Collective bargaining is governed by Act No. 80/1938 which empowers trade unions to negotiate agreements with employers concerning wages and other terms of employment of their members.
Collective agreements are according to Act No. 55/1980 automatically binding for all workers and employers operating within its occupational and geographical area. It is not a condition for the applicability of a collective agreement that the workers concerned are members of the signatory trade union or that those who employ them are members of the negotiating partner on the employers side. This law affects both domestic and foreign undertakings operating on the Icelandic labour market.
Each national federation negotiates at least one general collective agreement with SA which applies to wages and other terms of employment. Additional agreements are negotiated by individual trade unions where local conditions are taken into account.
Content of collective agreements
The content of general collective agreements can be divided into three parts. In the first part are provisions on wages and working time, including holiday payments, payments in cases of sickness and work-related accidents, meal and coffee breaks and minimum hours of daily and weekly rest.
The second relates to health and safety at the workplace, working clothes, trade union and pension fund fees, rules on notice of dismissal, selection and duties of trade union representatives etc.
The third part concerns the term of the agreement and in some cases dispute resolution of the negotiating parties and how do deal with changes that occur in underlying economic factors, such as inflation, which affect the expected outcome of real-wages during the validity of the agreement.
Occupational and geographical coverage
The occupational coverage of collective agreements is linked to the mandated occupational area of the signatory trade union and covers under Act No. 55/1980, all work that is customarily performed by workers who are members of the signatory union or is performed by workers engaged in the same type of work that the agreement applies to.
The geographical coverage depends on the material scope of the agreement on the one hand and the limits posed on by the geographical district of the negotiating trade union on the other.
Types of Collective agreements
General collective agreements
Each national federation negotiates at least one general collective agreement with SA which applies to wages and other terms of employment for all their members. This agreement contains all the relevant provisions such as pay, working time, meal and coffee breaks, payments in cases of sickness and work-related accidents, holidays and holiday payments, health and safety at the workplace, payment of union fees, choice and duties of trade union representatives etc.
Special collective agreements
General collective agreements are supplemented with agreements negotiated by trade unions at local-level on various issues such as shift-work arrangements.
Enterprise agreements are negotiated for large industrial companies such as aluminium corporations and hydro electrical power plant projects. Those agreements can be negotiated on behalf of a number of trade unions belonging to different occupational sectors and national federations. Such agreements cover all the relevant issues that a general collective agreement would cover.
Workplace agreements, supplementing collective agreements.
Incorporated into all collective agreements is a chapter called „Company-related parts of collective agreements” which is defined as an agreement concluded between a particular company and its workers, all of them or a specified group thereof, affiliated to one or more unions, concerning the alignment of a wages and terms agreement to the requirements of the workplace. Union representatives at the workplace act as spokespersons for workers in the course of negotiations with the company. The goal of such agreements is to enhance the cooperation of workers and management at the workplace, with the aim of making adjustments to improve the wage conditions with more productivity. The goal is furthermore to evolve collective agreements so that they benefit both parties. This type of agreement can cover issues such as flexible daytime work, a four-day work week, shift-work, postponement of weekly day off rest so that consecutive days off be taken over a period of 14 days, production related payment system etc. The benefit sought after must be divided between the workers and the employer in accordance with clear pre-conditions. A workplace agreement does not in itself constitute a collective agreement since a trade unions is not a party to it. The unions can nevertheless be called upon to participate as advisors and the agreement must comply on the whole with the applicable collective agreement.
Period of validity
Collective agreements are concluded for a specific period of time. If the parties have not concluded a new agreement before the old one expires, the terms of the old agreement will apply until a new agreement has been signed.
A collective agreement is valid from the day it is signed unless otherwise agreed by the parties, unless it is rejected by a majority vote in a confidential ballot held within four weeks of the date of signature. For a valid vote, at least one fifth of those on the voting roll or membership register, working under the agreement must participate.
Trade unions belonging to the same national federation, which has signed on their behalf a general collective agreement, can decide to put that agreement under a joint ballot for members of all the participating trade unions. If a general confidential postal ballot is held, its result is valid irrespective of participation rate. If two or more trade unions are involved in a collective agreement for members at the same place of work (enterprise agreement), it must be put jointly to a ballot involving all the members to whom it applies.
When a collective agreement has been signed the negotiating parties waive their right to take collective action inasmuch as the conditions established in the collective agreement are fully respected. Thus, a period of industrial peace is in principle to prevail for the validity of each collective agreement. Disputes regarding interpretation of collective agreements are to be referred to the Labour Court which is located in Reykjavik.