Ruling highlights dual pay scale debate

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In late February 2003, the High Court of Catalonia ruled that a 'dual pay scale' laid down in the Nissan company collective agreement for 2002-3 - whereby new recruits received lower pay than existing employees doing the same jobs - was invalid. This ruling highlighted disagreements between the CC.OO and UGT trade union confederations over such dual pay scales, and raises questions about bargaining on flexibility.

Over the past seven or eight years, a number of collective agreements have been signed introducing a dual pay scale (doble escala salarial) (ES9705209F), mainly in large companies. These agreements provide for newly-recruited workers to receive a lower rate of pay than existing workers performing the same work on the same job grade. Typically, the new workers earn 10% to 30% less than workers who are already in the company, without counting seniority bonuses or other items related to seniority. This concession to employers' demands has generally been compensated for in two ways: the creation of new jobs or the conversion of temporary contracts into open-ended ones; or additional annual pay increases for the workers on the lower pay scale until they reach parity with the other workers after an agreed period (eg three to five years).

These agreements have often been accompanied by disputes between trade unions and court cases. They have also proved difficult to control because much can change over their typical three- to five-year lifetime. Indeed, some disputes have arisen because companies have refused to abolish the dual pay scale when they start to make substantial profits instead of losses - an example being the SEA Tudor auto components firm in 1999 (ES0002278F). However, the most severe dispute is that which has recently arisen over a dual pay scale laid down in the 2002-3 collective agreement at the Spanish subsidiary of Nissan, the Japanese-based motor manufacturer, which is located in Barcelona.

The Nissan case

The dual pay scale at Nissan has several peculiar features. The 2002-3 company collective agreement establishes that new recruits will earn less than those workers already employed in the same category doing the same jobs. An unusual formula is used for this reduction: two bonuses formerly earned by all workers were abolished and, when the agreement was signed, an equivalent amount was guaranteed individually to the workers already on the workforce (but not new recruits), though this was not stated in the text of the agreement. The agreement offers no guarantee of a return to a normal pay situation if the economic situation of the company changes, and no compensatory measures in terms of the creation of new jobs or the conversion of temporary contracts into open-ended ones.

Therefore, those workers recruited at Nissan from 26 June 2002 (when the agreement was signed) have a contract providing for them to receive indefinitely an average of 17% less pay than actually received by existing employees. As mentioned above, no compensatory measures were offered in terms of employment, though a previous agreement included a promise that new workers would be recruited from a pool of almost 1,000 workers who have previously had temporary contracts in the company. There are investment plans for the production of a new Terrano model which, if carried out, will enable these new recruitments, though there is no commitment to linking this with the dual pay scale.

The Trade Union Confederation of Workers’ Commissions (Comisiones Obreras, CC.OO) and the General Confederation of Labour (Confederación General del Trabajo, CGT), refused to sign the Nissan agreement due to this clause, but the agreement was valid as it was signed by the General Workers’ Union (Unión General de Trabajadores, UGT) and the Independent Trade Union of the Nissan Group of Companies (Sindicato Independiente del Grupo de Empresas Nissan), which have a majority on the Nissan workers' committee. CC.OO brought a court case over the agreement and in late February 2003, the High Court of Catalonia (Tribunal Superior de Justicia de Catalunya) ruled that the dual pay scale was invalid. The judgment did not rule the whole agreement to be invalid, but found that there was no justification for the dual pay scale: it does not even offer net job creation, because new workers will merely replace those taking retirement or early retirement.

This is not the first time that dual pay scales have been challenged in court, and a varied body of case law has been created. For example, in 1999 the Spanish High Court backed the dual pay scale in a case involving the Caja de Ahorros de Asturias savings bank, which established lower basic pay and an objectives-based pay system for workers newly employed outside the Asturias region (ES9904119N). The Court found that there was no implication of discrimination in the agreement, as the new system of pay by objectives for workers outside Asturias allowed them to obtain the same pay as the workforce in Asturias.

Differences between trade unions

This is not the first time that differences have arisen on this topic between CC.OO and UGT, or that CC.OO has taken an agreement of this type to court, because the general policy of unity of action between Spain's two main union confederations does not rule out disagreements at company level. However, on this occasion the dispute was more important because of the size of the company and the proximity of elections to the Nissan workers' committee. In view of the court ruling it appears that many workers withdrew their vote from UGT in the subsequent election, but not to a sufficient extent to change the majority that signed the agreement.

CC.OO and CGT appealed to 'class solidarity' and to the perceived injustice of some workers permanently earning less pay for the same job in the same category, merely because they entered the firm later. UGT stated that the saving in wage costs achieved through the dual pay scale would ensure the stability of the motor manufacturing industry in the region and lead to new jobs as the new investments planned by Nissan are made. It believes that the position of CC.OO and CGT threatens these investments. The dispute between CC.OO and UGT has been on a major scale, and commentators have stated the two unions should treat this topic with care, because pay differences are a key issue in collective bargaining.

The company's reaction

Nissan initially reacted to the court ruling by stating that it would freeze the pay increases agreed for 2003 for its 2,400 employees. However, after CC.OO reported this announcement to the Labour Inspectorate (Inspección de Trabajo), the company stated that it would respect the provisions of the agreement but would appeal against the Catalonian High Court ruling. It also stated that the new situation may threaten the manufacture of the new Terrano model in Barcelona. Critics claim that this threat is disproportionate, bearing in mind that the agreed measure would only have reduced the pay of a few hundred workers by 17%, and claim that the company's aim may have been to pave the way for greater pay differentiation strategies in the future.

Commentary

The background to the Nissan dispute is the risk that negotiating flexibility may lead workers' committees to lose control of the situation, and they must therefore tread carefully. Unlike in other cases, the Nissan dual pay scale does not involve a 'solidarity pact' between workers, whereby some or all workers accept losses in exchange for the greater good of workers as a whole. Furthermore, the clearest difference between the Nissan case and similar deals elsewhere is that no fixed period was agreed for the measure, and it was therefore uncontrollable.

This topic and others are leading to disagreements between and within trade unions, mainly due to different points of view on the extent to which flexibility should be negotiated, and the guarantees that must be obtained in exchange. It is obvious that certain elements of flexibility must be negotiated, but two conditions seem reasonable: that flexibility measures should affect the whole workforce or be limited in time, because this is the only way to control or rectify the process; and that some compensatory measures should always be offered. Finally, the case of Nissan has shown that the culture of competitiveness and individualism is gaining ground among workers. As long as workers are not affected they do not perceive the harshness of such restructuring, and are therefore favourable or indifferent to measures that affect others. The crisis is such that only those who feel its brunt are really aware of it. (Fausto Miguélez, QUIT-UAB)