A collective agreement cannot be extended to every employer

On 15 May, the Supreme Court ruled that a collective agreement cannot be extended to an employer who has not entered into a collective agreement and is also not a member of the employers’ union that has entered into the collective agreement.

An employee who worked as a bus driver demanded through court from his employer the remuneration agreed in the collective agreement between the Estonian Association of Automotive Enterprises and the Estonian Association of Transport and Road Workers. The remuneration provided for in the collective agreement was higher than the remuneration agreed between the bus driver and his employer. The employer objected to the bus driver’s claim because the employer had not entered into a collective agreement and was also not a member of the Estonian Association of Automotive Enterprises. The County Court and the District Court upheld the employee’s claim, but the Supreme Court estimated that the lower-instance courts were wrong.

In its judgement No. 2-18-7821, the Supreme Court held that the Collective Agreement Act does not grant the parties to the collective agreement the right to extend the obligations of the collective agreement to an employer who is not a party to the collective agreement and does not belong to the association of employers that has entered into the collective agreement. According to the Supreme Court, a collective agreement is permitted to be extended to the aforementioned employer only if the employer has given its consent thereto.

The Supreme Court explained that if a collective agreement were allowed to be extended to an employer who is not party to the collective agreement and does not belong to the association of employers that has entered into the collective agreement, it could lead to disproportionate interference with the freedom to conduct business and the fundamental right to property. The reason is that in such a case, the employer can neither participate in the conclusion of the collective agreement nor influence the formation of the terms of the collective agreement.

In essence, the judgment of the Supreme Court means that if a collective agreement is entered into in the field of activity of an employer, but the employer is not a party to the collective agreement and does not belong to the employers’ association that is a party to the collective agreement, then the employer is not required to comply with the wage conditions and the conditions of working and rest periods arising from the collective agreement.