The Co-operation Act applies to companies and organisations that regularly employ more than 20 employees. Thus, an employer employing at least 20 employees must initiate co-operation negotiations when considering the termination, temporary layoff, or part-time employment of one or more employees.
The new co-operation law consists of four parts: 1. continuous dialogue, 2. change negotiations, 3. personnel's administrative representation, and 4. information provision in connection with business transfers, mergers, and divisions.
The following section focuses on the obligation of continuous dialogue and change negotiations. The aim of this writing is to provide a general overview of these matters. When a company is considering workforce reductions, we recommend consulting a lawyer specialising in employment law. Making mistakes in dismissals or change negotiations can prove surprisingly costly for the employer.
CONTINUOUS DIALOGUE
The Co-operation Act obliges workplaces to engage in continuous dialogue between the employer and its personnel. The employer must regularly engage in dialogue with the employee representative to develop the company's operations and the work community. Depending on the number of staff, dialogue must take place at least 2-4 times a year, unless the employer and the employee representative agree otherwise. How the dialogue is practically organised in the workplace must be agreed upon separately at the workplace. The subject of the dialogue includes, among other things:
- The company's development prospects and financial situation.
- Rules, policies, and principles applicable in the workplace
- Labour utilisation and personnel structure
- Staff competence needs and competence development
- Maintaining and promoting workplace wellbeing
A work community development plan must be drawn up for continuous dialogue, in which development prospects, goals and measures related to the work community are recorded.
The Act on Co-operation within Undertakings also imposes a regular information obligation on the employer. Among other things, the employer must provide the staff representative twice a year with information on staff numbers, the number of fixed-term and part-time employees, and a statement on the company's financial situation.
2. AMENDMENT NEGOTIATIONS (or the co-operation negotiations of the old law)
The new co-operation law includes only one chapter on negotiation obligations, which applies to both potential reductions in the use of labour and to negotiations concerning other significant personnel impacts (change negotiations).
2.1. Matters subject to change negotiations
The scope of change negotiations includes the employer's consideration of terminating, laying off, or reducing the hours of one or more employees on economic or production grounds. The new law includes a mention of the obligation to conduct change negotiations according to the provisions concerning staff reductions when the employer considers unilaterally altering a material term of an employee's employment contract on economic or production grounds for termination.
These so-called lighter change negotiations also cover significant changes to the employee's position that are considered by the employer and fall within the employer's managerial authority, such as changes to job duties, work methods, the organisation of work, the arrangement of workspaces, or the arrangement of regular working hours. The procedural rules governing these lighter change negotiations are also more limited than those for broader change negotiations relating to dismissals etc.
2.2. Timing and parties to change negotiations
Consultations on changes must be initiated when the employer is considering measures that fall within the scope of change consultations and is able to specify the personnel impact of those measures with enough precision to prepare a consultation proposal and negotiate on the matters concerned. Consultations must take place for a certain period, and the employer must not make decisions before the consultations have concluded. Thus, consultations must be conducted and concluded before the employer actually makes a decision.
Change negotiations are primarily conducted with the employer and the personnel representative. However, if a personnel representative has not been elected, the employer will conduct negotiations with the employees concerned. If the planned measures concern only an individual employee, negotiations can be held between the employee and the employer. However, the employee has the right to request the participation of a personnel representative in the negotiations or to request that the matter concerning them be handled between the employer and the personnel representative.
The employer must ensure that all personnel groups (employees, officials and senior officials) who may be affected by a workforce reduction have the opportunity to appoint their representatives for change negotiations.
3. CONDUCTING AMENDMENT NEGOTIATIONS
The content of change negotiations largely corresponds to the previous law. However, the right of staff to make proposals and present alternative solutions was strengthened. An employee representative or employee has the right to present alternative solutions in writing for consideration in change negotiations. If the employer does not consider the solutions proposed by the employee or representative to be feasible, the employer must, within the scope necessary during the negotiations, provide a written report on the reasons behind their stance.
3.1. Negotiation proposal
Before negotiations commence, the employer must provide a written proposal for negotiations, which shall at least state the time and place of the commencement of the change negotiations and a point-by-point proposal of the matters to be discussed in the negotiations. If the change negotiations concern workforce reductions or similar, the proposal for negotiations must also clarify, among other things, the planned measures and their grounds, and an estimate of the number of employees affected by them.
Information on the matters to be addressed must be clarified in such a way that the negotiation proposal allows for an initial familiarisation with the matter. The employer usually does not have all the relevant information at this stage, so providing detailed information is often impossible. Nor is it advisable for the employer to take a stance at this stage on whether any redundancies will be carried out through dismissals, lay-offs or reduced working hours.
If the change negotiations concern a reduction in the workforce and a unilateral change to the employment relationship, a written proposal for negotiations must be given 5 days before the start of the negotiations.
The employer must submit a proposal for negotiations to the TE Office no later than the commencement of co-determination negotiations.
3.2. Action Plan and Principles of Operation
If an employer plans to dismiss at least 10 employees for production and financial reasons, the employer must also present a plan of action at the start of the co-determination negotiations. The plan of action must at least include:
- negotiations' planned schedule,
- procedures to be followed in negotiations,
- Principles to be followed during and after the notice period regarding the use of public employment services, job searching and training
The action plan does not need to be a complete entity when it is presented to employee representatives. The plan can be supplemented and refined during negotiations. The action plan must be negotiated with employee representatives.
If, conversely, an employer plans to dismiss fewer than 10 employees, the employer must present operating principles at the start of change negotiations. In accordance with the operating principles, during the notice period, employees shall be supported in their proactive search for other employment or training, and in participating in services that promote re-employment.
3.3. Duration of negotiations
The minimum negotiation period for changes concerning a reduction in the use of labour is either 14 days or 6 weeks. The 14-day negotiation period applies when negotiations concern 1) the dismissal of fewer than ten employees, 2) the temporary lay-off of employees for a maximum of 90 days, 3) the employer has fewer than 30 employees in service, or 4) the employer is subject to restructuring proceedings. In other cases, a 6-week negotiation period shall be followed.
However, the parties participating in the negotiation may agree on a different negotiation period. The simplest and clearest approach is to record in the agreement the consensus that the negotiation obligation under the Co-operation Act has been fulfilled and that the employer may take the necessary measures.
3.4. Content of Negotiations
The aim of change negotiations is to reach consensus and for the negotiating parties to contribute. In terms of the content of the obligation to negotiate, no distinction is made between the number of employees the employer is considering dismissing, laying off, or reducing working hours for, or the duration for which they are considering laying them off. Change negotiations must always address the grounds for, impacts of, and alternatives to measures affecting personnel. Negotiations also cover, among other things:
- Suggestions and alternative solutions made by the employee or their representative
- options for limiting the group of people affected by workforce reduction
- other measures to mitigate the consequences for employees.
- Training and resettlement opportunities
- Work and working time arrangements.
3.5. Employer's statement
The employer must provide the negotiating parties with an assessment of its decisions within a reasonable time frame regarding the change negotiations. When reducing the workforce, the assessment must cover the following matters:
- The content of the decision considered by the employer
- the personal impact of decisions by staff group or by function
- Furlough durations
- When will the decision be implemented
- Clarification requested by a staff representative for all employees belonging to the staff group
I recommend that the employer provide an explanation no later than the day following the conclusion of negotiations concerning layoffs or dismissals.
Remember that regarding change negotiations, the employer must, within a reasonable time, provide the entire staff or the employees affected by the changes with a report on the decision and the estimated timing of the change.
3.6. Implementation of Termination and Lay-offs
After the employer has fulfilled its negotiation obligation, i.e. after change negotiations, dismissals or lay-offs can be implemented. The employer's statement as such does not yet mean the execution of dismissals etc. The actual dismissal procedure or lay-off procedure takes place in accordance with the provisions of the Employment Contracts Act concerning dismissal or lay-off.
4. CONSEQUENCES FOR THE EMPLOYER OF FAILING TO COMPLY WITH NEGOTIATION RULES
If an employer has terminated, laid off, or reduced the working hours of an employee, or unilaterally altered an essential term of the employment contract, and has intentionally or negligently failed to comply with their obligations related to change negotiations, they are obliged to pay compensation to the employee. The maximum amount of compensation is €35,000. If, taking into account all relevant circumstances, the employer's omission can be considered minor, the compensation may not be awarded.
It is important to note that awarding compensation does not require that the employee has suffered damage. Compensation may also be awarded in a situation where the employer has had grounds for dismissal, lay-off or reduction of working hours.
In addition, if the employer intentionally or negligently breaches their negotiation obligations, despite a reminder from the cooperation agent, the employer may be fined for breaching their cooperation obligation.
5. EMPLOYER'S CHECKLIST
- The employer must prepare for dialogue with staff quarterly.
- An employer covered by the Co-operation Act has a duty to negotiate, even if they are only considering dismissing one employee.
- The employer must conduct co-determination negotiations before making business decisions or decisions regarding workforce reductions.
- The employer must ensure the qualitative requirements for the representation of staff.,
- A co-operation representative may issue a directive to rectify a breach of the Co-operation Act, against which the employer may appeal.
- The employer's role is very active in change negotiations
- If your company is planning or undergoing change negotiations, it is recommended that you consult a lawyer on the matter.
This article was written by
Jari Sotka
Lawyer, MBA
Phew. 040 544 0610
[email protected]
Law Firm Amos Ltd www.amoslaki.fi
The author has worked as a lawyer and advocate for more than 25 years, focusing throughout his career on preventing and solving legal problems for small and medium-sized enterprises.
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