Employment Contracts Act reform runs into difficulties

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A tripartite committee with the task of reforming Finland's Employment Contracts Act did not succeed in making a proposal to the Government in autumn 1998, despite several deadline extensions. One aspect of the reform that has aroused disagreement will now be dealt with by state officials, which may indicate a chink in the tripartite cooperation process.

A tripartite committee consisting of the social partners, state officials and experts on labour law, appointed by the Government to examine a reform of the Employment Contracts Act (FI9706116F), has not yet been able to make a proposal and has had its reporting deadline extended several times. At the end of April 1998, the government extended the previous deadline to 31 October 1999. It also stated that the committee, in addition to its mission proper, should prepare by the end of September 1998 a proposal concerning provisions to ensure that all companies covered by collective agreements which have been declared "of general validity" have the possibility of applying any provisions in these agreements which weaken or limit the rights of employees laid down in labour legislation. In other words, the government sought a proposal as to how and to what extent unorganised employers should be granted the same possibilities as the members of employers' organisations in applying and exploiting those provisions of collective agreements which are less advantageous to the employee than the stipulations of labour law. Making a collective agreement "generally valid" means extending its effect to all employers in a sector, irrespective of whether or not they are members of the signatory employers' organisation.

Committee unable to agree

This additional "special commission" given to the committee by the government, which was to be part of the overall reform of the Act, aroused a wide-ranging dispute of principle within the committee, which could not be settled. No proposal could be made by the deadline, and the Minister of Labour, Liisa Jaakonsaari, instead passed the issue on to be dealt with by state officials. This irritated trade unions, and the dispute may become an obstacle to the reform.

However, the Ministry of Labour did receive, by the deadline, a communiqué from the committee chair, listing different alternatives on the bargaining issue - from the so-called "zero solution" (no changes now) to a model allowing quite extensive freedom for company-level negotiation. No consensus could be reached within the committee as to which of these alternative should be chosen. The Minister stated that the communiqué from the committee chair was not sufficient, and that she would now like the government to deal with the matter rapidly. According to the Minister, the special commission set by the government must be borne in mind, and the zero solution is therefore out of the question. However, the solution reached by officials must safeguard the further work of the committee, so that the overall reform of the Employment Contracts Act will not be endangered. According to Ms Jaakonsaari, the decision to be made by the officials will most likely be an interim one, because the committee must return to the matter when completing its proposals for the reform of the Act.

It became evident in the discussions held during spring and early summer 1998 that the opinions of committee members were at variance with the general goals of the reform. Even the special commission itself aroused disagreement. Trade union representatives considered this request as being limited to sick-pay provisions and related flexible provisions of collective agreements. Some committee members supported a wider interpretation, stating that the government initiative also concerned other labour law provisions, which give certain limited possibilities to collective agreements of deviating from the general obligations of the employment relationship by weakening the advantages of the employee.

Unorganised employers cause problems

The employee representatives on the committee would be prepared to consent to the application at company level of a deviation from the basic law, to the effect that the employment relationship must have lasted at least one month, and the period of sickness one day, before sick pay can be granted. These provisions are included in most collective agreements.

In the employers' view, there should also be a general authorisation allowing unorganised enterprises to weaken the statutory rights of their employees. This authorisation should be based on the general validity of collective agreements - the status of general validity provides for compliance by unorganised employers with collective agreements, but these employers are at present not allowed to use those flexible provisions in agreements that are less advantageous to the employee. Furthermore, the employers' representatives would like to extend the possibilities of deviating from the basic law so that these cover all the issues within the sphere of company-level agreements.

The unions do not accept this kind of general authorisation. They consider it desirable that employers should become organised and, furthermore, fear that the system of local agreements in unorganised enterprises is not equitable.

Tripartite cooperation under threat?

The strongest critics of the committee's "watered-down" proposal suspect that a change has taken place in the Finnish tripartite cooperation system. The fact that the proposition on general validity and unorganised employers will now be drafted by state officials is seen as an insult to the tradition of tripartite collaboration between the social partners and the government. With regard to the committee discussions, the general secretary of the Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK), Seppo Junttila, claims that the Federation of Finnish Enterprises (Suomen Yrittäjät, SY) - an organisation representing small and medium-sized firms which do not belong to the employers' organisations which have the right to negotiate collective agreements - and its associated interest groups are seeking to obtain only rights and not responsibilities. In a press release of 1 October, STTK stated that: "Propositions like this, picking the raisins out of the cake, are not acceptable. Especially central legislative changes of this kind that are part of the negotiation system should be made in cooperation between the social partners and the government. The preparation cannot be carried out by state officials alone."

According to Kirsti Palanko-Laaka, a department head of the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK), the prerequisites for making amendments to the law do not exist at this stage, because the committee could not complete the special commission given to it by the government. "SY has demanded most eagerly that the unorganised enterprises should be able to use such flexible provisions of collective agreements as relate to labour legislative issues. SAK will reject these possibilities, now and for ever. Amendments of this kind would be an attack against developments at the company level," Ms Palanko-Laaka states.

SAK's working committee on this issue has also taken a position in the dispute. The committee says that if the government forwards the matter of general validity to officials for preparation of a proposal, this will constitute a dangerous intrusion into the internal aspects of the bargaining system. At the same time, it is claimed, the government would be favouring de-unionisation in Finnish society and thus weakening the operation of the bargaining system, which is based on strong unionisation.

The SY representative on the committee, Rauno Vanhanen, demands that the general validity system be made less "one-sided". A company applying an agreement which is generally valid for its sector must comply with all the obligations of the agreement in question. However, the agreement's rules allowing procedures that are less restrictive than those laid down in the basic labour law can only be applied by companies belonging to the employers' organisation. In order to enjoy the rights afforded by the collective agreements, the company must join the employers' organisation. According to Mr Vanhanen, the present system is not in line with freedom of association. It also violates the principle of equality, as it gives the companies differing status depending on organisational membership. According to SY, this issue should be settled by adding general regulations to the Employment Contracts Act so as to correct its "one-sidedness", so that deviations implemented through the system of local agreements would also become possible also within the system making agreements general valid for unorganised employers.

The newspaper of the Construction Trade Union (Rakennusliitto), Rakentaja, declared in its editorial on 7 October: "... if a proposal on the freedom of unorganised companies is forced through to Parliament, as seems evident, the committee's work will, in practice, come to an end for now and the question will be taken up again in the next incomes policy round." The newspaper criticises the fact that, despite the disagreement within the committee, the chair made recommendations on different models for solving the questions that remain open. According to the paper, this could lead to an unsound situation: those within the organised labour market would be anchored to its agreements, while employers in the unorganised sphere could continue living "wild and free" and could "trample" on laws and agreements. The editorial claims that it ought to be clear that issues relating to working life should be prepared and concluded in an organised manner among the social partners, and not behind people's backs, which is allegedly in danger of happening now.

Commentary

The problems in reforming the Employment Contracts Act indicate difficulties in the tripartite consensus and cooperation system when it concerns issues that are "sacrosanct" for the social partners. The question of widening the possibilities for applying flexible provisions in collective agreements so that unorganised employers are included, seems to be an especially sensitive subject for the trade unions. The results of company-level agreements in the sphere of organised employers indicate that some progress has been made in this area, and the labour movement is unwilling to put this nascent development in jeopardy. On the other hand, it is very unclear what is actually happening in company-level agreements (FI9809178N). In real life, the situation may already by now, to some extent, be beyond the control of the social partners. Several research studies on the subject are due to be completed shortly, and will hopefully shed some light on the situation. (Juha Hietanen, Ministry of Labour)