New year, new rules on co-operation with personnel

Posted on

21 Dec

2021

Dittmar & Indrenius > Insight > New year, new rules on co-operation with personnel
The new year brings with it a reform of a central piece of Finnish employment legislation. The legislation concerning co-operation between the employer and the employees in the private sector has been overhauled.

The new Co-operation Act replaces the previous Act from 2007 from the beginning of 2022.The new Act has an equally broad scope of application as the previous one: it is applicable to every private-sector employer with at least 20 employees. The Act has been prepared in a tripartite working group, as is customary for employment legislation. The legislative reform was mainly urged by trade unions whose point of concern has for a long time been that the co-operation procedure is generally seen as synonymous with redundancies and lay-offs instead of allowing for a true dialogue between the employer and the employee. One of the goals of the new law is to give employees and their representatives a say in matters affecting the personnel on a continuous basis, rather than only when things look bad for the business and staff cuts are on the horizon.

In this article, we summarise some of the changes the new act brings about.

A new feature: Continuous dialogue between the employer and the personnel

A key novelty of the new Act is the employer’s obligation to conduct continuous dialogue with the personnel. Continuous dialogue is a procedure whereby the employer meets with its staff or representatives chosen by the staff to discuss matters that are subject to the dialogue. The idea is to increase the personnel’s insight into the operations of the employer and to give the personnel an opportunity to express their views on matters affecting them.

The Act lays down a general framework for the dialogue and stipulates the matters that must be addressed in it. That list of matters is quite extensive, including among others the foreseeable developments and the financial situation of the company, workplace policies and practices, use of fixed-term and part-time work and outsourcing of work, skills development and training as well as collecting of personal data. However, not every subject has to be discussed in every meeting.

The legislation gives ample leeway as to the practical ways of implementing the dialogue at the workplace. Unless otherwise agreed, a minimum requirement is that the meeting must be arranged at least once in a quarter year or, if the employer has less than 30 employees, twice a year.

Engaging in a meaningful dialogue as envisaged in the new law can present difficulties where the personnel or a personnel group has not chosen a representative. While the dialogue obligation does apply in these situations, the employer may carry out the dialogue by arranging a joint meeting once a year where unrepresented employees may attend and where the employer addresses the statutory matters.

Carrying out the dialogue is ultimately the employer’s duty but employee representatives may also make a request for dialogue on the statutory matters. Regardless of which party requests the dialogue, the employer must provide the employee representatives or employees with all necessary information which is reasonably providable and which the employer is not prevented from disclosing due to legal reasons.

As under the previous Act, the employer has the obligation to provide regularly certain information to the employee representatives on, for example, the financial situation of the company and the remuneration of the employees. Some of the obligations can be eliminated or modified by agreement.

Work community development plan

As part of the continuous dialogue, the employer must establish a work community development plan. The plan serves as a tool for improving and developing the personnel’s skills and wellbeing. The work community development plan must include a description of actions planned for that purpose as well as their schedule and follow-up measures. The work community development plan includes many similar items as the personnel and training plan under the previous law.

The proposed Act will introduce a rebranded co-operation procedure called "change negotiations" where these procedures are merged – at least in name.

Staff reductions and other changes

The current Co-operation Act provides for different negotiation procedures for workforce reductions on the one hand and changes based on the employer’s right to direct and supervise work on the other. The proposed Act will introduce a rebranded co-operation procedure called “change negotiations” where these procedures are merged – at least in name. Despite the new title, it will be crucial to distinguish between the two kinds of negotiations under the new Act. This is because the rules for both procedures are to remain essentially the same as under the current law. Thus, matters which may lead to a reduction of staff will continue to fall under strict formal procedural rules. By contrast, if the employer can make the changes on the basis of the right to direct and supervise work, a different co-operation procedure with considerably lighter formalities applies.

The proposed law explicitly provides for the right of employee representatives participating in change negotiations to make proposals and suggest alternative solutions to the employer’s proposal. The employee representatives’ proposals have to be submitted in writing. If the employer rejects the proposal, the employer is obliged to explain the reasons for the rejection in writing. One of the thorniest legal problems under the current Act is the timing of the negotiations. The government bill seeks to clarify the timing problem through guidelines given in the explanatory statement of the bill. The guidelines will be helpful for practitioners, but undoubtedly, new disputes will arise as to how to interpret the explanations correctly.

As under the current law, the stricter type of the change negotiations applies to decisions concerning redundancies, lay-offs and reduction of working hours. Additionally, the proposed Act has an explicit provision making that procedure applicable to changing the essential terms of employment. Finnish law recognises that the employer may not change essential terms of employment without relying on grounds for termination of employment. A logical extension of this rule is that the employer must conduct staff reduction negotiations when the employer intends not to terminate the employment contract but to offer the employee a new employment contract on different terms.

Sanctions

With regard to sanctions for non-compliance, the proposal retains the current compensation which the employer can be ordered to pay to an employee who has been terminated, laid off or whose working time has shortened. The new act will also codify the principle announced recently by the Finnish Supreme Court (KKO 2021:17) that failing to observe the procedure for workforce reductions in situations where the employer imposes a change that requires grounds for termination will result in a compensation for breach of the Co-operation Act. This point of law was not clear previously but has now been reinforced by the proposed law. The maximum amount of the compensation, which is non-pecuniary, is EUR 35,000 per affected employee.

The new Act will introduce a two-step process not found in the existing law to sanction the employer’s failure to conduct continuous dialogue. The Co-operation Ombudsman may give a notice to the employer for non-compliance with the dialogue obligation. If the employer does not remedy the non-compliance, the employer’s representative may be sentenced to pay a fine by a court. There are no changes to penalties in respect of other breaches of the law. In addition to the two-step process described above, the same forms of non-compliance as under the current law will be subject to the fine penalty.

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