Increasing local collective bargaining

The concept of local bargaining is not defined in the law. Local bargaining often refers to workplace-level agreements on matters set out in a collective agreement (such as working hours, annual holidays or wages).

As there is no universal definition of local bargaining, we must first specify what it involves.

1. Employer-specific collective agreements: The employer and the national employee association conclude a collective agreement on the terms of employment observed in the employment relationship.
2. Local agreements based on a national collective agreement: Under a collective agreement concluded by employer and employee associations, employers can agree on specific matters with a personnel representative or the personnel at the workplace level. Local bargaining can involve
   1. Matters that are not specified in the law and that are only set out in collective agreements. Such matters include the amount of pay or holiday bonuses.
   2. Matters on which general provisions are set out in the law, but deviations from the general rule can be made in national collective agreements. Parties to a collective agreement can authorise the parties in the workplace to agree on deviations. With few exceptions, the local bargaining described above is only open to organised employers (employers that are members of employer associations).
3. Local agreements based on the law: There are a few matters upon which workplace-level agreements can be concluded under the law. For example, under the Working Hours Act, an agreement on the introduction of a working hours account can be concluded at the local level.

The changes envisaged in the Government Programme concern the two first definitions (employer-specific collective agreements and local agreements based on national collective agreements). Local agreements based on the law are outside the scope of the reform.

The matters for local bargaining and the parties that can conclude local agreements are specified in the labour legislation and collective agreements. Labour legislation and collective agreements also contain more detailed provisions on the procedures and conditions for workplace-level agreements.

A collective agreement is an agreement concluded by one or more employers or employer associations with one or more employee associations. It sets out the terms and conditions that must be observed in employment contracts and employment relationships. These terms and conditions include the pay, working hours, annual holidays and other benefits in the workplaces falling under the scope of the agreement.

Collective agreements serve two important purposes:

1. They ensure that the minimum terms of employment are observed and
2. they oblige the parties to observe industrial peace. When a collective agreement is in effect, industrial action against the agreement is prohibited.

Collective agreements can be generally applicable or normally binding.

A generally applicable collective agreement is binding on all employers in the sector regardless of whether or not the employer is a member of an employer association. A generally applicable collective agreement sets out the minimum terms of employment for the sector.

The general applicability of a national collective agreement is determined by the committee confirming the general applicability of collective agreements, which operates under the auspices of the Ministry of Social Affairs and Health.

The obligation to observe industrial peace does not extend to employers who observe the provisions of collective agreements on the basis of general applicability.

A collective agreement is normally binding when the employer is a member of an employer association that has concluded a collective agreement with an employee association representing the same sector. A collective agreement is also normally binding when the employer is not a member of an employer association but has concluded a collective agreement with an employee association representing the same sector.

A personnel representative is a person who represents the employees when a local agreement is concluded.

The parties that can conclude local agreements are specified in collective agreements and labour legislation. In many collective agreements, the employer and the shop steward are specified as the parties who may conclude agreements at the workplace level.

A shop steward is elected by organised employees (members of employee associations) in the workplace from among themselves to act as the personnel representative. The task of the shop steward is to ensure that the collective agreement, labour legislation and other terms of employment are observed in the workplace. The shop steward also represents the employee association in the workplace. The shop steward acts as a party to local agreements if this is specified as a shop steward’s task in the collective agreement. 

The status and powers of the shop steward are set out in the collective agreement. Under the collective agreements, shop stewards have the right to obtain the information from the employers that they need to perform their tasks.

If the employees do not have a shop steward referred to in a collective agreement binding under the Collective Agreements Act, they can elect a representative from among themselves. Provisions on the elected representative are contained in the Employment Contracts Act.

Elected representatives are entitled to any information that they need to carry out the duties referred to in law and to sufficient release from work obligations.

Labour legislation contains a number of mandatory provisions. Mandatory provisions on employment terms cannot be deviated from by collective agreements or local agreements under any circumstances.

Labour legislation contains a number of semi-mandatory provisions. Semi-mandatory provisions on employment terms can only be deviated from by means of national collective agreements.

Agreements on semi-mandatory provisions can be concluded at the workplace level if  

• such agreements are permitted under a national collective agreement and 
• the employer is an organised employer (a member of the employer association). 

Under the existing legislation, local agreements on semi-mandatory provisions can only be concluded in companies that are members of employer associations.

The provisions on employment terms are dispositive if they are not mandatory or semi-mandatory. It means that the employer and employees can agree on employment terms unless otherwise stated in the collective agreement.

A yellow collective agreement is a bogus arrangement in which the employee association acting as a party to a collective agreement does not genuinely represent the employees but acts in the interests of the employer. 

A yellow trade union is a trade union that is in reality controlled by the employer, and its real purpose is not to protect the employees’ interests.

The Government aims to promote local bargaining because it helps companies to develop the way in which they operate and boost their competence.

The Government aims to overhaul the legislation so that local bargaining can be used in all companies on an equal basis regardless of whether or not they are members of an employer association or the extent of employee representation in them.

It is currently possible to deviate from many provisions of labour legislation by means of a collective agreement between national employer and employee associations. The working group proposes that in the future, similar deviations could also be made on the basis of employer-specific collective agreements, and that the employees could also be represented by a member association of a national employee association.

Bogus agreements involving employee associations that do not genuinely represent employees are already prohibited under the existing act on collective agreements. However, the working group proposes that it should be specifically stated in the Collective Agreements Act that when the purpose of an employee association is assessed, not only its formal purpose but also its actual goals and activities should be considered. The purpose of this amendment would be to ensure that only the agreements concluded by parties that genuinely represent the employers and employees would be considered as collective agreements.

A non-organised employer (an employer that is not a member of an employer association) must observe at least the provisions of a generally applicable collective agreement if such an agreement has been concluded in the sector. Generally applicable collective agreements may contain provisions permitting local bargaining. However, under the Employment Contracts Act, Working Hours Act, Annual Holidays Act and the Co-operation Act, non-organised employers may not apply the provisions of collective agreements that deviate from the law and require local bargaining. This means that non-organised employers are at a disadvantage compared to organised employers.

The working group proposes that the provisions permitting local bargaining should be extended to cover non-organised employers. In other words, in the future, non-organised employers observing generally applicable collective agreements would also be able to conclude local agreements.

Under the model proposed by the working group, the local agreement based on a collective agreement should as a rule be concluded between the parties specified in the collective agreement. If under the collective agreement, the shop steward must act as the employee representative in the local bargaining, the agreement would be concluded between the shop steward and the employer. If no shop steward has been elected and there are no provisions in the collective agreement on how to conclude local agreements without a shop steward, the alternative way specified in the law could be applied. In such cases, the local agreement could be concluded between the employer and the elected representative or between the employer and the personnel covered by the collective agreement. 

The proposed model would not infringe the bargaining rights of the parties to collective agreements because the alternative method specified in the law would only be used as a last resort.

This change is prompted by the fact that there are many workplaces without shop stewards. The absence of a shop steward prevents local bargaining if no alternative ways of concluding local agreements are specified in the collective agreement.

In order to conclude local agreements, the personnel representative must have sufficient competence and access to information. If elected representatives act as personnel representatives when concluding local agreements, the employer should promote their competence and knowledge of the operating environment.

Elected representatives would have the right to examine the role of the agreement with the personnel during the negotiations on the agreement.

Under the current legislation, elected representatives enjoy the same degree of protection as shop stewards.

No changes are proposed to legal protection procedures (monitoring and settling of disputes).

In the organised sector, employer and employee associations monitor compliance with collective agreements and local agreements based on them. Disputes are settled in the Labour Court.

In the non-organised sector, ensuring that local agreements are in compliance with the law and collective agreements would be the responsibility of the occupational safety and health authorities. Disputes would be settled in general courts.

Under the reform, the bargaining already available to organised employers would also become available to non-organised employers. Thus, it does not mean that all matters could be settled through local bargaining.

The fact that a local agreement could be terminated at any time also provides the personnel with protection.

On 3 July 2023, the Ministry of Economic Affairs and Employment appointed a tripartite working group to prepare a report on the matter that could be presented as a government proposal and that would be based on the Government Programme. The working group held its final meeting on 14 February 2024. The group was not unanimous in its work, as the employee central organisations (SAK, STTK and Akava) submitted objections to the report.

The Ministry of Economic Affairs and Employment circulated the proposal for comments between 1 March and 12 April 2024. After the consultation, preparatory work by public officials continues. The aim is for the Government to submit a proposal on local bargaining to Parliament in August 2024.

According to the report prepared by the working group, the new legislation would enter into force on 1 January 2025.

It is proposed that the legislation should contain a transitional provision under which a local agreement deviating from the collective agreement could be concluded between the employer and the elected representative or between the employer and the personnel. This provision would only apply to situations in which the collective agreement used as a basis for the option of local agreement has been concluded after the entry into force of the new legislation.

The purpose of the transitional provision is to ensure that before the new legislation is applied, the parties to a collective agreement could establish alternative ways to conclude local agreements if the workplace does not have a shop steward or other personnel representative.