Debate over viability of collective bargaining system

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In 2002, the basic legislative framework for collective bargaining is 75 years' old, and the relevant laws have changed little over this period. However, certain provisions of the legislation - notably on extending collective agreements to non-signatory employer, and on applying agreements to non-union employees - are increasing under debate.

In 1927, the Collective Agreements Act (Wet op de Collectieve Arbeidsovereenkomst, WCAO) came into force, followed 10 years later by the Collective Agreements (Declaration of Generally Binding and Non-binding Status) Act (Wet op het algemeen verbindend en onverbindend verklaren van bepalingen van collectieve arbeidsovereenkomsten, WAVV). Since coming into effect, these acts have been amended with respect to only a few minor points, and certain parts of both items of legislation are now increasingly under discussion.

Key points of the WCAO

The Collective Agreements Act (WCAO) has changed little since its inception in 1927. Acollective agreement (collectieve arbeidsovereenkomst, CAO) can be reached only between an association of employees that complies with a number of requirements stipulated by law on the one hand, and an employer or association of employers on the other hand. The most important provisions are contained in Articles 12 and 13 of the WCAO. Article 12 declares provisions contained in individual employment contracts that depart from the collective agreement null and void; the relevant provisions of the collective agreement apply instead. The so-called'minimum collective agreement' forms an exception to this rule; provisions of individual employment contracts that favour employees are not overruled by the content of the collective agreement.

Article 13 of the WCAO supplements the individual employment contract: if the individual contract does not contain provisions on a particular subject, the provisions of the relevant collective agreement apply. On the basis of Article 9 of the WCAO, all members of a trade union organisation that is party to a collective agreement are bound by it. This also applies to employees who revoke their membership during the agreement’s term of applicability and to employees who become members during this period. On the basis of Article 14 of the WCAO, an employer covered by an agreement is obliged to offer the same terms and conditions of employment agreed in the collective agreement to non-affiliated employees as well.

Key points of the WAVV

The Collective Agreements (Declaration of Generally Binding and Non-binding Status) Act (WAVV) is 10 years younger than the WCAO. This act has also changed little since its inception in 1937. The essence of the WAVV is that the Minister of Social Affairs and Employment can declare provisions of a collective agreement which is applicable throughout the country (or a significant part of it) to a sizeable majority of employees working in the sector concerned, to begenerally binding. The order declaring the agreement binding lasts for a maximum period of two years. Interested parties may object to the intention to declare an agreement generally binding. However, requests to declare the agreement binding are generally honoured. The Minister’s policy is covered in greater depth in the'test framework' for declaring collective agreements' provisions generally binding. This framework further explains the meaning of'a sizeable majority of the employees' and specifies which provisions in collective agreements are or are not eligible for being declared generally binding.

Scope of the WCAO and WAVV

Approximately 84% of the Dutch workforce falls under a collective agreement. The table below breaks down this coverage by type of agreement.

Collective bargaining coverage by type of collective agreement, % of all employees
Government sector collective agreement 12%
Company-level collective agreement 12%
Sector-wide collective agreement 53%
Sector-wide collective agreement, as a result of extension 7%
Not covered by a collective agreement 16%

Source: Minister of Social Affairs & Employment (SZW), Social Memorandum 2002.

In light of the current debate about collective agreements and declaring agreements generally binding (see below), two conclusions can be drawn from the above. First, the WAVV no longer appears to be of significant consequence in a quantitative sense: the extension of collective agreements based on the WAVV adds less than 10% to the total number of employees governed by a collective agreement. Second, it can be concluded that Article 14 of the WCAO is of great importance. With a unionisation rate of around 27%, Article 14 serves almost to treble the number of employees governed by collective agreements.

Debate over the WAVV

Criticism of the WAVV started even before the law came into force. Since then, the basic criticism have been that non-unionised employers are forced against their will to offer terms of employment that they had no part whatsoever in formulating. Companies’ competitive position may be weakened, especially in sectors vulnerable to fierce competition. The extension legislation is also believed to act as a hindrance to fledgling entrepreneurs. In the 1990s, an additional argument against the WAVV emerged: as the lowest wage scales included in collective agreements were imposed on all employers in a specific sector (above the legal minimum wage), employees at the bottom end of the labour market would find it harder to find work (NL9702103F andNL9705113N).

Proponents of declaring collective agreements to be generally binding perceive the WAVV as being important in terms of maintaining stability in the labour market. Declaring agreements generally binding may be considered as an indispensable instrument of support for collective agreements. Proponents also point out the existence of an option of granting exemption from the extension of a collective agreement (to fledgling entrepreneurs, for example).

Debate over the WCAO

An important topic of discussion in the debate about the WCAO legislation is the status of so-called'Article 14 employees'. Although these employees do not belong to a trade union, the employer is obliged by law to offer them the terms and conditions of employment agreed with the unions. Two related issues are regularly raised in discussion: the'free-rider' problem and the representativeness of unions. The free-rider problem relates to the fact that non-union members benefit from the results of collective bargaining without contributing to the unions’ activities at all. It has been suggested as a possible solution that only once a minimum level of unionisation has been reached within the company should the collective agreements apply to all its employees. In addition, the costs of the agreement should be covered by a levy paid by all employees and employers involved.

Decentralisation

Over the past few years, a trend towards decentralisation appears to have set in in the Dutch system of collective bargaining, which has served to shift the regulation of labour relations from macro level to company level (NL9905139F).

Despite an increase in the number of company-level collective agreements, sector-wide agreements still dominate in terms of scope. Partly as a result of the instrument of declaring agreements generally binding, sectoral agreements in fact determine the terms of employment of 84% of the workforce. It is true, however, that sector-wide agreements are increasingly adopting the character of framework agreements, which then need to be developed in detail at company level.

The current'Grafimedia' sector (ie graphical and media industr) collective agreement is a good example of such a framework agreement. In this case, the collective bargaining parties have departed from the old system in which six extensive and particularly detailed standard collective agreements governed terms of employment and were made generally binding. The present Grafimedia agreement has three layers: agreements on some issues have been reached at central (sector-wide) level and are known as the'umbrella' provisions; some apply only to specific subsectors and are known as the sector-specific provisions; and the third layer comprises company-specific or decentralised agreements. Negotiations pertaining to such decentralised agreements are carried out on the employee side byworks council s.

However, the shift towards decentralisation goes even further. Instead of generic collective agreements, more and more, agreements allow leeway to cater to individual workers' wishes in the form of'cafeteria' agreements (NL9906144F). Topics such as flexible early retirement and retirement, part-time work and leave for carers are often addressed in these agreements.

Alongside an increase in the number of company-level collective agreements and the trend towards individualisation within these agreements, there is a third noteworthy development. Instead of entering into collective agreements, some companies prefer to make direct agreements with the works council (NL9703106F). Company-specific arrangements, in the form of'personnel guides', drafted with or without consultation with the works council, are becoming increasingly popular. An important difference between collective agreements on one hand and agreements with the works council on the other, is that the latter do not necessarily apply imperatively to individual employment contracts. This difference is discussed quite regularly, especially by employers. However, successive governments have rejected lifting this distinction (see below).

Position of social partners and government

Particularly among employers’ circles and the liberal Party for Freedom and Democracy (Vereniging voor Vrijheid en Democratie, VVD) group in the Lower House of parliament, critical remarks have been made over 2001-2 about the Dutch system of collective bargaining. For example, Jacques Schraven, the chair of theVNO-NCW employers’ confederation raised the issue of how collective agreements are currently drafted in an interview published by the daily newspaper,Het Financieele Dagblad, on 5 August 2002. As alternatives to the current position, Mr Schraven mentioned'more arrangements with the works council' and'direct agreements between the employer and employee'. The trade unions strongly oppose such suggestions. Indeed, Mr Schraven’s own camp was not unanimously positive about his suggestions either - for example, the chair of the employers’ organisation in the metalworking industry applauded the positive aspects of collective agreements.

Following the remarks made by Mr Schraven, a VVD member of parliament, Geert Wilders, questioned the Minister of Social Affairs and Employment on 6 August 2002 about the representativeness of trade unions (NL0103127F) and bargaining concerning terms and conditions of employment. In his response, the outgoing Minister, Aart Jan de Geus, said that there are no legal rules on representativeness and that employers and employers' organisations are at liberty to choose whether or not to reach collective agreements with one or more trade unions. On the issue of the possible further decentralisation of bargaining concerning terms and conditions of employment, the Minister remarked:

There is nothing preventing bargaining concerning terms and conditions of employment from becoming more decentralised in the direction of the shopfloor. This is a matter for the social partners themselves. It is not the case that by definition there is a discrepancy between bargaining that leads to a collective agreement on the one hand and bargaining of a more decentralised nature on the other. Collective agreements can be established at company level too.

It is also possible to agree in collective agreements that (further) agreements can be reached at a more decentralised level, in the form of an agreement between the employer and the works council for example. This caters to the needs of the parties involved in establishing the collective agreement.

It is not possible to arrive at a collective agreement with a works council instead of a trade union. The works council is a body within the organisation and is therefore not an independent negotiating party. Besides, only those associations in possession of full legal rights are allowed to conclude collective agreements; the works council is not an association. Additionally, treaties limit works councils from acting independently in such a way as to overlap with the activities of trade unions. The works council may not undermine the position of trade unions.

Arranging terms and conditions of employment with individual employees instead of on the basis of a collective agreement is certainly also an option. After all, if a collective agreement does not apply to an employer, the employer often has to fall back on a large number of individual contracts reached with employees. The transaction costs associated with this constitute another reason for employers to want a collective agreement in place. In this sense, it is a cost consideration the employers have to make themselves.

Commentary

The question of whether the current collective bargaining system is coming apart at the seams prompts highly diverse responses. At the same time, the number of collective agreements reached and their scope has changed little over the years, and support from employers for the activities of the trade union movement appears undiminished. Employer representatives have also repeatedly stated that their preference is for negotiating with recognised unions (NL0103127F). In the meantime, the wish for a greater level of decentralisation expressed by employers and employees over the years (NL9811105F,NL0003184F andNL0110102F), has to a large extent been fulfilled.

Nonetheless, the situation is problematic for the simple reason that the established balance between employer and employee organisations is under pressure. Financial problems facing the trade unions appear to be biggest reason for this (NL0006192N,NL0112135F andNL0206105F). This, more than a possible lack of representativeness, forms a threat to the Dutch system of collective bargaining. (Robbert van het Kaar, HSI)

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