Government to reform collective bargaining rules

Last June the government issued a decree to reform the collective bargaining regulations after the social partners had failed to reach an agreement despite months of negotiations. Reform was seen as a necessary step to halt the rise in unemployment. It is hoped that by making the introduction of more flexible working conditions simpler and speedier, employers will be less likely to resort to mass dismissals in response to the economic crisis, and jobs will be preserved.

Introduction

The disagreement between social partners over collective bargaining reform has obliged Spain’s government to unilaterally introduce reform of the collective bargaining regulations, believed to be necessary in order to preserve jobs against a backdrop of economic crisis and rising unemployment. The new decree aimed to tackle two particular problems of the current collective bargaining regulations.

• The structure of collective bargaining is viewed as atomised and fragmented, with a high number of collective agreements that overlap in different domains.

• The government believes that the collective bargaining system did not allow companies to adapt working conditions (especially wages and working time) to changes in the economy or fluctuations in production or orders. This has resulted in the use of external flexibility measures, such as mass dismissals, rather than internal flexibility measures that might preserve jobs, such as functional or working time flexibility.

Collective bargaining before the reform

Reform in 1994, which did not have the approval of trade unions, led to a major change in collective bargaining in Spain. Certain elements previously regulated by the Workers' Statute, such as wages and working time, were transferred to collective bargaining. The aim was to increase the adaptability of firms by reducing the public regulation of such issues in what was described as a ‘controlled and conditioned deregulation’.

In the Spanish structure of collective bargaining, multi-company level agreements are predominant, and provincial and national sectoral agreements cover the majority of workers (ES0803029Q). In contrast, company-level agreements, despite having gained greater importance, cover fewer workers (ES0702019I).

The social partners have not created a space to negotiate flexibility and to adapt working conditions to the shifting economic situation of enterprises. As a result, debate is now focused on how collective bargaining can be adapted to a context of economic crisis.

Bargaining process

A new agreement on collective bargaining was signed in February 2010 by the Spanish Confederation of Employers’ Organisations (CEOE), the Spanish Confederation of Small and Medium-Sized Enterprises (CEPYME), the General Workers’ Union (UGT) and the Trade Union Confederation of Workers’ Commissions (CCOO) for the 2010–2012 period (ES1002019I).

The agreement committed the social partners to the modernisation of collective bargaining. This process was first delayed when the government introduced new measures to cut the public deficit, which were strongly opposed by the unions (ES1006011I), and then when the government issued a decree reforming the labour market, to which the unions responded with a call for a general strike (ES1010011I).

Some months after bargaining resumed, however, it seemed that the social partners were close to reaching an agreement. The main focus of talks was the introduction of measures to improve the internal flexibility of Spanish companies as a result of what appeared to be a greater understanding between the unions, and the election in December 2010 of the new President, Joan Rosell (ES1101011I).

However, the bargaining process broke down just as it was about to be concluded, as a result of a proposal made by employers’ organisations belonging to the Madrid Employers’ Confederation (CEIM) and backed by CEOE and CEPYME.

CEOE and CEPYME maintain that, in spite of a common general approach, problems arose when concrete measures needed to be identified. Employers’ organisations mentioned a number of factors on which the partners could not agree including:

• the extended validity of expired collective agreements (known as ‘ultra-actividad’, explained in more detail below);

• the ease with which small firms might be able to back out of payment agreements;

• flexibility measures;

• the wish of employers to link wages to productivity rather than to the consumer price index.

UGT and CCOO claim that the final proposal presented by CEOE and CEPYME did not reflect what had been agreed during negotiations, and had been changed in response to internal problems within the employers’ organisations. They also suggest that the employers hope to delay so that they can conclude reform with a new government more sympathetic to their views. Recent local and regional elections indicate that the conservative People’s Party is likely to win the next general election in Spain, due to be held on 20 November 2011.

Elements of controversy

The main areas of debate and disagreement are set out in the guidelines proposed by the Madrid employers (in Spanish, 1.25Mb PDF) and the unions (in Spanish, 163Kb PDF). They deal with the following issues.

• The levels and the structure of collective bargaining: employers’ organisations argue that the current structure of collective bargaining does not allow companies to adapt to fluctuations in the economy and production. They want to give company-level agreements more weight than multi-company level agreements, so that firms are better able to adapt local working conditions to the prevailing economic climate. The unions, however, believe that sectoral agreements are key instruments in the coordination of wages and working conditions and the best way to ensure good working conditions.

• ‘Ultra-actividad’: this principle, established in article 86.3 of the Workers’ Statute, states that a collective agreement that has expired will nevertheless remain in force until a new agreement is reached. Employers’ organisations believe it is necessary to establish exactly how long an expired collective agreement can be maintained. They propose that if a new agreement is not reached within six to eight months, general conditions or sectoral agreements should be applied.

• Modification of working conditions: employers’ organisations suggest that it should be possible to modify a collective agreement, temporarily or without the approval of workers’ representatives, when circumstances justify such a change. Unions are willing to discuss internal flexibility, but only if workers are given more information about their company’s economic and production situation.

• Opting-out clause: the employers’ organisations want to make it possible for firms to back out of their obligation to comply with agreed pay levels when the economic situation worsens. The unions believe that joint commissions are the most appropriate bodies to decide such matters.

Unilateral reform imposed by the government

The government’s response has has been to modify the collective bargaining regulations, in the absence of any tripartite agreement, stating three main objectives:

• to bring collective bargaining closer to the company level and sectoral situation;

• to streamline collective bargaining, making it easier for firms to adapt to local changes in the economic and employment situation, while maintaining security for workers;

• to adapt collective bargaining to new economic realities while supporting internal flexibility negotiated with workers’ representatives.

The government’s reform envisages a change in the structure of collective bargaining, giving greater priority to company-level agreements over multi-employer and provincial level agreements in matters such as basic pay and pay supplements, overtime, working time and shift work distribution, occupational categories, type of contracts and work-life balance measures.

The reform also obliges collective agreements to include mechanisms to reduce the period between the completion of one agreement and the introduction of a new one. The aim is that all collective agreements must establish deadlines for the negotiation of a new agreement – within eight months if the duration of the previous agreement was less than two years, or within 14 months if more than two years – and the development of voluntary mediation procedures. As before, the latest collective agreement will remain in force if a new agreement is not reached.

The decree also aims to enforce internal flexibility by establishing that collective agreements must identify a minimum and maximum limit of working time that can be distributed irregularly throughout the year (it established 5% of annual working time if no agreement is reached). It also makes it possible for companies to set up temporary periods of mobility between jobs within their establishments.

Reaction of social partners

The employers’ organisations say the reform has not made collective bargaining more flexible and does not allow companies to adapt to new working situations. They have strongly condemned the maintenance of the ‘ultra-actividad’ principle, which they believe undermines the capacity of firms to adapt working conditions to changing contexts.

In a joint document (in Spanish, 65.5Kb PDF), the unions have expressed their approval of the preservation of ‘ultra-actividad’, but state that the reform gives greater leeway to the employer in areas such as working time and functional mobility, and does not foster the participation of workers’ representatives in decisions of internal flexibility.

Both unions state that legal reforms adopted against the will of the trade unions and employers’ organisations are bound to fail, and only agreements between such organisations will further the objectives set by the Government. CCOO and UGT argue that the prevalence of company-level agreements on basic matters such as wages will bring about inadequate regulation of working conditions at company level. This will damage workers’ interests and jeopardise the cohesion of the sector by allowing firms to drive down wages and reduce the quality of working conditions.

Martí López, CIREM Foundation