When is a company obligated to initiate co-determination negotiations?

When is a company obligated to initiate co-determination negotiations?

According to the Act on Cooperation within Undertakings, an employer must initiate co-determination negotiations (formerly cooperation negotiations) when considering measures that may lead to the termination, temporary layoff, or reduction of working hours of one or more employees. on economic or production grounds. Negotiations must also be initiated when substantial changes to job duties, work methods, or the organization of workspaces are planned.

Significant organizational changes such as business divestitures, mergers, or demergers also require the initiation of change negotiations. The same applies to essential changes or downsizing of workplace operations. Technological changes with personnel implications, such as the introduction of automation or software systems, are also subject to mandatory negotiation situations.

It should be noted that the obligation to negotiate arises at the point when the employer considers the measures mentioned above – not when decisions have already been made. This emphasizes the preventive and inclusive nature of the change negotiation process.

What is the personnel limit for initiating co-determination negotiations?

The scope of the Co-operation Act will change starting from July 1, 2025. After the changes The Cooperation Act generally applies to companies that regularly employ at least 50 employees.. The provisions of the Employment Contracts Act apply to smaller companies.

However, the practice of continuous dialogue is also maintained in companies with 20-49 employees, albeit in a simplified form. The obligation to negotiate changes applies to companies of this size only in limited cases, such as when layoffs of at least 20 employees are planned. In addition, regulations concerning business transfers, mergers, and divisions continue to apply to companies employing at least 20 people.

The Finnish Act on Co-operation within Undertakings still does not apply to companies with fewer than 20 employees in any respect.

When calculating the number of staff, consider Regularly employed persons, including part-time employment. Fixed-term employees are not considered if their employment relationships are temporary and short-term.

What are the consequences if a company does not initiate mandatory employee negotiation (YT-neuvottelu)?

Failure to comply with mandatory co-determination negotiations leads significant legal and financial consequences. Primarily, an employer can be obliged to pay compensation to employees whose rights have been violated. According to the Co-operation Act, this compensation can be up to 35,000 euros per employee, depending on the seriousness of the violation.

In legal practice, there are examples where companies have had to pay large amounts of compensation due to negligence. In one case, the Supreme Court ordered an employer to pay an employee 10,000 euros in compensation when the termination was carried out without proper co-determination negotiations, even though there were grounds for staff reduction in themselves.

In cases of breach, employees have the right to bring a lawsuit in court within two years of the end of the calendar year in which the right to compensation arose. In addition, an employer who intentionally or negligently breaches the co-operation obligation may be ordered fine for breach of cooperation obligation.

It is also noteworthy that the failure to negotiate does not in itself invalidate the termination, but it can lead to significant compensation and reputational damage.

How should YT negotiations be conducted according to the law?

The implementation of change negotiations must adhere to precise formal requirements. The process begins with a written negotiation proposal, Which must be delivered at least five days before the commencement of negotiations. The presentation must state the start time and location of the negotiations, as well as the main points of the matters to be discussed.

Starting January 7, 2025, the duration of change negotiations will be significantly reduced. In cases of workforce reduction, the minimum negotiation period will be 7 days (instead of the previous 14 days) or three weeks (instead of the previous six weeks), depending on the number of employees and the scope of the planned measures.

If change negotiations concern the termination of at least ten employees for production and financial reasons, employment contracts may not end before 30 days have passed since the negotiation proposal was submitted to the labor authority. This new provision ensures that labor authorities have enough time to arrange employment support services.

The employer's duty to inform is extensive. When negotiations begin, employee representatives must be given all necessary information regarding the planned measures, and an assessment of their impacts, and information on the principles by which the employees targeted by measures are determined.

Minutes must be kept of negotiations, recording at least the dates of the negotiations, the participants, the outcomes of the negotiations, and any dissenting opinions. After the duty to negotiate has ended, the employer must present within a reasonable time General clarification to personnel representatives on decisions to be considered based on negotiations.

Are there alternatives to labor negotiations in the context of staff reductions?

Before initiating change negotiations, the employer should consider Alternative adaptation measures. Layoffs are one of the most common alternatives to termination, as they allow for a temporary reduction in workforce without ending the employment relationship. A layoff can be fixed-term or indefinite, and full-time or part-time.

Part-time work for employees is another option where working hours and, consequently, labor costs are permanently reduced. This can be a viable solution, especially in situations where the workload has decreased but the workforce is still needed.

Employees resettlement and retraining are also important options. The Employment Contracts Act obliges the employer to offer the employee other work and arrange reasonable training for new tasks, if possible.

Natural attrition, such as retirements or the end of fixed-term employment contracts, as well as recruitment freezes, can also serve as alternative means of workforce reduction. Voluntary arrangements, such as early retirement, study leave, or parental leave, can in some situations offer solutions for reducing personnel costs without layoffs.

Legal changes and future practices regarding YT negotiations

Significant changes to the Co-operation Act will come into effect on July 1, 2025. The key objective of the reform is to reduce the administrative burden, especially for SMEs, and to enable faster responses to changing situations.

The most significant future changes are:
1. The threshold for applying the Act rises from 20 employees to 50 employees
2. Companies with 20-49 employees have lightened obligations, such as continuous dialogue and negotiations on change in limited situations.
3. The minimum duration of change negotiations is halved (7 days or three weeks instead of the previous 14 days or six weeks)
4. New 30-day deadline for determining labor force services in cases of termination of at least ten employees

With the changes, companies can react to situations of change more quickly, which strengthens their operational capabilities, especially in challenging economic situations. At the same time, it must be taken into account that the employer still has the responsibility to ensure that all required matters are addressed even within a shorter negotiation period.

On a practical level, companies should familiarize themselves with upcoming changes well in advance and ascertain what they mean for their own operations. Companies employing 20-49 people in particular should examine how their responsibilities will change.

Managing change negotiations – the key to a successful change process

Starting change negotiations in a timely manner and implementing them in accordance with the law are key factors in adapting a company's operations to changing circumstances. Legal requirements, including future changes, impose clear framework for the process, and failure to comply with these obligations can lead to significant financial and reputational damage.

Especially for small and medium-sized enterprises (SMEs) that do not have their own HR department, conducting negotiations in accordance with the law can be challenging. A situation requiring change negotiations demands both legal expertise and the ability to support personnel in a difficult situation. In such cases, external expert assistance can be invaluable.

When the legislative changes come into effect on July 1, 2025, it is important that companies ensure they are operating correctly according to the new regulations. Docue's digital services and up-to-date document templates help companies conduct change negotiations and document them appropriately.

Continuous change in the working world requires companies to be even better prepared to handle personnel-related issues professionally and in compliance with the law. At their best, successful change negotiations can support a company's renewal and secure its future operational prerequisites, even in challenging situations. Contact our experts so today and ensure a smooth change negotiation process for your company!