The Finnish Co-operation Act (1333/2021) underwent a comprehensive renewal just a couple of years ago. Now, as part of the Finnish Government's aim to make the labour legislation more flexible and to improve the operating conditions for small and medium-sized businesses, the Co-operation Act is under reform again. The proposed changes will come into effect on 1 July 2025. Below, we discuss the key changes to the Co-operation Act.
Threshold for Application Raised
The threshold for the application of the Co-operation Act will be raised to companies, organisations, and branches that regularly employ at least 50 employees. However, certain obligations regarding continuous dialogue and change negotiations will still apply to employers regularly employing 20-49 employees. In practice, this means that employers with at least 50 employees need to fully observe the Co-operation Act, whereas employers with 20-49 employees are partially exempt from the Act's obligations.
Continuous Dialogue
The principle of continuous dialogue will be maintained even in smaller companies. Employers who regularly employ 20-49 employees will need to establish their own workplace-specific practices for the continuous dialogue. The matters to be discussed and the way the dialogue is conducted could therefore be carried out more freely in a manner deemed best at the workplace, and the law does no longer set any minimum number for continuous dialogue per year. The obligations for employers who regularly employ at least 50 employees remain unchanged, requiring continuous dialogue to be arranged four times a year.
Change Negotiations
As a rule, employers with 20-49 employees will no longer need to conduct change negotiations. However, even employers who regularly employ 20-49 employees will still need to conduct change negotiations if they consider, within a 90-day period, terminating employments, reducing working hours, or unilaterally changing essential terms of employment for at least 20 employees due to financial or production-related grounds, or layoffs based on such grounds.
Shortening of Negotiation Times
The negotiation times for change negotiations will be halved. The minimum duration of negotiations will be either three weeks or seven days, depending on the matters to be discussed and the number of employees.
Time Reserved for Employment Services
A new provision regarding time to be reserved for the employment services in connection with change negotiations is introduced. If an employer has submitted a negotiation proposal regarding a plan to dismiss at least ten employees on financial and production-related grounds, the employment agreements of employees dismissed on such grounds may not be terminated until 30 days have passed since the proposal was submitted to the employment authority. This new procedural rule aims to provide the employment authority with adequate time to collaborate with the employer to identify public employment services that facilitate re-employment before terminating the employment agreement. If the employer fails to comply with this 30-day period, they may be ordered to pay compensation to the dismissed employee for violating the Co-operation Act, up to a maximum of EUR 40,160.
Information Obligation in Connection with Business Transfers
The information obligation in connection with business transfers, mergers, and divisions continues to apply to all companies, organisations, and branches that regularly employ at least 20 employees.
Thoughts on the Changes
While these changes aim to ease administrative burdens for small and medium-sized companies, the amendments regarding the scope of application may appear somewhat ambiguous. Currently, the scope is clearly defined, applying to employers with at least 20 employees. Going forward, there will be two distinct thresholds – one for employers with at least 20 employees and another for those with at least 50 employees. This may create challenges, especially for smaller employers who regularly employ between 20 and 49 employees. Concerns and uncertainties may arise, especially when assessing whether the criteria for the change negotiations are met. Therefore, employers regularly employing 20–49 employees should carefully familiarise themselves with the new legislative changes and ensure that the obligation to conduct change negotiations is reviewed before any workforce reduction. Larger employers, who regularly employ at least 50 employees, must especially ensure that the new 30-day period reserved for employment services is observed in the event of potential mass redundancies. It is recommended to prepare for the upcoming changes well in advance, as failure to comply with the change negotiation obligation or the 30-day employment service period may result in the employer being ordered to pay compensation of up to EUR 40,160 per affected employee. Furthermore, it is good to keep in mind that many collective bargaining agreements contain provisions, e.g., on change negotiations and negotiation periods, which must also be taken into account when assessing the employer's obligations after the legislative changes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
