Conciliation proceedings and entering into a compromise agreement

Entering into a compromise agreement

Until the decision of the labour dispute committee enters into force, the parties may end the labour dispute during the proceedings by way of compromise. A compromise reflects the mutual will of both parties. Entering into a compromise agreement means that both parties make concessions in regard to the claims submitted to the labour dispute committee. The parties may amend the claims by way of compromise and agree on conditions that are important to them.

The parties should be open to compromise throughout the proceedings, as entering into a compromise agreement ensures legal certainty under the conditions that the parties have agreed upon. Both parties can make a compromise proposal to the other party throughout the labour dispute proceedings. Throughout the proceedings, the chairman of the labour dispute committee encourages the parties to enter into a compromise agreement and helps them in concluding it. 

A compromise agreement may be entered into until the decision of the labour dispute committee enters into force. The decision of the labour dispute committee enters into force after the time limit for recourse to a court expires, if the labour dispute does not continue in court (i.e. 30 calendar days after receipt of the decision). Therefore, it is possible to enter into a compromise agreement even after the parties to the labour dispute have acquainted themselves with the decision of the labour dispute committee after the session.

The compromise may not conflict with good morals or the law.

Once the parties have reached a compromise in the labour dispute matter, they have to submit a signed compromise agreement to the labour dispute committee. If the compromise is reached at a session of the labour dispute committee, the terms of the compromise may be recorded in the minutes.

The chairman of the labour dispute committee approves the compromise by a ruling, thus ending the labour dispute proceedings. Once the proceedings have been terminated, a party cannot appeal to the labour dispute committee against the same party on the same grounds. The chairman of the labour dispute committee will not approve the compromise if it conflicts with good morals or the law or if the compromise cannot be enforced.

The ruling on approval of the compromise has the same force as the decision of the labour dispute committee and can be used for recourse to an enforcement agent to begin enforcement proceedings.

The compromise agreement can be declared void on the basis of the grounds provided in the General Part of the Civil Code Act (if it is carried out under the influence of a material mistake, fraud, threat or violence).

Conciliation proceedings

Conciliation proceedings are a simplified voluntary settlement of a labour dispute through a conciliator. When carrying out conciliation proceedings through the labour dispute committee, i.e. a conciliation body, the conciliator is the chairman of the labour dispute committee.

Why choose conciliation proceedings?

The purpose of conciliation proceedings is to reach an agreement acceptable to both parties in a less bureaucratic manner by using a conciliator. In standard or written proceedings, the labour dispute committee makes a decision. In the case of conciliation proceedings, however, the labour dispute committee does not make a decision, but encourages the parties to settle and enter into a conciliation agreement.  

Conciliation proceedings do not include a session of the labour dispute committee. Compared to standard proceedings, conciliation proceedings take place in a more relaxed setting in the form of meetings. The time and place of conciliation meetings is determined by the conciliator. The conciliator summons the parties and/or their representatives to the conciliation meeting. A party may only be replaced in a conciliation meeting by their representative if they are authorised to enter into a conciliation agreement.

Conciliation proceedings only take place if both parties agree to it. That means that in order to commence conciliation proceedings, the consent of both parties has to be submitted to the labour dispute committee with a conciliation petition either in writing or in a format which can be reproduced in writing.

The role of the conciliator in conciliation proceedings is to first understand what the dispute concerns. The conciliator also has to understand what is important to the parties in order to guide them to see the circumstances important to the other party in addition to their own position and views. People are often preoccupied with their own rights, which causes them to overlook the bigger picture. The independent and impartial conciliator participates in the proceedings as an active listener and creates a peaceful setting for the parties to negotiate. The conciliator guides the parties to reach an agreement and, if necessary, makes conciliation proposals. The conciliator may talk to all the parties of the conciliation proceedings together or with each one individually.

Disputing parties are most often looking for third-party assessment or a decision on who is right and who is wrong. However, this is not necessary in every dispute. Conciliation proceedings do not only address legal issues, but all important circumstances involved in the dispute, including emotional satisfaction (e.g. the conciliation agreement may consist of the parties apologising to each other). The result of conciliation proceedings depends on what is important to the parties.

Settlement of a labour dispute through conciliation proceedings may take place during the employment relationship as well as after it has ended.  It is often seen in labour disputes that a party is offended by the other party or the employee and employer have neglected to discuss important aspects of their employment relationship, which has caused a rift. It is especially important to reconcile through conciliation proceedings in situations where the parties wish to settle a dispute during the employment relationship. In this case, conciliation proceedings are the best way to resolve the matter, as the parties can discuss their issues and disagreements in a relaxed setting and find solutions, i.e. enter into a conciliation agreement with the aim of continuing the employment relationship amicably.

Conciliation proceedings can also be carried out in regard to financial claims. A situation where the employer has neglected to pay the employee’s wages can also be settled in conciliation proceedings. For example, if the employer is willing to pay the wages and the employee is willing to discuss the conditions of the payment schedule. However, every dispute is different and the conciliation agreement depends on the circumstances of the dispute as well as the willingness of the parties to resolve it through reconciliation.

Conciliation is the quickest way to settle a dispute. As a rule, petitions submitted to the labour dispute committee are reviewed within 45 calendar days of receipt (which can be extended under objective circumstances), but conciliation agreements have to be concluded within 10 working days of the decision to accept the labour dispute petition, i.e. of the commencement of the conciliation proceedings. Therefore, the employee and employer reach the conclusion of the dispute quicker than with standard or written proceedings.

The negotiations held in conciliation proceedings are not public, meaning that the proceedings are only attended by the conciliator and the parties (i.e. the employee and employer and/or their representatives).

A conciliation agreement is binding on the parties. The agreement has to be performed within 30 days following the day when copies of the agreement were forwarded to the parties, unless a different time limit is stipulated in the agreement. If the agreement is not performed within the time limit, a party may present the conciliation agreement that has been approved by a conciliation body to an enforcement agent for enforcement following the rules provided in the Code of Enforcement Procedure.

Commencing conciliation proceedings in the labour dispute committee

It is possible to start conciliation proceedings by turning to the labour dispute committee or during the settlement of a labour dispute matter. The petition for conciliation proceedings can be submitted during the settlement of a labour dispute until a decision is made in the labour dispute matter. This means that it is possible to opt for conciliation proceedings until the end of the session or, in the case of written proceedings, until the decision of the chairman of the labour dispute committee is announced.

Below, we describe how to commence conciliation proceedings by recourse to the labour dispute committee as well as during labour dispute proceedings.

The conciliation agreement approved by the labour dispute committee may be contested by a party in court if the committee has committed a material breach of the rules of conciliation procedure and that breach has affected or could have affected the substance of the agreement. A petition for a declaration that a material breach of the rules of conciliation procedure has been committed by the conciliation body may be filed with the district court that serves the area in which the conciliation body has its seat within 30 days following announcement of approval of the conciliation agreement. If the court finds that the conciliation body has committed a material breach of the rules of conciliation procedure, which has affected or may have affected the substance of the conciliation agreement, the agreement that was approved by the conciliation body is declared void and the party has the right to seek a judicial remedy as soon as the corresponding order has entered into force.

Differences between conciliation proceedings and entering into a compromise agreement

The purpose of entering into a compromise or conciliation agreement is the same – for the parties to reach legal certainty under conditions acceptable to them. Both the ruling approving the compromise and the conciliation agreement approved by a conciliation body are mandatory for the parties to perform and constitute enforceable titles in enforcement proceedings.

The difference between entering into a compromise or a conciliation agreement is the role of the chairman of the labour dispute committee. Although the chairman of the labour dispute committee is obliged to do everything in their power for the parties to reach a compromise, in reality, the parties may enter into a compromise agreement without involving the chairman and submit the agreement to the chairman for approval. Conciliation proceedings cannot be held without the chairman of the labour dispute committee, i.e. a conciliator.

Therefore, if the parties do not reach a compromise, they can turn to the chairman of the labour dispute committee for conciliation proceedings. In doing so, the parties can discuss the conditions important to them and make proposals under the guidance of an independent and impartial conciliator.

Another difference between entering into a compromise or a conciliation agreement is the time limit established for its conclusion. The parties may enter into a compromise agreement at any time until the decision of the labour dispute committee enters into force. However, the time the decision enters into force depends on the course of the proceedings.

The parties may reach a compromise at an early stage of the proceedings, but it may take longer in some cases. For example, in the case of standard proceedings, if the chairman of the labour dispute committee has scheduled a session to hear the labour dispute matter, the session may take place one month after the matter was accepted. Under objective circumstances, the session may also be postponed. After the session, the chairman of the labour dispute committee notifies the parties of the time the decision is announced. The decision is announced to the parties within ten working days of the session. The decision of the labour dispute committee enters into force 30 calendar days after receipt of the decision unless the parties go to court with the same labour dispute matter. Therefore, depending on the circumstances, reaching a compromise may take a long time.

Conciliation proceedings, however, are faster, as they have a specific time limit – parties have to enter into a conciliation agreement within 10 working days of the start of the proceedings. Opting for a conciliation agreement is therefore a faster option for the parties to come to an understanding.

Further reading:

• Tööelu: Types of labour dispute procedure.