Concise guidelines on co-operation procedures in the event of lay-offs (due to the coronavirus)

Co-operation negotiations may be initiated when there is a realistic threat of the amount of work decreasing, based on the available information. In practice, this means that the employer can at least assess the scope of the need for reductions. The coronavirus pandemic will cause a tangible threat of a reduction in the work required by many companies.

Co-operation negotiations are initiated by issuing a negotiation proposal to the representative of the employees concerned by the negotiations. The primary employee representative is the shop steward, if such a person has been elected in the workplace. For example, a shop steward elected on the basis of the Collective Agreement for the Commercial Sector shall represent all of the employees covered by the Collective Agreement for the Commercial Sector, such as salespeople and warehouse workers.

The other representatives may include an elected representative or permanent representative elected on the basis of the Act on Co-operation within Undertakings.

If no representatives have been elected, the employer shall issue the negotiation proposal to all of the employees and ask them to nominate a representative for the negotiations. It is very important to have a representative because it is problematic to physically convene a large group of people in light of the coronavirus pandemic.

The negotiation proposal must be delivered to the TE office by the time the co-operation negotiations begin.

Negotiation proposal form:

Co-operation negotiation, proposal form

Phase 1: Co-operation negotiation proposal

The shortened three-day invitation period for co-operation negotiations, which took effect on 19 March 2020, applies to all co-operation negotiations under collective agreements between the Finnish Commerce Federation and PAM. In other cases, such as employees within the scope of application of the Collective Agreement for Opticians and the Collective Agreement for Commercial Transport Workers, senior clerical staff and employees not covered by the Working Hours Act, the invitation period is five days.

In addition, it is possible to make an agreement on a different invitation time in relation to the negotiation proposal. For example, it is possible to agree for the co-operation negotiations to commence immediately or on the day after the negotiation proposal is issued. The parties to the agreement are the employer and the party or parties representing the employees during the co-operation negotiations.

Phase 2: Duration of co-operation negotiations (does not apply to redundancies)

The shortened negotiation period of four days (unless otherwise agreed during the co-operation negotiations), which took effect on 19 March 2020, only applies to lay-offs of less than 90 days, and it is valid for collective agreements between the Finnish Commerce Federation and PAM.

The temporary amendments to the collective agreement which took effect on 1 April 2020 reduced the negotiation period to five days, including for indefinite lay-offs. The five-day negotiation period applies to all co-operation negotiations, irrespective of the duration of lay-offs or whether the employees are covered by the collective agreements between the Finnish Commerce Federation and PAM.

However, the four-day negotiation period may continue to be applied to lay-offs lasting less than 90 days within the scope of application of the collective agreements for the commercial sector.

How is the 90-day period calculated?

In the legal praxis, a lay-off of 90 calendar days means 64 working days (Supreme Court 1994:102). For example, if a lay-off concerns a maximum of 64 working days, the four-day negotiation period applies.

Example 1: If a full-time employee is laid off for an average of two days per week while continuing to work three days per week, a period of 64 working days of lay-off will accrue after 32 weeks (2 * 32). The same method of calculation applies when part-time employees are laid off. In such circumstances, the lay-off may encompass a calendar period of more than 90 calendar days (approximately three months). The shorter, four-day negotiation period can, therefore, apply to such situations.

Applying negotiation periods in parallel

The employer must take into consideration the minimum negotiation periods for each collective agreement, personnel group and planned measure separately. On a case-by-case basis, it is advisable to comply with longer negotiation periods for everyone for the sake of clarity.

However, the employer may choose to follow this procedure:

Example 2: If an employer is considering lay-offs lasting no more than 90 days for some of its employees and indefinite lay-offs for other employees, these cases can be handled during the same negotiations as follows:

The employer may issue one negotiation proposal to the employees’ representative, giving three days’ notice of the negotiations. The invitation may state that the employer is considering lay-offs of 90 days for some employees and indefinite lay-offs for others. The negotiations can begin after the three-day notice period and, when four days of negotiations have been conducted with the employees’ representative (unless a shorter negotiation period is agreed), the minutes can record the fact that the employer has conducted sufficient negotiations with some of the employees, and decisions can now be made concerning lay-offs of no more than 90 days. The employer must continue the negotiations for one more day to cover the period required for the indefinite lay-offs of the other group of employees. It is also possible to agree on a shorter negotiation period than five days for longer lay-offs.  

During the negotiations, agreements may be made to alter the lengths of these periods. In the fastest possible scenario, it may be agreed that the negotiations start and end on the same day.

The negotiation period begins to elapse when the first negotiations are held.

There is no minimum number of negotiation meetings; rather, the intention is that the parties conduct the amount of negotiation that they deem necessary.

Minutes shall be taken during negotiations to record the discussions held, the questions asked, the answers provided, and any dissenting views. The minutes shall be reviewed and signed by both parties together.

Form for minutes:

Co-operation negotiation minutes

If any matters are agreed, the agreement must be explicitly stated in the minutes. It is not enough to simply mention the matter.

During the negotiations, the issues should be covered in a spirit of co-operation with the aim of reaching a consensus on the negotiated matters.

The negotiations should cover the following matters concerning the measures considered by the employer:

(1) the grounds;

(2) impacts and alternatives;

(3) to limit the range of personnel affected by the reduction in workforce; and

(4) to mitigate the consequences of the reduction on the employees.

Example 3: The negotiations shall cover the grounds (a drop in demand due to the coronavirus pandemic) and impacts on personnel (the partial or complete reduction in the number of customers may lead to lay-offs).

The alternatives for limiting the number of lay-offs may include:

• Flexible arrangements for working hours
• Taking leave in lieu of holiday pay
• Using unpaid leave, such as study leave
• Retirements

In terms of mitigating the consequences of the process, it is advisable to discuss whether the lay-offs are to be implemented full-time or by reducing the working hours.

In the present circumstances, it may be that there are no viable alternatives. The various alternatives must nonetheless be considered, and efforts should be made to identify solutions. The example above describes the types of alternatives that the employer should bring up.

At the end of the negotiations, it is advisable to ensure that the minutes confirm the joint opinion that the negotiated issues were covered in sufficient depth.

If the negotiations concern only lay-offs, the employer does not need to cover the personnel and training plan referred to in section 16 of the Act on Co-operational within Undertakings or the plan and principles for action referred to in section 49 of the same Act.

Decisions that lead to lay-offs (such as the closure of a shop) or actual lay-off decisions cannot be made before the negotiations end. The negotiation only involves presenting plans and discussing the alternative solutions.

Example 4: process from the perspective of scheduling

The employer issues a proposal for co-operation negotiations within the scope of application of the Collective Agreement for the Commercial Sector on 1 April. Unless otherwise agreed, the co-operation negotiations begin on 4 April, three days after the negotiation proposal was issued. (The date on which the proposal was issued is counted in the total.) The negotiation period is four days, unless otherwise agreed.
The co-operation negotiations end on 7 April, after which the employer may decide on the action to take on the basis of the co-operation negotiations. Notices of lay-offs can, therefore, be issued as soon as the negotiations are concluded on 7 April. In this case, the first day of lay-off will be 12 April if a five-day notice period is observed. If a local agreement is reached to reduce the lay-off notice period to three days, the first day of lay-off will be 10 April.

The sanction for breaching the Act on Co-operation within Undertakings may be the payment of indemnification. The Act states that the maximum indemnification per employee is EUR 34,590. This applies to breaches occurring during the negotiation procedure, as well as unjustified application of section 60 of the Act on Co-operation within Undertakings to derogate from the negotiation obligation (see below).

In accordance with section 60 of the Act on Co-operation within Undertakings, a decision may be made concerning a reduction in the use of workers without holding co-operation negotiations if there are particularly weighty unforeseen reasons harming the productive or service operations or the finances of the undertaking which hinder the negotiations.

The central labour market organisations have issued the following statement concerning the grounds for applying section 60 of the Act on Co-operation within Undertakings:

“The central labour market organisation have agreed that a sudden and severe drop in demand for the company’s products or services may give rise to a need for the company to lay off a substantial proportion of its employees, constituting particularly weighty unforeseen reasons as referred to in section 60 of the Act on Co-operation within Undertakings. Assessments shall be conducted on a case-by-case basis. When there are no longer any grounds for derogating from the co-operation obligations, the employer must immediately initiate co-operation negotiations.”

In practice, it is also necessary to consider the amount of loss or damage incurred. The loss or damage must be non-negligible in relation to the size of the company, and it must be due to the co-operation specifically. In other words, the duration of the procedure could cause significant harm, loss or damage to the company’s operations when the grounds are assessed objectively.

In the current circumstances, this provision of the law may be applicable in some cases. However, employers are first advised to consider the possibility of a shorter negotiation period.

Procedure

In practice, the invocation of section 60 of the Act on Co-operation within Undertakings means that the employer notifies the personnel of the application of the provisions before issuing notices of lay-offs.

After this, the employer must engage in retrospective negotiations with the personnel. These negotiations shall mainly cover the grounds for the decision and the potential impacts on the employees’ positions. The employer must also explain the reason for derogation from the co-operation procedure.