IT union loses two-year battle with multinational CSC
The two-year conflict between multinational IT company CSC and Danish trade union PROSA has ended in a court defeat for the union. The dispute began in June 2009, over the renewal of their collective agreement, but escalated to a lock-out and strike action when the company demanded employees work longer for 10% less pay. The conflict has revealed how easily IT work can be outsourced to the East where skilled specialists work for less than half the wage of their Danish colleagues.
Effect of court ruling
Two years of unsuccessful negotiations about a renewal of the collective agreement between the multinational IT-company CSC and the IT-trade union PROSA ended in June 2011 when the Labour Court ruled against the union, saying that CSC was entitled to release itself from the agreement with PROSA. After the ruling, CSC signed a new agreement with another IT-union, HK. This agreement was much less favourable to the programmers and system consultants at CSC. PROSA consequently lost its bargaining rights and employee representatives for their 700 members at CSC.
The result of the conflict also revealed that, for Denmark, globalisation is no longer limited to outsourcing manufacturing to low-wage countries, but now also means that IT services can easily be outsourced to the East where skilled specialists work for less than half the wage of their Danish counterparts.
Background to dispute
In 1996, the large American-owned IT-company CSC bought the Danish state-owned company Datacentralen, which developed and maintained the data systems for most of the public sector. The IT union PROSA had the bargaining rights for the consultants and programmers employed by the company. CSC wanted to introduce more individually-based wages, but PROSA succeeded in keeping a system based on seniority. CSC then took on the maintenance of IT systems for some large Danish private companies, and in 2007 it hired several hundred IT specialists from its sister company in Asia, CSC-India. However, in 2009 PROSA accused CSC of underpaying 900 Indians contrary to the so-called ‘salary amount rule’, which is part of the Danish Aliens Act. After the Danish Foreign Service reported CSC to the police, CSC paid the Indians according to the Danish employees’ agreement.
In June 2009, the old agreement between CSC and PROSA expired and they began negotiations to renew it. In November, the Public Conciliator (Forligsinstitutionen) was called in to help, but without success. In accordance with Danish labour law, as there was no new agreement, the old agreement continued to be in force.
In June 2010, CSC suggested starting all over again and in December PROSA agreed. CSC demanded the abolition of an old job security agreement in order to increase working hours and introduce a pay cut of at least 10% for the 700 PROSA members. CSC argued that the old agreement was too favourable in a time of economic crisis and increased competition, and that other groups of employees at CSC had less favourable conditions. In the press, labour market experts were quoted as saying that the American parent company had ordered CSC Denmark to sort out the conflict – ‘once and for all’.
Breakdown in negotiations
After renewed consultations with the Public Conciliator and around 30 meetings between the parties, negotiations broke down on 8 February 2011. On the following day, CSC locked out 120 employees. This is in itself an unusual step for an employer, although not illegal, as it is generally the union that initiates an industrial conflict. The response from PROSA was to send out the first strike notice with effect from 1 June 2011. According to a ‘peace agreement’, a strike notice that covers vital systems in the public sector needs to be given three months in advance. After several fruitless attempts to find a solution, the Public Conciliator presented a compromise settlement that secured the current wages of the PROSA IT specialists until the spring of 2014. After this date wages were to be settled individually.
Reasons for conflict
One of the main causes of the conflict had been the disagreement about notice periods. For many years the notice period for PROSA members had been 23 months, much longer than the average of two or three months in the Danish private sector. The notice period serves as protection against dismissals. The longer the period, the more difficult it is for the employer to lay off employees, and PROSA feared that CSC would start streamlining the company from 2012 onwards. In the settlement proposal, the notice period was shortened to 11 months. The Public Conciliator demanded that the settlement proposal was put to the vote among union members. However, the result, announced on 12 June, showed that it had been rejected by 329 votes to 284.
The various attempts to reach a settlement had now lasted almost two years; 120 employees had been locked out since 9 February and around 330 employees had been on strike since 1 June. At this point CSC informed PROSA that they now considered themselves released from the collective agreement. When the union took the company to the Labour Court to challenge this, the court ruled on 23 June that the ‘conflict has had such a duration and intensity’ that CSC could rightly free itself from the agreement with PROSA. This led to CSC negotiating with HK and, four days later, on the 27 June they concluded a collective agreement, which was a much less favourable than the previous one. The PROSA members were offered the chance to work under this agreement, plus some extra elements from the old agreement. The members of PROSA held a meeting on 24 June and decided to call off the strike and go back to work on Monday 27 June.
Analysis of the conflict
The conflict has revealed that a well-educated workforce from non-Western countries, especially from India, can do the job for much lower wages than their Danish counterparts. The outsourcing of jobs to low-wage countries is no longer limited to low-skilled jobs. From 2008–2009 the Danish IT sector lost 5,400 jobs. This corresponds to 80% of the employment increase that the sector experienced from 2004–2008. In 2009 the employment of consultants and programmers, (such as the PROSA members) which had contributed the most to the jobs boom, also began to fall. One must conclude that although there is continued global growth in the IT sector, this will not be reflected in Denmark.
The conflict also showed that multinationals can use foreign workers or outsourcing to subsidiaries in low wage countries as way of applying pressure to Danish unions. The CSC-PROSA conflict is evidence of an ‘adjustment struggle’ that the Danish model of labour market regulation will face again. Under this pressure, it will be difficult to maintain present wage levels. Danish wages are among the highest in Europe and have increasingly been cited as the reason for Danish companies implementing a significant amount of off-shoring, especially in manufacturing, to low-wage countries.
Finally, the conflict revealed what happens to employment relations when a large, state-owned company responsible for important public service is privatised. The company is streamlined, which affects former ‘privileged’ employees. The fact that the employees deliver such an important service, vulnerable in the event of strike action, could strengthen their bargaining position. But this is negated by the ‘peace agreement’ which demands long notice periods in cases affecting the public interest, and by the existence of effective emergency preparations. CSC maintains vital data, such as tax information in the Central Person Register (CPR). This would allow the government to step in on the grounds that important public functions were at risk, if a strike was threatened. These limitations made it almost impossible for PROSA to take effective industrial action, which is something other unions could learn from.
The CSC-PROSA conflict could be the first of several such difficult conflicts in Denmark. At the time of writing, the privatised Danish Railways (DSB) are planning several hundred job cuts. As in the CSC-PROSA conflict, the transition from a large public company to a private company is leading to heavy job losses. A further complication is that although there is a collective agreement in place at DSB, it is at company level like the now defunct CSC-PROSA agreement. The new agreement made by CSC with the HK union was at national level.
The CSC-PROSA agreement was a ‘flagship agreement’ for PROSA and for the whole IT-sector. For PROSA as a union the conflict resulted in serious problems. The union lost its bargaining rights, and consequently also all its shop stewards. When the PROSA members at CSC no longer feel that they have any influence on their working conditions, they may join HK, and PROSA will lose a significant portion of its members.
Carsten Jørgensen, FAOS, University of Copenhagen