Reformed Co-operation Act entered into force on 1 January 2022

The Act on Co-operation within Undertakings has been reformed by the new Co-operation Act ("Act"). The reform also includes the Act on Personnel Representation in Company Administration in its entirety.  In the new act, co-cooperation is divided into four elements:

• Continuous dialogue between employer and personnel;
• Change negotiations;
• Transfer, merger, and demerger of the business; and
• Personnel representation in company administration.

The Act will continue to be applied only to companies with 20 employees or more, with a few exceptions regarding continuous dialogue and also personnel representation, the latter of which will continue to be applied only to companies with 150 employees or more.

Change Negotiations

The negotiation obligations of Chapters 6 and 8 of the old Act on Co-operation within Undertakings are compiled in the chapter concerning change negotiations (the obligation to negotiate). In substance, the content or procedure of the negotiations have not been changed. However, the Act now explicitly states that a unilateral amendment of an essential condition of an employment contract falls within the scope of the so-called reduction negotiations.

What is new is that the personnel representative participating in the change negotiations has the right to submit, in writing, proposals and alternative solutions for consideration. These proposals must be submitted to the employer in good time before the meeting. If the employer does not consider the proposal to be appropriate or feasible, the employer must provide a written reasoning behind its position during the negotiations.

Continuous Dialogue

Chapters 3 to 5 of the old act have been replaced by new provisions on continuous and regular dialogue. Dialogues are held in meetings which take place at least on a quarterly basis. If there are fewer than 30 employees, meetings may be held at least twice a year. If there is no chosen personnel representative, the dialogue may take place at a joint event which must be held at least once a year. The issues to be discussed in the negotiations are mainly in line with the old act. The new Act also obliges employers to provide personnel representatives with certain information twice or once a year. The content of the information corresponds to the disclosure obligations under Chapter 3 of the old act.

The new Act is not intended to change the procedures already in use for continuous dialogue, and it is possible to agree otherwise on the number and time of the negotiations as well as the appropriate occasion to deal with different issues. However, the Act does not allow for no negotiations to take place.

If the company is not using an ongoing dialogue and the number of employees is at least 30, the first dialogue negotiation should be held during the first quarter of 2022. Initiatives for dialogue can be made either by the employer or a personnel representative. It would be advisable for the employer to be active in organizing the dialogue, as in principle the employer should address the initiatives made by the personnel representative at the next meeting, unless otherwise agreed or if facing a large number of initiatives. If the personnel representative's initiative has been submitted later than two weeks before the meeting, the employer has the right to refer the matter to the next meeting.

Instead of a personnel and training plan, the employer must draw up a work community development plan in cooperation with the personnel representative as part of the dialogue. The content of the plan is defined in the Act and its main purpose is to anticipate developments that may have an impact on the competence needs and well-being of the personnel and to define measures for the development, maintenance and promotion of skills and well-being. In addition, the plan should pay attention to the management of the work community, the needs of personnel in different life situations and, in particular, the promotion of the working capability and labor market competence of elderly employees and those at risk of unemployment and incapacity for work.

Personnel Representation in Company Administration

The personnel representation in the employer's administration will continue to be agreed primarily between the employer and the personnel. If no agreement is reached, the representation will be carried out at the request of the personnel in accordance with the provisions of the Act. The aim of the new Act is to emphasise that the representation must be carried out in a company organ that actually handles important issues relating to the employer’s business and finances as well as the status of the personnel.