The purpose and parties of the Act on Co-operation within Undertakings

The purpose of the Act on Co-operation within Undertakings is to promote cooperation procedures between the undertaking and its personnel. The objective is to enhance cooperation between the employer, personnel and labour market authorities in order to improve the position of the employees and to support the employment of personnel in the context of operational changes within the undertaking.

The cooperation parties are the employer and the part of the personnel which is concerned by the matter at hand. If the cooperation negotiations consider a single employee, negotiations are primarily held between this employee and the employer. However, the employee has the right to request that the matter is also negotiated with the respective employee representative. If the matter concerns a certain operational unit or personnel of a single department, the matter shall be negotiated with their respective employee representative or, if the matter concerns several personnel groups, negotiations have to be conducted in a joint meeting. Some companies may have appointed a special negotiating committee for cooperation procedures.

The representative of a personnel group is usually either a shop steward elected in accordance with the relevant collective agreement or an elected representative in accordance with the Employment Contracts Act. If the personnel group does not have either of the two, a particular co-operation representative as referred to in the Act on Co-operation within Undertakings may be elected for a period of two years. In matters concerning safety and health of employees, also the Labour Protection Delegate may represent the personnel. If the personnel has not elected any representative, the employer shall negotiate together with all the employees concerned by the matter which is dealt with in the cooperation negotiations.

Matters to be discussed in the cooperation negotiations

The Act on Co-operation within Undertakings obliges employers to negotiate with the employees on many different matters. The negotiating process may be different depending on the type of the matter; negotiating for reducing the number of personnel, negotiations on the consequences of business transfer or other cooperation negotiation. For example the duration of the negotiations and the content of the obligation to negotiate may be different.

The Act on Co-operation within Undertakings applies to companies which regularly employ at least 20 employees. According to the act, the employer has an obligation to negotiate in the following situations, among others:

Changes in the business operations

Effects on personnel which are caused by the following shall be discussed in cooperation negotiations:

  • the closure of the undertaking or any part thereof, its transfer to another location or expansion or reduction of its operations
  • acquisitions of machinery and equipment
  • changes in the production of services or product range
  • other similar changes in the business operations
  • arrangement of work
  • use of external labour.

Exercising the employer’s right of direction is a prerequisite for these changes, i.e., dismissals, lay-offs, reducing the contracts to part-time ones or salary reductions are not possible. The conditions of an employee’s individual employment contract may not be altered unilaterally in the negotiations.

Transfer of business

The obligation to negotiate also applies to business transfer situations.

Reducing the use of personnel

The employer has the obligation to negotiate when considering measures which may lead to the termination of employment, laying off temporarily or changing the employment contract to a part-time contract of one or more persons, for financial or productive grounds. 

The employer may not take decision on measures possibly reducing the number of personnel prior to the cooperation negotiations. The obligation to negotiate is not affected by the decision-maker of the decision to reduce the use of personnel (the employer or another undertaking exercising a dominant influence over the employer). The measures considered by the employer may be, for example, business decisions which could lead to a reduction in the number of personnel such as closure of the undertaking or any part thereof, its transfer to another location or expansion or reduction of its operations