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Co-operation negotiations when reducing workforce

The Finnish Act on Co-operation within Undertakings (334/2007) is meant to improve the interactive co-operation between the employer and the employees. The goal is to develop the company’s operations and the employee’s chances to influence the decisions made in the company that affect their jobs, working conditions and position in the company. The act also aims to support employment when a company goes through operational changes.

The 8th chapter of the act regulates the co-operation practices when reducing workforce. The rulings of the chapter are applied when an employer is considering actions that switch a full-time contract to part-time, lay off or terminate the contract of one or more employees based on financial or productional reasons. This article discusses the co-operation practices and the periods of implementation in situations where an employer considers terminating the contracts of some employees due to the above-mentioned reasons.


Starting the co-operation process

Before starting the co-operation negotiations, the employer needs to provide the employees with a written negotiation proposal to begin the negotiations and the employment processes. The negotiation proposal must be presented minimum five days before the start of the negotiations. The proposal must include the starting time and the place of the negotiations as well as the subjects that will be discussed in the negotiations.

If the negotiations discuss terminating the contracts of minimum 10 employees, the proposal must also include the following information in written form:

  • Reasoning for the proposed measures
  • Estimated number of the terminations
  • The principles according to which the terminated employees are chosen
  • Estimated time limit for the terminations

If the plan is to terminate less than 10 employees, the employer may give the above-mentioned information orally. In this case, the employer is also required to give the information in a written form if an employee or a representative of a staff category so requests.

The employer must submit the negotiation proposal, or the information provided in the proposal in a written form to an employment office. The information must be submitted to the employment office latest when the negotiations begin if it hasn’t been submitted before in some other context.

After making a negotiation proposal to terminate more than 10 employees, the employer must provide the staff category representatives with an action plan to promote employment. While creating the action plan, the employer must, together with the employment office, identify the public services that improve employment. The action plan must include:

  • The timetable for the co-operation negotiations
  • The practices that will be followed in the negotiations
  • The practices planned for the period of notice that improve employment and education, and that are required by the Public Employment Services Act (1295/2002)

If the employer is considering terminating less than 10 employees, the employer must present the practices that will be put in place to support the re-employment or education attempts of an employee and their employment during the period of notice. The practices must be presented at the beginning of the co-operation negotiations, and they must utilise services that are in accordance with the Public Employment Services Act.


Going through co-operation negotiations

The planned terminations must be discussed in the co-operation negotiations to achieve consensus. The requirement for negotiation is fulfilled the same way whether there will be more or less than 10 terminations. The negotiations discuss:

  • The reasons and impacts of the measures
  • The above-mentioned action plan and practices
  • Options to limit the staff groups that are the subjects of the terminations
  • Options to mitigate the impact of the consequences on the employees

If the employer is planning to terminate minimum 10 employees and the company has minimum 30 employees, the negotiations must take at least 6 weeks.

If the employer is planning to terminate more than 10 employees and the company employs minimum 20 and maximum 30 people, the required length of the negotiations is 14 days.

The negotiations take 14 days also in the case where less than 10 employees are planned to be terminated.

Note that the length of the negotiations can be agreed upon in all above-mentioned cases. However, the length of the negotiations is always 14 days when the company is going through restructuring.

If the employer intentionally or due to negligence fails to follow the above-described co-operation process, the employer can be required to compensate the terminated employees according to the Act on Co-operation within Undertakings. Starting from the 1st of July 2019, the compensation is maximum €35,590, and the sum is revised every 3 years to take monetary revaluation into account according to the Prime Ministry’s regulation.

In court, an employee has been ordered to pay compensation, for example, in a situation where the co-operation negotiations were held only after the decisions to terminate employers was already made (KKO 2010:20). In other words, the final decisions about terminating employee contracts can only be made once the co-operation negotiations are over. The employer must provide, in an acceptable time frame, a statement about the decisions that need to be considered according to the negotiations. The statement must include at least the number of terminations in each staff category and the timeframe for the terminations.