Is the Luxembourg model of industrial relations in danger?

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The "Luxembourg model" of industrial relations is founded on institutionalised negotiation and social dialogue at all levels, but in the late 1990s it is not free from attacks triggered by the globalisation of capital and product markets. This article explains how the model works and assesses its future prospects.

For proponents of the "Luxembourg model" of industrial relations, the Grand Duchy appears to be one of the few countries where 60 years of negotiations and dialogue have provided the foundation for industrial peace, in exchange for social progress, social justice and respect for working people. Below, we examine the main features of the model, and its future prospects in a changing world economy.

The social partners' representative structures

Professional Chambers

The law of 4 April 1924 organised the representation of employers and workers in terms of socio-professional categories, by setting up professional "chambers" (chambres professionnelles) elected by secret ballot.

These professional chambers are organically linked to the procedure for adopting laws and to regulations for implementing laws, insofar as they must be invited to give an opinion on any legislation that may affect them.

Trade unions

Article 11 of the Constitution guarantees trade union freedoms, and the law of 11 May 1936 guarantees freedom of association in all sectors. ILO Convention No 98 on the right to organise and collective bargaining (1949) was ratified on 10 February 1958; it gives workers the right to protection from all forms of discrimination that threaten trade union freedom in the context of employment.

Economic and Social Council

The Economic and Social Council (Conseil économique et social) was established by the law of 21 March 1996.

The Economic and Social Council consists of 35 titular members and the same number of substitutes - of these, 28 are employer and employee representatives appointed by the Government Council on the basis of recommendations made by the most representative professional organisations.

The Economic and Social Council is one of the government's consultative bodies; it is charged with examining economic, financial and social issues that concern either a number of economic sectors or else the entire national economy in specific areas.

Employee committees/works councils

The Law of 18 May 1979 on reform of employee committees/works councils (délégations du personnel) places a duty on all companies that regularly employ more than 15 workers under a contract of employment to arrange for the appointment of such committees.

The legislation gives employee committees/works councils the general task of safeguarding and defending the interests of the company's employees with regard to conditions of employment, job security and social issues. The role of the committee/council embraces both individual and collective issues, and its job is to prevent or resolve any individual or collective employer/employee disputes that may arise.

Joint committees

Company joint committees (comités mixtes d'entreprise) were introduced under the law of 6 May 1974. They are made up equally of employer and employee representatives, and cover all private-sector companies based in Luxembourg and which employ an average of 150 or more workers over a three-year reference period.

The company's managing director must inform and consult the joint committee at least once a year on the company's current and prospective staffing needs, and on any training, refresher training and retraining implications for employees.

The law gives the joint committee the general right to deliver an opinion on economic and financial decisions that could have a serious effect on the structure of the company and levels of employment. The committee also has the right to take part in joint decision-making (codécision) on the following: the introduction or running of technical equipment intended to monitor the behaviour and performance of employees at work; the introduction of, and alterations to, measures relating to occupational health and safety and the prevention of workplace accidents; the drawing up of, and amendments to, general criteria affecting the selection of staff for promotion, transfer and dismissal and at the recruitment stage: and the drawing up of, and amendments to, general criteria used in staff assessments.

Board representation in limited companies

The law of 6 May 1974 introduced workers' representation at board level for: all companies based in Luxembourg and employing 1,000 workers over a reference period of three years; and all companies based in Luxembourg, irrespective of the size of the workforce, with a state shareholding of at least 25% or a government concession to carry out their main area of activity. The single-tier board of directors (conseil d'administration) consists of a minimum of nine members, and the law ensures that employees are represented by three of these members.

Legislative tools

The law on collective agreements

The law of 12 June 1965 on collective agreements grants national representative status to trade unions that can also establish their importance through the size of their membership, their activities and their independence.

Any employer requested by a representative union organisation to take part in negotiations aimed at concluding a collective agreement is under a statutory duty to begin talks. When the social partners cannot come to terms on a collective agreement, they may not resort to strike action or a lock-out, but instead must follow the conciliation procedure involving the National Conciliation Office (see next point).

The National Conciliation Office

The National Conciliation Office (Office National de Conciliation) is made up of the Minister of Labour or his or her delegated substitute as chair, plus three employers' representatives and three employees' representatives appointed by the Minister on the recommendation of professional organisations for employers, and of trade unions for employees.

The Office's job is to resolve collective disputes through an agreement reached by the representatives and the parties to the dispute; such an agreement is accorded the status of a new collective agreement. When the chair of the National Conciliation Office is of the view that all attempts at conciliation have been exhausted, a "statement of non-conciliation" is presented, which sets out the disputed points. The law states that the conciliation procedure involving the National Conciliation Office is mandatory.

The law on strikes and lock-outs

Workers' right to strike is not set out expressly in the Constitution or in any legislation. However, case law has established that "participation in a legitimate and legal workplace strike is an implied right for workers under Article 11(5) of the Constitution."

No strike or lock-out may take place until all avenues under the National Conciliation Office procedure have been exhausted. A strike may only be called after a "statement of non-conciliation" has been presented to the National Conciliation Office, and any illegal action may be punished by criminal penalties. Without going into the procedural details, it is important to bear in mind that strike action can take place within the law only if it is supported by a nationally representative trade union

How the model is organised and how it functions

As can be seen from the above, Luxembourg's social partners meet in session on an almost daily basis. As well as the bodies and procedures described above, the social partnership also operates at many other levels.

One example is the Tripartite Coordinating Committee (Comité de Coordination Tripartite). It is made up of four representatives each from the Government, employers and the most representative trade unions at national level, and plays an important role with regard to government measures to stimulate economic growth and maintain full employment. The Committee was set up under the terms of the law of 24 December 1977, and is required - after an examination of the overall economic and social situation and an analysis of the nature of unemployment - to give an opinion before a decision is taken on any of these measures. The Committee may also draw up its own proposals.

Without going into the precise detail of their activities and functions, tripartism informs the management structures and consultative and monitoring bodies of several other fields and institutions. They include:

  • social security - sickness funds, pension funds, the National Family Allowance Fund (Caisse nationale des prestations familiales) and the National Solidarity Fund (Fonds national de Solidarité);
  • the National Credit and Investment Society (Société nationale de Crédit et d'Investissement);
  • the Low-Cost Housing Fund (Fond pour le Logement à Coût modéré); and
  • the Comité de Conjoncture- a government committee that gives monthly reports on such matters as unemployment figures, and gives opinions to ensure that companies in financial difficulty receive "partial unemployment allowances".

Given that the above is not a complete list, one can only conclude that the social partners are virtually "condemned" to perpetual dialogue.

It should not be forgotten that the current structure is the result of a long process in which the social partners and successive governments alike have invested efforts, ideas and resources, and produced two-way concessions that have only been possible because of mutual respect between the parties and the existence of a single aim: the achievement of industrial peace in exchange for social progress.

An excellent description of the Luxembourg model appears in an article by John Castegnaro, the president of the OGB-L trade union confederation in the June 1997 issue of his organisation's journal, Actualités: "It is on the basis of the Luxembourg model that the National Tripartite Committee has been able to realise its action plan for full employment and economic growth, while: preventing mass unemployment and poverty, unlike in all other countries; introducing political stability; and offering a spirit of innovation whereby not only was the crisis [ie the crisis years of 1970-80] overcome, but a successful economic and employment policy has been implemented."

Is the model in danger?

Clearly, the age of economic globalisation in the "neo-liberal" 1990s has not come to a halt at the Luxembourg frontier; indeed, the pursuit of greater competitiveness and higher productivity has become so well established that phrases such as "rationalisation" "staff lending" (prêt de main d'oeuvre- whereby employees of a company in financial straits may, with ministerial permission, be "lent" to another company), "staff cuts" and of course "outsourcing" are now part of the language.

Furthermore, no headway has been made on some issues of national importance, which have in fact been blocked by the social partners because of fundamental differences of opinion. One area where agreement has been particularly difficult to achieve is working time, and there is now a tendency to impose "pre-conditions" in talks. Employers in the artisanal sector have been especially unwilling to embark on negotiations without first tackling the issue of flexible working hours (LU9708118N). An employee-side counter-offensive, with their representatives insisting on a reduction in working time as a pre-condition for negotiations, has been totally predictable outcome.

Although the social partners have some way to go before they can resolve major issues without upset, they are still able to make use of other official bodies where they can reach an agreement and even develop common strategies. An example of this took place on 3 September 1997 when, during a discussion under the aegis of the National Tripartite Committee, the Government set out what steps should be taken in the context of November 1997's special European Council Employment Summit, one of whose objectives is to institutionalise social dialogue at European level.

Commentary

The Luxembourg model has been tried and tested over the last 60 years. Although some issues have caused - and will continue to cause - friction, it is now so well established at all institutional levels that it will certainly be able to see off any future attacks. There is all the more to be said for this view as, for some investors, industrial peace can easily be a greater asset than a low-cost labour force. (Marc Feyereisen, ITM)

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