Amended Labour Code adopted

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After many months of negotiations and debate involving the social partners, the Polish parliament adopted a revised Labour Code in July-August 2002. The provisions of the amended Code reflect demands made for several years by employers' circles, which have sought more flexibility in employment relationships and lower employment costs in order to improve the competitiveness of the Polish economy. It is quite probable, however, that this reform of the labour market will meet with active opposition from trade unions, which have been against the reforms from the beginning.

A need for fundamental changes to Poland's Labour Code was identified in 1996, when a general amendment was made to the Code, which dated from the communist era (1974). Though the 1996 amendment eliminated outdated legal provisions no longer relevant in the market economy, it was still criticised by business circles as insufficient. The lack of radical changes to the Code at this stage resulted from the compromise approach towards trade unions of the then ruling coalition of the Democratic Left Alliance (Sojusz Lewicy Demokratycznej, SLD) and Polish Peasants Party (Polskie Stronnictwo Ludowe, PSL) - the SLD parliamentary group featured a strong trade union lobby, comprised of numerous MPs and activists from the All-Poland Alliance of Trade Unions (Ogólnopolskie Porozumienie Związków Zawodowych, OPZZ) - and fears of antagonising workers before the parliamentary elections of 1997.

In 2002, the issue of liberalising restrictive provisions in the Labour Code which, according to employers, have prevented the creation of new jobs, has become especially urgent. This is because of the prolonged economic recession (recent prognoses for the increase in GNP in 2002 are increasingly pessimistic, and it is certain that the national economy will not grow by much more than 1%) and growing unemployment (in July, the unemployment rate reached 17.4%). Actions taken by the government to alleviate the social effects of unemployment, especially among young people (PL0208101N), are interventionist in character and are regarded by employers as not being a substitute for permanent modifications in the legal environment for business. The left-wing government which returned to power following the parliamentary elections in 2001 is fully aware of this, and thus presented proposals for amendments to the Labour Code aimed at lowering employment costs and increasing flexibility in employment relationships.

Negotiations in the Tripartite Committee

The Minister of Labour and Social Policy, Jerzy Hausner, when taking over the post in autumn 2001, declared his intention of introducing thorough changes to the Labour Code. Considering that such a serious reform should be introduced with the acceptance of all the significant institutional partners, the Minister initiated a discussion in the national Tripartite Committee (Komisja Trójstronna). In order to do so, the Tripartite Committee, having been rendered obsolete in 1999 by the withdrawal of OPZZ, had to be reactivated. Negotiations were then conducted with the participation of the employers' organisations (PL0209104F) - the Confederation of Polish Employers (Konfederacja Pracodawców Polskich, KPP), comprised of large, mainly public enterprises, the Polish Confederation of Private Employers (Polska Konfederacja Pracodawców Prywatnych, PKPP), comprised of small and medium-sized enterprises, and the Association of Polish Crafts (Związek Rzemiosła Polskiego, ZRP) - and the two largest trade union confederations - OPZZ and the Independent and Self-Governing Trade Union (Niezależny Samorządny Związek Zawodowy Solidarność, the Independent and Self-Governing Trade Union (Niezależny Samorządny Związek Zawodowy Solidarność, NSZZ 'Solidarność').

The negotiations seemed promising at first. Early in 2002, it was reported to the media that an agreement seemed close, and OPZZ, PKPP and ZRP were working on a common position. Finally, however, in February OPZZ rejected any possibility of changes, despite the fact that the changes then on the table were rather modest - including, for example: an increase from two to five in the permissible number of successive fixed-term contracts; a reduction of pay premia for overtime work to 50% above normal pay; an exemption for small companies employing up to 20 people from the obligation to introduce 'work rules'; the exemption of such companies from provisions on collective redundancies; and a precise definition of employment relationships, in order to limit the increasingly common use of civil law contracts to regulate employer-employee relationships instead of employment contracts proper (this practice lowers costs for the employer but creates many difficulties for the employee). 'The rejection of these proposals was decided by the two most controversial proposals, concerning the reduction of overtime work rates and the possibility of concluding a larger number of fixed-term contracts,' stated OPZZ’s leader, Maciej Manicki, in justification of its decision. NSZZ 'Solidarność' adopted a similarly negative position.

Government proposals and responses

The lack of approval on the part of trade unions forced the government to formulate proposals for amendments to the Labour Codes on its own. The most important changes planned involved the following:

  • allowing fixed-term employment contracts to be concluded up to a maximum period of three years (previously nine months);
  • granting only employees who have been given notice of dismissal two or three days off work in order to search for a job during the notice period (this previously also applied to employees who resigned);
  • the introduction of 'substitution agreements', allowing for employees to be temporarily replaced during justified absence, such as maternity leave;
  • a reduction in the basic overtime pay premium to 50% (from 150%);
  • restricting the obligation to establish environmental, health and safety services to enterprises with over 100 employees, with smaller companies being able to outsource such services;
  • extension of the 'settlement period' for payment of wages from three to four months (and even up to 12 months under extraordinary circumstances);
  • linking pension/retirement compensation to length of service with a given employer (at least three years);
  • making the right to compensation for dismissal dependent on length of service with a given employer;
  • making collective agreements valid for only up to six months after their expiry (previously, expired collective agreements were valid until a new one was concluded);
  • the possibility of introducing interrupted daily working time (formerly prohibited); and
  • simplification of the obligation to record working time.

The regulations concerning sick leave were to remain unchanged, with the employer still bearing the cost of sick pay for the first 35 days of absence.

The governing coalition was supported by the opposition liberal Citizens’ Platform, (Platforma Obywatelska, PO) which presented its own project before the governmental proposals reached parliament. The PO's proposals were even more radical: there would be no limitations to the conclusion of fixed-term contracts; employers would be able to terminate an employment contract in the case of the employee being absent from work for longer than a month; the employer’s obligation to pay for sick leave would be limited to seven days, with the Social Insurance Company (Zakład Ubezpieczeń Społecznych, ZUS) paying 75% of basic pay for the remaining days (35 in total); the first day of sick leave would not be paid, or could be treated as holiday (up to five days of holiday entitlement could be used up in this way per year); the number of permitted overtime hours would increase to 240 per worker per year (up from 150); and an enterprise in danger of bankruptcy would be able to suspend some provisions of the Labour Code for a maximum period of six months.

Employers welcomed the legislative initiatives of both the government and the opposition. Simultaneously, the social partners made efforts to work out a consensus. The leader of OPZZ, together with representatives of the PKPP and ZRP employers' organisations, signed a statement in April, which contained their objections to the proposed measures on issues such as the termination of collective agreements, holidays, compensation and remuneration for overtime work. The parties agreed, on certain conditions, on the introduction of 'substitution agreements'. NSZZ 'Solidarność' was clearly opposed to the government's plans: the proposals were regarded as an infringement of employees’ rights, and major protest actions were announced. This was demonstrated by a public protest in Warsaw in late April, which included several thousand participants (PL0206101N).

New Code adopted

The protests, however, did not stop the legislative process, which was completed with the adoption of a new Labour Code by the lower chamber of parliament (the Seym) on 26 July 2002. The law was subsequently voted on by the upper chamber, the Senate, which also, although not unanimously, adopted the law on 7 August 2002. The legislative process was finalised with the signature of the law by the head of state on 26 August 2002. While the new legislation was being considered, the trade unions raised numerous objections, focusing in particular on the provision depriving employees of remuneration for the first day of sick leave.

The table below sets out the main changes introduced in relation to the previous version of the Labour Code.

The main 2002 amendments to the Labour Code
Issue Old Labour Code New Labour Code
Employment contracts Employment relationship defined as: performance of job by an employee for the benefit of an employer under the supervision of the latter, at a time and place indicated by the employer. As before, with addition of new paragraph precluding the replacement of employment contracts with civil law contracts (see main text above).
Sick leave Employees receive 35 days of paid sick leave, paid by the employer. Employees receive 33 days of paid sick leave, paid by the employer. If the sick leave last up to six days, the first day is not paid, unless the employees concerned use their holidays (in which case they receive remuneration). Four days' holiday per year may be used for this reason. If the sick leave lasts more than seven days, all days are paid.
Fixed-term employment Up to three fixed-term contracts of up to three months each permitted. If employment continues after the third such contract, an open-ended contract is presumed to exist. Employment of workers on fixed-term contracts is possible without any time limits until Poland’s accession to the EU. The previous provisions have been suspended.
Substitution agreements No provision for such agreements. During the justified absence of an employee - eg sick leave and maternity leave - it is possible to appoint another person in their place, on the basis of a 'substitution agreement'.
Overtime work First two hours of overtime work remunerated at a premium of 150% on top of normal pay. Each subsequent hour on weekdays, as well as all overtime at nights and on Sundays and holidays, remunerated with a premium of 200%. Each hour of overtime work on weekdays, as well as Sundays and holidays where these are normal working days, remunerated at a premium of 50% on top of normal pay. Overtime at nights, and on Sundays and holidays which are normally free, remunerated with a premium of 100%.
Interrupted working time Unpaid interruptions in daily working time not permitted (except for transportation). Depending on the type of job, the employer may introduce interrupted daily working time, with a break of up to five hours which is not calculated as working time.
Breaks during working day If employees work at least six hours in a 24-hour period, they have the right to a 15-minute break, counted as working time. It is possible to introduce a one-hour daily break, not counted as working time.
Days off for job seeking All employees under notice of termination of employment - through both dismissal and resignation - receive paid days off work to seek a job - two working days under a one-month notice period, three working days under a three-month notice period. Employer no longer obliged to provide days off where employee resigns (days off still apply to dismissed workers).
Collective agreements and other external acts regulating workers’ rights and obligations Collective agreements (and other 'external' regulations) cannot be less favourable for workers than those established in the Labour Code and other normative acts. Employers in an extremely difficult financial situation can, by agreement with company trade union organisations, suspend the application of a collective agreement (or other external regulations) up to three years.

Commentary

The most important aims of the architects of the reform of the Labour Code have been attained. The new Labour Code brings hope of improving the situation in the labour market, but this optimism is guarded for at least two reasons. The first relates to the approach of trade unions, especially NSZZ 'Solidarność', which during the negotiations in the Tripartite Committee consistently voiced apprehension over the proposed changes, and, after the completion of the legislative process, is now calling for protests against the new regulations. Such protests include a claim presented to the Constitution Tribunal (Trybunał Konstytucyjny, TK) that the law is unconstitutional; hence the Tribunal is to study the compatibility of the new provisions with the Constitution (if the decision is favourable to the claiming party, the entire legislative procedure would have to start anew). The more moderate OPZZ also faces divisions related to the liberalisation of the labour market and the role of OPZZ in its implementation (the number of criticisms of its leader, Maciej Manicki - accusing him of excessive compromise and abuse of the trust of the trade union’s rank and file - is growing). Finally, the significance of other forms of representation of employee interests is growing, triggered by the drop in trade union membership (PL0208105F).

The other issue remaining unresolved relates to the effectiveness of the ruling coalition as concerns the implementation of further elements of its legislative package entitled 'First of all - entrepreneurship' (the reform of labour law is only a part of the package) and of the 'anti-crisis' strategy of Vice-Prime Minister Grzegorz Kołodko (PL0208102N) aimed at stimulating the economy. (Jan Czarzasty, Warsaw School of Economics (Szkoła Główna Handlowa, SGH) and Institute of Public Affairs (Instytut Spraw Publicznych, ISP).

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