Labour legislation will change significantly
Prime Minister Petteri Orpo’s government is making significant and considerable amendments to the labour legislation that will have wide-ranging effects on the labour market in general. Some of the changes will take effect fairly quickly while some will enter into force later. In any case, the changes will occur during this term of government.
The effects will certainly also affect individual employers and employees. The proposed amendments apply widely to different areas of working life. A common feature of these propositions is that they aim to achieve a more flexible labour market and better employment rates in Finland.
The use of fixed-term employment contracts will be amended so that fixed-term contracts for up to one year would no longer require special grounds under the Employment Contracts Act, the so-called justified reason. At the same time, the government is aiming to prevent the unjustified chaining of fixed-term contracts.
Local bargaining and deviation from the collective agreements will be facilitated so that in the future, companies that comply with collective agreements on the grounds of universal applicability can agree locally on the same issues as organised employers. Above all, this means an end to the ban on local bargaining currently contained in the Employment Contracts Act.
Additionally, right to industrial actions will be reformed so that the duration of political industrial action will be limited to one day only, whereas now, political industrial action is not prohibited at all. Furthermore, the compensatory fines for illegal industrial actions will be increased significantly and employees will be liable to pay a personal penalty payment for taking part in illegal industrial actions. Solidarity actions will also be more limited than before.
The threshold for dismissal on grounds related to the employee’s person will be lowered. Currently, dismissal requires a proper and weighty reason. The government programme states that in the future, a proper reason for dismissal would be sufficient. As the protection against unjustified dismissal forms a wider picture, a change would not likely happen by only removing a word from the provision stipulating the grounds for dismissal in the Employment Contracts Act. A change will likely require wider amendments or at least a comprehensive preamble to the Act for the interpretation of the dismissal threshold, as the current case law spanning decades is based on the assessment of both proper and weighty reason for the dismissal. It is also likely that legal proceedings regarding dismissals on grounds related to the employee’s person will increase after the amendment.
The regulatory framework regarding collective-based redundancies and reduction of workforce will be revised significantly. In the future, the notice period for layoffs would be seven days, whereas now it is 14 days. Additionally, the employer’s obligation to rehire employees who have been made redundant would only apply to companies employing at least 50 employees. In other words, the obligation to rehire, which applies to the period following the dismissal of an employee dismissed for collective-based reasons, would be removed for small companies.
The scope of application of the Co-operation Act will be amended so that the Act will only be applied to companies with at least 50 employees. Additionally, the length of change negotiations preceding redundancies will be halved. Currently, the law prescribes a 14 day or a six-week obligation to negotiate on changes, depending on the number of employees affected by the planned measure. In the future, the length of the negotiations would be either seven days or three weeks.
The government is also proposing changes to sick pay. The right to pay during illness will be revised so that the first day of illness will be without pay, unless otherwise agreed in the collective agreement. This will not be applied to sick leave lasting more than five days nor where incapacity to work is due to a work-related accident or an occupational disease.
The general level of salary increases agreed in collective agreements will be tied to the salary increases in the export sectors. This aims to promote the so-called export-led labour market model which central export sector employers’ associations have promoted for a long time. Furthermore, the role of the national conciliator will be clarified so that the conciliator would not be allowed to surpass this general export-led level in their settlement proposals.
Earnings-related unemployment allowance will be staggered so that the allowance would be higher in the beginning of unemployment and would reduce as unemployment prolongs.
Lastly, adult education allowance and the job alternation leave system will be abolished.
If implemented, the proposed amendments would change the rules of Finnish labour relations more during this government term than has been done in decades. Some of the changes will override collective agreements. Collective agreements will therefore lose some of their significance in relation to these changes.
As these changes will be very significant and exceptional, we recommend every organisation and company to consider well in advance what these changes will mean for them.