Thought leadership from our experts

Local bargaining – a way to improve employment and competitiveness?

Local bargaining is considered to be an increasing trend in the Finnish labour market. Lately, there have been heated political discussions on whether local bargaining should be increased as a means to increase the employment rate. It is argued that this would give companies more freedom to agree on the terms and conditions of employment in more detail and, therefore, encourage them to hire new people and apply more flexible arrangements at the workplaces. The global business is changing rapidly, and the Finnish labour market must be able to respond to these demands. The Finnish Government's view is that this can only be achieved by allowing companies to agree on the employment terms and conditions at the business or workplace level. Therefore, promoting local bargaining to improve employment and competitiveness has been, from 2015 onwards, one of the key topics of the current Government Programme.

Local bargaining does not have a clear-cut definition. The concept may be understood in a broad or a narrow sense. In the broad sense, local bargaining means any actions taken by employer and employee to reach mutual understanding of matters at the workplace. As a rule, Finnish statutes are mandatory legislation. In employment law, this means that parties may not agree on weaker terms and conditions for the employee than the relevant statute provides. More advantageous terms and conditions are always allowed. However, certain provisions allow an employee and employer to make derogations when concluding an employment contract, but only from those few provisions which explicitly allow doing so.

The employment legislation also includes several provisions which are considered to be partly mandatory. This means that certain provisions are mandatory but may be derogated from by national employer and employee associations in collective agreements. In other words, if the employee and employer are members of a trade union, they are bound by the provisions set down in the collective agreement instead of the provisions provided in the statute. The right to derogate from the legislation by collective agreements is generally considered to be fair since the representatives from both the employee's and employer's trade union have a legal duty to supervise and promote their members' interests. After all, it is the trade union representatives who negotiate the terms and conditions of the collective agreements.

In the narrow sense, local bargaining means bargaining on the terms and conditions of employment at the workplace level based on the provisions of the applicable collective agreement. In other words, the employer and employees must comply with the provisions of the collective agreement, but may agree locally on matters from which the collective agreement allows to derogate. However, local bargaining is entirely voluntary. The parties may choose to follow all provisions set out in the collective agreement. When the parties cannot reach a mutual agreement or do not want to agree otherwise, the collective agreement is applicable in its entirety.

A number of collective agreements allow unionized workplaces to locally agree on the terms and conditions of the employment. However, unorganized employers do not have the same authorization to, for example, locally derogate from the provisions set out in a generally applicable collective agreement. A generally applicable collective agreement is deemed as nation-wide and is representative in the whole field in question. In other words, if the employers are non-union members, they must, anyhow, comply with the generally applicable collective agreement of a certain field or industry whenever there is a valid agreement. Currently, there are approximately 180 generally applicable collective agreements in Finland.

The non-union employers do not have the right to locally derogate from such terms set out in the collective agreement. This has caused a great deal of confusion among the non-organized employers. Therefore, one of the Government's demands is that the system of local bargaining should guarantee the same rights and obligations for organized and non-organized employers. It has been suggested that local bargaining could be increased by allowing it through legislation whenever local bargaining is not possible under the collective agreement. However, local bargaining would still be authorized primarily by collective agreements, and secondarily by legislation.

Currently, the outline for a local bargaining model is under intense negotiations between the labour market organizations. The proposed reforms are aimed to improve co-operation at the workplaces and to bring more flexibility to decision-making at the workplace level. Employment matters could be negotiated in more detail at the workplace compared to what the current statutes or collective agreements permit. For example, it is proposed that working time, working time accounts, wages, and measures to reduce sick leaves should be locally agreed because each workplace knows its individual needs best. Additionally, the collective agreements should also contain a so-called crisis clause which aims to help businesses to overcome extraordinary challenges.

According to the Finnish co-operation ombudsman, a functional local bargaining system requires stronger confidence and cooperation between the parties at the workplace. Employees must be kept up to date better on what is happening at the workplace, and, be better represented in the decision-making bodies of companies.

The proposed reform has been met with mixed feelings. For example, according to The Central Organisation of Finnish Industries, permitting the employment parties to adopt weaker terms and conditions than prescribed in the collective agreement could cause the entire collective bargaining scheme to crumble. Furthermore, the reform could also make it difficult for the trade unions to supervise and promote their member's interests. On the other hand, the employer representatives allege that local bargaining at the workplace level leads to improved productivity, operational flexibility and profitability.

The Finnish labour market is currently undergoing a very interesting reform. Yet, nothing is set in stone and therefore it is impossible to predict what will be the exact implications for the future.

Sources:

Literature

Kairinen, Martti; Hietala, Harri; Ojanen Petteri: Paikallinen sopiminen ja sopimukset. Talentum Pro, Helsinki 2015 (Kairinen – Hietala – Ojanen)

Saarinen, Mauri: Työsuhdeasioiden käsikirja 1, Edita Publishing Oy, Helsinki

(Saarinen)

Electronic sources

http://www.akava.fi/files/539/Local_bargaining_a_matter_of_necessity_and_trust.pdf

(Akava)

http://ek.fi/ajankohtaista/tiedotteet/2015/09/25/paikata-jarruttaa-ay-liittojen-vastahankainen-suhtautuminen/

(EK)

http://www.hs.fi/english/a1451278903991

(HS 10/2015)

http://www.hs.fi/kotimaa/a1449555866641

(HS 12/2015)

http://www.ilo.org/wcmsp5/groups/public/@ed_dialogue/@dialogue/documents/meetingdocument/wcms_159941.pdf

(ILO)

https://www.sak.fi/english/news/rules-on-local-bargaining-under-intense-negotiation-2016-02-26

(SAK)

http://www.sttk.fi/en/2016/02/25/rules-on-local-bargaining-under-intense-negotiation/

(STTK)

http://www.tyosuojelu.fi/web/en/employment-relationship/collective-agreement/local-agreement

(Työsuojelu)

Legislation

Employment Contracts Act (55 / 2001, as amended)

(Employment Contracts Act)