Contracting-out leads to public transport strike

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Public transport employees went on strike in Helsinki on 2-8 February 1998 in a dispute arising from the contracting-out of public services. The sector's social partners reached an agreement after the confederations - SAK for the unions and and TT for the employers - joined in the negotiations. The dispute highlights Finnish employees' fear of new procedures and "internationalisation" of the labour market.

An issue concerning outsourcing, which was "swept under the carpet" in the negotiations over the new two-year national incomes policy agreement (FI9801145F), caused a strike by public transport employees in Helsinki in February 1998. The strike, begun by public transport drivers on 2 February, was illegal because insufficient notice was given before the start, and it caused the worst traffic jams in Finnish history. The strike stopped underground trains and trams completely and bus traffic to a large extent.

Despite negotiations held between employers and trade unions during autumn 1997, agreement could not be achieved without strike action. The action was postponed until after the conclusion of the incomes policy agreement, as earlier action could have put the whole agreement at risk - which is why the dispute was kept under wraps. Altogether, 3,300 drivers participated in the action, belonging to the Trade Union for the Municipal Sector (Kunta-alan Ammattiliitto, KTV) and the Finnish Transport Workers' Union (Auto- ja Kuljetusalan Ammattiliitto, AKT) - which are affiliates of the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) - and the Federal of Municipal Officers (Kunnallisvirkamiesliitto, KVL) - an affiliate of the Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK). The employers are represented by the Employers' Federation of Road Transport (Autoliikenteen Työnantajaliitto, ALT), to which the transport contractors belong.

When the strike broke out, mediation was provided by the district conciliator,Esa Lonka. However, negotiations ground to a halt with the result that SAK and the employers' confederation, the Confederation of Finnish Industry and Employers (Teollisuuden ja Työnantajain Keskusliitto, TT) stepped in. Through this intervention, major supporting strikes by the Civil Aviation Workers' Union (Ilmailualan Unioni, IAU) and the Finnish Locomotive Drivers' Union (Veturimiesten Liitto, VML) were prevented. Such strike action could have had a paralysing effect on air and railway traffic, but this which was avoided through a solution reached on 8 February.

The background to the dispute

Public transportation in Helsinki has traditionally been provided by the city's own public transport service. Nowadays, however, local authorities invite tenders from transport contractors in order to achieve efficiency and cost savings. When a new contractor wins a contract, the employees' position has been vague and their main concern has been to secure their existing acquired rights and benefits. A disagreement as to how these rights and benefits can be transferred to the new company that has won a contract has created tension for a long time. Until now, the situation has been considered as a transfer of business, whereby the "old" employees move with their acquired rights and benefits to the new company. This interpretation of the "paragraph concerning transfer of business" in the Employment Contracts Act has also been confirmed in a precedent set by a ruling in the local court. However, this precedent has not been accepted by the employers.

Employees have feared that in a business transfer situation they would be considered as "new" employees, with the result that, for instance, holidays would vanish and pension benefits would be weakened. Contracting-out would, at worst, lead to a situation where the employees terms of employment were amended twice a year. The employees have also been scared of losing their jobs completely. The Minister of Labour, Liisa Jaakonsaari, would have been prepared to change the relevant paragraph of the Act so that similar disputes could be avoided. This idea was rejected, however.

Contracting-out has made it possible for public transport fares to remain reasonable, thus benefiting the customers. The municipality of Helsinki estimates that it saved FIM 12 million during the last round of tendering. Previously, Helsinki public transport had been part of the "closed sector" and the service was financed with taxpayers' money, using the city's own equipment. Now the market has been opened to subcontractors, through public tendering. It has been calculated that the personnel costs constitute about half of the total expenses. The drivers have been afraid that the savings would pose a threat to their conditions of employment: the standard of the equipment cannot be reduced, because safety requires certain norms, and other fixed costs are also difficult to cut, so all that remains to be cut is the personnel costs.

Main points of the agreement

For the employees, the main benefit of the agreement concluded on 8 February is that the terms of the contract of employment have been regulated. The accord provides that in transfers, the employees' period of service and the length of the employment relationship will be considered as being unbroken for the purposes of determining pay, holidays, sick pay and notice periods. The agreement also provides that:

  • if the new contractor is hiring new drivers, the drivers employed by the company that lost the contract should have priority. The announcement of such vacancies should be made within two months of the tender being accepted. However, there is no obligation to hire the employees of the losing company;
  • work will be offered to employees who have lost their jobs due to contracting-out. However, these employees must first report themselves as "unemployed jobseekers" at the employment office; and
  • a follow-up group will be established, with the task of monitoring the fulfilment of the agreement.

No protection against unilateral termination of the employment relationship was achieved: a new contractor can bring in its own employees and if it has no need for extra employees, the dismissed employees of the losing company remain unemployed.

Strike breaches duty to maintain industrial peace

The Labour Court judged the February strike to be illegal, resulting in heavy fines for the unions. The Act on Mediation in Labour Disputes states that a strike warning should be given at least two weeks before the action, but in this case the notice was given only a couple of days beforehand. From the standpoint of the public, the strike started suddenly. The application of the incomes policy agreement would have required industrial peace, but the local adaptation of the agreement could not be agreed and the dispute escalated into a strike.

Severe criticism of the strikers was made by the Employers' Confederation of Service Industries (Palvelutyönantajat, PT), which is not a party to the strike but whose members are covered by the contracting-out policy. PT's managing director, Jarmo Pellikka, denounced the strike as follows: "The ways of proceeding were completely illegal. This is what has usually been called anarchy" (quoted by the Finnish News Agency on 13 February). Mr Pellikka fears that the whole negotiation system is under threat due to illegal strikes. The strike was also condemned outright byTapani Kahri, deputy managing director of TT, because of the breach of industrial peace. The chair of SAK, Lauri Ihalainen, gave his full support to the strikers by stating that tendering should be carried out on solid economic grounds, without threatening employees' benefits and employment security.

According to the opinion polls, a majority of the public considered the strike to be justified. The most authoritative support for the strikers was given by the Finnish President, Martti Ahtisaari.

The effects of globalisation

The chair of the KTV union, Jouni Riskil, wished to see the dispute in the larger European context. According to him, many other European countries have harsh rules in this area - but when necessary, the trade union movement will take strong action to resist such threats to the employees' interests.

The strike aroused debate on the potential conflict between economic "globalisation" and employment security. Some 72%-73% of Helsinki's public transport is already being handled by foreign companies, and traffic contractors will have important new markets when, in four to five years' time, all the routes in Helsinki will be put out to tender. Many companies from elsewhere in Europe might be interested in these markets, and in the contracting-out procedure the cheapest tender wins while the employees watch from the sidelines. Especially in the branches of the economy where qualifications do not play a key role, employees' acquired rights and benefits can be threatened, and this development is now being resisted by the trade union movement. Paradoxically, the movement is prepared to approve the European single currency, which will open up markets and accelerate the competition as never before.

In this discussion, a traditional conflict between labour and capital can be discerned. On one hand, globalisation and competition can produce benefits through efficiency, with lower price levels as a consequence. On the other hand, free market forces can put the employees at risk. It seems to be rather difficult for the social partners to agree on the rules to govern these development in order to avoid conflict.


A notable aspect of the strike was the very wide support given to it by public opinion, despite the fact that it caused severe problems in daily work journeys. Generally, it was estimated that this support was due to people's fear of losing their own jobs. Public tendering is affecting more and more employees, especially in the municipal sector.

International competition is justified by claiming that it will bring benefits for all - but the drastic change in labour market structure, along with unemployment and atypical work relations, indicate the opposite. The strike can be seen as an indication of wide preparedness for action. Rioting in the streets, as may occur in some cases in Germany and France, is not part of Finnish culture. However, quite a lot about Finnish attitudes can be deduced from the opinion polls, which show that the majority of those interviewed considered the strike to be justified, even if it was illegal. (Juha Hietanen, Ministry of Labour)

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