Arbitration decision on working conditions of TAP-Air Portugal pilots

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In March 1999, an arbitration decision was issued in a dispute over the working conditions of pilots at TAP-Air Portugal, Portugal's national airline - the first such decision to be made in Portugal in 25 years. The conflict had been referred to an arbitration board by management and the SPAC trade union, after negotiations had reached an impasse, and the decision has the effect of a new collective agreement. However, TAP - which is preparing for privatisation - finds the award excessive and is seeking to have it overturned.

The working conditions of pilots at TAP-Air Portugal, Portugal's national airline, have been the subject of negotiations and strikes since 1997 (PT9708134N), especially with regard to their working hours and rest periods. Negotiations resulted in partial adjustments of working conditions in September 1997 and April 1998, which prevented industrial action and thus guaranteed flights during Expo '98, the major world exhibition that took place in Portugal in 1998 (PT9804174F). These agreed changes have since been put in practice by company management, though without the legal force of a formally negotiated collective agreement. The pilots had hoped to negotiate a formal company-level agreement that world enshrine these new working conditions, but an impasse was reached in 1998 and both parties agreed to resort to arbitration - a highly unusual move in the Portuguese context. As a guarantee of impartiality, a presiding arbitrator was chosen from another European country. The initial aim of the arbitration board was to decide on issues regarding working hours and rest periods. However, at a later date, the TAP administration requested that pay issues also be included in the decision-making process. At the end of March 1999, the committee's decision was issued and with it, a completely new agreement containing hundreds of clauses. This was the first such arbitration decision to be issued in Portugal for 25 years.

According to the administration, the cost-related clauses in the arbitration decision imply a PTE 26 billion increase in expenses for the company, a very high figure when compared with the PTE 60 billion involved in TAP-Air Portugal's forthcoming privatisation.

The arbitration decision

TAP has nearly 8,300 employees, with the pilots numbering 432. The company had projected a total increase in costs of PTE 1.135 billion in 1999. In the meantime, TAP and the ground crew trade unions had reached an agreement on a 3% pay increase in March 1999. Now, according to TAP, under the terms of the new agreement for pilots resulting from the arbitration decision, its costs will increase by 94.85%. The agreement contains new terms on basic salary, seniority pay, overtime, landing bonuses, transportation allowance, supplements for seniority both in TAP and in the profession, and supplementary retirement benefits. It also deals with tax issues and eligibility requirements for promotions, and lays down rules and regulations governing working hours and rest periods, among other items.

According to data from the Association of European Airlines (AEA) and the Organisation for Economic Cooperation and Development (OECD) after purchasing power corrections are made, TAP pilots are the second most highly paid in Europe, often earning more than twice as much as the average. To counter this argument, the Civil Aviation Pilot's Union (Sindicato dos Pilotos da Aviação Civil, SPAC) states that if foreign companies which play by the same industrial relations rules can still remain viable, so can TAP.

In addition, knowing that Swissair (the Swiss national airline) was slated to become a privileged partner in the TAP privatisation process, the pilots from both companies had in December 1997 signed an agreement that they would try to bring the working conditions for pilots in both countries more in line with each other. The TAP privatisation proposal, which was published in April 1999 and has already been approved by the cabinet, will allow company employees to become shareholders.

Dispute resolution

In Portugal, during the negotiation or revision of collective agreements, the parties are allowed recourse to three forms of dispute resolution: conciliation, mediation and arbitration. The process is voluntary and can take place only if both parties agree on the manner in which the dispute will be handled (with the exception of compulsory arbitration). Arbitration as a form of dispute resolution empowers a neutral third party - in the form of an arbitration board, made up by one representative chosen by each side, plus an independent arbitrator chosen by both - to render binding decisions regarding the matters under dispute. Arbitration can be either voluntary or compulsory. Compulsory arbitration is used in cases involving state-owned companies, at the request of both parties, or on the advice of the company's governing board, or when either party does not agree on the arbitrator chosen by the other side, or on the choice of the independent arbitrator. In voluntary arbitration, the parties can choose to define their own rules or use those rules laid down in the law. The arbitration award is considered as a collective agreement. In practice, has hardly ever been used in Portugal.

The current situation

The agreement resulting from the arbitration decision for TAP pilots is now awaiting official registration and publication at the Ministry of Labour and Solidarity (Ministério do Trabalho e Solidariedade, MTS), and undergoing legal analysis. TAP, which considers the decision completely untenable, is attempting to appeal against the decision and all its contents on economic and legal grounds. The arbitrator who voted against the award did so claiming that the salaries proposed were exorbitant and clearly out of line with current salaries being paid at TAP and other airline companies.

The SPAC trade union expects to see the agreement implemented and considers the arbitration decision binding. It claims that:

• too much importance is being given to the economic impact of the agreement, since the company is not taking into account the fact that since 1997, every month, it has already been paying part of the amount that has now officially been added to salaries;

• it does not know whether TAP is or is not giving an accurate rendering of its future annual costs; and

• the arbitrators were careful in analysing all the documents of a technical and economic nature that were put at their disposal

The pilots have stated that they are willing to analyse any problems TAP may find with the agreement and help to find solutions, once the agreement comes into effect. Reactions elsewhere have been mixed:

• in parliament, parties have asked the parliamentary committee on public works and utilities to hold a hearing on the TAP arbitration decision with the minister in charge;

• other TAP employees and trade unions within the company held a plenary and have expressed to the Prime Minister their concern over "the future and the viability of the company";

• public opinion seems to believe that the pilot's unions will probably agree to make concessions in exchange for stock options in the company when privatisation gets underway, thus eventually benefiting from the high costs of the arbitration agreement;

• the Spanish pilots' union has expressed publicly its support for the Portuguese pilots.

• Swissair, which had signed an agreement with TAP and is a member of the same Qualiflyer Group alliance of airlines, is proceeding with caution with regard to further negotiations.

Legal framework

As mentioned above, the arbitration board submitted its decision for deposit and publication to the Ministry of Labour and Solidarity's Labour Administration. According to the applicable law, "instruments of collective regulation", including arbitration decisions, which act as collective agreements, require publication in order to become valid. Publication must be preceded by deposit and registration. It should be stressed that the Labour Administration is not authorised to assess the content of arbitration decisions and agreements. Legal supervision belongs exclusively to the courts. The Labour Administration is responsible only for checking if all the formal elements are present when the instrument is deposited (identification of the parties involved, and the date and area covered by the decision) and verifying certain requirements not contained in the document (eg compliance with the minimum period of validity of the collective instrument which is being reviewed). If any of these elements or requirements is missing, the Labour Administration is obliged to reject the deposit without recourse to further assessment..

Once the arbitration decision has been published it can be legally challenged in court only on procedural grounds (gross error or mishandling) or on grounds of content illegality.

Commentary

For many years the social partners have expressed their regret that conditions do not favour using arbitration as a means of collective dispute resolution. In a way, however, this is somewhat of a preconceived notion, since arbitration has always been one of the instruments of dispute resolution provided for by labour law. Moreover, on several occasions during the 1980s, arbitration was used to settle disputes in state-run companies. In these cases, arbitration was carried out under the system whereby the minister in charge can impose compulsory arbitration. Indeed, TAP was referred to compulsory arbitration twice in 1985 to settle labour disputes with both ground personnel and pilots. There are legal limits imposed on recourse to arbitration only with regard to settling individual disputes. The reason is that, in such conflicts, the issues in question are usually rights that the law considers inalienable, and thus not subject to arbitration.

Thus, in practical terms, arbitration has played a small role in Portugal for two main reasons. In the case of collective labour disputes, which were always open to arbitration, mistrust in the arbitration process has always been a stumbling block. This might have been one of the legacies of legislation under the pre-1974 corporatist regime, under which strikes were forbidden and arbitration, controlled and regulated by the state, figured largely in a system where collective autonomy was seriously limited. As for individual disputes, arbitration has played only a small role because it is not permitted in cases where it would be highly relevant (eg dismissal of employees).

The arbitration decision to settle the TAP/SPAC dispute has generated so much debate that it is likely to confirm the mistrust of the social partners with regard to the usefulness of the process. TAP's refusal to abide by the arbitration decision and the continuation of the dispute seem to demonstrate that recourse to arbitration has not helped the parties to overcome their differences. (Maria Luisa Cristovam, UAL, and António Nunes de Carvalho)