Industrial relations in the candidate countries
This report examines a number of key aspects of industrial relations in the 10 Central and Eastern European and Mediterranean countries which seem likely to join the European Union in 2004. It focuses on: the general features of collective bargaining; bargaining and social dialogue at sectoral level; bargaining at enterprise level; and employee participation through works councils.
In the coming years, a number of countries will accede to membership of the European Union, eventually almost doubling the current amount of Member States. Thirteen countries have filed a request for accession, and negotiations have been held with 12 of them - Turkey being the exception (the Laeken European Council meeting in December 2001 [EU0201231N] foresaw the opening of accession negotiations with Turkey, but without any clear timetable). The 12 'negotiating candidates' have different prospects as to their possible date of accession. While for 10 countries accession in 2004 can be considered a reliable assumption, for Bulgaria and Romania EU membership seems to be a longer-term goal. The current report therefore limits itself to 10 candidate countries - Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia - all or some of which are likely to join the EU in the near future.
As part of a collaboration between the European Foundation for the Improvement of Living and Working Conditions and the area Office for Central and Eastern Europe in Budapest of the International Labour Organisation (ILO), this background report has been drawn up by MÃ¡ria LadÃ³. The opinions expressed in the report reflect the views of the author and do not necessarily imply an endorsement by the ILO nor by the European Foundation. The report's aim is to outline some major trends in industrial relations in the candidate countries, and thus to provide a basis for a comparative assessment of industrial relations dynamics in current and future EU Member States. It concentrates on two areas:
- collective bargaining, with a special focus on the sectoral level; and
- informing and consulting workers, and the relevant participatory institutions.
All candidate countries seem to have shortcomings or difficulties in both areas, which should be addressed in the context of their preparation for EU membership. While the upcoming accession justifies the selection of these specific areas for examination, the report unavoidably gives only a partial picture of industrial relations in the candidate countries, and a less favourable one in some respects. Most importantly, it does not cover the well-established processes of tripartite consultation and negotiation at national level. This tradition of tripartite cooperation is a valuable asset new Member States will bring into the EU.
Despite the growing interest in candidate countries in general, their industrial relations have not yet been analysed in a fully comprehensive and comparative way. There is no systematic information and data collection on industrial relations in these countries, neither are the changes in the relevant legislation and institutional structures properly documented. In general, much less information is available on industrial relations in the Mediterranean candidate countries than on those from Central and Eastern Europe. The ex-socialist countries are, however, usually discussed in the context of economic and political transition, and thus developments in industrial relations, especially recent ones, are often disregarded. This problem has been strongly confirmed during the preparation of this report: information on candidate countries is so uneven and limited, and the quality of sources - with a few exceptions - is so uncertain, that any overview is unavoidably somewhat unbalanced and incomplete without launching a targeted, comparative investigation into industrial relations in these countries.
The present report seeks to summarise and reflect on the latest available (published or unpublished) papers that address, among other issues, the two selected areas of industrial relations. A list of the most frequently used sources is provided in the 'References and sources' section at the end of this report. As the current report basically provides a summary of these various sources, no special reference is made to the individual sources, except some exact quotations. The report also reiterates, without providing precise references, some of the findings of research in which the author has been involved.
It should be noted from the outset that the data provided in this report on issues such as trade union density rates and collective bargaining coverage rates at sector and enterprise levels should be treated with some caution. For example, there is major uncertainty over figures on union density rates, while the weakness of the systems of registering collective agreements in many candidate countries means that they do not capture the exact extent of bargaining.
Diversity in industrial relations - heritage of the past
Although this report aims to give a general picture of industrial relations in candidate counties, and to outline some common trends and features, the diversity in these countries' industrial relations should first be underlined. Two specific distinctions are especially clear:
- candidate countries from Central and Eastern Europe (CEE) differ in many respects from the Mediterranean ones; and
- important differences prevail among the CEE candidate countries.
EU enlargement will thus bring in a wide range of industrial relations culture, most of which is significantly different from that of the current Member States.
CEE candidate countries, due to their 50 years of socialist past and subsequent decade of transition, will join the EU with a significantly different economic, social and political heritage to that of Malta and Cyprus, with their past much closer to 'mainstream' European history. This is also reflected in the CEE countries' industrial relations, whose differences can be traced back primarily to the genesis of the current social partners' organisations.
As emphasised by Franciszek Draus (in his 2001 synthesis report, Social dialogue in European Union candidate countries- see below under 'References and sources' for full reference), in CEE candidate countries, the employers' organisations were formed during a period characterised by a massive withdrawal of the state and the timidity or even political weakness of trade unions. Employers' organisations in these countries have thus developed essentially as interest groups, or lobbying groups whose primary concerns are economic policy, privatisation of businesses and integration of post-socialist economies into European and global economic structures. They have not been required to confront strong and demanding trade unions.
From the very beginning of the transition process in the CEE countries, the trade union context has been highly politicised. Whether acknowledged or not, all trade unions have their roots in the former socialist trade union movement: as a basis for either reforms (while maintaining some sort of continuity), or complete denial. Trade unions have thus established themselves more in relation to the socialist past than with a view to the real, emerging needs of workers. Many of them have acted in a similar way to political pressure groups.
Circumstances have thus provided the social partners in CEE countries with a unique start, not comparable with the usual genesis of social partner organisations in western European countries, and indeed the Mediterranean candidate countries.
There is important diversity in the industrial relations of the various CEE candidate countries, owing to: (i) the differences that already existed in their socialist past; (ii) the options they have taken during the transformation process; and (iii) the progress they have achieved so far.
Nevertheless, CEE candidate countries share some important common features, such as the establishment of a basic legislative framework for industrial relations. Legislation regarding the social partners and their rights and obligations, as well as industrial relations structures and procedures in general, is already in place in all countries concerned. This is a result of heavy legislative activity over the past decade. The rules are relatively new and not yet consolidated, and will certainly be subject to some corrections in the years to come. One area which deserves special reconsideration and legal clarification in future is the 'representativeness' of social partner organisations, as argued below (under 'Legislative framework').
Another feature common to many CEE candidate countries is that the state has taken a relatively strong role in the operation of the industrial relations system. This explains, to a certain extent, the weakness of the social partners in some countries and their inability to take up issues via bipartite collective bargaining at national and sectoral levels - as we will examine later on.
In most CEE candidate countries, industrial relations are still evolving. Industrial relations practices and capabilities that are typically present in advanced EU Member States have, understandably, not yet fully developed. While these countries' formal structures and legal procedures could look quite similar to those in current Member States, their actual functioning might be rather different, due to the prevalence of old values and behavioural patterns.
Collective bargaining - general features
Collective bargaining, in general, has a much more limited role in the candidate countries than in the current EU Member States. The scope of collective bargaining, measured through coverage rates, is relatively low. The average bargaining coverage rate for CEE candidate countries is currently estimated at 25%-30% of the labour force. In Cyprus, it is estimated at around 65%-70%, while no similar estimate is available for Malta. There are significant differences in coverage rates across the countries concerned, varying between 10%-15% in Lithuania and around 50% in Slovakia - not taking into consideration Slovenia, where coverage is almost total, due to the obligatory nature of collective bargaining (see below).
The collective bargaining systems of the candidate countries share only a few common features. The most important one is that, except in Slovenia, there is no national (central) bilateral bargaining which might lead to legally binding agreements. This can be attributed, primarily, to the role played in the candidate countries by national (central) tripartism, including tripartite national agreements.
In this context, Latvia's national general agreements on minimum wages deserve some comment (as they are often misinterpreted). These agreements are concluded by the two national social partner confederations - the Latvian Employers' Confederation (Latvijas Darba DevÃ©ju KonfederÃ¡cija, LDDK) and the Free Trade Union Confederation of Latvia (Latvijas Brivo Arodbiedribu Savieniba, LBAS) - and contain a considerably higher minimum wage than the mandatory national minimum wage, which is set, after due consultation in the National Tripartite Cooperation Council, by the government. The higher agreed minimum wage is, however, a recommendation only, and not legally enforceable. Nevertheless, the minimum wage set by collective agreements at various levels tend to be 30% to 50% higher than the amount set by the government.
Another common feature of the candidate countries is the absence of collective bargaining at regional level. Similarly, regional tripartite (or broader) cooperation also seems to be a rare phenomenon in most candidate countries. An exception is the regional agreement concluded in the Ida-Virumaa region of Estonia, where trade unions have a strong presence and industry is highly developed (a legacy of the period of Russian rule). The agreement, signed by the regional branch of the Association of Estonian Trade Unions (Eesti AmetiÃ¼hingute Keskliit, EAKL), the Federation of Estonian Employers and Industry (Eesti TÃ¶Ã¶andjate Keskliidu, ETTK) and the local authorities, focuses on employment and unemployment. It can be considered more as a loose, general framework for tripartite regional cooperation than an actual agreement with clearly set targets and responsibilities.
Collective bargaining is in reality single-level bargaining in all candidate countries except Slovenia and to a certain extent Slovakia, even if bargaining formally takes place on more levels. The reasons will be discussed later in this report.
Candidate countries seem to differ as to the main levels of collective bargaining, and to the extent of centralisation/decentralisation, as follows:
- Slovenia has the most centralised bargaining structure (SI0206102F) due to specific legal and institutional arrangements, discussed below (under 'Sectoral collective bargaining - current state of affairs');
- Slovakia and Cyprus have predominantly sectoral bargaining structures;
- the Czech Republic and Hungary have a mixture of sectoral and enterprise bargaining, albeit a quite unbalanced one; and
- all other candidate countries have a more or less decentralised bargaining system.
The dominant bargaining levels also vary from sector to sector. In Latvia, for example, sectoral collective agreements have been concluded in such sectors as the transport, communication, energy and forestry, while 80%-90% of enterprise-level agreements have been signed in (public sector) education and science institutions, service enterprises and healthcare institutions.
As collective bargaining, with a few exceptions, occurs essentially at company level in candidate countries, this renders the coverage rate relatively low. It also limits the possible role of extension mechanisms (ie making an agreement binding on an entire sector or area). These procedures are usually included in the relevant legislation but have only limited impact, if any.
As a consequence, in most candidate countries, there is a strong correlation between trade union membership and the coverage rate of collective agreements - see table 1 below. This should be interpreted in the light of the fact that in all but two applicant countries agreements signed by trade unions are automatically applied to non-union employees in the enterprise concerned. One of the exceptions is Estonia, where such wider application has to be stated in the agreement - as is the general practice. The other exception is Malta, where the high (60%-70%) unionisation rate can be interpreted both as a precondition for, and a consequence of, the country's practice of 'union-member-only' agreements.
Within the limits of the available data, there are only two countries where there is a significant discrepancy between bargaining coverage rates and unionisation rates: Slovakia and - much more markedly - Hungary. This is brought about by the practice of sectoral bargaining, primarily in Slovakia, and the extension mechanisms applied in a few cases in Hungary.
|Country||Coverage rate of collective agreements||Unionisation rate|
* Coverage rates are available only for the various bargaining levels separately, and there are no general figures taking into account the overlapping of agreements concluded at different levels. ** The higher rate is calculated on the basis of the active labour force working in areas where trade union membership is allowed by legislation.
Notes: All figures are estimates except trade union density in Slovenia; the figures refer to different years between 1999-2001; for details of sources, see the 'References and sources' section at the end of this report.
Collective bargaining is heavily regulated by legislation in most CEE candidate countries, especially in terms of provisions on the bargaining parties. Collective bargaining is the area where the representativeness of social partner organisations is addressed and the relevant criteria are established. These rules are, however, not always coherent and applicable, due to the difficulties brought about by the complexity of the widespread co-existence of a number of trade unions within enterprises and within the same sectors, as well as by the political sensitivity of specifying bargaining parties. Legislation in some countries seems to be more complicated than is probably needed - for example, that in Hungary regarding enterprise-level bargaining. In other countries, the rules seem to be too vague to be applied easily. An example is the Polish rules regarding sectoral bargaining. Here, the Labour Code contains somewhat dubious provisions regarding the legal capacity of trade unions to conclude sectoral collective agreements. On the one hand, it stipulates detailed criteria regarding individual sectoral organisations but, on the other, it also acknowledges a sort of 'derived representativeness'- ie if sectoral or occupational trade union organisations are members of a national confederation which is recognised as being representative, they are automatically regarded as being representative and have the legal capacity to conclude collective agreements. At the same time, the Labour Code gives sectoral employers' organisations the right to negotiate and conclude collective agreements, without laying down any criteria as to how this right is to be acquired.
In certain countries (such as the Czech Republic or Slovakia), irrespective of the existence of sophisticated formal rules on representativeness, what matters in collective bargaining is de facto, mutual recognition by the social partners themselves.
In general, the legislative framework in the candidate countries ensures the basic conditions for collective bargaining, at both enterprise and sectoral levels. This is an important achievement in itself, bearing in mind that CEE candidate countries had a completely different 'collective bargaining' system and practice during the socialist period, which ended just a decade ago.
Free collective bargaining was made legally possible in some CEE countries as early as the beginning of the 1990s - examples are the Czech Republic (Collective Bargaining Act, No. 2/1991) Hungary (Act XII of 1992 on the Labour Code) and Slovenia (Labour Code, 1989). Some other countries have dismantled previous safeguards and limitations on collective bargaining progressively. In Poland, for example, the legal framework for entirely free bargaining has existed only since November 2000 (when the relevant Chapter XI of the Labour Code was substantially amended). In Estonia, the Collective Agreements Act, adopted originally in 1993, has been amended several times, but still contains some elements, such as a list (though not an exhaustive one) of the issues that can be subject of collective bargaining, that are debatable. The same is true regarding the legislation on collective bargaining in Latvia and Lithuania, though here the rules on the possible content of bargaining are less detailed.
These situations strongly contrast with the cases of Cyprus and Malta. In Cyprus, voluntary, free collective bargaining was legally adopted in the 1960s, when Cyprus became independent. In Malta, the Industrial Relations Act, which sets the framework for collective bargaining, has been in force since 1976. Over recent decades, bilateral bargaining has become deeply rooted in the economy and society of both countries, while in most CEE candidate countries the practice of voluntary, free bargaining is far from being implanted in this way.
Sectoral collective bargaining - current state of affairs
Sectoral collective bargaining is poorly developed in all candidate countries, with the exceptions of Slovenia, Slovakia and Cyprus.
In Slovenia, the bargaining system, introduced in 1990, is highly centralised and far from voluntary. Two general national agreements are concluded first in the bargaining cycle: one for the state and 'budgetary' (ie funded from the state budget) sector; the other for the competitive market sector of the economy. Sectoral agreements must comply with the relevant general agreement, and should follow one other in a special order. The conclusion of sectoral agreements is compulsory. The parties to sectoral agreements are the relevant sectoral trade unions and relevant sectoral organisations of the Slovenian Chamber of Commerce and Industry (Gospodarska zbornica Slovenije, GZS), in collaboration with the relevant sectoral sections of the the Slovenian Employers' Association (Zdruzenje delodajalcev Slovenije, ZDS), the national employers' organisation. Slovenian enterprises are obliged to be members of the Chamber of Commerce and Industry, and sectoral agreements thus cover practically all important sectors of the economy. This legal and institutional arrangement resembles more the Austrian collective bargaining system (AT9912207F) than that of the other candidate countries.
This bargaining system has been under constant debate in Slovenia since 1995, when the government proposed profound changes. The draft law it issued at this stage provided, among other measures, for the elimination of the obligatory bargaining system, and the replacement of chambers by voluntary employers' organisations as bargaining parties. The initiative was strongly opposed by both social partners. A recent amendment to the Labour Code (adopted in May 2002 and in force since 1 July 2002), approved after a long debate leading to consensus within the tripartite Economic and Social Council of Slovenia (Ekonomsko socialni svet Slovenije, ESSS), has paved the way for dismantling the current bargaining system. A new law on collective agreements, currently under discussion within the Council, will regulate the procedural details of bargaining, in which voluntary employers' organisations will replace the chambers. By accepting the recent modification of the Labour Code, the social partners have already committed themselves to this fundamental change. It is a shared worry of the social partners and the government that collective bargaining will have a lower coverage rate in future. As a safeguard, they intend, for example, to make extension automatic if collective agreements have been signed by sufficiently representative social partner organisations.
In Slovakia, similarly to Slovenia, almost all economic sectors are covered by sectoral collective agreements. Unlike Slovenia, these agreements are the outcome of completely voluntary bargaining. While in quantitative terms Slovakian bargaining practice at sectoral level is rather impressive, in quality terms serious doubts could be raised. The country's widespread sectoral collective bargaining has a clear connection with the high degree of centralisation of the social partners and the strong institutional concentration.
In Cyprus, sectoral bargaining is quite intense, and can be considered as the prevalent form of bargaining, with most terms and conditions of employment determined through sectoral collective agreements.
Malta should be mentioned separately, as it has no sectoral bargaining, due to the size of the economy, and as a longer-term impact of the British colonial period.
Sectoral collective bargaining practice can be analysed along various dimensions. Here we focus on two major areas:
- the number of collective agreements concluded at sectoral level and their coverage rate; and
- the content of collective agreements concluded at sectoral level.
It should be noted that there are other dimensions of sectoral bargaining, not covered here, such as the sustainability and enforcement of collective agreements (as suggested by Yousef Ghellab and Daniel Vaughan-Whitehead at a November 2001 ILO/European Commission conference on 'sectoral dialogue in candidate countries'- see below under 'References and sources').
Number of collective agreements at sectoral level
As indicated by table 2 below, the number of collective agreements concluded at sectoral level is relatively low in all candidate countries, with the exceptions mentioned above.
|Country||No. of collective agreements||Coverage rate of collective agreements at sectoral level (% of labour force)|
|Estonia||7 10 'subsectoral'||Under 10|
|Hungary||19 sectoral 33 multi-employer||10.6 (sectoral only) 17.8 (sectoral and multi-employer together)|
|Poland||136 multi-employer agreements, of which 20 have sectoral scope, of which 8 are 'proper' sectoral agreements||Under 10|
|Slovenia||38||Close to 100|
Notes: There is no sectoral bargaining in Malta; the figures refer to different years between 1999-2001; for details of sources, see the 'References and sources' section at the end of this report.
Caution has to be exercised when interpreting any figures on collective bargaining. First of all, even the term 'sectoral' collective agreement has to be used very carefully, as legislation in some countries does not include this concept but instead refers to 'supra-enterprise level' collective agreements, or collective agreements concluded at 'higher than enterprise level'. This is the case, for example, in the Czech Republic, Hungary, Poland and Slovakia. These terms could mean 'proper' sectoral agreements, in the common understanding of the term, but could also refer to multi-employer agreements, signed by a number of individual employers and the relevant sectoral trade union(s).
Multi-employer collective agreements are quite typical in CEE candidate countries, as they are usually concluded by the successors of large, formerly state-owned companies which disintegrated into several (sooner or later privatised) enterprises over the 1990s. As the successor enterprises continue to have close economic ties, and sometimes even ownership relations with each other, the setting of common labour and employment standards seems almost self-evident. Multi-employer collective agreements are only seldom the signs of newly emerged alliances among employers aimed at controlling the labour market. Multi-employer collective agreements may cover almost all (or at least most of the) major employers in a given sector, and thus regulate the dominant segment of the sector; or may cover only some employers (at least two, in principle), and thus regulate only a small(er) segment of the sector.
When figures are provided on sectoral collective bargaining in the candidate countries, this important distinction among the different types of agreement concluded at this level is usually disregarded. The Polish figures (see table 2 above) show how misleading such a lack of differentiation can be: out of the 136 registered supra-enterprise collective agreements, only 20 have sectoral scope, and out of those only eight can be considered as real sectoral agreements (those, for example, in the energy sector, coal mining, brown-coal mining, steelworks and metalworking, and grain production).
The interpretation of what constitutes a sectoral collective agreement is again somewhat different in the candidate countries of the Baltic region. In Estonia, the term can refer to 'proper' sectoral collective agreements (as in the transport and metalworking sectors), but can also mean an agreement signed by a single employer in a monopoly position (as in the oil, mining, electricity, railway and postal sectors). The term 'subsectoral' collective bargaining essentially covers multi-employer bargaining. In Lithuania, the few agreements that exist at sectoral level have been concluded by one or two large state-owned enterprises (represented by the respective ministries) that monopolise their whole sector (as in the telecommunications, railway and energy sectors). Although such accords certainly have a sectoral scope, it would be better to describe them as enterprise agreements. The classification of sectoral collective agreements can also be decisive in terms of their potential extension - for example, in Hungary, only 'proper' sectoral agreements can be extended to the entire sector.
In addition, sectoral collective bargaining figures for candidate countries often refer to both the market (production) sector (including private and public enterprises) and the public services (primarily education and healthcare). This makes any comparison with sectoral bargaining coverage rates in current EU Member States rather doubtful. Furthermore, the notion of 'public sector' is often used just to indicate state (public) ownership irrespective of the economic activities carried out. As experts argue, in Poland, for example, all sectoral collective agreements have been concluded in the public sector. Collective agreements at sectoral level actually cover mainly state enterprises and companies owned by the state treasury engaged in production and, to a lesser extent, education and municipal workers. Thus, collective bargaining at sectoral level is a practice relevant to public companies and service institutions, but not for private companies in the competitive sector. By contrast, in Slovenia, around two-thirds of sectoral agreements have been concluded in the industrial and commercial sectors, and one-third cover institutions dependent on the state budget and public services.
Despite all the above uncertainties, it is reasonable to state that sectoral collective bargaining practice is modest in most candidate countries. In addition, the few agreements concluded at sectoral level have weak regulatory force, not only due to their limited scope but also because of their weak content.
Content of agreements concluded at sectoral level
Below we list a number of shortcomings in content which seem to be a widespread feature of collective agreements concluded at sectoral level in the countries considered - the observations below do not relate to Slovenia, due to its special bargaining structure and practice (see above), and to Cyprus, where sectoral collective agreements have similarities to those in the western European countries. As the shortcomings listed seem to be generally present, irrespective of the actual type of collective agreement (ie 'proper' sectoral collective agreements, subsectoral agreements, multi-employer agreements etc), for the sake of simplicity we disregard the differentiation below and refer to all collective agreements concluded at sectoral level as 'sectoral collective agreements'.
- Sectoral collective agreements mainly (as in Hungary, Poland and Slovakia) provide the lower bargaining levels with recommendations, and not with precise provisions that the lower-level social partners should observe in their own bargaining and collective agreements. These recommendations are often formulated vaguely or in a declaratory way, and thus cannot be even considered as general orientations, or frameworks. While, in general, we consider the absence of binding provisions as a weakness of sectoral agreements, the major Czech employers' organisation, the Union of Industry and Transport, for example, suggests that moving in this non-binding direction is necessary in order to conclude sectoral agreements at all.
- Sectoral collective agreements often merely reiterate the provisions of legislation (those in Labour Codes or other labour- and employment-related acts), and contain few provisions, if any, that reflect compromises reached through due bargaining (as in Slovakia). This is a reflection of the persistence of past socialist practices that render collective bargaining formal and collective agreements rather empty of content.
- Should the provisions of sectoral agreements go beyond legislative provisions, the additional obligations on employers, and the new rights, higher standards and benefits guaranteed for workers, do not result in significant extra expenditure for employers.
- There are several issues that could be subject to sectoral agreements but are seldom dealt with, such as: working conditions; health and safety at work; workers' protection in the event of restructuring in the sector; training and retraining; dispute settlement in the sector; or joint follow-up of the implementation of the sectoral agreement.
- Regarding wages, sectoral collective agreements are usually confined to some general provisions (such as the sectoral minimum wage or the annual average wage increase), with the detailed regulation left to enterprise bargaining (as in Hungary and Slovakia).
- Sectoral agreements, with a few exceptions, do not show much originality, neither by taking up less traditional bargaining issues, nor in the approaches to how the issues are addressed.
As sectoral collective agreements tend to contain general and sometimes loose provisions (such as recommendations), their enforcement is obviously more of a political than a legal nature. In practice, it is only the commitment of the respective memberships of the signatory parties that guarantees the observation of these agreements. What is striking, however, is that even the signatory parties show limited interest in monitoring the implementation of sectoral agreements. Neither do the agreements themselves provide for special monitoring mechanisms. This situation raises further doubts regarding the effective regulatory force of sectoral collective agreements in candidate countries.
Sectoral collective bargaining - the obstacles
Various pieces of research have sought to explore the major factors in sectoral bargaining's continuing weakness across the candidate countries, especially in the CEE candidate countries. The explanations, with different wordings and somewhat different emphases, point to the same reasons.
The section on the candidate countries in the European Commission's forthcoming 2002 report on Industrial Relations in Europe underlines three factors that explain the absence of collective bargaining at sectoral level:
- restructuring in enterprises' property and organisational forms, with three major interlinked factors - the extreme diversity of enterprises within the same sector, the growth of small private enterprises, and the behaviour of foreign enterprises;
- the structures and strategies of the social partners; and
- the limited room for manoeuvre in the current period of economic recession, which makes it difficult to conduct meaningful bargaining at more than one level.
In his synthesis report (see below under 'References and sources'), Franciszek Draus identifies and discusses three types of factor:
- the general socio-economic structures and budgetary and pay policy in the candidate countries - these can be considered as objective obstacles;
- the attitude of employers and the situation in terms of employers' organisation; and
- the situation and policy of trade unions.
Yousef Ghellab and Daniel Vaughan-Whitehead (see below under 'References and sources') underlines four elements as determinants of the weakness of sectoral social dialogue:
- the weak institutional capacity and representativeness of social partners at sectoral level, including such aspects as
- the difficulty of maintaining a 'parallel presence' at all levels of industrial relations when human and financial sources are scarce,
- the internal structural deficiencies of social partner organisations,
- the limited technical capacity of social partners,
- the lack of trade union representation in the growing private sector,
- the lack of authority to conclude sectoral agreements in the case of employers' organisations, and
- the opposition of multinational companies;
- the ambiguous role of the state, which manifests itself in such areas as:
- a legislative framework that is not supportive enough, and
- technical assistance provided to social partners which seems to be too limited compared with the needs;
- the weak institutional framework for sectoral collective bargaining, especially the lack of permanent, stable structures endowed with appropriate resources; and
- the unstable economic and structural environment, in the CEE candidate countries in particular.
The case of Hungary
The impact of the abovementioned major factors has been felt to differing degrees in candidate countries. The case of Hungary is examined in more detail here to illustrate the country-specific features. It has been selected not only because Hungary is the country of origin of the author, but much more importantly because: (i) Hungary seems to be a typical example of the CEE candidate countries in this respect; and (ii) it is the only country where the weakness of sectoral collective bargaining, both in quantity and quality terms, has been investigated repeatedly, from as early as 1996 (see below under 'References and sources' for details of the various studies on this issue).
The major obstacles to sectoral collective bargaining in Hungary can be summarised as follows.
- Structural instability in the economy. The profound restructuring of the economy, changes in the organisational structure, size, property form etc of enterprises, and the accelerated rise and fall of enterprises have created unstable, fluid conditions that are highly unfavourable to the development of sound sectoral social partners and of bargaining at levels higher than the enterprise. The social partners have had difficulties in keeping pace with the rapid changes in the economy, in both institutional and policy terms. The rapid growth of small private firms has made it especially difficult to organise interest representation organisations with a reasonable degree of membership on both employers' and workers' sides. The behaviour of foreign employers has, with some exceptions, also worked against the organisation of well-structured social partner organisations on both sides.
- The extreme diversity of enterprises within a given sector. The differences in economic, social, industrial relations terms within certain sectors are far too large to allow for the establishment of a common framework suitable for all, or at least most, enterprises in the sector. The provisions and norms set by possible sectoral collective agreements would be either too low or too high, and meaningful only for a few enterprises.
- Economic conditions. For many years the economic recession has limited considerably the room for bargaining. With the limited scope for manoeuvring and working out concessions, it is usually difficult to conduct meaningful bargaining at more than one level. In this economic context, the structure of the industrial relations system has become a determinant factor.
- The sectoral level is squeezed between central tripartism and traditional enterprise bargaining. Given the limited available space for bargaining, the question arises as to which level is best suited to using this restricted room for manoeuvre. The answer in Hungary has been twofold: to conduct tripartite negotiations on a mandatory minimum wage at national level, along with developing general guidelines for annual wage increases; and to provide enough space for enterprise-level bargaining. It has been the development of intermediate-level bargaining, at both sectoral and regional levels, that has suffered delays. As the economic conditions are becoming more favourable, the sectoral level could certainly be freed from the current two-sided pressure from central tripartism and enterprise bargaining. However, recent experience with significant increases in the national minimum wage has again called attention to the strong connection between the various bargaining levels. If negotiations at national level exhaust the available room for bargaining, not that much is left for lower levels, and thus collective agreements, especially at sectoral level, can easily be 'watered down'.
- The 'traps' of strong national tripartism. There is no doubt that central tripartism has played a historic role in all CEE candidate countries over the past decade. In Hungary, it has contributed to the peaceful transition in at least three different ways: (i) smoothing the way to economic and social changes; (ii) facilitating the development of social partner organisations and their learning process; and (iii) assisting the government (the state) to withdraw gradually from the economy. Despite the positive role central tripartism has played so far, the dominance of national tripartite cooperation and dealings has had its own 'traps' regarding the sectoral level of industrial relations:
- social partners have had to organise themselves first at national level in order to take part in central consultation and negotiations. This has resulted, in many cases, in an artificial development;
- in this sense, the backwardness of sectoral collective agreements and social dialogue can be considered as an unfavourable side-effect of prospering tripartism; and
- as long as sectoral cooperation is not sufficiently developed, tripartite forums will continue taking on the consultative and regulatory role that bipartite structures usually play. Tripartism will thus be strengthened.
- Shortcomings in legislation. The most frequent argument is that the provisions of the Labour Code on sectoral collective agreements are too vaguely formulated. Just as importantly, the Labour Code does not provide a supportive general context for collective bargaining. Although there have been repeated attempts to include provisions that would motivate collective bargaining, the impact has been limited or even controversial.
- The institutional weakness of sectoral social partners. There are weaknesses on both sides:
- regarding trade unions, the major obstacles are as follows: (i) the presence of unions is weak in private enterprises, which now have a significant if not dominant weight in practically all sectors; (ii) trade union pluralism seems to be an obstacle in some sectors to the conclusion of collective agreements at sectoral level; (iii) relations between unions acting in enterprises and their sectoral organisations are sometimes conflictual, with negative consequences for both, weakening them vis-Ã -vis employers and employers' organisations; and (iv) falling union membership is weakening the authority and political credibility of trade unions in general;
- obstacles are also numerous on the employers' side. The most well known but still unresolved problem is that some employers' organisations are not authorised to conclude collective agreements. As mentioned above in the discussion of the origins of social partners in CEE countries (under 'Diversity in industrial relations - heritage of the past'), employers' organisations were created and still function primarily as economic lobbies. They consider their major partners to be governments and parliaments, not the trade unions. Their activities are primarily aimed at influencing economic and social policy-makers. Additionally, employers' associations are often too weak institutionally to be capable of reconciling the heterogeneous interests of their members; and
- finally, there is a particular mismatch or asymmetry of social partner organisations at sectoral level. Most sectoral trade unions have survived the profound economic and political changes of the last decade, and thus, alone or together with some new professional trade unions, are ready to enter into bargaining at sectoral level. Their employer-side counterparts are, however, either missing or have a far too complex structure. The quasi-employer organisations of the socialist past had a regional rather than sectoral structure, and the establishment of sectoral sections has been rather slow.
- Lack of political will to bargain at sectoral level, and no interest in formal control. Given the economic circumstances and the decentralised bargaining structure, neither trade unions nor employers' associations have, with a few exceptions, a strong political will to conclude collective agreements at sectoral level. Trade unions which function in large enterprises often prefer to bargain exclusively in the framework of these enterprises. Similarly, employers, and especially foreign employers, prefer distinct deals. Sectoral agreements so far have not offered particularly attractive benefits for employers. The possible advantages of sectoral agreements, such as the elimination of severe competition, especially in wages and working conditions, are not yet so important for employers, or can be achieved in other ways. Moreover, sometimes employers have just the opposite interest: they wish to fuel competition. This is the case, for example, in the commerce sector, where multinationals are in an uninhibited fight against one another, and employees are often the losers in terms of wages and working conditions, while immense adaptability on their part is taken for granted.
The nature of the obstacles revealed by the above analysis leads us to the assumption that significant changes in sectoral bargaining practice are not likely to be achieved in the candidate countries in the foreseeable future, despite wide-ranging efforts, especially by the governments. Therefore, on accession candidate countries will bring an impressive variety of sectoral bargaining practices and traditions into the European Union. These will range from the Austrian-type compulsory bargaining structure in Slovenia to highly decentralised systems (as in Poland), where sectoral bargaining has very limited, if any, regulatory force.
The weakness of sectoral bargaining in most candidate countries, in itself, gives rise to certain concerns. The fact that sectoral social partners tend to refrain from laying down sector-specific general minimum standards, and from adopting a 'solidaristic' wage and employment policy, has far-reaching implications, such as: the wide sectoral wage disparities - including between male- and female-dominated sectors; the growing differentials in working conditions; the spread of unfair labour practices in order to maintain or foster profitability; the increased vulnerability of individual enterprises, as market competition is not relieved even in those areas that fall under the scope of collective agreements; and the lack of shared values.
The backwardness of sectoral bargaining, however, should be seen in the wider context of: the national industrial relations system; the forms of governance which are characteristic of the individual candidate countries; the size and structure of the economies and major economic activities etc. Therefore, in some candidate countries it is pointless to urge the strengthening of the sectoral level, or the establishment of a highly centralised, two- or three-tier bargaining structure. In most candidate countries, however, the weakness of sectoral collective bargaining is likely to lead, in the longer run, to more economic and social disadvantages than its current short-term advantages (especially the high degree of wage flexibility, and the absence of any outside control over enterprise matters). In these countries, future efforts will rightly focus on the sectoral level.
Sectoral collective bargaining is only one, albeit rather important form of social dialogue at this level. In the next section, we broaden the scope of this overview to sectoral social dialogue, finding that the situation in this area in the candidate countries seem to be even more critical.
Sectoral social dialogue
Sectoral social dialogue, in the European sense, is rather poorly developed in almost all candidate countries, if it exists at all. The only exception is Cyprus.
To support this general observation, it is worth examining what activities and functions fall within the concept of 'sectoral social dialogue'- ie what is lacking when there is no such dialogue. As no general definition of the term is available, we rely on the pragmatic approach of the European Commission. Describing sectoral dialogue at Community level, the Commission's 2000 Industrial relations in Europe report emphasises the following:
... sectoral dialogue enables the social partners to play a dual role: firstly, they fulfil a watchdog function by making their concerns known to the Commission and the Council; secondly, they provide a forum for the exchange of ideas and dialogue between the social partners ... The sectoral social dialogue has generated a large number of joint texts ... representing the culmination of a cooperation process and, to a limited extent, a process of negotiation between the social partners. They take the form of joint opinions, declarations, resolutions, guidelines, codes of conduct, agreements protocols and agreements proper. Under the social dialogue system, the social partners can take a wide variety of initiatives. The most current are training schemes ... joint conferences and studies.
If we follow this interpretation of sectoral social dialogue with the obvious adjustments to the national context, and compare the activities of sectoral social partners in candidate countries with those of the European Union-level sectoral actors, the difference is striking. Neither the available literature nor the experts involved in comparative investigations listed below (under 'References and sources'), have referred to any significant examples of sectoral social partners in the candidate countries regularly exchanging information, or addressing jointly the problems and challenges of their sector. Contacts between sectoral trade unions and employers' organisations seem to be limited to actual collective bargaining, where bargaining at sectoral level takes place at all. The only exception is Cyprus, where both social partners have a very positive attitude towards sectoral (and especially national) bipartite dialogue. They jointly discuss issues of common concern, in the forms of seminars or other meetings. They often address particular problems of a particular sector (or the economy in general) and industrial relations issues.
Should the above situation prevails, candidate countries will have difficulties in implementing numerous Community Directives. For example, Council Directive (2000/43/EC) on implementing the principle of equal treatment between persons irrespective of racial or ethnic origin states the following in its Article 11 on 'Social dialogue':
1. Member States shall, in accordance with national traditions and practice, take adequate measures to promote the social dialogue between the two sides of industry with a view to fostering equal treatment, including through the monitoring of workplace practices, collective agreements, codes of conduct, research or exchange of experiences and good practices.
2. Where consistent with national traditions and practice, Member States shall encourage the two sides of the industry without prejudice to their autonomy to conclude, at the appropriate level, agreements laying down anti-discrimination rules in the fields referred to in Article 3 which fall within the scope of collective bargaining. These agreements shall respect the minimum requirements laid down by this Directive and the relevant national implementing measures.
The Directive thus urges both social dialogue in general and, specifically, the conclusion of agreements as a means for promoting equal treatment. The social partners in candidate countries, with a few exceptions, are not yet prepared for such activity.
The lack of bipartite, autonomous social dialogue at sectoral level is less dramatic in small countries, where the sectors themselves have only limited sense in economic terms. This lack is, however, a significant weakness of industrial relations in most CEE candidate countries, as sector-specific issues are not addressed by those who are best placed to do so - the sectoral social partners.
There have, however, been some promising sectoral initiatives over the recent years. Most of them have been urged by the European Union social partners, and have been connected to the enlargement process itself. For example, in the commerce and banking sectors there have been various conferences and round tables. These events have been instrumental in building contacts and providing first-hand experience of EU sectoral social dialogue to the relevant actors from candidate countries. Further assistance is needed, however, to make the occasional contacts between sectoral social partners in candidate countries develop into a 'process of continuous interaction', which is sustainable without the direct involvement of the EU sectoral partners.
In a few candidate countries, tripartite structures have been established at sectoral level. For example, in the Czech Republic, tripartite committees provide the institutional framework for consultation with the social partners on economic and social issues that relate to individual sectors. The relevant ministries and the corresponding sectoral trade unions and employers' organisations take part in these consultative bodies. Sectoral tripartite bodies also exist in Poland, Slovakia and Slovenia. While these tripartite bodies certainly have their raison d'Ãªtre, and have played a distinct role in the countries concerned, their existence might be considered as less favourable from the point of view of encouraging autonomous social dialogue among the sectoral social partners. They could, however, provide a solid basis for bipartite social dialogue if and when economic and social circumstances make the 'retreat' of the government desirable and realistic.
Collective bargaining at enterprise level
As discussed earlier (see above under 'Bargaining levels'), collective bargaining in some candidate countries unfolds primarily at the enterprise level, as in Estonia, Latvia, Lithuania, Malta and Poland. In Hungary and the Czech Republic, the enterprise level can also be considered as the dominant level of bargaining, although sectoral collective bargaining also has a certain, complementary role. In Slovakia, due to the dominance of sectoral collective agreements, enterprise-level bargaining has much less significance. In Slovenia, enterprise-level bargaining takes place in economically successful enterprises only, as the others are not in a position to agree on more preferable provisions than those already set by sectoral agreements, concluded on a mandatory basis.
Qualitative information on enterprise bargaining is even more scarce and unreliable than on sectoral collective agreements. The major limitation is that in most countries only the number of the agreements is registered, which in itself does not have much meaning. If some additional information is provided, it usually refers to the proportion of enterprises covered by enterprise-level collective agreements, which again only gives a very vague indication of the regulatory role of collective bargaining. The limited data available on the number of enterprise-level agreements in the candidate countries and their coverage rate is set out in table 3 below.
|Country||No. of collective agreements at enterprise level (coverage rate, where available)|
|Cyprus||400 (40%-45% of the labour force)|
|Estonia||570 (around 10% of labour force, under 1% of enterprises)|
|Hungary||1,303 (39.3% of labour force)|
|Latvia||2,018 (around 8% of enterprises)|
|Lithuania||- (around 10% of enterprises)|
|Malta||Some hundreds in force*, 68 newly negotiated in 1999|
|Poland||12,000 registered**, of which around 9,000 are in force (around 30% of labour force)|
|Slovakia||Estimated at some thousands|
* Enterprise collective agreements are concluded for three-year terms - the number of those actually in force is not available as only newly negotiated agreements are registered. ** Figure refers to the number of collective agreements concluded since 1995 when registration was introduced.
Note: figures and estimates refer to the situation in different years between 1999-2001; for details of sources, see the 'References and sources' section at the end of this report.
Decentralised bargaining structures, according to the literature, function much more efficiently and lead to more balanced results if they are supplemented by various coordination mechanisms (for example, pattern bargaining, sequencing or coordination by the national or sectoral social partner organisations). However, one of the striking features of the candidate countries examined here is that decentralised bargaining also means isolated and fragmented bargaining, due to a lack of coordination procedures and practices. The only such endeavour we are aware of is transnational coordination within some multinationals, which is especially visible when they have more than one production site within one country.
If decentralised bargaining is not sufficiently complemented by coordination mechanisms, the outcome of bargaining may not be balanced. Moreover, such bargaining could even increase differences in working and employment conditions, reflecting solely the power relationship between the particular bargaining parties. Interestingly, even in Malta, which has a long tradition of decentralised bargaining, coordination does not go beyond providing a general structure for the agreements. This so-called 'model collective agreement' was developed by the General Workers' Union (GWU) and Malta Employers' Association (MEA) in 1967.
In all candidate countries, except two Baltic states, collective agreements at enterprise level are concluded with trade unions. In Estonia and Latvia, 'workers' trustees', as the authorised representatives of all employees (see below under 'Information and consultation of workers' for more details), can also sign collective agreements, though no information is available on this practice (in the third candidate country from the Baltic region, Lithuania, only trade unions are entitled to conclude collective agreements).
Hungary is a special case. Since 1999, works councils have been entitled to conclude with employers so-called 'works agreements', which can regulate the same matters as collective agreements. This right is granted to works councils only in cases where there is no trade union represented in the enterprise. Works agreements cease to be effective if the works council is terminated or if a collective agreement is concluded whose scope extends to the employer concerned. Due to the general co-existence of trade unions and works councils, giving works councils the power to bargain has resulted in much more political debate and conflict than practical impact. Trade unions were concerned about the government's decision to grant works councils the right to conclude agreements, because they thought that employers would use this possibility to prevent trade unions gaining a foothold in enterprises, thus undermining their overall position and role in the economy (such concerns are shared by trade unions in other candidate countries, such as Poland).
There is no obligation on the enterprise-level parties to conclude an agreement in the candidate countries. While this is a quite ordinary situation in most EU Member States, for the CEE candidate countries the shift from compulsory (as in the old political system) to voluntary bargaining has meant a profound change. Trade unions have found themselves without firm legislative backing, while employers have been freed from an artificial obligation. Employers' reaction has been more to reject enterprise-level collective bargaining totally than to find a new, suitable meaning for it. The majority of new employers in all CEE candidate countries have also proved to be resistant to collective bargaining (and generally also to enterprise-level trade union organisations) and, consequently, the scope of enterprise collective bargaining has been shrinking.
In these circumstances, a number of governments have started to exert some pressure, through legislative instruments, to make employers enter into bargaining. In Estonia, for example, according to a new Trade Union Act (adopted in June 2000), employers are obliged to start bargaining if a trade union representative or 'workers' trustee' has made a written proposal to conclude a collective agreement. Employers that fail to respond to such a proposal are subject to a fine. In Hungary, the Labour Code obliges employers to initiate, once a year, wage bargaining (ie collective bargaining on a single crucial issue) with trade unions within the enterprise.
This sort of legal measure, however, has limited impact on employers' willingness to conclude collective agreements. For example, in Latvia, the Law on Collective Agreements (adopted in 1991) stipulates that an employer cannot refuse to enter into bargaining if trade unions seek to initiate it. However, although this provision has been in force for more than a decade, over 80% of the active labour force is still not covered by collective agreements. The situation is not much different in Lithuania, where a similar obligation has also been in force since 1991, and the overall bargaining coverage rate was still as low as around 10%-15% in 2000. The only possibility of changing this situation, according to some trade unions in the Baltic region, is to make collective bargaining compulsory again. In other words, employers should be obliged not only to respond to trade union initiatives and enter into bargaining, but also actually to sign an agreement. In our view, this is not a solution to the problem (and would indeed - unlike an obligation to bargain - be incompatible with ILO Convention No. 98 on the right to organise and collective bargaining).
Enterprise-level collective bargaining is, by definition, very sensitive to workplace power relationships. Although no systematic research has been carried out on this issue, what is known about bargaining procedures and the content of enterprise collective agreements in the candidate countries indicates that they reflect a fairly unbalanced power relationship. Representatives of trade unions from various candidate countries tend to outline the typical situation as one in which: on one side, are the employers armed with sophisticated and modern human resources management (HRM) techniques; while, on the other side, are local trade union representatives who are directly dependent on their employers and vulnerable, especially under harsh labour market conditions. In many enterprises, bargaining conditions are certainly more favourable to mutual compromise and concessions than this picture suggests, but the concerns expressed about management predominance cannot be neglected.
In this regard, Malta, with its 'British-type' industrial relations system and established traditions, certainly represents a different model. Through enterprise-level collective bargaining, the Maltese social partners play a vital part in determining labour standards and working conditions.
Enterprise-level collective bargaining is a crucial element of the bargaining structure and industrial relations system in a number of candidate countries. It is thus especially important to bear in mind that decentralised bargaining in these countries is rather fragile, and that the coverage of agreements can easily and drastically decrease if local conditions are unfavourable for bargaining.
Information and consultation of workers
Information and consultation rights for workers are a key element of the 'acquis communautaire'- the body of EU law which must be adopted and implemented by the candidate countries. An obligation on employers to inform and consult their employees, often through representatives, is laid down by specific items of EU legislation on this issue, such as the European Works Councils (EWCs) Directive (94/45/EC) (categorised as one of the 'social dialogue' acquis). However, it also features in a number of other areas of the acquis, such as labour law - eg the Directive (80/987/EEC) on the protection of employees in the event of their employer's insolvency, the collective redundancies Directive (98/59/EC) or the transfer of undertakings Directive (now consolidated in 2001/23/EC)- or health and safety - both in the framework health and safety Directive (89/391/EEC) and in several specific Directives (such as those on the protection of workers from the risks related to exposure at work to carcinogens [90/394/EEC] and asbestos [83/477/EEC]).
Two recent Directives have focused specifically on employee information and consultation, essentially through representatives. Directive (2001/86/EC), adopted in October 2001 (EU0206202F), provides for employee involvement (through both information and consultation structures or procedures and board-level participation) in 'European Companies' (SEs) - the new optional form of Europe-wide company set up under the European Company Statute - reflecting the EU's concern with these issues.
The March 2002 Directive (2002/14/EC) establishing a general framework for informing and consulting employees (EU0204207F) widens the scope of EU legislation on the national dimension of information and consultation beyond specific circumstances (such as collective redundancies and transfers of undertakings) to more general matters and decisions. Under the Directive, all undertakings with at least 50 employees (or establishments with at least 20 employees - the choice is left to the individual Member States) must provide employee representatives with: information on the recent and probable development of the undertaking/establishment's activities and economic situation; information and consultation on the situation, structure and probable development of employment and on any anticipatory measures envisaged, in particular where there is a threat to employment; and information and consultation, with a view to reaching agreement, on decisions likely to lead to substantial changes in work organisation or contractual relations.
In the light of the European Union's clear intention that workers should be informed and consulted on all major enterprise decisions, we provide below an overview of the current state of development of dialogue between management and workers within enterprises, and particularly consultative procedures, in the candidate countries. The focus is on forms of employee participation that enable workers' involvement in the managerial decision-making process through consultation. The participation of workers in company ownership is not discussed, although various forms of such employee ownership have emerged in the privatisation process in most CEE candidate countries - particularly in Estonia, Hungary, Lithuania, Poland and Slovenia (these represent interesting experiments more in economic terms than in the context of workplace industrial relations). We also do not look in detail at the case of Malta, which has a system of elected 'worker directors' on the board of companies (similar to a number of such schemes which once existed in the UK). The number of worker directors has been reduced in recent years, but still they play an important intermediary role between management and unions in some public sector organisations.
The information and consultation of workers is one area of industrial relations where the differences between the CEE candidate countries and the Mediterranean ones seem less pronounced: in all candidate countries, the introduction of workers' rights to information and consultation will require the modification of workplace industrial relations and the corresponding domestic legal framework. The changes needed are, however, deeper in the case of several CEE candidate countries, than in Malta or Cyprus.
Until very recently, in candidate countries workers have, with a few exceptions, been solely represented at enterprise level via trade unions. The longer-standing exceptions are Hungary and Slovenia, which over the 1990s established a dual institutional system of worker representation - ie workers are represented by trade unions primarily for collective bargaining purposes, and by works councils for information and consultation purposes.
Estonia and Latvia have a special model of dual representation, with workers able to be represented by both trade unions and so-called 'workers' trustees'- ie employees elected to represent the workforce. The workers' trustee is not necessarily a member of a trade union, though this is nearly always the case when a union is active in the enterprise. The workers' trustee: represents all the employees of the enterprise in question; exercises information rights; monitors the implementation of collective agreements and individual employment contracts; mediates in labour disputes; and is authorised to conclude collective agreements at enterprise level (see above under 'Collective bargaining at enterprise level'). As no findings of empirical investigations on workers' trustees are available, it is not possible to assess whether this system operates sufficiently in 'trade union-free' enterprises, on the hand, and whether it provides a second, additional channel for worker participation in enterprises with trade unions, on the other.
The single system of workers' representation at enterprise level - ie through trade unions - which seems to be the general situation in the CEE candidate countries, has a number of implications in the wider industrial relations context, as follows.
- Most importantly, the absence of a distinct institution for workers' participation does not necessarily mean that workers are not informed or consulted on crucial workplace and company decisions, as in the CEE candidate countries, trade unions have information and consultation rights.
- Where there are no trade unions at a workplace, workers are left without any institutional representation, and with practically no appropriate mechanisms for information and consultation - the only exceptions are Estonia, Hungary, Latvia and Slovenia (see above). The low trade union density rates in some of the countries with only a single, trade union, channel of representation - eg estimates of 40% in Slovakia, 30% in the Czech Republic, or 15% in Lithuania and Poland (see table 1 above) - suggest that relatively large numbers of workers may have no representation at all. In addition, the decline in union membership seems to be continuing in all CEE candidate countries, while the number of enterprises with no trade union presence continues to grow.
- There will clearly always be enterprises where there are no formal representatives of workers. This situation is foreseen in the Community acquis which require information and consultation of employees, and special provisions seek to ensure a minimum level of communication between employers and workers even in such cases. For example, the transfer of undertakings Directive (2001/23/EC) provides (in Article 7(6)) that, where there are no representatives of employees in an undertaking or business 'through no fault of their own', the employees concerned themselves must be informed in advance on a number of issues. When the CEE candidate countries introduce national measures along these lines, accompanied by sanctions for breaches, it is a concern that these measures will not be widely observed in most countries. The reasons are various, including: a general weak compliance with legislation among this type of enterprise; the unbalanced power relationship between employers and their individual employees; the limited knowledge of workers regarding their rights; and their reluctance to fight for or defend their rights.
When transposing the EU Directives that give workers a right to information and consultation, the governments of the candidate countries, in principle, have three options:
- to make a clear distinction between enterprises with trade union representation and those without it, extending unions' information and consultation rights along the lines laid down in the Directives where they are represented in a workplace, while introducing special participatory mechanisms solely for 'union-free' workplaces;
- not to make any distinction between enterprises with or without trade union representation, introducing common participatory mechanisms to apply in all enterprises. This will mean a profound reconsideration of the rights and functions of trade unions within enterprises; or
- to introduce participatory mechanisms in all enterprises, but with somewhat different powers depending on whether or not there is trade union representation within the enterprise, thereby avoiding possible conflicts over the dismantling of certain trade union rights.
The available information suggests that the third option has proved to be most feasible for candidate country governments.
Workers' participation through works councils
Until very recently, works councils had emerged only in Hungary and Slovenia out of the eight CEE candidate countries examined. In Hungary, works councils were introduced by the Labour Code (Act XXII of 1992), while in Slovenia the relevant legislation was a special law on worker participation adopted in 1993. In both cases, the legislation was inspired by the German co-determination system (DE0107234F). There are, however, significant differences between the Hungarian and Slovenian legislation, in at least two respects:
- in Slovenia, the establishment of works councils (and the election of workers' delegates in enterprises with fewer than 20 employees) is a right granted to workers, and not an obligation imposed on employers. In Hungary, by contrast, the law obliges employers to establish works councils (or to ensure the election of workers' delegates in enterprises with more than 15 but fewer than 50 employees), though no special penalty is stipulated for infringement; and
- in Slovenia, works councils possess much broader powers than they do in Hungary, and thus have more possibilities for influencing strategic decisions as well as the actual management of enterprises.
Despite the differences in the legislation, works councils share a number of common features in the two countries, primarily in their actual functioning. Works councils and trade unions are mutually interdependent and mutually reinforcing forms of representation in both countries, in that: works councils are usually created at the initiative of trade unions; the same people hold key positions in both institutions; works councils without any trade union backing can easily be absorbed into the management structure of enterprises; and trade unions without any works council support would face difficulties in obtaining information and being consulted on major strategic issues. Nevertheless, the parallel existence of trade unions and works councils within companies brings about some specific conflicts that are not easy to handle, as Hungary's decade-long experience shows.
In Poland, some so-called 'worker committees' (similar bodies to works councils) still exist in state-owned enterprises, as remnants of the late socialist period. They are regulated by the law on workers' self-management in state-owned enterprises (adopted in 1981 and amended subsequently). In principle, they have substantial rights regarding privatisation-related decisions. In reality, their role in the transformation of state-owned enterprises is much more limited The very act of privatisation of an enterprise also means the dissolution of its worker committees (according to the law of 30 August 1996 on commercialisation and privatisation of state-owned enterprises). As privatisation proceeds further and nears completion, worker committees will fade away.
The transposition of the Community acquis relating to workers' information and consultation rights has recently prompted the Czech Republic and Slovakia to introduce works councils.
An amendment to the Czech Labour Code in 2000 has made it possible to establish works councils in enterprises with at least 25 employees, where no trade unions operate. Should any trade union emerge in the enterprise, the works council has to be dismantled. The only power of works councils is to be the channel for workers' rights to information and consultation as set out in the Community acquis relating to 'labour law' (eg transfers of undertakings or collective redundancies). In smaller enterprises, a workers' delegate may be elected, whose rights are identical to those of the works councils. The introduction of these new institutions is not obligatory but optional, and their existence is conditional upon the absence of trade unions.
The provisions are similar in Slovakia, where works councils were introduced by a comprehensive modification of the Labour Code in 2000. The only difference relates to the size of the enterprises covered: in Slovakia the threshold for establishing works councils is 20 employees. In both countries, the new provisions on worker participation came into force on 1 January 2001. So far, no information is available on the number of works councils created and their actual functioning.
Interestingly, in the Czech Republic, some employers established works councils without any legal basis in the late 1990s. Their aim was to overcome the contradiction between their obligation to inform and consult workers (as already stipulated in the Labour Code) and the lack of suitable institutional arrangements. These initiatives were strongly opposed by trade unions.
In the Baltic candidate countries, the possible introduction of works councils was put on the agenda in mid/late 2000. The issue was the subject of tripartite negotiations in Estonia, and was included in draft amendments to the Labour Codes of Latvia and Lithuania. In Estonia, the continuing debate focuses on the composition of works councils - ie whether they should be bipartite or workers-only committees. No recent information is available regarding the outcome of these initiatives in Latvia and Lithuania.
Some workers' representatives from the candidate countries have already gained some experience of European Works Councils. According to European Trade Union Institute (ETUI) figures, however, their involvement is modest: less than one fifth of EWCs in multinationals that operate in CEE candidate countries (including Bulgaria and Romania) have included local workers' representatives from these countries, either as observers or full members. In Poland, where there is the greatest presence of multinationals with EWCs, 206 in total, local representatives are allowed to participate in the EWC in only 23 of them, or less than 12%. If EWCs were more open towards representatives from candidate countries, this would certainly have a multiplicator effect and thus strengthen domestic participatory mechanisms.
Obstacles to the introduction of works councils
The general lack of a distinct representative body for informing and consulting workers is not only an expression of the still evolving nature of industrial relations in CEE applicant countries. The heated debate that surrounds the issue of workers' participation in all candidate countries, as well as the controversial views and strong reactions of the social partners with regard to the introduction of these institutions, point to wider and deeper roots. For example, in 1997 the Polish government had to withdraw a draft law that provided for the establishment of works councils, due to its firm rejection by both employers and trade unions.
There are several factors that hinder the establishment of works councils and similar institutions in the candidate countries, especially in the CEE countries, as follows.
- The most decisive factor seems to be the traditional view that trade unions are general representatives of all workers, and not of their members only. If this approach is followed:
- other institutional forms of representing workers' interests at enterprise level seem to be superfluous. It is not by chance that in the Czech Republic and Slovakia the recent introduction of works councils is limited to enterprises where no trade unions operate; and
- the introduction of enterprise-level consultative bodies in addition to trade union structures requires modification of the legislation that recognises unions as the only channel for representing workers. This step will run into heavy opposition from unions and thus might be a politically risky exercise.
- The existence of a workers' right to information and consultation is often considered, especially by liberal governments and new employers very much guided by the principle of the free market, as an obstacle in the way of privatisation and/or of flexible adjustment to changing market conditions. In their view, works councils and similar formal structures fit into neither the overall philosophy, nor the practice of economic transition.
- Even the more 'worker-friendly' governments in some CEE candidate countries have been rather reluctant to introduce special mechanisms or distinct bodies to ensure minimum conditions for informing and consulting workers. The representation of workers via trade unions has been considered as sufficient. Governments have also been concerned not to increase obligations on employers, as this could work against attracting foreign direct investment. For most private investors, the existence of trade unions in workplaces in CEE candidate countries is already an unusual and somewhat discouraging phenomenon, and the creation of new mechanisms would add to this. The cost implications of a dual model of representation can also be a cause for concern, as argued, for example, in the current debate in Estonia.
- The experience of the socialist past has an impact on the prospects of works councils. Various participatory bodies existed in most CEE candidate countries, and workers had a rather mixed experience of these structures. Although they have been dismantled, these bodies still to some extent cast a shadow on any seemingly similar institutions. Workers' modest interest in the issue, and the infrequency of initiatives to establish works councils when the relevant legal framework is provided, can be partly traced back to this negative past experience.
- In a few cases, social partner organisations have protested less against the concept of worker participation as such, but more against the specific legal provisions aimed at introducing works councils. In Latvia and Lithuania, for example, trade unions very much opposed the idea set out in the relevant draft legislation (see above) that employee representatives should be appointed by employers, believing that this could lead to the manipulation of works councils. This practice very much reminded the unions of the socialist past, when participatory bodies worked primarily if not exclusively for the benefit of employers.
The impression is that, where introduced in the candidate countries, works councils will need considerable attention and support in the future in order to gain a foothold and eventually become operational. Similarly, the implementation of new provisions for informing and consulting workers, introduced as part of the legal harmonisation process with the EU, should be thoroughly monitored, as they cannot be regarded as organic elements of the industrial relations systems of most candidate countries.
Some concluding remarks
It is perhaps somewhat unfair that this report concentrates on those areas of industrial relations which are by far the least developed in candidate countries. Both collective bargaining and informing and consulting workers display a number of weaknesses, at least in term of their current practice.
The candidate countries concerned seem to be aware of the shortcomings in their collective bargaining systems. The strikingly lower coverage rate of bargaining in most candidate countries, compared with most EU Member States, is a matter of concern for both sides of industry. The backwardness of the sectoral level has attracted a high level of attention. Various initiatives have already been launched, aimed at strengthening sectoral collective bargaining and sectoral social dialogue in general. Bilateral technical assistance projects financed by the EU's PHARE programme are being implemented (for example in Estonia, the Czech Republic, Hungary and Poland). These efforts have a double aim:
- first, they seek to ease the tensions and distortions of the domestic labour market through more intense collective bargaining. It is a shared conviction that collective agreements at sectoral level could be instrumental in setting common standards on a wider scale, and may thus hinder the emergence of economic and social gaps which are excessively wide; and
- second, by strengthening the sectoral social dialogue, candidate countries are trying to become better prepared for their future roles in the EU. It is widely realised that the sectoral level has a growing importance in the EU, and that the social partners have a significant voice and rights in sectoral matters. By establishing structures similar to the EU-level sectoral social dialogue committees (EU0201236F), the candidate countries are trying to imitate on a national scale the roles and functions that they are going to take up later within the EU.
While most candidate countries have already faced up to the weakness of their collective bargaining practice, their shortcomings in the area of informing and consulting workers are far less well recognised. Governments are still very much engaged with the transposition of the relevant EU Directives, and the newly introduced structures and procedures are, inevitably, far from being operational, if implemented at all. Focused efforts are needed in this field as well.
Finally, candidate countries, especially CEE countries, can best be described as having a dual system and a dual reality:
- institutionalised workplace industrial relations are present only in the relatively small and decreasing number of large enterprises; while
- in the growing number of small and 'micro' companies, and in new private businesses, both the structures and the actors for formal bargaining and social dialogue are missing.
If the significant share of self-employed people in the labour force, as well as the existence of an informal sector, are taken into account, it is reasonable to state that social dialogue at workplace level is the practice of a privileged few in the candidate countries. This situation needs to be addressed, and responses have to be found also in relation to the transposition of the Community acquis.
References and sources
The main sources for the information in this report are as follows.
- Papers prepared in the framework of a project launched by the European social partners and supported by the European Commission, and presented at a conference on 'The social dialogue in the candidate countries', held in Bratislava on 16-17 March, 2001. The synthesis report (Social dialogue in European Union candidate countries, unpublished manuscript) was compiled by Franciszek Draus and is quoted repeatedly in the current report. Country papers, covering all candidate countries except Malta and Turkey, were prepared by the following authors: Yves Chassard; Constantin Ciutacu; Franciszek Draus; Grigor Gradev; Steliana Pert; Valentina Vasile; and the Research and Development Centre - Intercollege, Cyprus.
- A report on industrial relations in candidate countries, forthcoming as a chapter in the Commission's 2002 report on Industrial relations in Europe, and national reports and discussion papers prepared as background materials for this report by a working group on industrial relations and EU enlargement. The working group, under the leadership of Daniel Vaughan-Whitehead (European Commission), included the following invited experts from selected candidate countries: Miroslav Belinda (Slovakia); Grigor Gradev (Bulgaria); Maria Matey-Tyrowicz (Poland); Miroslav Stanojevic (Slovenia); as well as MÃ¡ria LadÃ³, the author of the current report.
- Papers prepared for and presented at an International Labour Organisation (ILO)/European Commission conference on 'sectoral dialogue in candidate countries', held in Prague on 30 November-1 December 2001. The conference focused on selected candidate countries, whose sectoral bargaining practice was analysed by the following authors: Vasil Kirov (Bulgaria); Tiit Kaadu (Estonia); MÃ¡ria LadÃ³ (Hungary); Kazimierz Kloc (Poland); Claudia Ana Moarcas (Romania); and Ludovit CzÃria (Slovakia). The synthesis report is under preparation by Youcef Ghellab of the ILO Central and Eastern European Team (CEET) and Daniel Vaughan-Whitehead of the European Commission.
- Industrial relations in Central and Eastern Europe between transition and accession to the EU, Heribert Kohl, Wolfgang Lecher and Hans-Wolfgang Platzer, Abteilung Internationaler Dialog, Freidrich-Ebert-Stiftung (available in Hungarian).
- National background papers prepared for a workshop on 'social dialogue and EMU in the candidate countries', organised by the European Foundation for the Improvement of Living and Working Conditions, held in Vienna on 22-24 May 2002. The authors of the national reports were: Kaia Philips and Raul Eamets (Estonia); Edward Zammit (Malta); Wieslawa Kozek (Poland); and Miroslav Stanojevic (Slovenia). An earlier, more detailed study by Edward Zammit on the national industrial relations system in Malta was also made available.
For readers interested in further information on some of the specific issues touched on in this report, the following may be useful.
- For details on the issue of accession to the EU of Turkey - 'the most recent candidate and oldest associate'- see 'Putting the Turkish EU candidacy into context', Gamze Avci, European Foreign Affairs Review, Volume 7, Issue 1, spring 2002.
- On the weakness of sectoral collective bargaining in Hungary see especially the following publications: 'Moves towards free wage bargaining in Hungary', ErzsÃ©bet Berki and MÃ¡ria LadÃ³, in Paying the price. The wage crisis in Central and Eastern Europe, Daniel Vaughan-Whitehead (ed), Macmillan Press-St Martin's Press; London-New York, 1998; 'Hungary', Lehoczky Csilla Kollonay and MÃ¡ria LadÃ³, in New patterns of collective labour law in Central Europe, Umberto Carabelli and Silvana Sciarra (eds), GiuffrÃ© Editore, Milan, 1996; 'Sectoral social dialogue in Hungary', MÃ¡ria LadÃ³, paper prepared for conference on 'Sectoral dialogue in candidate countries', Prague, 30 November-1 December 2001; HelyzetkÃ©p az Ã©rdekegyeztetÃ©srÃµl (1990-1994)[Overview of industrial relations], MÃ¡ria LadÃ³ and Ferenc TÃ³th, Ã‰rdekegyeztetÃµ TanÃ¡cs TitkÃ¡rsÃ¡ga Ã©s a MunkaÃ¼gyi Kapcsolatok TÃ¡rsasÃ¡g kiadÃ¡sa, Budapest, 1996; 'The system of collective bargaining in Hungary', BÃ´eÃ¡ta Nacsa and LÃ¡szlÃ³ Neumann, paper prepared for the tripartite conference on 'Promotion of collective agreements and the question of representativeness in Hungary in light of the experience of EU countries', Budapest, 20-21 September 2001; Az Ã¡gazati kollektÃv szerzÃµdÃ©sek elemzÃ©se[The analysis of sectoral collective agreements], Tibor NÃ©meth, GyÃ¶rgy Kaucsek and PÃ©ter Simon, manuscript, Institute for Labour Research, Budapest, 1998; and 'The role of multi-employer collective agreements in regulating terms and conditions of employment in Hungary', AndrÃ¡s TÃ³th, Transfer, Vol 3. No 2, 1997. The analysis in the current report also draws on the conclusions of several meetings addressing the problems of sectoral collective bargaining over the years. The dilemmas associated with the relationship between central tripartism and the sectoral level of industrial relations are analysed in detail in 'Tripartism and/or bipartism in Hungary', MÃ¡ria LadÃ³, paper prepared for the IIRA fourth European regional congress, Helsinki, 23-26 August 1994.
- For examples of sectoral social dialogue in the commerce, construction, road transport and textile and clothing sector, see 'Sectoral social dialogue in Hungary', MÃ¡ria LadÃ³, paper prepared for the ILO/EC conference on 'sectoral dialogue in candidate countries', held in Prague on 30 November-1 December 2001.
- For more details on sectoral social dialogue initiatives in the candidate countries, see various issues of the European social dialogue newsletter from the European Commission, as well as in the special edition of the newsletter on 'Preparing for enlargement', September 2000.
- Works councils in Hungary and Slovenia are analysed in detail in Industrial relations in 'Post-communism': Workplace cooperation in Hungary and Slovenia, Miroslav Stanojevic, manuscript, forthcoming, 2001.
Bargaining coverage and unionisation rates
The sources of the figures used in table 1, 'Bargaining coverage rates and unionisation rates in candidate countries (%)' are as follows (the full references to the publications and papers referred to are given in the list above).
- Cyprus. Coverage rate of collective agreements and unionisation rate: Ministry of Labour and Social Insurance of the Republic of Cyprus.
- Czech Republic. Coverage rate of collective agreements: author's own estimate based on three sources (estimates vary considerably, as enterprise collective agreements are not registered) - i) 25% rate referred to in Franciszek Draus's synthesis report, Social dialogue in European Union candidate countries ii) 30% rate for 1998 given by Franciszek Draus in Social dialogue in the Czech Republic iii) estimate of 30% made by Miroslav Belinda during discussion in the European Commission's working group on industrial relations and EU enlargement in 2001. Unionisation rate: 2000 figure given by Franciszek Draus in Social dialogue in the Czech Republic.
- Estonia. Unionisation rate: 2000 figure (precisely 14.8%) given by Kaia Philips and Raul Eamets in Social dialogue and EMU in the candidate countries: Estonia.
- Hungary. Coverage rate of collective agreements: author's own estimate for 2001, based on figures given by BÃ´eÃ¡ta Nacsa and LÃ¡szlÃ³ Neumann in 'The system of collective bargaining in Hungary', referring to 1999, and comments from the social partners referring to more recent bargaining practice.
- Latvia. Coverage rate of collective agreements: 2001 figure given by Yves Chassard in Social dialogue in Latvia. Unionisation rate: 2001 figure given by Yves Chassard in Social dialogue in Latvia.
- Lithuania. Coverage rate of collective agreements: Author's own estimate for 2000, based on two sources - i) rate of 'hardly 10%' referred to in Franciszek Draus's synthesis report, Social dialogue in European Union candidate countries ii) comments from the members of the Estonian delegation to the May 2002 Vienna conference on 'social dialogue and EMU in the candidate countries'. Unionisation rate: 2000 figure given by Yves Chassard in Social dialogue in Lithuania.
- Malta. Unionisation rate: 1999 figure given by Edward L Zammit in Social dialogue in Malta.
- Poland. Unionisation rate: 2000 figure given by Franciszek Draus in Social dialogue in Poland (rate estimated at around 20% in 2001 by Maria Matey-Tyrowicz for the European Commission working group, and at around 18% by Wieslawa Kozek in a paper for the May 2002 Vienna conference on 'social dialogue and EMU in the candidate countries'- officials from the Ministry of Labour confirmed the lower figure from Draus).
- Slovakia. Coverage rate of collective agreements: figure given in Franciszek Draus's synthesis report, Social dialogue in European Union candidate countries (an estimate is at least 60% is given by Ludovit CzÃria in Sectoral social dialogue in Slovakia). Unionisation rate: 2000 figure given by Franciszek Draus in Social dialogue in Slovakia.
- Slovenia. Unionisation rate: 2001 figure given by Miroslav Stanojevic in The EMU and the social dialogue in Slovenia.
Collective agreements at sectoral level
The sources of the figures used in table 2, 'Collective agreements at sectoral level in the candidate countries' are as follows (the full references to the publications and papers referred to are given in the list above).
- Cyprus. Number of collective agreements: 2000 figure given in the European Commission's forthcoming 2002 report on Industrial relations in Europe. Coverage rate of collective agreements at sectoral level: Ministry of Labour and Social Insurance of the Republic of Cyprus.
- Czech Republic. Number of collective agreements: 2001 figure given by Miroslav Belinda and Kristina KoldinskÃ¡ in Report for the European Commission on social aspects of industrial relations in the Czech Republic.
- Estonia. Number of collective agreements: 2001 figures given by Tiit Kaadu in Sectoral social dialogue in Estonia. Coverage rate of collective agreements at sectoral level: 2001 figure given by Tiit Kaadu in Sectoral social dialogue in Estonia.
- Hungary. Number of collective agreements: 1999 figures given by MÃ¡ria LadÃ³ in Sectoral social dialogue in Hungary (based on figures given by BÃ´eÃ¡ta Nacsa and LÃ¡szlÃ³ Neumann in 'The system of collective bargaining in Hungary'). Coverage rate of collective agreements at sectoral level: 1999 figures given by MÃ¡ria LadÃ³ in Sectoral social dialogue in Hungary (based on figures given by BÃ´eÃ¡ta Nacsa and LÃ¡szlÃ³ Neumann in 'The system of collective bargaining in Hungary').
- Latvia. Number of collective agreements: 1999 figure given by Yves Chassard in Social dialogue in Latvia.
- Lithuania. Number of collective agreements: 2000 figure given by Yves Chassard in Social dialogue in Lithuania.
- Poland. Number of collective agreements: 2001 figures given by Maria Matey-Tyrowicz in the report on Poland for the European Commission working group. Coverage rate of collective agreements at sectoral level: estimate given by Barbara Skulimowska at the May 2002 Vienna conference on 'social dialogue and EMU in the candidate countries'.
- Slovakia. Number of collective agreements: 2001 figure from unidentified source (Franciszek Draus cites figure of 56% for 1999). Coverage rate of collective agreements at sectoral level: 1999 figure given by Franciszek Draus in Social dialogue in Slovakia (Ludovit CzÃria gives an estimate of 50% for 2001).
- Slovenia. Number of collective agreements: 2000 figure given in the European Commission's forthcoming 2002 report on Industrial relations in Europe.
Collective agreements at enterprise level
The sources of the figures used in table 3, 'Collective agreements at enterprise level in the candidate countries' are as follows (the full references to the publications and papers referred to are given in the list above).
- Cyprus. 2002 figures from Ministry of Labour and Social Insurance of the Republic of Cyprus.
- Czech Republic. 1999 figure given by Franciszek Draus in Social dialogue in the Czech Republic.
- Estonia. 2000 figure given by Kaia Philips and Raul Eamets in Social dialogue and EMU in the candidate countries: Estonia.
- Hungary: 1999 figures given by MÃ¡ria LadÃ³ in Sectoral social dialogue in Hungary (based on figures given by BÃ´eÃ¡ta Nacsa and LÃ¡szlÃ³ Neumann in 'The system of collective bargaining in Hungary').
- Latvia: 2000 figures given by Yves Chassard in Social dialogue in Latvia
- Lithuania: 2000 figures given by Yves Chassard in Social dialogue in Lithuania.
- Malta: 2001 figures given by Edward L Zammit in Social dialogue in Malta.
- Poland: figures given by Maria Matey-Tyrowicz in the report on Poland for the European Commission working group
- Slovakia: figure given by Franciszek Draus in Social dialogue in Slovakia.
- Slovenia: estimate for 2001 given by Metka Stoka-Debevec at the May 2002 Vienna conference on 'social dialogue and EMU in the candidate countries' (enterprise agreements are not registered in Slovenia).