Impact of legislative reforms on industrial relations

The International Labour Organization has called on Romania to make changes to its labour and social dialogue legislation. The move comes after a study on the Labour Legislative Reforms in Romania was published in January 2013 by a group of independent experts. The experts, and a round table meeting that coincided with the release of the study, conclude that labour reform in 2011 had a negative impact on workers. It affected union coverage and access to collective bargaining.

Background

The results of an impact study into labour legislative reforms in Romania were published on 25 January 2013. The study, carried out by a group of independent experts, was commissioned by the International Labour Organization (ILO).

To coincide with the release of the study, a round table meeting was convened, bringing together members of the National Tripartite Council for Social Dialogue, as well as representatives from a number of interested parties.

One of the conclusions was that the labour reforms undertaken in 2011 have had negative effects on the employees’ coverage with regard to collective bargaining and worker protection. Based on these findings the ILO Director General, Guy Ryder, wrote a letter to Romanian Prime Minister Victor Ponta calling for changes to the labour and social dialogue legislation. It also called for Romania’s compliance with core ILO Conventions.

Reforms affect social dialogue

The issues date back to 2011, when the Government of Romania agreed two pieces of legislation which had a major impact on industrial relations. The two laws were the Labour Code Act 53/2003, republished, and the Social Dialogue Act 62/2011.

The social dialogue laws repealed a raft of legislation that had been used to govern collective bargaining. These included:

  • the Collective Bargaining Agreement Act 130/1996;
  • the Labour Disputes Settlement Act 168/1999;
  • the Trade union Act 54/2003;
  • the Employer organisations Act 356/2001;
  • the Economic and Social Council (CES) Act (CES) 109/1997;
  • the Government Decision 369/2009, regarding the operation of the social dialogue committees (RO1107029I).

The new rules on social dialogue essentially change:

  • the conditions that collective agreements must meet with regard to their scope and for registration purposes;
  • the criteria to be fulfilled by the social partners that seek to be recognised and be representative;
  • the tripartite institutions involved and the role of each of them in the system of industrial relations.

The new rules triggered objections and discontent from all the national trade union confederations and from some of the employer organisations. The unions and employer groups were also unhappy at the government’s failure to create an adequate framework for discussing the new legislation with the social partners and considering their views before making final decisions. The social partners made their objections both before and after the enactment of the new legislation (RO1202039I).

Finding that the new legislation was contrary to some ILO conventions ratified by Romania, the trade unions requested the technical support of ILO experts.

Assessing the impact of the reforms

At the Romanian trade unions’ request, both the Social Dialogue Act, and the amended version of the Labour Code were examined by ILO experts.

In 2012, ILO commissioned an Impact Study on the Labour Legislative Reforms in Romania, which was completed by the end of the year.

The conclusions reached by the experts assigned to this study were made public at the round table convened on 25 January 2013. The meeting was attended by members of the National Tripartite Council for Social Dialogue (CNTDS), a body established under the new law, the Minister of Labour, the State Secretary for social dialogue on behalf of the Government, representatives of the national trade union confederations, employer organisation representatives at national level, and experts from the International Monetary Fund (IMF), European Commission (EC), the World Bank (WB), and ILO.

Main findings

One of the conclusions reached by the experts was that reforms of the social dialogue institutions at a time when the country was still in an economic crisis seemed to have caused a crisis of its own. It said there had been a negative impact of these very social dialogue institutions, and on the parties to the social dialogue.

Also noted was the effect of the abolition of the national unique collective agreement. This had been used to govern all the workers in all companies, irrespective of their size. Experts said the abolition of the agreement, along with the new rule that makes collective bargaining mandatory in companies staffed with more than 20 workers, had diminished the coverage of the workers’ rights through collective bargaining.

The impact study shows that firms with 20 workers or fewer accounted for more than 94% of all the active companies in the Romanian economy, and for over 25% of all employees in the country.

The replacement of the branch bargaining level by the sectoral bargaining level was found to have brought social dialogue to a stalemate. This was because the social partners were obliged to re-apply for representativeness based on new criteria, in order to be allowed to take part in the collective bargaining and to execute sectoral collective agreements. All of these things were time-consuming.

One other reason why, in 2011, no collective bargaining was possible at this level was the belated issuance of the government decision with regard to the configuration of the new sectors. The decision came in December 2012, seven months after the law was passed. By November 2012, only one sectoral collective agreement had been negotiated and executed – for pre-academic education – and seven new collective agreements at group of units’ level, five of which were in the public sector.

Under the new legislation, collective agreements and sectoral collective agreements may be duly registered only if the number of employees in the corporate entities affiliated with the signatory employer organisations represent at least 50% plus one of the total number of employees in the sector.

According to the new rules, for some sectors the necessary minimum number of workers hired in the affiliated companies at the employer federation increased five times. For example, in the commerce sector, the minimum number had been 88,500 workers. This was increased under the new rules to at least 411,000. In the construction sector, the threshold rose from 39,000 to 147,000 workers.

The new regulations make collective agreements valid only in those companies affiliated at the employer organisations that have signed them, while previously the collective agreement for an economic branch was applicable to all the workers in all the companies in that economic branch.

The research also brought to light a decreasing appetite among employers to obtain acknowledgement of their representativeness at sector level, which became one more stumbling block in the collective bargaining process.

At company level, the number of collective agreements negotiated and executed in 2011 and 2012 dropped to almost a half, compared with 2009 and 2010.

The study also observed not only that the erga omnes (applying to all) principle had been abandoned, but also that workers were less protected in comparison with the previous agreement.

Another effect of the recent changes is the preponderance of the collective agreements at sector and group of unit levels in the public sector, in which, according to the new legislation, pay is set by law, not by negotiation.

Conclusions of the round table

The debates heard the opinions of all the sides represented at the round table – the government, social partners, IMF, EC, WB, and ILO.

The participants agreed on the negative effects that the legislative reforms have had on the process and the system of collective bargaining in Romania.

These effects translated into a reduced rate of coverage of collective agreements for Romanian workers by narrowing the opportunities to negotiate, to register and perform a collective agreement of national coverage. The basic rules of sectoral collective agreements had also changed, along with the rules governing the representativeness of trade union and employer organisations.

Shortly after the round table, on 2 February 2013, ILO Director General Guy Ryder contacted the Prime Minister of Romania, Victor Ponta. He issued a letter stating that the:

...round table provided a useful opportunity for all parties to discuss the impact of the reforms on workers and employers organisations and on collective bargaining mechanisms and outcomes in an open and constructive manner.

The ILO letter said that in the medium term, in order to ensure that future real wage increases are aligned with productivity, there needed to be efficient wage policies and participation of the representative social partners. Ryder also said ‘changes will be needed to bring current labour and social dialogue labour legislation into compliance with core ILO Conventions’.

The ILO document ends with a statement that welcomes the consensus reached with regard to the need to achieve these transformations through national tripartite social dialogue, and affirmed ILO’s readiness to provide support in order to attain this.

Commentary

The authors themselves point out in the study, that the time lapsed from the date of these legislative changes is rather short. However, the official statistics show that in 2008 the employees’ wages accounted for 42% of the gross domestic product, and the gross operating surplus for 47.2% of the GDP. In 2011, the share of the employees’ wages had dropped to 40.6%, and the surplus rose to 50.8%. In other words, the crisis took its toll mostly on the workers and their earnings.

The process is also mirrored by the opinion polls conducted by the national trade union confederation National Trade Union Bloc (BNS), which have been quoted in the study. They show that the level of employees unhappy at the level of their pay grew from 48% in 2010 to 55% in 2011. These feeling are exacerbated by the employers’ failure to involve the workers in the decision-making process, or to seek their views when planning changes in the company.

Constantin Ciutacu, Institute of National Economy, Romanian Academy

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