Collective bargaining in Latvia

Collective bargaining is regulated by Part B of the Labour Law (Sections 17–27). The law describes the content and form of collective agreements, parties to a collective agreement, the effect of a collective agreement over time, the effect of a collective agreement on workers, procedures for entering into a collective agreement, the approval of a collective agreement, amendments to provisions of a collective agreement, familiarisation with a collective agreement and the settlement of disputes.

A collective agreement is a voluntary instrument but is binding on all parties involved once it is concluded. Changes in collective agreements should be agreed by all parties involved.

Collective bargaining is voluntary and is usually initiated by trade unions. It has increased in recent years. Sector-level collective bargaining is still weak, although special attention has been paid to sector-level collective bargaining since 2009.

New practices have been introduced in company-level and sector-level bargaining. The essence of these practices is the connection of collective agreements with certain economic benefits or with important economic processes in the country.

At company level, companies that have collective agreements were given tax allowance for  part of the meal and medical treatment expenses of all employees specified in the collective agreement and paid by an employer. Such expenses are excluded from the income of the person for whom the salary tax is paid, if they do not exceed €480 per year (on average €40 per month).

This incentive was initiated by trade unions.

At sector level, collective agreements were used in order to increase financial discipline and to increase salaries. The first example of these applications of collective agreements is in the construction sector, where sector-level collective bargaining is supported by an economic stimulus – less pay for overtime work. Collective bargaining was initiated by the employer organisation the Latvian Construction Association (Latvijas Būvuzņēmēju apvienība, LBA), which facilitated the establishment of the Partnership of Latvian Construction Contractors for the management of the bargaining process. In 2019, a general agreement was signed by 313 construction companies and trade unions in the construction sector on minimum wages, and relevant amendments were made to the Labour Law.

The amendments to the Labour Law adopted on 16 June 2022 resulted in two changes in the regulation of collective agreements. The first amendment concerned the possibility of derogations from collective agreements, and the second related to the obligation of the employer to inform all employees about a new collective agreement no later than one month after its signing.

Wages are usually determined in negotiations between the employer and the individual employee. Wage bargaining coverage is not monitored at national level. It can be roughly characterised using data from an annual LBAS survey, but these data are collected on a voluntary basis, are not perfect and have not been publicly available since 2015.

CSP provides data on the composition of employees by economic activity and the scope and nature of collective agreements for 2010, 2014 and 2018 (Official Statistics Portal, 2023a).

With a recently signed general agreement in the construction sector, wage bargaining coverage has certainly increased.

Collective wage bargaining coverage of employees at different levels

Source: Official Statistics Portal (2023a)

Collective wage bargaining coverage of employees

Sources: Eurofound, European Company Survey 2013 and 2019 (including private sector companies with establishments with more than 10 employees (NACE codes B–S), with multiple responses possible); Eurostat [earn_ses10_01], [earn_ses14_01], [earn_ses18_01] (including companies with more than 10 employees (NACE codes B–S, excluding O), with a single response for each local unit); OECD and AIAS (2021); LBAS database (2015); Official Statistics Portal (2023a); ILO

The main level of collective bargaining is company level.

In Latvia, collective agreements are not distinguished as wage agreements or working time agreements. Collective agreements usually include a wider scope of issues but do not specifically tackle the issues of wages and working time, because these aspects of working conditions are sufficiently regulated by the law. Regarding working time, collective agreements most typically provide more holidays or more time for education.

In 2019, the first real wage agreement was concluded in the construction sector. A sector-level collective agreement (general agreement) has been valid from 3 November 2019. It states that the minimum gross monthly wage in the construction sector should be €780; the minimum hourly rate should be €4.67; mandatory additional pay should be paid if an employee has obtained relevant vocational education; additional pay for overtime work should be no less than 50% of the employee’s salary; and the minimum monthly wage for student trainees for their first six months should be €546.

Levels of collective bargaining, 2022

Note: Wage and working time issues are negotiated at national level but do not result in collective agreements.

Articulation

The highest standard for employment relations is the law. Any collective agreement may only improve conditions set by law and by the highest-level collective agreement. Since sector-level agreements are almost non-existent in Latvia, company-level agreements must provide better conditions than the whole scope of labour legislation.

Collective bargaining may be carried out at any time, and collective agreements may be concluded at any time. Negotiations on the national minimum wage between the government and the national-level social partners are conducted before the adoption of the state budget, usually in August or September, when statistical data on economic development for the first half of the year are available.

Section 19 of the Labour Law specifies the effect of collective agreements during their period of validity but does not specify what happens when they expire and are not negotiated within a certain period. Regulations for such situations should be included in collective agreements. The law states: ‘A collective agreement may be entered into for a specified period of time or for a period of time required for the performance of specific work. If a collective agreement does not specify a time of effect, the collective agreement shall be deemed to have been entered into for one year.’

A collective agreement may be terminated before the expiry of its term on the basis of an agreement by the parties or a notice of termination by one party if such a right has been agreed on in the collective agreement.

Official procedures for wage bargaining coordination are not established.

Informal coordination is not developed either. There are only three sector-level collective agreements (identified as general agreements): in the railway sector, the construction sector and the glass fibre industry. In some sectors, trade unions and employer organisations have concluded cooperation agreements that are similar in terms of format and wording.

LBAS and LDDK organise measures for improving sector-level social dialogue, but these efforts have a capacity-building rather than a coordinating purpose. However, since 2008, the social partners have participated in the action programmes financed by the EU Structural and Investment Funds aimed at building the capacity of the national-level social partners. These projects include special projects for capacity-building for social dialogue at sector and regional levels. These projects are aimed at information and consultation for member organisations, which may be considered a kind of ‘soft’ coordination.

In compliance with Latvian law, a general agreement entered into by a large enterprise, an employer organisation or an association of employer organisations is binding on the members of the organisation or the association of organisations. If an enterprise or organisation or an association of employer organisations concluding an agreement employs more than 50% of the employees or provides more than 50% of the turnover in a sector, a general agreement is binding on all employers of the relevant sector and applies to all their employees.

A company-level collective agreement is binding on the parties, and its provisions apply to all employees who are employed by the relevant employer or in a relevant undertaking of the employer, unless otherwise provided for in the collective agreement. It should be of no consequence whether legal employment relationships with the employee are established prior to or after the coming into effect of the collective agreement.

Other voluntary mechanisms of extension of the application of the terms of collective agreements do not exist.

The Labour Law states that ‘an employee and an employer may derogate from the provisions of a collective agreement only if the relevant provisions of the employment contract are more favourable to the employee’.

The legal way to derogate from an existing collective agreement is by amending the provisions of the agreement. Section 23 of the Labour Law determines the mechanism for amending provisions of a collective agreement. The law states that during the period of validity of a collective agreement the parties may amend its provisions only in accordance with procedures prescribed by the collective agreement or with the procedures for establishing a collective agreement (Section 21 of the Labour Law) if such procedures have not been prescribed.

In 2022, the rules on derogation clauses were changed for cases specified by the law; derogations from the above-mentioned provisions were permitted only if the overall level of protection of employees was not reduced. To date, there has been one such case – on the determination of an employee’s probationary period.

Section 16(3) of the Labour Dispute Law stipulates that if a collective interests dispute is tackled using conciliation procedures, parties should refrain from taking collective action (including strikes or lockouts). The same requirement is valid if the collective dispute is resolved by the court of arbitration (Section 20(5)). Section 14(2) of the Strike Law states that during the strike neither trade unions nor employees are allowed to communicate to the employer demands that have not been indicated in the declaration of a strike.

There is no information on the existence of peace clauses in collective agreements.

According the LBAS database, the most important other aspects of working life addressed in collective agreements until 2015 were:

• additional holidays, for instance in the case of childbirth

• additional benefits, such as paid phone bills, transport, meals and health insurance

• paid training and education

• improved conditions for the reconciliation of work and private life (e-work, telework, flexible working time)

• additional measures for older workers