Paper factory offers compensation package under union pressure

A decision was taken on 24 February 2009 at a meeting of the board of directors of the Mondi paper manufacturing group to temporarily close the company’s site at Stamboliiski at the end of May. The managing director in Bulgaria explained that the temporary closure did not mean that the factory will necessarily re-open in the future; it is possible that it might be closed down permanently, although it could start operating again under certain conditions.

Background

Bulgaria’s largest paper factory, Mondi Stamboliiski SPJSC – owned by the international paper manufacturing Mondi Group – announced that it would temporarily close its plant in the central part of southern Bulgaria on 31 May 2009 until market conditions improve. The Mondi Group started operations in Bulgaria in 2006 and the company worked at about 60% of its maximum annual production capacity of 120,000 tonnes in 2008. The shutdown is part of Mondi’s restructuring plan aiming to curb the effects of the global economic crisis; the decision was taken on 24 February 2009 at a meeting of the company’s board of directors.

As a result of the economic downturn, companies are experiencing significant difficulties; many enterprises are being forced to introduce short-time working schemes and, in some cases, to make staff redundant on a temporary basis – or even permanently. So far, Mondi has temporarily closed or sold factories in Denmark, France, Hungary, Spain, Sweden and the United Kingdom (UK) in order to focus on core operations and optimise production.

The Managing Director of Mondi Stamboliiski, Alexander Krikler, explained that the difficult market conditions and problems surrounding the main raw material supplies – energy and timber – are the main reasons for the decision to close the site. For example, the price of wood started to increase in Bulgaria in 2006 and is now €15 more expensive per unit than the wood in other European countries.

Proposed dismissals

On 9 March 2009, Mondi’s management informed the company’s trade unions and the National Employment Agency (Агенция по заетостта) about the forthcoming mass redundancies, as required by the labour legislation (Article 130а, Point 2 of the Labour Code). At that time, the company had a total of 412 employees and the dismissals were planned for about 350 workers. The management decided that it was necessary to keep about 60 qualified workers on site in order to maintain the equipment and skills so that the company would be able to recommence operations in case of favorable market conditions.

The Municipal President of Stamboliiski, Nikola Mihailov, announced that the factory workers had informed the local administration that the company would cease production with the promise of restarting in the autumn of 2009. He acknowledged that the municipal administration was very concerned because the redundancies would lead to higher unemployment and also to a reduced municipal budget; the taxes that the company pays are the main source of income for the town.

However, Mr Krikler admitted that the temporary closure did not mean that the factory will necessarily re-open in the future; it may in fact be closed down permanently, although it could start operating again under certain conditions.

Trade union reaction

A total of three trade union organisations are present in Mondi Stamboliiski: the Federation of Trade Union Organisations in the Forestry and Wood Processing Industries (Федерация на синдикалните организации от горското стопанство и дървопреработващата промишленост, FSOGSDP), affiliated to the Confederation of Independent Trade Unions in Bulgaria (Конфедерация на независимите синдикати в България, CITUB); the Confederation of Labour Podkrepa (Страница на КТ Подкрепа, CL Podkrepa); and the Association of Democratic Trade Unions – the latter is not recognised at national level. The company’s collective agreement expired in November 2008 and the trade unions had prepared a new version which has not yet been discussed with the employers.

As noted, the trade unions were informed on 9 March that the company had to resort to redundancies. At the initiative of the unions, several meetings were organised in March 2009 for information and consultation purposes, where the trade unions emphasised the need for benefit packages for employees made redundant. The final round of meetings between the trade union representatives and the company’s management began on 25 March 2009, with a view to concentrating all efforts on making the company operational again.

Compensation agreement reached

According to an agreement signed by all parties on 7 April 2009, the three trade unions and the company’s management participated in the consultation initiated by Mondi in order to apply the legislation on mass redundancies. The dismissals were to take effect from 27 April 2009 up until the end of May 2009.

Under the terms of the agreement, the company is obliged to offer financial compensation to certain categories of employees who will be affected the most by the dismissals. For example, the company will pay five months of gross pay to pensioners with 10 years of service. Other beneficiaries include workers whose jobs were readjusted for health reasons or disability, members of the family if both spouses have been working in the company, mothers with children, single parents and heads of households.

Commentary

Mondi’s management and the trade unions have initiated discussions with the State Forestry Agency, the Ministry of Economy and Energy (Министерство на икономиката и енергетиката) and the National Assembly (Народно събрание) with the aim of creating more favourable conditions for the wood industry.

Snezhana Dimitrova, Institute for Social and Trade Union Research (ISTUR)

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