All collective agreements on the general labour market in Iceland contain so called "Priority clauses". Priority clauses in collective agreements have a long history in Iceland and have become firmly established by tradition and the structure of the Icelandic labour market is based on these clauses. Originally, its purpose was to protect the unions’ right of existence and hence the right to organize. Today they emphasise the importance of organized labour market, its stability and is interlinked with and a vital component of the duty to respect industrial peace during the duration of collective agreements. The Icelandic Constitution contains a special provision guaranteeing the right to remain non-unionised; Article 74, paragraph 2, states that no one may be obliged to be a member of an association. The Icelandic Priority clauses do not violate that provision.
A clear distinction must be made between closed shop clauses which exclude workers on the one hand and priority clauses on the other which do not have the same affect. In that respect, it should be noticed that freely negotiated priority clauses in collective agreements, such as the Icelandic ones, are in full conformity with ILO Convention No. 87 and 98. The closed shop clauses were dealt with by the Icelandic Parliament in 1995 when above-mentioned Article 74 was amended. The conclusions of the discussion there was, as stated in the opinion of the Constitutional Committee of the Parliament, that the priority clauses of collective agreements did not entail compulsory membership of the type covered in Article 74 of the Constitution. The provision was not intended to change the legal situation then prevailing on the labour market as regards priority clauses.
The priority rights under Icelandic collective agreements do not entail an exclusive right of the trade union to negotiate a collective agreement and must be interpreted narrowly as the Labour Court has stated, taking into consideration that it is an exemption from the fundamental freedom to negotiate and the fact that membership of Trade unions is not to be resolved in collective agreements” ( C-17/1997 p.189 and C-3/2015 p.7.) It shall also be emphasised that a priority right enjoyed by one trade union does not preclude the establishment of more trade unions within the same occupation in the same geographical union area. The
Icelandic Labour Court has recognized the right of a trade union to negotiate on behalf of its members, even though another union had made an agreement on priority rights for its members.
The trade unions in Iceland emphasise that the union can only have recourse to a priority clause if it can proof that its member is of same qualifications or better qualified than a non-unionized applicant. When interpreting the clause it must also be kept in mind that employers are free to determine the conditions applicants must meet in order to be rewarded a contract of employment and that the clauses must be interpreted narrowly as the Icelandic Labour court has stated.