Conflict over redundancies at Telekomunikacja Polska

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In March 2005, the management of Telekomunikacja Polska SA., the Polish state-owned telecommunications operator, announced up to 3,500 redundancies out of a workforce of 30,000. In response, a majority of the workforce voted in favour of industrial action in a ballot. Talks broke down and protest actions began in April, following which the company increased the package on offer for employees taking voluntary redundancy and cut the number of planned job losses.

Although its monopoly position has recently been opened to competition by other telecoms providers, Telekomunikacja Polska SA (TP SA) continues to be Poland’s dominant fixed-line telephony operator and the largest provider of internet connections. The process leading to TP SA’s emergence in its present form commenced in 1991, with the separation of the telecommunications component of the state-owned postal and telecoms operator, Polska Poczta, Telegraf i Telefon. The single-shareholder State Treasury company TP SA commenced operation in January 1992. Since 1998, TP SA’s shares have been publicly listed. Amendments to the Communications Act were enacted in 1999, and it no longer requires that the State Treasury holds at least 51% of TP SA stock. Since mid-2000, TP SA has a strategic partner in France Télécom, which took up a stake approaching 48%; the State Treasury’s stake in TP SA has shrunk to 3.87%.

TP SA now offers the full range of modern telecommunications services, comprising - in addition to fixed-line telephony - data transmission, mobile services and internet services. Fixed-line telephony continues to be the single largest category of TP SA’s operations; it has some 10.5 million land-line subscribers (PL0411106S). Since 2001, the TP SA group has reduced employment from more than 57,000 people to 30,000; overall, the successive redundancies have been carried through without major conflicts, possibly thanks to the fact that the company offered generous severance packages in accordance with the relevant collective agreements.

New redundancies at TP SA

On 3 March 2005, the directors of TP SA, in compliance with the relevant procedures, served notification that another wave of redundancies is imminent to the 20 trade union organisations active within the company as well as the Labour Offices (Powiatowe Urzędy Pracy, PUPs) of the counties in which the TP SA group has operations. The notifications elaborated on the reasons underlying the anticipated redundancies - first and foremost, falling revenues and the resulting need to reduce the company’s operating costs. The redundancies were to extend to a maximum of 3,500 employees, ie over 10% of the TP SA workforce.

On 18 March 2005, the directors of TP SA opened negotiations with the unions with an offer whereby those employees who resign their jobs voluntarily would receive additional compensation. Those employees who decide to leave by the end of June 2005 (counted in reference to effective termination of the employment contract) would receive not only the benefits laid down in the Labour Code and in the relevant collective agreement, but also an additional payment corresponding to three months' average basic pay.

Conflict emerges

In a strike referendum held on 16 March, out of around 60% of TP SA employees participating, 92% voted in favour of industrial action. The union leaders took care to emphasise, however, that this result in itself did not mean that a strike was inevitable; they stated that future developments would depend on the outcome of talks with the management, and that they wanted to keep all options open.

In the course of consultations, the unions alleged that TP SA had breached the procedure that must be followed in the lead-up to collective redundancies, as laid down in the 2003 Act regarding the detailed principles governing termination of the employment relationship on grounds not attaching to the employees (PL0306101N). The unions alleged that TP SA’s directors failed to hold talks with the union organisations - geared at avoiding the contemplated redundancies, or at least at limiting them - before announcing the job losses. The unions also took issue with the economic, organisational and technological arguments cited in support of the redundancies; one of the points raised to counter them was the fact that, in 2004, TP SA ranked among the four Polish companies posting the best financial results.

On 24 March, representatives of the unions, including the Inter-Employer Union Organisation of Telecommunications Workers affiliated to the Independent and Self-Governing Trade Union Solidarity (Niezależny Samorządny Związek Zawodowy Solidarność, NSZZ Solidarność) - the strongest union at the company - broke off talks with TP SA management, accusing it of keeping up a pretence of dialogue while surreptitiously working to effect the redundancies as planned. On 30 March, the unions decided to commence protests. A strike committee was convened, a hunger strike was launched at TP SA headquarters in Warsaw, and the start of a full-blown strike was scheduled for 5 April. The beginning of the strike was moved back to 11 April in deference to the death of Pope John Paul II.

On 31 March, letters were dispatched to parliamentary groups and to the Prime Minister, appealing for mediation and for no sale of the TP SA shares held by the State Treasury. Representatives of the TP SA workforce met members of government and a demonstration was held outside the company’s head office in Warsaw. On 4 April, the situation at TP SA was discussed by the social dialogue 'problem team' of the national Tripartite Commission for Social and Economic Affairs (Komisja Trójstronna do Spraw Społeczno-Gospodarczych) (PL0210106F), but no concrete outcome was reached. Representatives of the communications industry section within the Trade Union Forum (Forum Związków Zawodowych, FZZ), one of the three nationwide union organisations represented on the Tripartite Commission (PL0210106F), embarked on a parallel mediation mission of their own accord, and eventually drew up a protocol together with TP SA management that provides for voluntary redundancies.

On 11 April, TP SA employees nationwide held an hour-long strike commencing at 14.00, although provision of telecoms services continued unaffected. In many cities across the country, union activists organised meetings outside the local TP SA offices. The hunger strike in Warsaw continued.

Reaction of board of directors

More than a month following the announcement of the collective redundancies, the directors of TP SA modified their original proposals. All employees who decide to leave the company before 21 April will now receive, in addition to the ordinary severance benefits mandated by law and the collective agreement, an even larger additional payment. With all elements factored in, the severance package per employee now approaches PLN 50,000 - an amount comparable to that offered under a previous 'social package' in effect until December 2004. At the same time, the directors proposed that the number of job losses be reduced by 600, leaving the final figure at 2,845.

Commentary

The conflict at TP SA has actually been continuing since 2002, when the unions began a collective dispute with the directors. At that time, 17,000 jobs were cut as part of the restructuring process. This was to be the final wave of mass redundancies, with the directors offering assurances to that effect as late as in the second half of 2004. Some union leaders maintain that the decision to make redundant another group of employees stems from the rejection by France Télécom of the budget presented to it by TP SA in late 2004.

Over the past few years, TP SA has been keeping up a healthy rate of increase in revenues from sale of goods and services - in excess of 10% annually, in some instances. 2004 did witness a pronounced drop in sales compared to 2003, by 6%, but the figure was still a very respectable one; profits, meanwhile, swelled by 125% compared with 2003.

Some union leaders argue that the management of TP SA and of France Télécom, hoping to compensate for the fall in revenue, are following the path of least resistance and want to trim employment at short notice. They calculate that, even if 4,000 employees were dismissed from TP SA, the resulting savings would cover a mere 18% of the drop in revenue; they also maintain that there is no justification in scaling back employment, given the huge net profit posted by TP SA in 2004.

It should be borne in mind, however, that one of the factors contributing to 2004’s windfall for TP SA was adaptation to market conditions prevailing in the European Union. The telecommunications sector in Poland is indisputably in need of major technological changes, for instance in the field of internet service provision. Regard must also be had for the prices charged by TP SA for its services; these continue to be very high in comparison with other EU countries. (Jacek Sroka, Institute of Public Affairs [Instytut Spraw Publicznych, ISP] and Wrocław University ([Uniwersytet Wrocławski, UWr])