Controversy over extension mechanism of collective agreements

The Chancellor of Justice has declared that the extension mechanism of collective agreements in Estonia is disproportionately restrictive of freedom of entrepreneurship. However, the trade unions disagree with this position. The Ministry of Social Affairs has not yet drafted its proposal for changes to the Collective Agreements Act, which will amend the extension mechanism for collective agreements.

In recent years, the extension of collective agreements has raised considerable debate. The issue arose when a small entrepreneur, who had to close down some of his activities due to an extended collective agreement in the transport sector, made an application to the Chancellor of Justice, (Õiguskantsler), Allar Jõks. Chancellor Jõks, who assessed the case in 2005, concluded that the current extension mechanism disproportionately violates people’s fundamental right to entrepreneurship and thus requested that the Ministry of Social Affairs (Sotsiaalministeerium) change the Collective Agreements Act. In September and October 2006, the social partners put forward their positions on this issue.

In accordance with the Collective Agreements Act, which was adopted in 1993, a collective agreement that is entered into between an employer organisation or federation and a trade union or trade union confederation may be extended in relation to wages, working time and rest time. The scope of the extension is determined by the actual agreement.

Chancellor’s position

In his annual report on 2005 activities, published in 2006, Chancellor Jõks outlined his position on the issue of extensions to collective agreements, indicating that the current situation could harm the interests of entrepreneurs and that the legislation should therefore be changed.

At present, no representation criterion exists for parties who are permitted to extend a collective agreement. According to the Trade Unions Act, passed in June 2000, a trade union may be formed by five employees and a trade union confederation by five unions. In the case of employers, the representation criterion is equally broad. Thus, associations that represent only a small fraction of respective actors may conclude an extended agreement and make it obligatory for other parties.

Moreover, there is no opportunity for those outside of the contracting parties, who are nonetheless subject to the conditions of the extended agreement, to give their opinion on the agreement. Therefore, employers must comply with the agreement even if it is not feasible. In addition, the parties do not have to inform the other groups concerned either of their plan to extend the agreement or of the commencement of negotiations.

Chancellor Jõks referred to ILO recommendation 91, according to which national regulations may make the extension of a collective agreement subject to the following provisions:

• the parties concluding an extended collective agreement must be sufficiently representative;

• prior to the extension of the agreement, third parties whom the extended agreement affects should have an opportunity to submit their observations.

Employers’ proposals

The Estonian Employers’ Confederation (Eesti Tööandjate Keskliit, ETTK) argues that representation criteria should be put in place for the concluding parties extending a collective agreement; this could include, for example, representation for a majority of employees in a sector, or for those belonging to a confederation. ETTK proposes that the representation of parties, content of the agreement and scope of extension should be assessed by trade unions and employer confederations. At the same time, the other employers who are not among the contracting parties should be permitted to give their opinion on the planned agreement within a reasonable period of time. Any disputes arising out of the proposed extensions should be solved through the mediation of the confederations concerned.

Meanwhile, the Estonian Chamber of Commerce and Industry (Eesti Kaubandus-Tööstuskoda, EKT) contended that extensions to a collective agreement should be based on a conscious and enlightened choice. The extensions should only take two forms:

• extension of an agreement to members of the contracting organisation;

• freedom of other groups to take on the conditions of a collective agreement, if the contracting parties agree to it.

Opposition of trade unions

The Confederation of Estonian Trade Unions (Eesti Ametiühingute Keskliit, EAKL) disagrees that the current mechanism disproportionately restricts the freedom of enterprise. EAKL argues that the idea of proportional representation criteria for the parties concerned would make the extension of collective agreements virtually impossible, and that the only representation criteria should relate to confederation membership. EAKL believes that the decision to extend a collective agreement should be made by the contracting parties only, although the confederations should be involved in assessing if the parties are representative enough to do so. The opinions of other trade unions and employers who are not among the contracting parties should thus be limited to an advisory role. The trade unions have also proposed adding the provision for holidays to the list of issues that can be extended.

Commentary

In Estonia, collective agreements have been extended in two sectors, namely in transport and healthcare, and at national level in relation to the minimum wage agreement. Therefore, the extension mechanism has not created many problems thus far, and the application to the Chancellor of Justice has constituted an exception rather than a common practice.

Epp Kallaste and Marre Karu, Praxis Centre for Policy Studies