The Finnish Co-operation Act will be renewed and proposed to enter into force on 1 January 2022

The purpose of the revised Finnish Co-operation Act is to improve the interaction between the employer and the personnel and to create a framework for the development of the company and the work community

The intention is that the proposed Government’s Decree for a new Co-operation Act would be submitted to the Parliament on 30 September 2021 and the Acts would enter into force on 1 January 2022. The proposed Co-operation Act would regulate a number of issues in a way that closely resembles the current Act in force. However, the reasoning in the Governmental Decree regarding the paragraphs states that wordings that differ from the current Act are not intended to change the existing legal interpretation (case law). However, it should be noted, that the changes made will leave it unclear to what extent previous statements in case law and legal literature will remain in force when the new Act enters into force.

Demand for dialogue | New Co-operation Act

One of the key changes in the proposed new Co-operation Act is the ongoing dialogue between employer and employees. In future, there should be a regular dialogue between the employer and the employee representative at least quarterly, unless otherwise agreed between the parties.

The obligation to dialogue will increase the costs for employers, as the working time of the employer’s representative, the employee’s representative or the employees will be used to carry out the dialogue. In addition, the fulfilment of the obligation requires more frequent co-operation with the employees.

The obligation to dialogue would, as proposed, apply to:

  1. the development prospects and financial situation of the undertaking or entity;
  2. workplace rules;
  3. work practices and policies;
  4. manpower patterns and staffing structure;
  5. competence needs and competence development; as well as
  6. maintaining and promoting well-being at work 

At the workplace level, however, the concrete themes on which dialogue will take place under the above issues between the parties will be addressed in more detail.

In addition, the dialogue between the parties would also address certain cooperation obligations under other legislation, such as the collection of personal data during recruitment and during the employment relationship.

The new Act on Co-operation Negotiations would clearly provide employees’ representatives with more information on matters affecting employees and thus enable closer co-operation between the employer and the employees’ representatives.

The new proposed Co-operation Act stipulates in Section 44 of the Act that if an employer violates obligations or regulations other than those covered by the compensation provision, the individual representative of the employer shall be punished by a criminal fine.

The support for continuous dialogue set out in the proposed Act is in line with the purpose of the Act. However, the procedure entails certain legal challenges. The subjects of the ongoing dialogue are imprecisely defined in the Act. For this reason, it is easily unclear to the employer and the employee what issues are involved in the ongoing dialogue. Although the breach of the obligation of continuous dialogue is sanctioned only after the failure of the Co-Ombudsman’s request, it should be noted that the sanction is criminal. Criminal liability for an obligation vaguely stated by law is however severe for the employer.

Obligation to negotiate | Co-operation

Another significant change proposed in the new Co-operation Act is that it would include only one Chapter on the obligation to negotiate. This figure applies both to possible reductions in labor use and to negotiations on other significant staffing effects (change negotiations). The regulation of change negotiations is largely in line with the current Act.

With the reform of the Co-operation Act, the timing of the start of change negotiations will be specified so that the negotiations must take place before a business decision is made. The right of employees’ representatives to make proposals other than to propose alternative solutions would also be strengthened. Therefore, in future the employee’s representative would have the right to submit proposals and alternative solutions in writing for change negotiations and to receive a written reply from the employer.

Under the current Act, one of the most controversial and litigious issues has been the issue when the employer should have entered into collective bargaining for its workforce reduction plans. However, the issue has been addressed in the Governmental Decree regarding the new Act. Nevertheless, the discussion of the Governmental Decree does not significantly clarify the situation from what it is at the moment.

Furthermore, the new obligations of the proposed new Act in relation to the ongoing and regular dialogue with the employer are likely to increase the problems of interpretation of the right time to start co-operation negotiations and, consequently, the litigation on the subject. The problem materializes in practice for the employer in situations where the employer has to assess, in particular, whether it is a matter of dialogue exclusively within the meaning of the new Act or whether a negotiating proposal should be made “for certainty”.

Employee representation in corporate governance

The third reform is the transposition of the provisions on employee representation in corporate governance. At present, these provisions are contained in the Administrative Representation Act (725/1990).

The purpose of the new Co-operation Act is to add a qualitative requirement for both statutory and contractual employee representation. Under the proposed new Act, staff representation should take place in an institution that actually deals with important business, financial and staffing issues. In addition, the employee representative would also be entitled to receive training to the extent necessary for the performance of the employee representative’s role in the company’s institution. The new Act on Co-operation must be taken into account when implementing representation.

Amendment of the Act on the Co-operation Ombudsman

The package also includes a proposal to amend the Act on the Co-operation Ombudsman. According to the proposal, if it is obvious that the employer is in breach of the Co-operation Act, the Co-operation Ombudsman may instruct the employer to remedy the unlawful conduct. The draft Act proposes that the summons be binding on the employer so that the summons can be appealed to an Administrative Court. This opportunity for appeal however leads to new challenges. The proposed new Co-operation Act leaves room for improvement in the future on this subject.

The binding nature of the Ombudsman’s request and the associated possibility of appeal means that the Ombudsman officer should be able to formulate his request in such a way that the employer concerned clearly understands from the request how the company should act or change its previous activities to comply with the request. For this reason, a mere call to stop an illegal activity and a requirement to act in accordance with the law should not be a sufficient requirement for a request. However, when the Ombudsman officer is unable to accept oral evidence but is solely relying on written submissions from the parties and the normally contradictory written material, it must be acknowledged that it is very challenging to make a high-quality request on the basis of the above material.

As we know, the Act on Co-operation applicable to private sector companies is interpreted by the general courts. This is usually the case when dealing with a claim for compensation in connection with collective redundancy negotiations. In a situation where an undertaking appeals from the request of the Ombudsman to an Administrative Court, it would, in our view, be based in part on the fact that the undertaking does not consider that it has broken the Act or that the infringement was not such as to justify a request of the Ombudsman officer in the first place. Consequently, in dealing with such a complaint, the Administrative Court would have to rule on the interpretation and application of the Act on Co-operation in the private sector which is normally foreign to it. Furthermore, this would be the only context in the proposed Act where the Administrative Court would interpret the Co-operation Act. This structure contained in the proposed Act runs the risk that the interpretations of the same Act by different courts interpreting the law may differ.

To Do List | Co-operation Act

  1. Prepare for dialogue on a quarterly basis between employer and employee
  2. Take into account the possible criminal liability of the employer
  3. Make sure that change negotiations begin before making a business decision
  4. Ensure the quality requirement of the institution where employee representation is carried out
  5. Provide possible training to the employee representative
  6. Please note that the Ombudsman Officer may issue a request to remedy the omission
  7. Be aware of the possibility to appeal the request of the Ombudsman Officer

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Our partner Oscari Seppälä is pleased to tell you more about the proposed Co-operation Act and its effects on HR and business. If necessary, contact your contact person and we will tell you more about how your company can prepare for the entry into force of the new Co-operation Act.

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** This article is for informational purposes only and is not intended as legal advice.