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Generally Binding Collective Agreement

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The source ranked behind employment legislation and collective agreements is the generally binding collective agreement. The general applicability of a collective agreement is based on the Employment Contracts Act. This means that an employer who is not party to a union must comply in its employment relations with a nationwide collective agreement that is considered representative of the field in which the company operates. The generally binding collective agreement shall be applied in all companies trading in a specific business field, i.e.also in such companies which are not members of an union that has been a signing party of the collective agreement.

The ratio behind generally binding collective agreements is to safeguard the minimum working conditions of employees whose employers are not parties to a union. A generally binding collective agreement obligates only the employer.

The general binding nature of a collective agreement is determined by a confirmation board, consisting of three members. The board’s decision may be appealed to the Labour Court, whose decision is final. The general binding nature of an agreement may, however, be altered if there is a material change in the preconditions of the agreement.

In order to confirm the general applicability the following conditions must be fulfilled:

  1. Nationality:A collective agreement shall be national when there are no restrictions regarding to its applicability (it covers the whole of Finland). A local collective agreement, for example an agreement commenced between a local company and a local union, can never be considered as national.
  2. Collective agreement is considered representative in the sector in question: The sector in question is defined according to the prevailing collective agreement practice. Differences between different sectors are primarily defined according to how the collective agreement’s scope of application is defined also considering the purpose of the parties. Therepresentativeness of the collective agreement means in practice that at least circa half of the employees in the sector are members of the union normally bind to the collective agreement (not by the basis of generally binding effect).

The applicable collective agreement in a business sector may also be found through the line of industry and professional field principles. In accordance with the former, the collective agreement applicable to the principal business sector is equally applied to activities that are unrelated to the principal business. An example will illustrate this principle. A company carrying on transport business had a cafeteria for its employees in its terminal building. The cafeteria was not considered a separate business but part of the transport business. The cafeteria did not have the position and activities normal to a cafeteria business. Hence, the collective bargaining agreement applied to the accommodation and restaurant industry was inapplicable and instead the collective agreement for garages in the car sector was used.

In accordance with the professional field principle, the applicable collective agreement may be determined on the basis of the employee’s work assignments in deviation from the principal business. For example, the business sector for the collective agreement applicable to white collar employees of a travel agency was that of travel agencies. The collective agreement in question, was however not applicable to tourist guides of the travel agency who worked abroad, as the nature of their work was different from what was provided in the collective agreement. The collective agreement was not considered applicable even though it included provisions relating to work assignments that were closest comparable with those of the guides.

See [2.1.2.3.3 Provisions of Collective Agreements].

Legal Counsel

Minna Sysimetsä, Senior Legal Counsel, +358 20 7205 423, minna.sysimetsa@fondia.com, I specialize in contract law, employment law, corporate law and dispute resolution.

Minna Sysimetsä

Senior Legal Counsel

+358 20 7205 423

I specialize in contract law, employment law, corporate law and dispute resolution.

Timo Tuuli, Senior Legal Counsel, Team Leader, +358 20 7205 483, timo.tuuli@fondia.com, I focus mainly on license, delivery and procurement agreements relating to information technology, and on labour law, corporate law and questions relating to marketing and IPR.

Timo Tuuli

Senior Legal Counsel, Team Leader

+358 20 7205 483

I focus mainly on license, delivery and procurement agreements relating to information technology, and on labour law, corporate law and questions relating to marketing and IPR.