Collectively agreed wages extended for building workers

From September 2005, all employers in the building sector in Norway's Oslo-fjord region are obliged to pay wages at a level at least equivalent to the minimum wage provisions in two relevant collective agreements. Foreign companies operating in Norway must thus follow Norwegian pay and conditions. Meanwhile, the legal framework regulating the extension of collective agreements has been evaluated by the government.

From 1 September 2005, an administrative provision has come into force that provides for the extension of collective agreements in the building sector in the Oslo region. The initiative comes against the backdrop of foreign companies providing lower wages than is common among Norwegian companies in the same sector. In Norway, extension of agreements may take place only in situations where foreign companies pay lower wages than is common in Norway. The Ministry of Labour and Social Affairs presented on 22 September 2005 an evaluation of the Act relating to General Application of Wage Agreements, which has so far been invoked only two times. The Ministry has mooted a small number of changes to the legal framework.

Collectively agreed wage in the building sector

The administrative provision for the extension of important parts of the collective agreements in the building sector in the Oslo region came into effect on 1 September 2005. Thus building workers are now entitled to a minimum hourly wage of at least NOK 126 (skilled) or NOK 115 (unskilled). Electrical installation workers (mainly electricians) are entitled to a minimum wage of NOK 140.49 (skilled) or NOK 119.01 (unskilled). In addition to wages, a number of other provisions in the collective agreements have been extended, including working time regulations, overtime compensation rules, shift-work compensation and accommodation rules.

In the spring of 2005, the Norwegian Confederation of Trade Unions (Landsorganisasjonen i Norge, LO) put forward a petition for the extension of collective agreements for building sector workers and electrical installation workers in the Oslo-fjord region. The rationale behind this move was that foreign service-providers (among others employment agencies) from the new EU Member States operate with wage levels far below those normal in Norwegian working life. In June 2005, the tariff board, which is vested with the authority to make decisions about such extensions, decided unanimously to extend selected provisions in the collective agreements for building workers to all enterprises located in the Oslo-fjord region (this includes Oslo itself, as well as the counties of Østfold, Vestfold, Akershus and Buskerud). This area covers approximately 30% of all building and construction activity in Norway. The extension of the agreement for electrical workers covers Oslo and Akershus. The decision will be applicable until spring 2006 (when the relevant collective agreements expire), or longer if the board makes a new decision. The agreed minimum wages are significantly below the average wage in this sector, but are expected to entail a significant increase in wages for many workers employed through temporary employment/hiring firms from Poland and the Baltic states. The decision is unanimous in that the employer side on the tariff-board also found that the preconditions for extension were met.

The Labour Inspection Authority (Arbeidstilsynet) is vested with the responsibility of monitoring compliance with the new administrative provision. The authority will first and foremost concentrate on monitoring developments in the more fraud-prone parts of the building sector, and will also oversee whether or not work is carried out according to rules pertaining to work environment and safety. The authority is now working to develop routines and procedures for such inspections, and will also seek cooperation with the Polish inspection authority. Companies breaking the rules may be subject to fines, and may also be taken to court by employees or trade unions affected by such breaches. The Act relating to General Application of Wage Agreements also provide unions with the opportunity to boycott companies that do not comply with a decision to extend collective agreements. So far this mechanism has not been brought into play.

Extension of collective agreements a novelty in Norway

Until 2004, there was no tradition for the extension of collective agreements and their provisions in Norway. In 1993, the opportunity to extend collective agreements was introduced into the legal framework with the Act relating to the General Application of Wage Agreements (Lov om allmenngjøring av tariffavtaler mv) in cases were foreign workers receive lower wages than is normal in Norwegian working life. The decision actually to extend a collective agreement or part of its provisions is vested in a special tariff board (Tariffnemnda). If the board, which comprises representatives from each major social partner organisation as well as three independent representatives, makes a decision to extend a collective agreement or parts of it, the decision takes the form of an administrative provision under the Act. An extension covers all employees affected, both native and foreign workers.

The Act was employed for the first time in 2004, when LO filed a petition for an extension of relevant collective agreements at a large oil installation site (NO0411103F). The recent decision to extend pay and conditions in the building and electrical workers sector is only the second time this opportunity in the legal framework has been invoked. There is significant interest in the latest decision, not least because it involves a substantial part of the building sector. LO has also filed a petition for an extension in the building sector in the county of Hordaland (covering Norway's second-largest city, Bergen).

In the aftermath of the first decision, the Ministry of Labour and Social Affairs took the initiative to evaluate how the Act has worked in practice. The report based on this evaluation was presented on 22 September 2005. In the report, the Ministry considers experience with the existing law and discusses possible changes to the legal framework. In a small number of areas, recommendations for change are presented. The Ministry proposes giving relevant employee and employer organisations the right to access to documentation on pay and employment conditions in companies covered by an extension, regardless of whether or not companies and their workers are organised/unionised. Another proposal considered is that of vesting a duty in the main entrepreneur or contractor (eg the company with the main responsibility for a building project) to include a clause in their contracts committing subcontractors to the pay and employment conditions stipulated in the extension decision. The relevant organisations and public authorities are now considering the proposal for changes.

Commentary

The issue of the pay and employment conditions of foreign workers has risen on the agenda in Norway in conjunction with the eastward enlargement of the European Union. Statistics show that labour immigration to Norway from the new Member States has increased threefold in the course of the past year, and that many of these people work within the building and construction sector. Trade unions contend that these workers often have pay and conditions well below that which is common in Norwegian working life. Moreover, trade unions - together with some employers - worry that foreign companies may out-compete Norwegian companies and workers through lower pay and conditions. The problem is first and foremost associated with foreign service-providers, in relation to companies both carrying out work in Norway and hiring out workers. Transitional rules (introduced in 2004) ensuring a wage for foreign workers equivalent to that which is common in Norwegian working life are not applicable to these types of enterprises (NO0312103F, NO0405105F and NO0506101N).

There is no national minimum wage in Norway (TN0507101S), nor is there a tradition of extending collective agreements to non-unionised employees/employers. The implication is that there is a substantial number of Norwegian workers not subject to collective agreements, in particular in smaller companies. The Act relating to the General Application of Wage Agreements was introduced in 1993, in connection with the ratification of the European Economic Area (EEA) agreement. It was not, however, invoked until 2004. The latest decision, applicable to all building activity in the Oslo-fjord region, will provide a test as to how this type of mechanism will work in Norwegian working life, not least in relation to how compliance with these decisions may be monitored and followed up.

Trade union organisations have, in relation to the existing legal framework, emphasised a need to improve the ability to monitor whether or not foreign companies operate with substandard pay and conditions. The proposed changes to the legal framework recently presented by the public authoritie meet to only a limited degree the demands for legal changes presented by the trade unions. It does not provide enhanced access for employer and employee organisations to documentation on pay and employment conditions prior to a decision to extend by the tariff board - the Act requires that the petitioner in an extension claim (usually a trade union) must put forward documentation that provides evidence of foreign companies operating with substandard pay and employment conditions. Both trade unions and the Labour Inspection Authority have pointed to the difficulties of obtaining such evidence in relation to foreign companies and their employees. The employer side, on the other hand, is very reluctant to allow the social partners such access to wage information from companies without collective agreements or unionised workers.

Following the general election in autumn 2005, the former centre-right coalition government will be replaced by a social democrat-led coalition government in October 2005. This means that the outcome of the process towards a revised Act is very much open, and that trade union organisations now stand a better chance of achieving acceptance for their views and demands with regards to changes to the present legal framework.

The experience of labour immigration and agreement extension may in the long run generate discussions as to how the Norwegian collective bargaining system will cope with these types of cases. The Confederation of Norwegian Business and Industry (Næringslivets Hovedorganisasjon, NHO) has previously argued that a national minimum wage is a better alternative than extension of collective agreements. The employer side has been divided on the issue of extension. While NHO is on the whole sceptical about such a mechanism, some of its member associations have supported demands for extension. (Kristine Nergaard, FAFO Institute for Applied Social Science)

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