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A tripartite committee which has been working on a reform of Finland's Employment Contracts Act since 1995 submitted its proposals for a new Act in February 2000. The preparation of the proposed amendments involved many disagreements and during the final stage disputes centred especially around changes concerning the "general validity" of collective agreements and temporary agency work. These disputes are now expected to continue within the government before legislative proposals are brought before Parliament.
A tripartite committee with the task of reforming the 1970 Employment Contracts Act has finished its work, and it proposed a new amended Act on 15 February 2000. The Act governs such basic issues as drawing up contracts of employment, the rights and duties of employers and employees, the terms and conditions of employment, the grounds for termination of employment, and the procedure to be observed on termination. The work of the committee had been in progress for several years (FI9706116F), and many deadlines have been over-run (FI9810179F). The reform process has involved many disputes of principle, and these are becoming political in nature now that a revised Act must be prepared within a coalition government made up of right- and left-wing parties. Differing views concerning the "general validity" of collective agreements, in particular, are splitting the government ranks between right and left (FI9905105N). At present, a collective agreement may be deemed to be binding on all employers and employees in a sector, and not just members of the signatory organisations, if at least half of the employers belong to the relevant employers' organisation.
Main points of the reform
The committee chair's proposal for a new Act was approved in a vote by a large majority of the committee. The key points of the proposal are as follows.
- New criteria for a collective agreement to be regarded as generally binding should be specified. The minimum terms of employment applicable to all employment relationships should still be defined according to such a generally binding agreement. An employer would have to comply at least with the provisions in a national collective agreement deemed to be representative in the relevant sector as regards those terms of employment and working conditions which relate to the work done by the employee concerned or to closely comparable work. The Ministry of Social Affairs and Health would have to confirm, by a ruling, whether a national collective agreement was so representative in its area of application that it could be deemed generally binding. This Ministry ruling could be appealed against and referred to an industrial tribunal, whose decision would be final.
- Temporary agency workers would be subject to the regulations of the generally binding collective agreement applicable to the user company, if the temporary agency is not bound by another collective agreement (FI9911126N).
- The gap between open-ended and fixed-term contracts should be narrowed. The Act should provide that an employee's employment-related benefits should be accumulated in the case of repeated fixed-term employment relationships with the same employer. Further, employers should be obliged to take account of the position of part-time and fixed-term employees in their service by notifying them of upcoming and current vacancies, in the same way as they inform other employees. If employers had a need for more labour, they would be under obligation to offer the additional work primarily to employees who had already been working for them part-time. It should not be permissible for the terms of part-time and fixed-term contracts to be less advantageous to employees than those for other employment relationships, if there is no objective reason for this.
- The periods of notice of termination of contract to be observed by employers should be reduced in the case of short-term employment relationships. On the other hand, a notice period of six months should be applied once an employment relationship has continued for more than 12 years, whereas under the current Act it becomes applicable only in employment relationships that have continued for 15 years.
- The grounds for summary or immediate dismissal should be clarified and specified. A contract of employment could be cancelled immediately only for particularly weighty reasons. Among the reasons deemed to be of this kind would be a violation or neglect of one party's obligations arising out of the employment contract or the law, which was so grave and had such a fundamental effect on the employment relationship that the other party could not be reasonably required to continue the contractual relationship, even for the duration of the period of notice.
- Concerning business transfers, if the seller has terminated the employment contract of an employee before the transfer, then the existing regulation concerning the duty of an employer to rehire an employee in certain circumstances after the employment relationship has ended, should be extended to cover also the employer to whom the business is transferred.
- Workers would have the right to elect an employees' delegate to act as their representative in cases where they are not represented by a shop steward elected on the basis of a collective agreement. Each personnel group could elect a delegate from among themselves. Such a delegate would be secondary in status to the shop steward referred to in collective agreements.
The provisions are formulated so that the Act would fulfil the requirements of the EU Directives on fixed-term work (1999/70/EC) (EU9901147F) and on part-time work (97/81/EC) (EU9706131F), and the amended Directive (98/59/EC) on transfers of undertakings.
Social partners take differing positions
The social partners have expressed their standpoints regarding the committee's proposal. Those most satisfied seem to be the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) and the Confederation of Finnish Industry and Employers (Teollisuuden ja Työnantajain Keskusliitto, TT). The most critical organisations have been the Employers' Confederation of Service Industries (Palvelutyönantajat, PT) and the Federation of Finnish Enterprises (Suomen Yrittäjät, SY).
According to SAK, the proposed new Employment Contracts Act would enable a relatively stable development in relations between employer and employee in the coming years. From the employees' point of view, the most important reforms are the minimum terms for temporary agency workers, the increased legal protection in cases of dismissal, the new criteria for general validity and official procedures relating to employment contracts, and the improved position of fixed-term workers. However, the organisation finds it unfortunate that one principle which it has advocated - that the most representative collective agreement for a sector should be used as the criterion for general validity (FI9906109N) - was not accepted for inclusion in the committee's proposal.
TT considers that, from the employers' perspective, the proposal contains many positive changes, with increased freedom of agreement between the contractual parties. The Act would become more of a framework law instead of the existing "top-down" control. The proposal clarifies the principles of contract termination and lay-offs. The reorganisation of a company, for example, would be more clearly a ground for dismissal. The norms concerning dismissals and lay-offs would be reduced in number, and formulated so as to be applicable to the practical needs of working life. Among other points, the period of notice in short-term employment contracts would be reduced significantly. The employers also consider it important that the period during which employers are obliged to continue paying wages would be reduced from two weeks to one week in cases where the reason for interruption of work is a strike outside of the company. Overall, the proposal is seen as a balanced whole - a compromise in which all the parties have had to give up a part of their central goals. "However, there is a wide consensus underlying the basic solutions proposed by the committee," states TT.
The Confederation of Unions for Academic Professionals (Akateemisten Toimihenkilöiden Keskusjärjestöi, AKAVA) is satisfied with the proposed improvements concerning employee representation, which has particular significance for senior staff. It considers that every personnel group has the right to elect a person having the privileges of a shop steward, even if this is not governed by a collective agreement of its own. However, the organisation declares that the position of company managers in connection with the Employment Contracts Act should have been clarified.
The Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK) is content with the compromise reached and finds the amendments as a whole to be relevant to the future needs of working life. An especially positive factor in STTK's view is that the position of fixed-term contract workers, temporary agency workers and part-time workers in relation to full-time, open-ended employment relationships has been clarified.
The Commission for Local Authority Employers (Kunnallinen Työmarkkinalaitos, KT) has expressed a differing viewpoint on the proposals. KT believes that the hiring of stand-in employees on fixed-term contracts should not be made more difficult than at present, and that the provisions of the present Act are adequate. This position is motivated by the fact that the economic situation of many municipalities is poor, and increased obstacles to hiring fixed-term employees would make it more difficult to hire anyone at all for some posts. Furthermore, many municipal workplaces have a majority of women workers, and when they take family leave this creates a need for additional, fixed-term personnel to replace them. The need for stand-ins in local authorities is due also to their longer annual holidays and the various flexible working time arrangements arising from legislative obligations (eg sabbatical leave).
The State Employer's Office (Valtion Työmarkkinalaitos, VTML) has declared its dissenting viewpoint concerning fixed-term contracts in particular. It wants the present legislation to remain unchanged as far as possible.
The Federation of Finnish Enterprises (SY) states that the proposal concerning a change in the general validity rules would mean a return to a centrally controlled system. The organisation thinks that such a change would reverse the increasing trend toward local agreements that has been evident in procedures adopted by the social partners during the last few years.
The Employers' Confederation of Service Industries ( PT) regrets that the committee, which had been in operation for over four years, could not reach a full consensus on the reform of the Act. PT believes that many of the committee's proposals hinder the viability of service enterprises in particular. In the dissenting statement issued by PT, attention is drawn to the issues of temporary agency workers, dismissals and business transfers. "Companies that recruit labour would be put in an unreasonable position, because following the regulations would be practically impossible, it is claimed. The committee's proposals on lay-offs are said to be unclear, and the various clauses are contradictory. The provisions concerning business transfers would complicate the transactions of small and labour-intensive companies in particular," states PT.
Commentary
Work on the reform of the 1970 Employment Contracts Act has been under way for several years, and many deadlines set by different governments have been exceeded. This indicates how difficult the reform process has been. In the compromise proposal issued in February 2000, both employers and trade unions have had to make concessions regarding their main goals. The differing statements of the parties indicate that the struggle will continue within the government. It is noticeable that SAK and TT have found a common denominator, whereas the service employers' organisation PT and SY, which represents unorganised employers (FI9906108F), have aimed to prevent improvements in employee rights in the spheres of temporary agency work and general validity. SAK even accused SY of creating unrest during the negotiations. TT watched from the sidelines and let the dispute move on to the political arena. Within the coalition government, the conservative National Coalition Party (Kokoomus), which has substantial entrepreneur support, cannot allow general validity to be extended easily. The left-wing parties sitting in the same government will naturally stay on the side of the employees and, in the worst scenario, the proposal will result in increased tensions within the government. The government bill on revising the Act is due to be brought before parliament in spring 2000. (Juha Hietanen, Ministry of Labour)