New act aims to simplify termination of collective agreements

On 12 March, the Estonian Parliament passed amendments to the Collective Agreement Act making it easier for employers to terminate collective agreements. Previous regulations had meant that when a collective agreement expired, its terms would automatically remain in place until a new deal was signed. Employers felt this made agreements open-ended and hampered their ability to make changes in the workplace, but unions were strongly against reform of the rules.

Background

Estonian collective bargaining legislation was based on the principle that even though an agreement was in place for fixed term, employees and employers had to comply with its conditions until a new one was signed by both parties. The problem for employers was that this meant that even when a collective agreement expired, they were still bound by its rules. Employers were concerned that this meant if a new collective agreement could not be reached, the old one could potentially stay in place forever. The only way to end a collective agreement was for a new one to be signed.

This system was found to violate the Estonian constitution by limiting the freedom of entrepreneurship because it was not possible for employers to withdraw from an expired agreement. This might mean that they were unable to restructure in response to changing economic conditions, particularly if a collective agreement contained expensive provisions for redundancies or lay-offs.

The aim of the proposals

On 12 March, the Estonian Parliament passed amendments to the Collective Agreement Act, establishing the right of a party to a collective agreement to unilaterally terminate it once it had expired. The government also hoped that the new regulation might encourage more employers to enter into collective agreements if they knew it could be brought to an end once it had expired.

The amendments took effect from 1 May 2012 and also apply to collective agreements concluded prior to that date.

Reactions from social partners

There were mixed reactions from the social partners to the change.

Employers strongly supported the amendments. They suggested that industrial action should also be prohibited during the negotiation of new collective agreements.

Trade unions, however, were firmly against the proposed amendments. The Estonian Trade Union Confederation (EAKL) argued that the plan was not in accordance with the international agreements Estonia has signed, such as the European Social Charter and International Labour Organization conventions. They were also concerned it went against legal principles, such as the principle of legal certainty and proportionality, and the employees’ protection principle. EAKL said it believed the amendments would not help to improve industrial relations and would instead increase the number of collective labour disputes.

The union federation also pointed out that a comprehensive reform of industrial relations was being planned by the government, and said it was unreasonable for amendments for this one piece of legislation to be rushed through.

On 17 March, the Independent Trade Union of Miners and Energy Workers (EPTAL) organised a demonstration, with around 2,000 protesting against the approved amendments.

New regulations

Despite trade union opposition, on 12 March 2012 the Estonian parliament passed the amendments of the Collective Agreements Act. Under the new regulations, a collective agreement would be turned, by default, into an open-ended contract if one of the parties did not give written notice to the other party that they do not wish to extend the collective agreement at least three months before the expiry date.

Employers and employees are now required to comply with the conditions of the open-ended collective agreement until they have reached a new agreement or until it is cancelled by one of the parties.

According to the new regulations, a collective agreement that has become open-ended can be terminated by either party as long as they give least six months notice. Starting from the announcement of termination, the parties are not obliged to refrain from calling a strike or a lock-out.

Commentary

On 18 May 2012, the Ministry of Social Affairs started negotiations with social partners over the industrial relations reform in Estonia. The reform covers different aspects of industrial relations, including collective agreements at company level, sectoral collective agreements, labour disputes, strike action as well as the role of Public Conciliators’ Office (Riiklik Lepitaja).

Liina Osila, Kirsti Nurmela, Praxis Center for Policy Studies

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