Draft laws on national and sectoral social dialogue submitted to parliament

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In February 2006, the Hungarian government submitted to parliament bills on the tripartite National Interest Reconciliation Council, the sectoral social dialogue committees and other aspects of social dialogue. The drafts, which have been endorsed by the social partners, give the operation of the various forums a legal basis and lay down criteria for trade union and employers' organisations to participate in the dialogue.

The National Interest Reconciliation Council (Országos Érdekegyeztető Tanács, OÉT), Hungary's institution for macro-level tripartite consultation (HU0502105F), was established in 1988. Its operation is currently based on the agreement and mutual recognition of the parties rather than on legal grounds. Requirements and goals related to EU accession, the demands of social partners and the policy of the government resulted in an agreement on the renewal of social dialogue in OÉT, which was concluded on 27 July 2002 (HU0209101N). The drafting of legislation to give OÉT a legal basis started on the basis of this agreement and was later given a decisive impetus by decision No. 40/2005 (X19) issued by the Constitutional Court (Alkotmánybíróság, AB). According to this decision, OÉT can exercise functions of executive power only if law legitimises its members and operation (OÉT’s function of executive power includes the right of co-decision on certain legislative acts and the right of delegation to bodies exercising executive power - eg bodies deciding on the expenditure of public funds). The AB decision set 31 March 2006 as the deadline for making such a law.

A programme aimed at strengthening Hungary's system of sectoral collective bargaining and agreements started in the early 2000s as a result of the demands of joining the EU-level sectoral social dialogue and the perceived inadequacies of the operation of the national industrial relations system, which is basically built on company-level collective agreements (HU0212106F). This process led to an agreement signed on 22 September 2004, which regulates the operation of sectoral social dialogue committees (Ágazati Párbeszéd Bizottságok, SSDCs) until it is regulated by law (HU0501105F). In this agreement, the social partners and the government committed themselves to developing a draft law on the SSDCs.

Negotiations with the social partners on these issues ended on 27 January 2006 with the government receiving support from both sides for the submission of two bills to parliament, the first on the operation of OÉT and the second on the operation of SSDCs. Although parliament started a general debate on the bills, this was suspended on 13 February because of the general elections due in April 2006. It will be the next parliament’s task to debate and pass the bills.

Draft law on national social dialogue

The draft law regulating OÉT mainly repeats the rules of operation that have developed organically over the last 18 years as a result of cooperation between the social partners and the government. The innovation of the proposal compared with former practice is that it identifies the circle of participants in the forum. While participation has so far been based upon the mutual recognition of the partners (therefore, only small changes have occurred in the identity of the participating organisations over the last 18 years), now, according to the bill, participation will depend on a measurement of electorate support.

Trade union confederations must, in order to participate in OÉT:

  • have member organisations that operate in at least four industries and at least 12 economic sub-branches;
  • have member organisations with regional organisations in at least three regions or in eight counties;
  • have member organisations with workplace organisations at at least 150 employers; and
  • be members of the European Trade Union Confederation (ETUC).

Employers’ associations (HU0512103F) may be the member of OÉT if they:

  • have member organisations that operate in at least two industries and at least six economic sub-branches;
  • have member organisations with regional organisations in at least 10 counties;
  • have a membership including at least 1,000 employers or employing at least 100,00 employees; and
  • be a member of a European employers’ association.

In order to meet these criteria, employers' or employees' interest-representation organisations can form coalitions. The government - as usual - is the third party, and the OÉT president is the minister of employment and labour.

According to the proposal, the National Election Committee (Országos Választási Bizottság, OVB), which is responsible for organising national parliamentary and local elections, will decide whether participants meet the above criteria. The law will provide that the financial resources for the operation of OÉT should be ensured by the government via the competent minister. The source of funding is the centrally managed part of the Labour Market Fund (Munkaerőpiaci Alap).

Furthermore, the draft law gives a definition of terms that have not so far been defined by Hungarian law, or terms whose definition as used in company-level social dialogue is not deemed suitable for national-level consultation and social dialogue. Thus, the proposal defines 'interest reconciliation', agreement, consultation and bargaining at national level.

Draft law on sectoral social dialogue

The basis of the bill on SSDCs is the abovementioned agreement reached in 2004, which identifies the identity, rights and operation of participants in sectoral social dialogue. As it contains detailed rules for SSDCs, the task was to put the agreement into the appropriate legal form and harmonise it with existing laws.

The draft law defines the SSDC as a body in which employers’ interest representations (the employers’ side) and sectoral trade unions (the employees’ side) participate to hold bilateral social dialogue on various issues of sectoral importance in the areas of industrial relations and employment . Besides sectoral dialogue committees, the law makes separate provisions on the interest representation of disabled workers and their employers and the social dialogue between these two parties.

According to the proposal, the purpose of the law is to regulate the development of the institutional system of sectoral social dialogue and its balanced operation in such as way that makes it possible for employers and employees of a given sector to act together in the interest of the economic development of the sector and autonomously decide about most of the 'behavioural' rules to be followed in the sector. The system helps interest-representation organisations to conclude collective agreements that cover more employers and employees than now, with a view to creating standardised conditions of employment and work. Such agreements are seen to support competitive neutrality both in the labour market and the goods market, while the system seeks to mobilise the capacities of employers’ and employees’ interest representatives in favour of the mutual setting of employment conditions and the solution of sector-specific professional issues.

This draft law specifies in detail the criteria for an organisation to qualify as a sectoral interest-representation organisation, and describes the procedure for establishing an SSDC and how an organisation can join an existing SSDC. Furthermore, it specifies representativeness rules and related rights. Meeting these criteria is to be reviewed by a new institution, the Committee of Participation Permission (Részvételt Megállapító Bizottság), the members of which will be experienced experts in industrial relations, mostly members of the Labour Mediation and Arbitration Service (Munkaügyi Közvetítő és Döntőbirói Szolgálat, MKDSZ), who will be nominated by the parties to the social dialogue.

Given that the priority objective is to conclude sectoral collective agreements, the rules of the Labour Code on the extension of collective agreements, including the coming into force and termination of extended agreements, are included in the draft law.

The draft law includes basic rules for the operation of the Council of Sectoral Dialogue Committees (Ágazati Párbeszéd Bizottságok Tanácsa) (HU0501105F), The two draft laws sharply separate the competencies of OÉT and SSDCs: the Council of Sectoral Dialogue Committees deals with the issues affecting all SSDCs, basically the conditions of operation and the various issues of regulation, rather than with the working conditions in a particular sector, while national labour issues and the economic and social interests of employees and employers remain in the competency of OÉT. Just as in the case of OÉT, the bill specifies the financing of the administrative, business, financial and information activities related to the operation of SSDCs, and the infrastructural conditions necessary for the operation of the committees.

The draft law's explanatory provisions give definitions of terms, such as social dialogue, social dialogue committee, agreement, bargaining, consultation, social partner, forum and coalition, which will be incorporated in national labour law through this draft - similarly to and in accordance with the law on OÉT.

Social dialogue on proposed laws

Both draft laws were discussed by OÉT and the Council of Sectoral Dialogue Committees, with each naturally spending more time on the bill that concerns it. Several debates were opened during the discussions, partly because of conflicts of interests between the parties and partly because the partners were worried about potentially excessive governmental intervention.

For instance, it was debated at both forums whether an organisation can participate in national and sectoral dialogues simultaneously. The root of the problem is the special situation of employers’ associations in agriculture, which are basically sectoral but traditionally participate in the work of OÉT. Eventually, the draft law on OÉT solved the problem by making participation in two industries a criterion of participation in OÉT. If an organisation meets the requirements of the law on SSDCs too, it is permitted to participate in dialogue at the two levels.

Out of fear of excessive governmental intervention, the social partners demanded that the law should not regulate the internal decision-making system of the employer and employee sides of OÉT. According to the original language of the draft, the decision-making system of a given side belonged to the competency of that side; if, however, it could not agree on a decision, a decision-making mechanism described in the proposed law would apply. Eventually, this passage was deleted on the request of the social partners. Interestingly, the 2004 agreement on SSDCs included this mechanism and was incorporated in the draft law without objection.

The social partners were afraid that the draft laws would exclude smaller organisations from the dialogue. The two laws solve this problem by two different methods. According to the proposal on OÉT, in order to meet the criteria of national interest representation, coalitions can be formed; while the bill on SSDCs permits the participation of a given organisation to be based on the mutual recognition of partners if it meets the definition of sectoral interest representation.

Commentary

If the bills on OÉT and sectoral dialogue are passed, the first period of social dialogue and macro-level consultation after Hungary's 'regime change' will be closed. The second phase will be the stage of legal foundation and legitimisation. Since the parliamentary debates will be held after the general elections in April 2006, support for these draft laws will depend on the composition of the new parliament. However, no sharp disputes are expected on these issues. With the current text of the laws satisfying the social partners, the question remains if it meets the requirements of the abovementioned Constitutional Court decision. Consequently, primarily in the case of the law on OÉT, a 'preliminary norm control procedure' by the Constitutional Court may be necessary.

Since the draft laws' rules mostly describe already existing mechanisms, no rapid reorganisation of the social partners and of the employer and employee sides of OÉT and the SSDCs is expected. Notwithstanding, the new rules will encourage current organisations to reconsider their organisational policy and form new strategies in order to meet the criteria of participation. For instance, some social partner organisations will have to modify their charters and form of organisation while others will have to comply by the rules on internal structures in order to be able to participate in social dialogue. The rules may in the longer run help the merger of organisations, which may help to make the present 'multi-player' system more effective and uniform.

The legal regulation of the operation of SSDCs will help social partners to participate in the development of sectoral policies more directly, and promote sectoral collective agreements. These agreements enhance the protection of employees and allow employers to deviate more from the minimum standards of labour law (especially in the field of flexible work organisation and non-standard forms of employment). The draft laws settle the issues of financial support to increase the capacities of the social partners, which - if everything turns out well - constitute the basis of their independence.

A main lesson of the debate on the drafts is that social partner organisations often failed to recognise the abovementioned advantages or to recognise them as their own. This is why the debate on the bills was not closed and they were not passed in the parliamentary term now ending. (Erzsébet Berki and László Neumann, Institute of Political Science, Hungarian Academy of Sciences)

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