the Finnish private sector employee consultation law (Act on Co-operation within Undertakings) 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 sick leaves shorter than five days. Sick leaves resulting from occupational accidents or diseases would be exempted. The proposed rule would apply if the applicable collective agreement does not provide otherwise. This would highly limit the impact of the planned change 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 reasons related to the employee will be made easier for the employer.

This is the most far-reaching and principally 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 actions.

Sympathy actions will be made subject to a proportionality rule which will 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 of sympathy measures. Political industrial actions will be permitted but are not allowed to last longer than one day.

In addition, sanction fees for unlawful industrial actions will be enhanced by raising the minimum fee to EUR 10,000 and the maximum to EUR 150,000. As a matter of ground-breaking novelty, an individual employee could be ordered to pay a sanction fee 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 shop steward 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.

The Government has now taken office, and it is expected that the preparatory work on the labour market reforms will start in the coming months. The reforms will be prepared in a tripartite process, but the new legislation will not be subject to the approval of the tripartite constituents.

Trade unions have already voiced their opposition to the Government’s plans. Some turbulence may be lying ahead for the Finnish labour market, and the coming years will show how the political programme will eventually play out. One thing is sure though: these are very interesting times for Finnish employment law!

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