Parliament intervenes to end major conflict

Denmark experienced 10 days of major industrial conflict over April-May 1998, after workers unexpectedly rejected a mediation proposal to end the 1998 bargaining round, demanding more time off. After attempts by the LO trade union confederation and DA employers' confederation to renegotiate the deal became deadlocked, Parliament adopted a government bill on 7 May, which brought the dispute to an end on the following day.

On 24 April 1998, the members of the organisations affiliated to the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO) and the Danish Employers' Confederation (Dansk Arbejdsgiverforening, DA) were balloted on a joint mediation proposal for the bargaining round in the entire DA/LO area, drawn up by the Public Conciliator and accepted by DA and LO on 30 March (DK9804163F). The proposal - bringing together and renewing approximately 600 collective agreements - followed a settlement in the key industry sector, which was reached despite concerns that negotiations would fail and a major dispute would break out (DK9803158F). Once the industry deal was struck, the ballot on the overall joint mediation proposal - which was recommended by the unions - was widely regarded as a formality; it had been 42 years since a joint mediation proposal was last rejected and 13 years since Denmark last experienced a major conflict. However, a clear majority of those voting in the ballot (265,000 out of 565,000, or 56%) rejected the mediation proposal (DK9804166N). At 47%, the participation rate among union members in the ballot was the highest for 25 years. It seemed that the workers' message to LO was clear: renegotiate the mediation proposal and introduce more days of leave, thus taking the first steps towards a sixth week of paid holiday (the Holidays Act gives all workers the right to five weeks of paid holiday per year).

Following the rejection, a major industrial conflict broke out in the private sector on 27 April.

Renegotiation attempts fail

Given the rejection of the mediation proposal, LO invited DA to renegotiate the deal with a view to finding a compromise which was acceptable to its members. Since DA had achieved full support for the mediation proposal among its own affiliates, it stated that the situation was an internal trade union matter which DA had no part in. Claiming that DA's behaviour was jeopardising the agreement-based "Danish Model" of industrial relations and the parties' credibility, LO urged DA to reconsider its position and renegotiate. The Minister of Labour, Ove Hygum, stated that it was the responsibility of both parties to reconvene and renegotiate a solution which could bring the conflict to an end. On 29 April 1998, after two days of conflict, DA accepted the invitation from LO and renegotiations commenced.

Although DA was willing to offer concessions on more days' holiday and extra days off for employees with children, LO could not accept that these improvements were to be financed within the existing economic framework already agreed upon. Early in the negotiations, LO proposed prolonging the agreement's duration from two years to three, and providing for three days' extra holiday and two days additional leave for employees with children. When negotiations became deadlocked, LO then proposed two days' extra holiday and two days additional leave for those with children. However, LO reiterated that improvements in leave should be financed by expanding the overall cost increase set out in the mediation proposal.

Whereas DA was willing to meet the demand for more time off, it would not accept expanding the proposal's overall cost increase. Instead, after days of negotiations during which no information was published, DA publicly announced its final offer on 5 May, demanding a reply from LO later the same day. LO turned down DA's proposal, which was for one extra day's holiday for all workers and an additional day's leave for those with children, financed by reducing the agreed increase in employers' occupational pension contributions by 0.4% of the paybill.

5 May proved to be the turning point in the conflict. Negotiations were at a standstill and LO's strategy was to let the conflict continue in the expectation that employers would recognise that a solution would be more costly then the mediation proposal, and that they should contribute more. The president of LO, Hans Jensen, directly warned off the Government by stating that a parliamentary intervention in the dispute would be very foolish.

The conflict was estimated to have cost employers DKK 600 million per day, while trade unions paid out some DKK 200 million per day to workers on strike.

So near and yet so far

During the seven days of the renegotiation process, the Prime Minister,Poul Nyrup Rasmussen and the Minister of Labour continuously emphasised that the Government did not plan to intervene and that the social partners should redouble their efforts, take their responsibilities seriously and finish the job. On 4 May, the Prime Minister proposed that the Public Conciliator be invited to act as a neutral mediator. The proposal was turned down by both parties.

On 5 May, employers in commerce commenced a sympathy lock-out of 30,000 retail workers and 15,000 electricians, whereby expanding the conflict to some 500,000 workers. Production losses were in the area of DKK 8.5 billion, and there were widespread shortages of goods and worsening sanitary conditions in childcare institutions and homes for the elderly and hospitals. Since negotiations had broken down, and since a continuation of the conflict would diminish the possibility of conducting a proper campaign prior to the referendum on the Amsterdam Treaty on 28 May, a government intervention became more likely and was perceived as increasingly legitimate.

Given that his proposal to involve the Public Conciliator had been turned down, and having several times underlined the sole responsibility of LO and DA, it was a reportedly angry and disappointed Prime Minister who on 6 May 1998 informed the public that the Government would pass a bill in order to end the conflict. Parliament duly adopted the bill with a clear majority in favour on 7 May, thus ending the conflict on 8 May. The legislation imposes a settlement based on the mediation proposal from the Public Conciliator which was rejected by workers on 24 April, but which also contains additional elements arising from the renegotiations between LO and DA.

The law contains an additional day of annual leave for workers who have a minimum of nine months's service in a company. Each employee who is a parent with children under the age of 14 years, and who has a minimum of six months' service, will have a right to an additional two days' leave in 1998 and three days' leave per year from 1999. To finance these additional days off, the increase in employers' pension contributions set out in the joint mediation proposal will be reduced by 0.4% of paybill. The legislation cancels the special sickness taxation which obliges employers to pay DKK 325 per employee per year to the state. This will cost the state approximately DKK 400 million per year.

Government intervention is by and large not a new feature in the history of collective bargaining in Denmark (DK9803158F). However this latest intervention is novel in that it is not based exclusively on the joint mediation proposal but equally on the elements arising from the renegotiations between LO and DA. Although the renegotiation process failed, it did offer the Social Democrat-led Government an opportunity to pass a bill, which stood a better change of being well received by workers (many of whom still vote Social Democrat) than if it had simply put its own proposals on the statute book.

With its greater economic room for manoeuvre, the Government was able to include the demands made by both sides. In order to keep the cost of the bill within the framework agreed in the mediation proposal, the Government relieved employers of DKK 400 million of costs through the sickness taxation change. Workers gave up a 0.4% increase in employers' pension contribution and gained one more day's holiday and three days' additional leave for employees with children under the age of 14.

LO and DA deplore Government's intervention

In the light of the Government's decision to intervene in the industrial conflict, the LO executive board adopted the following statement on 6 May:

"The Government's decision to intervene in the labour market conflict constitutes an infringement of the right to free bargaining and to conclude collective agreements. The intervention may have marked consequences for the Danish labour market model in the future. The conflict had at no point in time developed so as to threaten essential social services, which is why the Government's decision is unfounded. The intervention is a consequence of the employers' indication of their non-willingness to continue the negotiations despite the fact that not all negotiation possibilities had been exhausted. Even though LO notes that the intervention contains elements of its proposals for additional time off for workers and thereby improve the conditions for families with children, it finds the deterioration of pensions totally unacceptable. This weakens pensions for a group of wage-earners who are already lagging behind in respect of pensions schemes. Seen from an economic point of view, the financing of the intervention is a step in the wrong direction because it puts a brake on savings. This will increase the demands for a subsequent economic intervention which the wage-earners will have to pay for later on. "

According to LO, approximately 65,000 of its members would have been better off under the joint mediation proposal than under the legislation. This minority group of workers cannot meet the service requirements which will entitle them to the extra day's holiday and/or the three additional days off for those with children. These workers are employed in sectors characterised by seasonal or precarious employment and frequent changes of job. However, a large group of some 150,000 LO members with children under the age of 14 will benefit from the three days off to be with their children, and the extra day's holiday, as their length of service is sufficient.

In a statement issued on 6 May 1998, DA equally regrets the government intervention, stating that:

"employers felt that the parties themselves should have resolved the conflict. However, employers have to acknowledge the fact that the conflict had a prospect of being long and painful. During the conflict LO announced several times that the new solutions should harm neither competitiveness nor employment. However, in the end LO could not accept such a solution. It is regrettable that the intervention favours workers. It is deeply alarming that Parliament rewards a rejection of the joint mediation proposal. This could make it difficult to gain support for future mediation proposals. The 1998 collective bargaining has been difficult, because of the general election and the political promises made. If such situations are to be avoided in the future, it is vital that a respectful interplay between the social partners and the political system is achieved."

Why did workers reject the mediation proposal?

According to opinion polls conducted for the Mandag Morgen newsletter between the second and fourth day of the conflict (28-30 April), two issues made workers reject the joint mediation proposal: some 70% cited the lack of improvements in holiday entitlement as a reason for their rejection of the proposal; while 50% stated that employers' behaviour during collective bargaining motivated their rejection.

A Gallup survey conducted at the beginning of the conflict, on 27 April, found that whereas a majority of Danish people expressing a view opposed the conflict (48.7% opposed and 34.9% in favour), a clear majority supported the wish for one more week of paid holiday (52.9% in favour and 26.4% opposed). After the implications of the Government's bill were made public on 6 May, six out of 10 Danes were satisfied with the bill, according to surveys conducted by Sonar.

The demand for more time off came as a surprise. A membership survey conducted for LO in early January 1998 gave no evidence of a demand for more time off among workers. In fact, more time off was not included on the list of the 12 top priorities for the trade union movement's work in 1998 (DK9801152N).

Although it may not have been a direct consequence, new voting rules made it more possible than ever for a mediation proposal to be rejected. Under the old voting rules, the mediation proposal would have been adopted. Although a clear majority (56%) of the votes cast in the ballot were opposed to the proposal, the "No" voters constituted a mere 26% of all those entitled to vote. The previous rule required 35% of all those entitled to vote to oppose a proposal in order for it to be rejected. The new rules state that if 40% or more make use of their right to vote, then the outcome will be decided by a simple majority. If the participation rate is less than 40%, then 25% of all those entitled to vote must vote "No" for the mediation proposal to be be rejected.

Commentary

Collective bargaining in 1998 in the LO/DA area began with two-and-a-half months of stalemate in the industry sector. The fact that DA's bargaining strategy, which gave a leading role to industry, kept other bargaining sectors from initiating bargaining and to a large extent dictated the economic framework and the issues for bargaining, has not only been the subject of internal criticism among DA's affiliated organisations, but equally provoked workers' rejection of the mediation proposal. The dominant role played by employers in industry has been criticised during and after the conflict. Other DA affiliates, both smaller and more sizeable, have been displeased with their role in the bargaining process, and employers in commerce have been especially unhappy about being dragged into the conflict by the use of sympathy lock-outs.

The 1998 bargaining round underlines the need to reconsider the structure and procedure of the bargaining process in the LO/DA area. If controlled decentralised bargaining, with industry in the lead, is to be replaced by simultaneous sectoral bargaining, structural reforms will have to commence. Such reforms should aim to diminish the number of affiliated organisations of the two confederations and establish fewer and more powerful sectoral organisations. This has been carried out in the industry sector, but is lacking elsewhere.

The very negative reaction of workers to the industry-dominated proceedings in the bargaining round has given the social partners another argument for advancing structural reform. If workers reject future mediation proposals on the grounds of the employers' industry-led bargaining strategy, the Danish model will be faced with a serious structural crisis.

The fact that the mediation proposal could be, and was, rejected raises issues about trade union democracy. The new voting rules have revitalised direct democracy within the trade union movement, and will thus challenge the traditional indirect manner in which demands have been drawn up and voiced. More debate and discussions on workers' demands are called for, if future discrepancies between workers and their representatives are to be diminished.

Following the rejection of the mediation proposal, the two main social partner organisations, LO and DA, relived for a short time the central bargaining role that they enjoyed in the 1980s. However the majority of affiliates of LO and DA did not seem willing to let the confederations emerge from the situation as "winners". Had DA been willing to offer concessions on the overall costs of a new proposal and had LO been willing to offer concessions on occupational pension contributions, a compromise would have been possible. Thus both sides would have come out of 1998's collective bargaining as winners.

It seems unquestionable that more time off will also be an issue in the collective bargaining which will occur in the public, financial and agricultural sectors in 1999. (Kåre FV Petersen, FAOS)