Work Victory for the Chamber: Regulation for Extending the Collective Agreement Conditions to Become Stricter

On 13 September, the Riigikogu passed the amendments to the Collective Agreement Act, which foresee stricter rules for extending the terms and conditions of collective agreements. Proposals made by the Chamber were taken into account when making the amendments.

Currently the collective agreement terms and conditions may be extended by the agreement between a trade union and union of employers to the entire sector. At the same time, the applicable law does not foresee the representation criteria of the trade union and union of employers. This means that currently, a union of employers consisting of two entrepreneurs and a trade union consisting of five employees may conclude a collective agreement and extend the agreed minimum wages to all employees and employers of the same area of activity.

Sufficient representation required for extending the collective agreement
The amendments to the Collective Agreement Act soon to enter into force establish specific criteria for representation for the parties who are allowed to extend the terms and conditions of collective agreements. In the future, the agreements to extend the terms and conditions of collective agreements may be made by a union of trade unions or a trade union of a profession whose members make up 15 percent of the employees of the field or who have at least 500 members, a union of employers whose members are employers for at least 40 percent of the employees of the specific area of activity.

Initially, the Ministry of Social Affairs wanted to establish the requirement of representation only for the union of employers, but by the proposal of the Chamber, the representation criterion will also be extended to trade unions. With the proposal from the Chamber, the Ministry increased the criterion from the initial 20 percent to 40 percent. Additionally, we proposed to the Riigikogu to increase the representation criterion of trade unions up to 25 percent, but this proposal was not taken into account.

Other requirements for extending the terms and conditions of collective agreements
In addition to the representation criterion for the union of employers and trade unions, there are other additional requirements for extending the terms and conditions of collective agreements. For example, before extending the terms and conditions of a collective agreement, the parties to the negotiations are required to inform of the intent to extend the employers and employee unions as well as associations towards whom the contract term is to be extended. Furthermore, the parties who are extending the terms and conditions of the collective agreement must consult with them.

In the future, the Minister of Health and Labour has the obligation to check if the terms and conditions arising from the law for extending the collective agreements have been met. Among other things, the Minister must check if the trade union and union of employers fulfil the criterion for representation. If the requirements have been met, the Minister will publish the extended terms and conditions of a collective agreement in the Ametlikud Teadaanded (Official Notices). The extended terms and conditions of the collective agreements will enter into force three months after they have been published in the Ametlikud Teadaanded, unless a later date is set out in the agreement.

What happens to the currently applicable extended terms and conditions of collective agreements?
Any extended terms and conditions of collective agreements published in the Ametlikud Teadaanded before the entry into force of the amendment, which do not meet the requirements for the representation criterion, shall become invalid on 31 December 2021, unless an earlier date has been set out in the collective agreement.

Amendments do not concern the agreement on the national minimum wage
A separate provision on the establishing of the minimum wage will be set out in the Collective Agreements Act. The principle according to which the employees’ confederation and employers’ confederation may agree on the national minimum wage as an extended collective agreement, which then will be applicable for all employees and employers. At the same time, the amendment foresees that the representation criterion or other requirements applicable for extending the collective agreement terms and conditions shall not be applicable for the agreement on the minimum wage.

The Minister of Health and Labour will have to publish the agreement on the national minimum wage in the Ametlikud Teadaanded within ten days. The agreement on the national minimum wage will enter into force one month after its publication in the Ametlikud Teadaanded, unless a later date is set out in the agreement.

The amendments will enter into force on the tenth day after their publication in the State Gazette. The exact date of entry into force is not known yet, but most probably, the amendments will enter into force in October of this year.

The amendments to be entered into the new Collective Agreements Act are available HERE.

Should you have any questions regarding the amendments to be entered into force, contact our jurists at juristid@koda.ee.