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On Questions Surrounding Collective Agreements in Estonia

1. Introduction

A collective agreement is an agreement which, in addition to individual employment contracts, laws and other administrative acts, regulates employment relationships. The regulatory scope of collective agreements may be more detailed than that provided for in the legislation. On the level of the establishment, collective agreements, in comparison with individual employment contracts, guarantee more systematic regulation. The standardisation of employment relationship regulations is one of the aims of collective agreements on the industry level.

With collective agreements, a wider range of employment relationships is agreed upon than in the case of individual agreements. One may unquestioningly agree with the statement that collective agreements are one of the means of redistributing profits.

In the case of collective agreements, the force of the conditions of an agreement is greater than in agreements between individual employers and workers. In the case of breaches of the conditions of the collective agreement, an employer’s control is greater than in the case of the breach of an individual agreement.

Despite the various positive principles mentioned above, and the fact that the negotiation of some labour conditions is delegated to collective agreements in the Estonian labour legislation, approximately 10% of Estonian workers were covered by collective agreements as of November 1997.

The survey carried out by the Association of Estonian Trade Unions did not cover the Confederation of Professional Employees, the Central Medical Workers’ Federation, the Estonian Food and Agricultural Workers’ Union or the Independent Seamen’s Union.

Reasons differ for the low rate of the conclusion of agreements. In addition to other causal factors, some certainly arise from changes in the economy, the structure of the enterprise, the different means of doing work (many fixed-term contracts), the evaluation of work, payment according to contribution, the rise in the educational level of workers, improved training, the better organisation of management, developments in the employment of personnel, etc. The above factors also lead to individualisation in the negotiation of working conditions [1, pp. 124, 188]. The low level of trade union membership in Estonia, approximately 20% of the workforce, also undoubtedly plays a role. It must also be kept in mind that a large number of jobs in Estonia are provided by small enterprises.

Whereas the above tendencies function in most European countries, there are distinctively Estonian reasons why a tradition of concluding collective agreements has not developed.

It was not long ago that the sole employer in post-Soviet countries was the State, which regulated its workers’ employment relationships in great detail with several acts. Unpredictability was largely excluded by agreements. Today, the number of employers is many times greater, and labour legislation leaves much unregulated.

The fear of collectivism, which has its origins in the past, largely rules out the collective solution of wage-related problems. Satisfactory wage agreements are few and far between. Ten such agreements have been concluded on the industry level by members of the Association of Estonian Trade Unions. In order to conclude such agreements, one must find a leader on at least the establishment level, find financial information and acquire knowledge and wage specialists in organisations in the industry.

2. Legal Regulation

The conclusion of collective agreements is regulated by the Collective Agreements Act, and disputes arising out of the entry into or performance of collective agreements are regulated by the Collective Labour Dispute Resolution Act.

According to the principles set down in Article 4 of ILO Convention No. 98 and Article 6 of the amended European Social Charter, measures appropriate to the national conditions shall be taken, where necessary, to introduce machinery to promote voluntary negotiation between employers or employers’ organisations and workers’ organisations, with a view to the regulation of terms and conditions of employment by means of collective agreements. Thus, this field is already regulated by law in most European countries. No so-called basic agreements between employers and workers’ central organisations for the regulation of the conclusion of collective agreements between employers and workers have been concluded in Estonia. The first such agreement is in the preparatory stage. This agreement between central organisations promises to be general in its wording and accepting of the parties and their member organisations.

3. Concept of Collective Agreement and Parties Thereto

A collective agreement is a voluntary agreement. The Collective Agreements Act does not include the principle that parties commencing negotiations towards a collective agreement must begin negotiations in good faith (i.e. the conclusion of an agreement is intended in all events) and that the parties do not have the right to refuse negotiations.

According to the Act, the parties to a collective agreement may be, on the one hand, workers or their organisation, and on the other hand, employers or an employers’ organisation (CAA § 2). Under the Act, the third party to the agreement is stated to be the Government of the Republic. This principle is rare in collective agreements and is presumably occasioned by the fact that the workers’ and employers’ central organisations are concluding an agreement on raising the minimum wage. Whether such trilateral agreement is a collective agreement with compulsory implementation and liability for non-compliance is another question [2, p. 92].

As can be seen, the existence of a trade union is not compulsory for the conclusion of a collective agreement. It is uniformly stated in the relevant legislation of most of the countries of Eastern and Western Europe that one of the parties to a collective agreement is a trade union. The 1970 ILO resolution on trade unions’ rights and their connections with civil liberties clearly states that the conclusion of collective agreements is the primary right of trade unions.

It derives from the definition in the Estonian Collective Agreements Act that agreements may be concluded at the same time (on the level of the establishment) for workers who are not members of a trade union and for those who are members.

Pursuant to Article 5 of ILO Convention No. 135 and Article 3 of ILO Convention No. 154, appropriate measures shall be taken, wherever necessary, to ensure that the existence of elected workers’ representatives is not used to undermine the position of trade unions. The functions of workers’ representatives who are not members of trade unions may not include activities considered in that state to be the sole privilege of trade unions.

Collective agreements in Estonia are concluded by trade unions. The referred provision that collective agreements may also be concluded by workers, that is by a representative chosen by them, is normally used by employers’ representatives when it is necessary to exert pressure on trade unions. Thus an employer may promise to hold elections for workers’ representative with the aim of electing an individual in the interests of the employer, and then conclude an agreement with the non-union workers’ representative, or conclude a better agreement with the referred workers’ representative than with the trade union. Therefore, the mentioned provision is used mostly in conflict situations in which either relations with the trade union are not successful, or the organisation’s operations are not desired. Thus, this legal provision provides an opportunity to violate the principles of the above-mentioned convention. The law grants both the trade union and the workers’ representative the power to conclude agreements, without specifying which has precedence in the conclusion of collective agreements.

Due to the existence of such provision in the Estonian Collective Agreements Act, it is necessary, in order to avoid conflicts between the two delegations, to define the above-mentioned precedence in the law.

The above idea of the author of the law seems at first to be advantageous for establishments which do not have unions, i.e. that non-union workers may also conclude collective agreements. Practice has shown that in case of desire to conclude a collective agreement, a union is formed – even simply due to the support, knowledge and protection resulting from the common structure of unions. Collective agreements concluded on different levels form a whole, i.e. they support and complement each other from the bottom up and from the top down. Agreements concluded by non-union workers would remain outside the system or, in other words, separate. The question of the authority of non-union workers to take responsibility for obligations undertaken in the agreement and to be one of the parties in the case of a dispute has not been analysed in this article. Problems encountered by establishments in case of no union are resolved in many countries (Belgium, the Netherlands, Sweden, etc.) by administrative legislation, which extends the effect of industry-level agreements to those establishments of the industry where the employer or employees are not union members.

4. Application of Collective Agreements Act to Public Servants

The Collective Agreements Act refers to the conclusion of agreements between an employer and workers. The Collective Agreements Act has previously entered into force as the Public Service Act. According to the Public Service Act, labour laws apply to public servants to the extent that the Public Service Act does not state otherwise. No Estonian law has taken from public servants their constitutional right to organise in workers’ organisations and hold negotiations for the conclusion of collective agreements. The Collective Agreements Act applies in Estonia to both those employed under employment contracts and to public servants. In the public service, the conclusion of collective agreements (on the part of civil servants and employees of local government bodies) is becoming increasingly frequent.

Due to the earlier entry into force of the Collective Agreements Act, the peculiarities regarding the collective negotiations and collective agreements of public servants are not regulated in the Act.

It is, however, clear that certain substantial differences exist in the system and organisation of public servants’ contract negotiations and the competency of negotiating delegations in the distribution of budget funds and the establishment of public servants’ working conditions. Much depends on future developments and on what kind of public service system evolves in Estonia. The implementation and understanding of the whole system will take time. The Collective Agreements Act as regards public servants must certainly be added to. The ban on strikes in the public sector lays greater demands on the effectiveness of the conciliation procedure and its speed with regard to public servants. The Collective Labour Dispute Resolution Act, similarly to the Collective Agreements Act, lays down no special norms for public servants. All the same, one must reiterate the aim of ILO Convention No. 151. The above-mentioned convention on the regulation of public servants’ collective negotiations does not restrict the corresponding rights of public servants, but rather supplements ILO Conventions Nos. 87 and 98 and establishes the State’s power to regulate, for certain categories of public servants, the extent of safeguards prescribed in the convention [3, p. 72].

5. Levels in Conclusion of Collective Agreements

Collective agreements in Estonia are concluded on the level of the establishment, on the industry level and on the State level. As in other Eastern European countries, the conclusion of collective agreements on the establishment level is dominant in Estonia [4, p. 146]. Approximately 18 collective agreements have been concluded on the industry level. Agreements regulating working conditions within an industry are most often concluded where the industry is composed mainly of large monopolistic establishments such as energy, oil shale, railroads, communications. As a result of restructuring, redistribution, changes of ownership, etc. in the above-mentioned establishments, there is reason to believe that the presently-existing monopolistic contract will become the basis for independent structures (for instance the railroads).

The term industry is questionable in Estonia. The economic situation of establishments within the same industry differs greatly. In an industry-level agreement, it is very difficult to agree on more than the minimum, which for some establishments is the maximum they can perform, but for the other part not worth agreeing on.

On the state level, agreements are concluded bilaterally – between employers’ and workers’ central organisations – and trilaterally – between the above-mentioned central organisations and the Government of the Republic.

It must, however, be reiterated that agreements concluded within an industry support that which is done at the level of the establishment and pass on that which has been concluded on the state level. Without an intermediate link, it would be difficult to speak of an operating, unified system.

6. Force of Collective Agreements and Broadening of that Force with Administrative Legislation

According to the Estonian Collective Agreements Act, an agreement is legally binding for the organisations concluding such agreements and their members, unless otherwise prescribed in the agreement (CAA § 4). The provision “not otherwise provided for” is used by almost all parties to agreements on the level of the establishment, since in establishments it is the wish of most employers to have the conditions of the agreement applied to all workers regardless of their membership [5, p. 151].

The Act does not regulate how a collective agreement affects a member who leaves the organisation, as is established in the legislation of many countries. In Finland and Sweden, the relevant laws state that a collective agreement continues to be valid for both an employee who leaves the union and for a union which leaves its mother union (as in § 26 of the Swedish Co-operation Act). In Estonia, it would be difficult to implement such principle in practice.

Estonian laws do not regulate how member unions are permitted to act, i.e. whether they are allowed to subscribe to an agreement or not, in the event that a mother union concludes an agreement or makes changes to an agreement. In the majority of countries, such situations are regulated, to a greater or lesser extent, by legislation (for instance § 2 of the Finnish CAA).

The expansion of the force of collective agreements, by regulation or other such act on the part of the Ministry of Social Affairs, etc., to establishments of an industry which are not members of the signing parties of the agreement is unknown in neither Estonian law nor the practice. In many European countries, the principle of the extension of the force of a collective agreement to establishments of the industry finds legal expression either through administrative legislation (the Netherlands, France) or directly by law (Sweden).

7. Form and Duration of Collective Agreements

According to law, collective agreements must be concluded in writing.

The legal deadline for contesting an agreement is one year, unless otherwise agreed by the parties. In practice, agreements without a time limit are also in use, that stipulate the time of advance notice on termination.

According to the law, parties, regardless of the termination of an agreement, are required to exercise the rights and perform the obligations of the old agreement until a new agreement enters into force, except for the requirement to maintain labour peace.

This clause helps to maintain continuity in the conclusion of agreements, although this provision also provides an opportunity to claim the validity of a collective agreement, when in actual fact, dialogue is not taking place and the provisions of the agreement are of no importance in the regulation of employment relationships due to their age and frequent generality.

8. Provisions of Collective Agreements. Incorporation of Provisions into Individual Employment Contracts

Considering that the provisions of collective agreements may be divided into normative and compulsory, and the normative, in turn, into individual and joint, then it may be said that as regards the normative, individual norms dominate in Estonia [6, p.166].

There are few individual provisions relating to wages and employment standards, agreements are regulative and guided by contemporary principles, i.e. education, the difficulty of the job, qualification and contribution in case of allocation of wages. One may agree with the statement that negotiations often taken place without the existence of serious financial information. Few parties have acquiesced in agreements that necessary information for negotiations be exchanged between the parties. The provisions of the Act are general in this respect – a collective agreement shall be concluded on the basis of sufficient information and the representative may obtain information.

The most widespread of joint provisions are the regulation of the working conditions of the trade union and its representatives, the establishment of the joint organisation of labour protection, the establishment of the formation of a conciliation committee, etc. [6, p. 167] The part of joint provisions relating to the obligations of trade unions is little-developed and, in many respects, trade unions fear accepting responsibility for the improvement of quality and discipline.

Compulsory provisions do not play a large role in agreements. Responsibilities, legal force, deadlines for contesting an agreement, settlement of conflicts, the procedure of interpretation and termination are regulated in very general language. The accountability of the parties in the event of non-performance or inappropriate performance of obligations is mostly of a general wording. Few agree as to the financial responsibility.

The principle that the individual norms of the normative part of a collective agreement are to be automatically incorporated into individual employment contracts is not regulated in the Collective Agreements Act. ECA § 15, however, clearly states the invalidity of employment contract terms which are less favourable to employee than those agreed to in a collective agreement. That signifies the implementation of the individual provisions in the normative part of a collective agreement in all cases. The limited regulation of collective agreements and the general wording of individual norms leads to a situation where collective agreements are most often treated more as individual, declarative documents. In the event of the existence of a collective agreement, pertinent references are made in individual agreements to the provisions of the collective agreement.

9. Labour Peace Requirement and Suspension of Agreement

In discussing the given topic, one must take into consideration the fact that the obligation to maintain labour peace is both passive and active [6, p. 171]. In the performance of the obligation to maintain passive labour peace, all members of the union covered by the collective agreement are forbidden to take part in strike action. Under the obligation to maintain active labour peace, it is the requirement of not all those covered by the agreement, but of the contracting parties to undertake inspection and explanatory activities in order to prevent the organisation of a strike or other such action on the part of members.

The Estonian law provides for the general obligation to maintain labour peace, and that obligation may not be altered under any agreement. During the period of validity of a collective agreement, the parties are required to fulfil the conditions prescribed in the agreement and not to declare a strike on the basis of the modification of conditions set down in the collective agreement (CAA § 11). Such definition represents a passive obligation to the contracting parties, but not to their members, who are also covered by the conditions of the agreement, neither to declare nor to take part in a strike.

The above-mentioned provision of the Act allows participation in a sympathy strike (the aim of which is support, not amendments to the terms of an agreement). That is, of course, in the case where the parties have not agreed in the collective agreement that all actions are forbidden during the effective period of the collective agreement. In Estonia, not only trade unions have the right to undertake strike action. Workers may also strike.

In comparison, the formulation of § 8 of the Finnish Collective Agreements Act establishes, in addition to the obligation on the part of those covered by the agreement to maintain passive labour peace, an active obligation of the contracting parties to influence their membership, through their activities, to refrain from strike action.

In Estonia, the possibility of suspending a collective agreement on the grounds that the other party significantly violates the provisions of the agreement has not been legislated. In practice, it has been agreed in collective agreements that if one party does not perform the agreement, the other party may likewise not perform. The legal solution to non-performance of the agreement is, for the parties, to turn to the court or the labour disputes committee.

10. Procedure for Settlement of Disputes. Responsibility for Violation of Collective Agreement

Disputes arising upon the conclusion of a collective agreement involve conflicting interests and are resolved on the initiative of one of the parties in the presence of a conciliator, after the failure of conciliation due to a strike.

Disputes ensuing from the non-performance or inappropriate performance of a collective agreement, as well as disputes regarding interpretation, involve conflicting rights, i.e. such conflict has arisen out of the presumed violation of the rights of one party, and these, according to the Collective Labour Dispute Resolution Act, are resolved by a labour dispute committee or in the court. The deadline for contesting an agreement is not specifically provided for disputes arising from collective agreements. One must refer to the deadlines for contesting an agreement established for labour disputes. As a result of the above-mentioned different norms existing in collective agreements, a plaint may be brought by either an individual worker to whom a wage level provided for by a collective agreement is not applied, or a trade union which is not provided with office space in an establishment.

The main issues of disputes have to do with the performance of the agreement, different interpretations and disputes resulting from a change in employer or ownership.

Disputes regarding interpretation may also be caused by the fact that the provisions of collective agreements may often be understood in different ways. Compromises are often made due to weak bargaining power, and the wordings of individual provisions, especially, are imprecise. For example: it is established in a provision of an agreement that wages will be indexed, followed by the precise explanation of the procedure for that, and at the end it is added that this depends on the condition of the establishment, or that holiday pay will be paid as possible. Many disputes arise from inability to perform an agreement, resulting from the economic situation of the establishment.

A great number of disputes arise in case of change in the employer, and the new employer neither recognises nor performs the agreement. According to § 11 of the Collective Agreements Act, neither the reorganisation of an establishment or changes in the subordination, ownership or means of ownership of the establishment may alter the applicability of a collective agreement.

Disputes resulting when new, independent commercial enterprises are created out of a holding company have become more frequent. These new commercial enterprises are created through non-financial deposits made out of the property of the existing holding company. Although former activities are, for the most part, continued in the different enterprises, and most workers begin work in the commercial enterprises created, the so-called new commercial enterprises do not recognise the collective agreement as legally binding on them. No legal decision has yet been made with regard to such cases.

Responsibility for violation of different provisions of a collective agreement is not specifically defined in the law. The Collective Agreements Act, as a labour act, should be verified by labour inspectors, and the same responsibility should be applied with regard to the violator, as in the case of violations of labour laws. In the event of non-performance of a collective agreement, a violated legal provision is the provision which requires the performance of the terms of a collective agreement. The verification of the performance of the laws regarding collective employment relationships usually takes place when a trade union directs the attention of the inspector to it.

In the agreement between the Association of Estonian Trade Unions and the State Labour Inspectorate, it has been agreed that if necessary, trade unions will present to the inspector the collective agreements concluded in that establishment for examination during verification visits. Collective agreements are not registered in Estonia.

Compensation for property or moral damage caused to the other party by the violation of a collective agreement is not provided for by the law.

The role of responsibility in the acts regulating collective employment relationships undoubtedly needs to be made more detailed in future.

11. Conclusion

In conclusion, it may be said that, in the present economic situation, where keeping expenses at the minimum and the extreme flexibility similar to the non-existence of regulation are more important than social equilibrium, it is very difficult to increase respect for the conclusion of collective agreements in Eastern European countries, which lack such traditions. It is necessary to advance the conclusion of collective agreements, since their development allows a regulatory gap to be filled, making working conditions uniform and providing a more flexible regulation of working and production conditions than that enabled by the laws.

One may assume, however, that the existence of collective agreements will depend on the size and profile of an establishment, as well as wage-paying methods, particularities of the given industry, the nature of the work being done and the level of education of the workers.

According to different studies, the procedural norms deriving from the relevant laws have a limited effect on the success of the conclusion of collective agreements [7, p. 183].

In the present situation, the relevant laws undoubtedly support the conclusion of collective agreements.

It will likely become necessary to make the time limit and the responsibilities of the parties more specific in Estonian regulation of this field. Detailed implementation of certain rules (mainly those involving negotiations) is, however, involved with a certain risk of excessive interference in the process of voluntary negotiations. In other words, what national rule of procedures would promote but not interfere with the negotiating process? However, Estonia is, and will likely remain, far from the creation of an interfering rules of procedure. The fact that many features which would regulate the conduct of the parties in the conclusion of an agreement in different situations: the force of an agreement in the case of the movement of a member from one union to another, or in the case of the movement of unions; or the restructuring of establishments, are not regulated in the Estonian Collective Agreements Act, arises from the fact that the legislator focused attention on the conclusion of collective agreements at the level of the establishment, where few changes take place. Over time and with the diversification of the practice of concluding collective agreements, the needs for changes in the regulation will become clear. In addition to the above bottlenecks, the topic of this paper intersects with the questions of the conciliation mechanism and the improvement of regulations (both legislation and agreements) regarding workers’ representatives and organisations representing workers.


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