The Finnish Act on Co-operation within Undertakings (the “Co-operation Act”) mandates co-operation negotiations between employers and employees. The purpose of the Act is to develop active co-operation between companies and their employees and improve employees’ ability to influence decision making relating to their work, their working conditions and their position in the company. The Act applies to companies employing 20 or more employees. Although the co-operation process is usually only seen as a phase before any reductions, it is meant to be a dialogue between the employer and the employees about the possible changes in the company. Changes do not necessarily indicate reductions, but instead may concern, for example, the adoption of new IT procedures or new ways to organize the work.

Plans to reduce the labor force, however, are the most well-known situation. When a company is planning to terminate or furlough employments, it has to co-operate with employees according to Chapter 8 of the Co-operation Act. Chapter 8 regulates the negotiation time, the information which must be given and the procedures that must be followed after the negotiation. The negotiation period lasts 14 days to 6 weeks, depending on the reduction plans. The employer has to give accurate information regarding the reduction plans and must give the employees a real chance to influence the decision making. The decisions can only be made after the negotiations have ended. According to the Act, the parties to the co-operation negotiations consist of the employer and the company’s employees who are subject to the matter negotiated. The employer is usually represented by a company’s manager or, for example, a supervisor or team leader, and the employees by an employee representative.

In 2007, the new Co-operation Act (334/2007) replaced the old Co-operation Act (725/1978). While the old act regulated co-operation negotiations between employers and employees, it did not define employees to include a company’s management. Moreover, the government’s proposal clearly stated that it should not be applied to managers. Thus, there was no requirement that employers conduct co-operation negotiations with company managers before terminating their employments. When the new Act took effect, it was assumed that this facet of the law would remain the same. This assumption was also supported by law literature and often justified by the rationale that the managers of a company are well-aware of the company’s situation and thus do not need to be informed of it in co-operation negotiations. However, neither the new Act, nor the government’s proposal, explicitly excludes a company’s management. This was just the common assumption.

In 2011 the Co-operation Ombudsman, who supervises the Co-operation Act and provides instructions and advice, gave an instruction regarding employers’ co-operation obligation towards management of the company. The Co-operation Ombudsman was asked whether the Co-operation Act applies to a company’s employed management, especially managers working alongside the managing director. (Managers who have a manager or similar agreement are employed managers. In other words, they are employees. A company’s managing director is, however, outside of the Act’s purview, because it is considered an organ of the company.)

The Co-operation Ombudsman answered with an instruction stating that the Co-operation Act must be applied to all employees of a company – including employed managers. The Co-operation Ombudsman’s instruction was based on the wording of the Co-operation Act and the government’s proposal. Neither of the Act nor the government’s proposal had stated that the Act should not apply to the management. This is why the Act should be applied to all employed personnel.

The instructions given by the Co-operation Ombudsman are not legally binding. A legally binding interpretation can only be given by the court.

The Helsinki Court of Appeal recently issued a judgment regarding the application of the Co-Operation Act to the management of the company. The case (Helsinki HO 7.5.2013 1315, appealable judgment) involved the vice principal of the Institute of Marketing, a private academy offering vocational education. The vice principal who reported to the Institute’s principal, was dismissed in 2010 on financial and production-related grounds following co-operation negotiations. During negotiations, it was not explicitly stated that the changes in business functions might lead into terminations. The Institute claimed that the Co-operation Act did not apply to the vice principal, and what was negotiated was not relevant since the vice-president was nevertheless aware that her employment could be terminated.

The court stated that the co-operation negotiations undertaken by the Institute were not sufficiently detailed. The employees had not been informed that their employments might be terminated. The employer had not fulfilled its co-operation obligation towards the management of the company. As an employee of the Institute, the Co-operation Act had to be applied to the vice principal.