Social dialogue & conflict resolution mechanisms

Social dialogue and conflict resolution mechanisms in the acceding countries: Cyprus, the Czech Republic, Latvia, Lithuania and Slovakia

Prague, 14-16 January 2004

Speech abstract - Martti Kairinen

Professor of Labour Law,
University of Turky, Finland

Social dialogue and conflict resolution in Finland

1. Social dialogues

General picture
The basis of the present-day industrial relations model and social dialogue in Finland may be described as a consensual one. Different kind of negotiations and bargaining takes place on (1) central, (2) federal and (3) local (enterprise) levels. The first general agree-ment made in 1946 between the SAK (Central Organization of Finnish Trade Unions) and the employers` confederation ( nowadays TT, Confederation of Finnish Industry and Em-ployers) has been the axis of the whole negotiation and bargaining system. Similar gen-eral agreements between the confederations make up the core of the negotiating and col-lective bargaining system. Legally binding and nationwide collective agreements are made between federations of both parties. Important social dialogues are taking place also at the enterprise level, between shop stewards and individual employers.

Incomes policy and tripatism
The last 34 years period of incomes policy and centralized labour market settlements has enhanced the status of the central confederations. The main aim of incomes-policy has been to co-ordinate the different sectors in the light of the principles of economic policy. The role of the Economic Council, chaired by the Prime Minister, has been important in steering the economic policy. The principle of tripartism is mentioned in the programs of our governments. The principle holds that the state, the representatives of the employers and the representatives of the employees should work together in mutually balanced co-operation. The state has to negotiate with a view to reaching agreement on labour-market issues (including social insurance) and to be an equal negotiating partner with respect to the organizations of either side. The employers’ and trade-union organizations are also represented in committees, working groups, and advisory bodies of various kinds. It has also been typical of Finnish labour legislation that it has originated from bargaining be-tween the parties and often also constitutes “agreed legislation”.

Actors and Acts
The present-day Constitution (2000) provides the legal framework for the functioning of industrial relations and social dialogue. Fundamental rights include, among other things, freedom of association and the right to organize. Employees and their employers are organized mainly with the principle of industry-based unionism. The manual workers in a par-ticular industry form a federation for that industry (sector) and the employers do likewise. For professional employees, academics, unionization follows the principle of occupation-based unionism to some extent. Federations are further members of confederations.

Average union density has risen to a significantly high level. Membership rose steeply in the period when incomes-policy agreements began at the end of the sixties. At that time it was also agreed that employers could deduct union dues (1.5-2%) from employees’ pay and the union dues became tax-deductible. It has been estimated that four out of every five employees are members of a trade union or comparable body. Particularly the unemployment benefits linked to the union memberships have been instrumental in boosting union membership.

The legal status of collective agreements is determined in the Collective Agreements Act (1946). Negotiations and procedures for concluding legally binding collective agreements mainly at the federal level derive from established bargaining practice and provisions in agreements.

The organizations bound by their collective agreement are also obliged to ensure that their members observe it. During the period of its validity a collective agreement imposes a peace obligation with respect the issues it covers. Industrial actions which contravene par-ticular stipulations in the agreement or the agreement as a whole are prohibited. The La-bour Court is empowered to impose a compensatory fine as a sanction (max 23.500 euro). Forms of political and secondary/sympathy actions are generally allowed since they are not directed against collective agreement applicable to those taking the action.

A specialized Labour Court for the resolution of disputes about collective agreements, composed on the tripartite principle, began its work in 1947. In addition to the impartial members of the court, there are also members who represent the employers` side and the employees` side

When the collective bargaining mechanism began to function, also a union representatives system at workplaces grew up. The role of shop stewards (employee representatives) is important in the dialogues at local level (co-operations within enterprises, applications of collective agreements and local bargaining).

National collective agreements are concluded between respective federations in a given industry. There are about 200 of these nation wide sectoral agreements. Employees who work for member enterprises of employers’ federation, fall within their scope of application. Federation level agreements determine the main labour costs and employees’ social bene-fits as well as their working hours. They bring also the industrial peace to the country. The system of collective bargaining is based on collective agreements with normal applicability. The normative effect derives from membership of the federation. In practice, the binding effect on the employer is of key significance. Collective agreements prescribe only mini-mum terms and conditions of employment. Collective agreements cover about 90% of working employees since the level of union density is high.

In practice, very few agreements are concluded directly between one employer (enterprise) and a union representing the company’s employees (company agreements). On the other hand, during the last 10 years the opportunities for concluding agreements at local level have been extended both by statutes and by federation-level collective agreements. It constitutes an organized decentralization of the bargaining process. Local bargaining at enterprise level concerns, above all, working hours (flexibility), performance-based payment systems and changes in working conditions.

Erga omnes effect of collective agreements
About half of the federation-level collective agreements have erga omnes applicability on the basis of the Employment Contracts Act (2001). This means that also non-organized employers are obliged to observe the terms and conditions laid down in collective agree-ments concluded for area of employment concerned. To have erga omnes applicability, an agreement must have national coverage and quality to be deemed representative for the relevant branch of activity. The general rule is that an agreement covering about 50% of all employees in the branch concerned may be considered as a representative. A special Board for confirmation of erga omnes applicability makes a decision on the question of the representativeness. In practice, the significance of erga omnes applicable collective agreement is primarily in respect of the minimum wage.

2. Dispute resolution mechanisms

2.1 Grievance procedure concerning collective agreements

In the case of differences of opinion about the application of provisions in a normal applicable collective agreement, the agreements themselves also contain provisions specifying a grievance procedure in the form of rules on negotiation. The starting-point is that if a difference of opinion concerning the application of collective agreement between the union representative and the employer cannot be resolved at the workplace, a memorandum of disagreement is drawn up and the dispute is referred to the relevant national federations for negotiation. If the negotiation route fails to yield a result the matter may be taken to the Labour Court, whose ruling is final.

The role of arbitration is rather limited in Finland in labour issues. It is a possible option in-stead of courts and mediations but in use only in some branches.

2.2 Strike actions and mediation of collective interest disputes

Finland has endured many strikes and other forms of industrial actions. During recent years, however, the number of working days lost through industrial action has shown a considerable decrease. The nature of industrial action has also changed somewhat, episodes have become shorter and much more of the nature of demonstrations. It has also been typical of the strikes that trade unions back each other up by different kind secondary/sympathy industrial actions.

The system for mediation/conciliation of labour disputes has been a factor in improving re-lations between the collective organizations and promoting the peaceful solution of dis-putes of interest. The machinery of mediation comprises, in addition to a national conciliator, five part-time district conciliators. The national conciliator is appointed by the Presi-dent of the Republic for a term of 4 years. In particular situations an ac hoc conciliation board may be set up or a temporary conciliator appointed. National industrial disputes are a matter for the national conciliator.

The present legislation on the mediation of labour disputes ( Labour Disputes Act1962), lays down provisions on the activity of conciliation organs, obligations on the party initiating a work stoppage and the right of the Ministry of Labour, in certain circumstances, to have the intended stoppage only postponed for maximum of14 days. The Act imposes on the parties to a dispute an obligation to give advance notification, whereby notice of a work stoppage, which has arisen because of a labour dispute of interest, must be communicated to national conciliators and to the other party two weeks before it is due to occur. This obli-gation is sanctioned by a fine. In political and sympathetic actions there is only a recom-mendation that a notice should be given four days before. Participation in mediation pro-ceedings under the chairmanship of the conciliator is compulsory (but without legal sanc-tions), but there is no compulsory resolution of the dispute. In Finland the government and parliament have not directly intervened in labour disputes by an special Act, like it happens sometimes in Denmark and Norway.

In general the mediation constitutes a service to the social partners mainly in their difficulties to conclude a collective agreement. The system is a combination of State-intervention and private mediation.

The conciliator’s duty is to take appropriate measures after receiving information of a work stoppage. The conciliator can decide the manner and order in which the dispute will be handled and if a settlement proposal is needed and appropriate. The main strategy of the conciliator is to reach a compromise, but there are also disputes where such compromise cannot be reached. Sometimes it happens that one part of issues are settled according to the will of the employer and one part according to the will of the employees and some de-mands are simply removed from the table. Our present conciliator is little worried about those disputes in which the territory of union-membership is involved. Another group of dif-ficult cases is work stoppages of so called “key groups” of employees

2.3 Individual disputes of rights

Disputes concerning legal rights and obligations cannot be resolved on the initiative of con-ciliators since they fall within the province of the Labour Court or civil courts. In this kind on matters only a voluntary mediation is possible at the request of both parties, and it is possi-ble even in illegal strikes.

The main division of jurisdiction between these courts depends from the fact whether the relevant legal norm in case is in a collective agreement or in a statute, e.g. a legal dispute concerning termination of an employee can be settled in two ways: (1) through grievance procedure (including a possible final judgement of Labour Court) based on collective agreements, or (2) through a sentence of a general court based on law (statutes).