Changes to Cooperation Act at the beginning of July

The Cooperation Act contains provisions on the obligation to conduct change negotiations when an employer is considering terminating or laying off one or more employees or shifting them to part-time work for financial or production-related reasons or unilaterally changing an essential term of the employment contract.

The provisions of the law guarantee that negotiations are held before any reduction measures are taken according to the time limits prescribed by the law, and that the reasons, effects and alternatives to the reduction measures considered by the employer are discussed in the negotiations.

Application threshold will rise

The amendment will affect the threshold for applying the Cooperation Act by raising it significantly. The Act will apply to companies, corporations and branches that regularly employ at least 50 people (the current limit is 20 people). The provisions concerning these employers will remain unchanged from the current law, with the exception of shorter negotiation times for change negotiations and a 30-day period reserved for examining the availability of employment services.

However, as an exception to the general scope of application, the amended law contains a list of the provisions that will apply to employers who regularly employ between 20 and 49 people.

As a result of raising the threshold for applying the Act, companies and corporations that regularly employ less than 50 people will, in principle, no longer have a statutory obligation to conduct change negotiations.

However, the obligation to hold change negotiations when the employer is considering workforce reduction will still apply in certain circumstances. An employer who regularly employs between 20 and 49 people will be required to conduct change negotiations when the employer is considering reduction measures concerning at least 20 employees over a 90-day period, i.e. the termination or shifting to part-time work or changing an essential term of the employment contract for financial or production-related reasons or lay-offs due to financial or production-related grounds as referred to in the Employment Contracts Act.

If the number of employees subject to the measures under consideration remains below 20 over a 90-day period, an employer with less than 50 employees is not legally obliged to hold change negotiations under the Cooperation Act.

The principle of continuous dialogue under the current Act will still apply, with lighter procedures, to companies or corporations that regularly employ between 20 and 49 people. 

The employer must establish workplace-specific practices for regular continuous dialogue. Dialogue refers to the discussion of matters between the employer and the employee representative to promote adequate and timely communication between the employer and employees and the employees’ ability to influence matters concerning their work, working conditions or position.

The employer and the employee representative or employees must try, wherever possible, to agree on matters concerning dialogue. However, it is ultimately up to the employer to decide on the appropriate organisation of dialogue if no agreement can be reached with the employee representative or the employees on the methods and content of the dialogue.

Time for examining availability of employment services

As a completely new provision, the amended Act specifies the time to be reserved for examining the availability of employment services to support the re-employment of dismissed employees. If the employer submits a proposal for negotiations concerning their plan to terminate at least ten employees on financial and production-related grounds, the employment contract of such employees may not end before 30 days have elapsed since the submission of the proposal to the employment authority. 

This 30-day period is particularly relevant in situations where the minimum duration of change negotiations is seven days and the employee has a short notice period.

Fulfilment of the negotiation obligation

The negotiation times of change negotiations concerning workforce reduction will be reduced by half. The statutory minimum duration of such negotiations will be either three weeks or seven days, depending on the matters to be negotiated and the number of employees. Although the statutory negotiation times will be reduced, it may still be necessary to hold the negotiations over a longer period of time, as the applicable collective agreement may contain provisions on the times applied to change negotiations.

The shorter seven-day negotiation time will apply in cases of workforce reductions where the reduction impacts less than 10 employees, the negotiations concern a lay-off of up to 90 days, or the number of people employed by the employer is less than 50. In other situations, the statutory negotiation time is three weeks, unless otherwise agreed.

Procedure when change negotiations are not required

If a company or corporation that regularly employs less than 50 people reduces its workforce and has no obligation to conduct change negotiations, the employer is obliged to comply with the Employment Contracts Act in the event of a reduction. Depending on the situation, the employer must comply with the provisions of Chapter 5, Section 3 of the Employment Contracts Act concerning an advance explanation and hearing in the event of a lay-off and the provisions of Chapter 9, Section 3 on the employer’s duty to explain in the event of dismissal. These provisions of the Employment Contracts Act do not prescribe any time limits for providing these explanations and, as a result, the procedure for reducing the workforce in a company that regularly employs less than 50 people is significantly faster and the administrative burden is lighter than in companies where negotiations are required.