Disputes over employers' right to change collective agreements

Workplace-level bargaining ran into difficulties in several Finnish companies in the early months of 2005 due to attempts by employers to apply to their workforces different sectoral collective agreements than those that had previously governed their pay and conditions. Trade unions did not accept such changes and organised strikes in protest. Legal experts disagree over whether employers have the right to choose collective agreements to their liking.

With the exception of the paper industry, new collective agreements were concluded in all major sectors of the Finnish economy between December 2004 and March 2005 (FI0504202N). The new agreements were then to be applied at workplace level by bargaining over new local agreements. For the most part, this took place quite smoothly but in some companies heated disputes arose between the parties. A common source of disagreement in many cases was the wish of some employers to apply the collective agreement of a different sector than that which had applied until then.

The disputes

The Foxconn and Uponor companies changed affiliation from the Chemical Industry Federation of Finland (Kemianteollisuus) to the Technology Industries of Finland (Teknologiateollisuus) in early 2004 and wanted to start applying the collective agreement signed by their new employers' organisation from early 2005. By doing so, they would have achieved substantial savings on labour costs. The workforces of the two firms opposed the step and held a walk-out strike at the end of 2004, arguing that their employers were violating their freedom of association by pressuring them to change affiliation from the Chemical Workers' Union (Kemianliitto) to the Finnish Metalworkers' Union (Metallityöväen Liitto, Metalli), the contracting parties of the Chemical Industry Federation of Finland and Technology Industries of Finland respectively. Nevertheless, Foxconn and Uponor began to apply the technology industries’ collective agreements in February 2005.

The Chemical Workers' Union did not accept the decisions of Foxconn and Uponor to change collective agreements. It asserted that not only are most of the companies’ affected workers members of the Chemical Workers' Union, but also their Finland-based production consists overwhelmingly of plastic products and as such they are subject to the plastic industry collective agreement, bargained between the Chemical Workers' Union and the Chemical Industry Federation of Finland. On these grounds and with the aim of binding Uponor to follow the plastic industry agreement, Kemianliitto took legal action against Uponor at the Labour Court (Työtuomioistuin) whose ruling on the matter is expected later in spring 2005. The union could not do the same in the case of Foxconn because, unlike Uponor, the company had already broken official ties with the Chemical Industry Federation of Finland and the Labour Court only handles matters between contracting parties. Thus, the Chemical Workers' Union organised a strike at Foxconn's factories in February 2005 in order to pressure the company to change its stance. The industrial action lasted two weeks and affected up to 1,000 workers. It ended in Foxconn agreeing to reapply the collective agreement for the plastic industry until June 2006.

In January 2005, the mechanical and electrical installations supplier Are affiliated to Technology Industries of Finland and began to apply a new collective agreement to its 230 electricians the following month. This led its previous contracting party, the Finnish Electrical Workers' Union (Sähköliitto), to take legal action against it at the Labour Court. The ruling in this case is also expected later in spring 2005. According to the trade union, 90% of the electricians’ work consists of tasks that fall within the scope of the old agreement. It believes that Are’s goal in changing agreements is to achieve competitiveness through lowering wages. The union also disapproves of the role played in the matter by Technology Industries of Finland. It believes that the employers’ organisation is engaged in an active recruitment campaign, in which its embrace of Are was to act as an 'advertisement' for other companies looking to cut their costs. Furthermore, the Finnish Electrical Workers' Union argues that as part of the 'campaign', Technology Industries of Finland does not collect any membership fees from companies. A lawyer with the Chemical Workers' Union, Jukka Heikkerö, also believes that Technology Industries of Finland is conducting an expansion campaign. He is, moreover, of the opinion that it is doing so in cooperation with its contracting party, the Finnish Metalworkers' Union, whose strategy, Mr Heikkerö alleges, is to appeal to companies by devising collective agreements that are good for them rather than for their workers. Technology Industries of Finland and the Finnish Metalworkers' Union have not issued official statements concerning these allegations.

The Electrical Workers' Union pressed its cause of reinstating Are as its contracting party through industrial action in March 2005. The strike at the company lasted for two weeks and was deemed illegal by the Labour Court. The union nevertheless achieved its goal: the strike ended when Are agreed to the union’s demand and began applying the old agreement.

Another strike, albeit only half a day in length, took place in March 2005 at Alko, the state-owned alcoholic beverages retailer. The dispute there, as in the aforementioned cases, was largely the result of the employer changing collective agreements. Alko joined the Commercial Employers' Association (Kaupan Työnantajaliitto) in 1998 and the collective agreement it applies has since been gradually changed towards the new employer organisation's agreement, which is much less favourable for workers than the previous one. The changes have met with much opposition from the employees.

Legality of employers’ actions unclear

The Collective Agreements Act does not explicitly impose restrictions on companies that wish to start applying a new collective agreement, provided this is done in between contracting periods. According to Kari-Pekka Tiitinen, professor of labour law at the University of Helsinki, a company is indeed allowed between contracts to choose a collective agreement that is more favourable to it by changing its employers’ organisation affiliation. The company’s possibilities may, however, be limited by the Associations Act and the regulations of the relevant employers’ organisations, he argues. Mr Heikkerö of the Chemical Workers' Union strongly disagrees. He is of the opinion that case law clearly indicates that employers are bound by the collective agreements of the sectors in which they operate: if the workers’ tasks clearly fall within the scope of a certain sector’s collective agreement, that agreement must be applied. Nonetheless, he does not see it as being impossible that the Labour Court might issue a verdict favouring Uponor, thus granting validity to the company’s agreement with the Finnish Metalworkers' Union. Mr Sähköliitto sees the same outcome as being possible but unlikely in its case against Are. The union has stated that a verdict in favour of Are would constitute a fundamental shift in Finnish practice over collective agreements. It insists that labour legislation is supposed to act as a protection for workers and such a ruling would go against this principle.

Commentary

The outcomes of the disputes at Are and Foxconn were largely determined by industrial action. The levels of organisation of the Electrical Workers' Union and the Chemical Workers' Union at these companies were sufficiently high and their members were prepared to take part in the strikes. Thus the unions could effectively force the employers into compliance with their wish to continue as their contracting parties. Had the workers at the two firms belonged to the Finnish Metalworkers' Union, the outcome could have been very different. This is how the freedom to organise principle is supposed to function. In the case of Are the decisive strike was illegal, which makes it understandable that one of the leading demands of Finnish employers’ organisations has long been to make the fines for illicit industrial action more prohibitive.

Despite the primacy of the freedom to organise principle in determining outcomes in many cases, the decisions of the Labour Court later this spring could be significant. If the court rules in favour of Are and Uponor, employers’ power to choose collective agreements could substantially increase in sectors where unions are not strong. (Aleksi Kuusisto, Labour Institute for Economic Research)