Employers and unions adopt positions on labour market reform

Download article in original language : ES9702203FES.DOC

Employers and unions want to reduce the amount of temporary recruitment and the number of types of employment contract. They also want to increase their freedom to negotiate labour market issues through collective bargaining. These are the key issues in the current debate over a new round of labour market reforms in Spain.

Debate, controversy and negotiation between employers' associations and trade unions in relation to a third set of reforms of the Spanish labour market have been continuing since spring 1996. The first set of reforms was carried out in 1984 and the second in 1994. There has been progress in defining approaches to the negotiation of this third set of reforms, as can be seen from the drawing up of a common agenda and certain general points of agreement. However, in the negotiation process there have also been disagreements over proposals and alternatives.

Agreed subjects for negotiation

The most elementary diagnosis of the situation involves a consensus at least on the subjects for debate between employers - CEOE (Confederación Española de Organizaciones Empresariales, Spanish Confederation of Employers' Organisations) and CEPYME (Confederación Española de la Pequeña y Mediana Empresa, Spanish Confederation of Small and Medium-Sized Enterprises) - and trade unions - CCOO (Comisiones Obreras, Trade Union Confederation of Workers' Commissions) and UGT (Unión General de Trabajadores, General Workers' Confederation). It is commonly agreed that the reforms should have a global perspective in order to ensure that the legal framework meets the requirements of changing production processes. As a result, there is a list of agreed topics on the negotiating agenda:

• unemployment - running at 21.9% according to the EPA (Encuesta de Población Activa, or Survey of the Working Population) - and its highly temporary nature;
• individual dismissal (for objective reasons);
• the rationalisation and modernisation of the collective bargaining structure;
• the correction of shortcomings arising from the repeal of the Labour Ordinances (regulatory norms adopted under the Franco regime, which are to be replaced by framework agreements);
• the development of the "Agreement for Solving Labour Disputes Out-of-Court" (Acuerdo para la Resolución Extrajudicial de los Conflictos Laborales); and
• the adaptation and application of the Prevention of Labour Risks Act (Ley de Prevención de Riesgos Laborales).

A common approach has been achieved most notably in three areas - temporary employment, individual dismissals and bargaining structure - on which we focus below.

Temporary employment

The first area where a common approach has been developed concerns the harmful effects of the highly temporary nature of employment in Spain - 35% of all employment is temporary, according to the EPA, taking into account fixed-term contracts, work contracted through temporary work agencies and other forms of casual employment. The trade unions see the problem as reflecting the rise of seriously precarious employment, and a sharp decrease in the legal and trade union protection of workers. A revealing figure is that 70% of the contracts registered by the National Institute of Employment (INEM) in 1996 had a duration of less that three months, according to a report - La contratación y paro registrado- drawn up by the Ministry of Labour. On this subject, the employers have modified their stance in recent years. Today they interpret the highly seasonal nature of employment as an obstacle to domestic consumption and hence an impediment to Spanish economic recovery. Thus, both sides consider it possible to reduce the number of types of employment contract from 17 to four, which is merely a recognition of what has been taking place in practice. In fact, through collective bargaining, there have already been some cases in which temporary contracts have been extended beyond the period laid down by law. Some lawyers view this as a step towards more stable employment contracts.

Individual dismissals for objective reasons

The second area in which a common approach has been identified is the dissatisfaction that both employers and trade unions feel about the overuse of court procedures for individual dismissals for objective reasons (that is, individual redundancy for economic reasons). The 1994 labour reform (Article 52.1.c of the Workers' Statute ( Estatuto de los Trabajadores,ET)) laid down that for this kind of dismissal it was not necessary to obtain administrative authorisation through redundancy procedures, which were reserved only for collective redundancies. The solution to the problem was therefore left in the hands of each employer and union and negotiated through collective bargaining. However, in practice there have been no substantial agreements on this subject, which has reinforced the tendency to refer disputes over individual redundancy to the labour courts, leading to an overuse of court procedures and an increase in the costs of dismissal.

Employers and unions now agree in principle that the reasons should be defined more simply so as to allow judges to declare "justified dismissal", that is, objective dismissal for economic reasons. This involves a lower amount of compensation (severance pay based on 20 days per year of employment) rather than the compensation laid down in the most expensive forms of dismissal that they have been forced to apply up to now (severance pay based on 45 days per year of employment, the calculation applied to cases of unfair dismissal).

Rationalising the structure of collective bargaining

The third common area lies in rationalising and modernising the structure of collective bargaining. The 1994 labour reform favoured increasing the freedom of employers and unions and reducing the role of government. However, not even widening the scope of collective bargaining has made it possible to cover the gaps in the regulation of working conditions resulting from the repeal of the Labour Ordinances. Consequently, gaps in collective agreements leave certain segments of employment without contractual points of reference in their labour relations.

Furthermore, the structure of collective bargaining is also unsatisfactory for both sides. For CEOE and CEPYME, the structure should be adapted to changes in production processes: in particular, areas for negotiation should be decentralised in order to facilitate their adaptation to the specific situation of each enterprise or sector. In fact, the 1994 reform introduced standards that allow a greater functional and regional decentralisation, by permitting the negotiation of agreements at the enterprise level that insert the detail omitted in higher-level agreements. However, the unions interpret this point as a clear weakening of the process of collective bargaining as it could allow the introduction of worse conditions. Another problematic question is the contractual structure inherited from the Franco regime. However, both parties concur at least on the need to rationalise collective bargaining, extend its content and reinforce their freedom along the lines already established in the 1994 reform.

Tensions in the bargaining process

Despite these area of agreement - on the bargaining agenda and on the principles involved in certain aspects of the topics - there are also basic differences in the objectives and priorities of the two sides.

The first difference is over the nature of the so-called "stable employment contract". CEOE proposes a stable contract of 10 years' duration for the recruitment of young people, whereas CCOO and UGT consider this proposal to be unacceptable because they feel that it would involve a long contract but one with nevertheless a fixed duration. The unions have put forward a counterproposal for recruitment. It is a training contract of two to four years' duration for people under 27 years of age, with a guarantee that at its end the employment relationship will not be broken.

The second point of difference for the unions is that amendment of the objective reasons for dismissal should not centre merely on a reduction in the cost of dismissal. However, the employers feel that the high cost of dismissal has four harmful effects on employment and on enterprises: it increases the cost of enterprise flexibility; it increases the wage demands of employed workers; it reduces labour mobility; and, in combination with unemployment benefit, high severance pay increases the "profitability" of being unemployed. On this point there is also another difference. CEOE is in favour of including in the new regulations the reasons for objective dismissal so that they are clearly established in law and so that it is unnecessary later to refer cases to the labour courts. On the other hand, the unions are in favour of introducing the reasons for collective dismissal into agreements.

Thirdly, with regard to the clarification of dismissal, CEOE proposes severance pay of under 45 days per year of employment in cases where the employer fails to prove to the judge that there are objective reasons. Reduction in costs resulting from redundancy is a priority for the employers. On the other hand, the unions feel that the cost of redundancy is not an essential hindrance to mobility and recruitment, since the statistics reveal a very high volume of hirings and dismissals.

The fourth difference is the employers' insistence on eliminating the "ultra-activity" of collective agreements. That is, they want each negotiation of an agreement to start from scratch, without taking into account or repeating the clauses negotiated in previous agreements. To this, the employers' proposal adds that the provisions of a collective agreement should not apply to those who have not been represented in its negotiation. In other words, they want to eliminate the generally automatic applicability - erga omnes- of agreements concluded at a level higher than the enterprise. These two questions are unacceptable to the unions because their presence is not guaranteed in all workplaces, especially in the small and medium-sized enterprises (SMEs) that characterise production in Spain, where their density of membership is very low. These proposals are therefore seen as a way to legitimise deregulation.

According to the unions, the small scale of Spanish production seriously hinders their presence in companies, and the representation of the workers involved. Even public and union mechanisms to check compliance with labour regulations on recruitment or health and safety are clearly ignored or not applied. In other words, the degree of divergence between the theory and practice of labour relations in the SMEs is very high.

Commentary

Firstly, all parties are now beginning to recognize that temporary employment has perverse effects. Evidence of this is demonstrated in the uncertainty that affects especially young people, the stagnation of consumption and the slowing of economic recovery. Furthermore, excessive labour turnover affects motivation and incentives at work and vocational training in the enterprise. A "stable contract" - that is, one of indefinite duration - therefore seems to be an urgent need.

Secondly, collective bargaining would seem to be the best means for dealing with objective individual dismissal and, indeed, some collective agreements have already covered this question.

Thirdly, over and above the differences between the social partners, it must be pointed out that their increasing autonomy is now tending to modify the Spanish model of labour relations. This is shown in the trend towards developing procedures for solving disputes out of court. In 1995, CEOE, CCOO and UGT signed the Agreement for Solving of Labour Disputes Out-of-Court (ASEC), which was applicable to collective disputes arising out of the interpretation and application of a state regulation or collective agreement, or those arising during the course of collective bargaining. Up to now, the model of labour relations has been characterised by the absence of out-of-court procedures. ASEC aimed at freeing the courts of work, reinforcing the freedom of the social partners and modernising the Spanish model of labour relations.

Lastly, it must be borne in mind that this increasing sphere of freedom for the social partners may be threatened if they do not reach an agreement before the summer. In this case, it is possible that the Government will intervene to introduce its own labour reforms. (Martin Artiles, QUIT)

References

"Las reformas de estructuras en España", Círculo de Economía, Boletín, Nº 60, Madrid .

"Criterios para la negociación con CEOE y CEPYME sobre la reforma del mercado de trabajo y la negociación colectiva", CCOO-UGT, Documento 16 diciembre 1996.

"Adaptabilidad y causalidad de la contratación temporal en la negociación colectiva posterior a la reforma", Ricardo Escudero, Working Paper. University of Málaga.