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Co-operation Negotiation Obligation in Reducing Workforce

The provisions on workforce reduction in Chapter 6, Section 16, paragraph 1 of the Act on Co-Operation within Undertakings apply when the employer is considering measures that may lead to termination of an employment contract or employment contracts, lay-off, shifting a contract of employment to a part-time contract of one or several employees on financial or productive grounds or to the unilateral modification of an essential term of an employment contract. The employer cannot make the decisions leading to reduction of employees before the change negotiations are over. Therefore, negotiations must be held when the employer still considers the decisions possibly leading to reductions.

The grounds for terminating an employment relationship, lay-offs, and part-time work are not laid down in the Act on Co-Operation within Undertakings but instead in the Employment Contracts Act. Terminating an employment relationship based on financial or production-related reasons is handled more closely in section [Terminating the Employment Contract Based on Production-Related or Financial Reason], reasons for lay-off in section [Lay-offs] and reasons for part-time in section [Shifting to Part-Time Work].

Parties to Change Negotiations

Termination, lay-off or shift of a contract of employment into a part-time contract of employees is handled between the employer and the employee representatives. Negotiations may also take place in a joint meeting. Termination, lay-off or shift of a contract of employment into a part-time contract of a single employee or specific employees may be handled between the employee or employees and the employer. In such cases, the employee has the right to request that the matter concerning them is also negotiated with their representative

Proposal for negotiations and provision of information

The employer must submit a written proposal for negotiations at least five calendar days before the negotiations, indicating the date, place and main points of the negotiations and a proposal on the issues to be discussed in the negotiations.

Employees or their representative must also be given more specific information about the grounds for the anticipated actions, a preliminary estimate of the number of redundancies broken down by personnel groups and procedures, a time estimate during which the redundancies will be made, and the principles for determining the employees to be made redundant. Written information provided for the representatives of the personnel groups has to be attached to the proposal for negotiations if the employer is considering serving notice of termination, lay-off for over 90 days or reducing a contract of employment into a part-time contract of over ten employees. In other cases, the information can also be given orally, but the employer shall provide the information in writing on request.

Informing the Employment and Economic Development Office

The proposal for negotiations or its contents shall also be delivered in writing to the Employment and Economic Development Office no later than at the commencement of the change negotiations.

Plan and Principles for Action

After having made the proposal for negotiations of their intention to serve notice of termination to at least ten employees, the employer shall at the commencement of the change negotiations provide the representatives of the personnel groups with a report on a plan of action to promote employment. The action plan includes an obligation to cooperate with the Employment and Economic Development Office.

The plan of action must provide:

  • the intended timetable for the change negotiations

  • the procedures to be followed therein

  • planned principles of action regarding public employment services to be applied during the notice period

  • principles of action promoting applying for work and education.

If the intended terminations affect under ten employees, the employer has to present lighter principles of action that, at minimum, define how the employer supports the employees’ independently applying for other work or education and their employment with the public employment services during the notice period.

Contents of the Negotiations

The reasons for the redundancies, their effects, the above-mentioned action principles, and plans, as well as alternatives to the proposed actions, must be dealt with in the redundancy negotiations. The negotiations shall also cover options for limiting the number of people and mitigating the negative consequences, as well as written proposals or alternative solutions put forward by the employee representative/employee. In particular, the negotiations should address the training opportunities for employees as well as the employer’s possibilities to relocate the employees facing the termination or lay-off threat to other positions within the company. The possibilities for work and working time arrangements should also be discussed. In addition, the need for changes to the work community development plan resulting from the company's redundancy plans must be addressed.

Negotiation Period

The negotiation period referred to in the Act on Co-operation within Undertakings is either 14 days or six weeks. In companies that employ normally at least 20 but fewer than 30 employees, the negotiations should last at least 14 days in order to fulfill the employer’s negotiation obligation. If the company employs at least 30 employees, the negotiation period is 14 days, if the reductions involve less than 10 employees or if the lay-off period is a maximum of 90 days. The negotiation period is six weeks if the reduction involves at least 10 employees or if the lay-off period is more than 90 days. The negotiation period is counted from the first day of negotiations.

It is also possible that the parties agree differently upon the negotiation period and the fulfillment of the negotiation obligation. A written agreement is endorsed.

Drafting Minutes

It is endorsed to draft the minutes of the reduction negotiations, although it is mandatory only at the employee’s request. The minutes must provide information on the time of the negotiations, the parties, and the matters and results of the negotiations. All the representatives of the employer and the personnel groups that have been present at the negotiations inspect and sign the minutes, unless otherwise agreed upon in the negotiations.

Use of Experts

Employee representatives have the right to consult and receive information from experts in the relevant operational unit and, as far as possible, from other experts in the undertaking when preparing for dialogue or negotiations on changes in the operation of the undertaking and the development of the workplace and during the negotiations themselves, where this is necessary for the matter under discussion. The employer may use external experts to function as leaders in negotiations or as advisors. For their part, the employees are entitled to use the company's internal experts in case it is necessary for the matter under negotiations.

Decision and informing thereof

After having fulfilled their duty to negotiate, the employer can commence the reductions, lay-offs, part-time jobs and changes to the essential terms of the employment contract. Within a reasonable period of time after the negotiations, the employer must inform the employees or personnel representatives involved in the negotiations of the decisions to be considered on the basis of the negotiations. The report shall provide the number of employees whose contracts will be terminated, the duration of the lay-offs, and an estimate of the time during which the planned reductions are intended to be carried out. This separate report is not required if the employer makes the decisions immediately after the negotiations and informs the employees or the representatives of the personnel thereof.

The report or employer’s notification of the decision is not a notice of termination, lay-off notice or notice of reduction of the employment relation to part-time contract. These notifications must be provided usually personally to the employee. As a rule, these notices must be given to the employee personally, in accordance with the Employment Contracts Act.