25/09/2020

Interpreting the Information Obligation – Efforts to Comply with the Co-operation Act Not Always Enough

 

The Act on Co-operation within Undertakings is a procedural act that sets a great many requirements on employers but provides few direct answers. The employer’s duty to provide information involves some particularly difficult questions to interpret.

This blog post covers two recent court decisions that show that it may not be enough for an employer to make an effort to act in compliance with the Co-operation Act. The obligation to pay indemnification can arise if an employer has negligently violated an obligation the contents of which are not provided for in detail in the act.

INFORMATION REQUIRED TO BEGIN NEGOTIATIONS

When commencing co-operation negotiations to reduce personnel under chapter 8 of the Co-operation Act, the employer must provide the personnel with the following information in the proposal for the commencement of negotiations or at the latest in the first round of negotiations:

  • the grounds for the intended reduction of personnel
  • an initial estimate of the scope of personnel effects
  • the principles used to determine which employees will be subject to personnel effects
  • an estimate of the time for the implementation of the planned reductions.

Providing sufficient information is a basic requirement for a successful negotiation procedure. The employer’s concrete plan forms the foundation for the negotiations between the parties, and the personnel can present their own alternatives.

TIMING OF NEGOTATIONS IS KEY

Negotiations should not be started too soon, because early on the employer usually does not have sufficient information to fulfil its information obligation. On the other hand, the employer cannot proceed too far in planning, as no actual decision to reduce personnel can be made before commencing co-operation negotiations.

Choosing the correct time to commence negotiations is one thing where an experienced employment lawyer can support an employer even before negotiations start.

CASE 1: REFERENCE TO LEGISLATION NOT SUFFICIENT INFORMATION ON DETERMINATION PRINCIPLES

There are no detailed instructions in legislation, case law or legal literature on exactly what information employers have to provide on the principles used to determine which employees will be subject to personnel effects. Traditionally, a reference to the order of termination of the applicable collective agreement for employees or civil servants has been considered sufficient.

However, exactly what is considered a sufficient description of the determination principles has remained unclear in organisations that are not subject to the order of termination of a collective agreement. The Supreme Court weighed one such situation in decision 2020:7, in which it deemed that a statement to the effect that the order of termination is in compliance with legislation and is non-discriminatory does not give the personnel sufficient information to prepare for the negotiations.

Despite the fact that neither the Co-operation Act nor its legislative materials provide any details on how the determination principles are to be described, the employer in the case was deemed to have acted negligently by making a general reference to acting in compliance with the law, and this gave rise to the obligation to pay indemnification.

However, in its decision the Supreme court did not provide any detailed guidance on what kind of information on the determination principles would be deemed sufficient. The Supreme Court merely stated that ‘with respect to the determination of what employees will be subject to measures, relatively general information on the principles guiding the determination may be sufficient’.

This guidance to provide general information leaves many employers still wanting more concrete instructions. Based on prior case law, a description of the factors that the employer will consider when making the choice would be sufficient. Such factors could include:

  • suitability for new duties
  • versatility of skills
  • retaining important expertise
  • other similar factors.

It is not necessary to provide a plan of whose employment relationship would be terminated, but to describe what factors the employer will consider take into account when making choices.

CASE 2: COURT OF APPEAL REQUIRED GEOGRAPHIC BREAKDOWN OF PERSONNEL EFFECTS

The Vaasa Court of Appeal issued two decisions on 29 June 2020 concerning assessing the scope of personnel effects. Pursuant to the Co-operation Act, at the start of negotiations, the employer must provide an estimate of the number of terminations, lay-offs and reduction of employment contracts into part-time contracts.

The  Court of Appeal took the position that the employer’s estimate must be broken down by personnel group and geographical area if this information is necessary for the negotiations. No such obligation can be found directly in law.

The Court of Appeal justified its position by an interpretation of the Collective Redundancies Directive and by stating that the precision of the information provided by the employer must be assessed in relation to the purpose of the co-operation proceedings. According to the Court of Appeal, the employer must make a case-by-case determination of whether a geographic breakdown is information that is necessary for the purpose of the co-operation procedure. For many employers, this guidance also raises more questions without providing certainty that they have fulfilled their obligation to provide information.

In the Court of Appeal’s decisions, the employer had provided its estimate of the need for reductions by personnel group, but because it was a large company with business operation in different municipalities, the Court of Appeal found that the employer should have estimated the geographical breakdown of the personnel reductions.

Because the employer had not done so, it was ordered to pay indemnification—despite the fact that the Co-operation Act does not contain an express provision imposing such an obligation. The Court of Appeal’s judgments are not yet final (as at 21 August 2020).

FEWER DETAILS AND MORE GENUINE DIALOGUE IN THE FUTURE?

Some of the problems in the current Co-operation Act from the perspective of employers are that the act is open to interpretation, contains complex procedural rules and imposes harsh consequences for breaching them.

It is difficult for employers and employees to have an real dialogue and negotiate in the spirit of co-operation when the procedure easily becomes bogged down in details that the employer may not be able to gain certainty of from the law despite best efforts. 

The Co-operation Act is planned to be reformed to better realise the spirit of co-operation between employers and employees. Instead of detailed procedural regulations, the spirit of co-operation could be better served through more general regulation. The new act is also intended to add flexibility through allowing procedural rules to be deviated from by agreement in a national collective agreement or in a co-operation agreement between the employer and personnel.

The government proposal on the amendment was supposed to be published during the spring of 2020, but has been delayed by the coronavirus pandemic.