Influence of Trade Unions in Employee Relationships

Majority of developed nations adhere to prescribed labour standards in wages and working conditions; employment forms, compensations, incentives, bonuses, and allowances that are regulated, either by law or collective bargaining agreements. These joint accords, in turn, are covered by judicial or conventional decrees which explain processes, causes and results. However, the rationality of these pacts does not merely represent judgments made by national institutions and economies. It takes into account as well the social factors and the aggregation of decisions which constitute the systems of industrial relations. Industrial relations have varied throughout the ages and differ in terms of concepts and implementation.

As a background, based on statistics from the Federation of European Employers, “membership in trade unions declined in Western Europe during the last twenty years. Out of more than 27 member states of the European Union (EU), only eight nations have more than half of their labour population as members of a trade union. In fact, the four most populated states all have moderate numbers of union membership with Italy at 30%, the UK 29%, Germany 27% and France at only 9%. The reasons will be discussed in the middle portion of this amalytical paper (2010).”

Ferner and Hyman (1998) have argued that “Europe developed unique features in industrial selections at the end of the nineteenth and during the twentieth century and most of these remain in force until the present time. Collective bargaining is the principal responsibility of employers’ associations and trade unions by trade or sector and coordinated by confederations. Bargaining at company level came later, is growing, but remains under the aegis of federations. A distinction is made between collective bargaining, which deals mostly with wages and working time, and participation of wage-earners, which includes work conditions, welfare, and the adaptation of a broader collective agreement. (1998)”

“Industrial relations in Europe are undergoing rapid internationalization. Even as integration takes place, national politics and industrial relations will remain as the major areas for the social regulation of work and employment in Europe. This is because European integration for more than four decades has become a process of economic liberalization through international means of opening up national economies through internationally negotiated expansion of markets beyond national borders. Industrial relations have therefore always, although to varying degrees, been governed by rules, not just of contract, but also of status rules that impose rights and obligations on contracting parties that they are not allowed to modify by mutual agreement (Wolfgang, 1998).” This is where Marshall’s concept of industrial relevance becomes relevant. Marshall’s theory states that, “social rights are awarded not on the basis of class or need, but rather on the status of citizenship. He claimed that the extension of social rights does not entail the destruction of social classes and inequality. According to Mundlak, “While Marshall’s concept of industrial citizenship may seem to be in decline, other labor market institutions are trying to bridge the divide between citizenship and labour rights: workplace democracy, which assumes the constituency of workers in the corporation; and corporate citizenship, which is used to entrust corporations with obligations that are traditionally expected of human citizens. Citizenship’s contribution to the analysis of labour market institutions lies in the emphasis on the public nature of workers’ rights, in the association of rights with obligations, and in the emphasis on active participation (1950).”

This dissertation will come up with critical analyses of the theories stated above and at the same time focus on the following countries belonging to the European Union namely: Britain, France, Germany and Hungary. There will be substantial discussion regarding the public sector being the only remaining sector wherein trade unions have influence in employment relationships. Likewise, the other points to be assessed are the labour laws in the four countries, labour markets and employment trends, role of the state and industrial relations in the public sector, European Social Model, European Union Law, European Community Labour Law and European Regulation of Working Time.

Comparative Assessment of Labour Laws in Britain, France, Germany and Hungary

Before we look into and make a comparative assessment of existing labour laws in the four member-nations of the EU, let us first consider one definition given to a union – It is a legal entity consisting of employees or workers having a common interest, such as all the assembly workers for one employer, or all the workers in a particular industry. A union is formed for the purpose of collectively negotiating with an employer (or employers) over wages, working hours and other terms and conditions of employment. Unions also often use their organisational strength to advocate for social policies and legislation favorable to their members or to workers in general. The European Industrial Relations Observatory On-line reported that “trade unions in Europe aspire to collective bargaining in the form of the European social dialogue, but also channel much of their efforts towards influencing the political and administrative processes at EU level. The European Trade Union Confederation (ETUC), which brings these trade unions together at EU level, encapsulates some of these in the Preamble to its Constitution. The ETUC, consisting as it does of free, independent and democratic trade union confederations and European industry federations, aspires to be a unified and pluralistic organisation representing all working people at European level (2009).”

In his discourse, Meyers put emphasis on the fact that, “labour law is part of a system, and the consequences of change in one aspect of the system depends upon the relationship between all elements of the system. Since those relationships may not be similar between the two societies, the effect of similar legislation may differ significantly as between the two different settings (1967, p. 243).”

Another relevant concept comes from Kahn-Freund (1974), “the use of the comparative legal method requires a knowledge not only of the foreign law, but also of its social, and above all its political, context. The use of comparative law for practical purposes becomes an abuse only if it is informed by a legalistic spirit which ignores this context of the law (p. 27).”

Regarding labour relations, Kahn-Freund has this to share. “On the whole, and subject to limitations I shall have to discuss, this tendency should be welcomed. To appreciate its significance, it is perhaps useful to distinguish between three purposes pursued by those who use foreign patterns of law in the process of law making. Foreign legal systems may be considered first, with the object of preparing the international unification of the law, secondly, with the object of giving adequate legal effect to a social change shared by the foreign country with one’s own country, and thirdly, with the object of promoting at home a social change which foreign law is designed either to express or to produce (p. 2)”

Kahn-Freund concludes, and this is very vital to this thesis, by asking and giving the answers: “How great is this danger of a misuse of the comparative method in the field of labour relations which is my third and last example? Clearly there is no field of human endeavour in which it is more important to set up international standards and to transplant institutions and principles from more to less developed countries. Not only is it important-the impressive achievement of the International Labour Organisation shows that it is possible. Here, if anywhere, we see the comparative method in action, in success-ful action. This is the obverse side of the coin. Let us look at the reverse. In each country the relations between management and labour are organised under the influence of strong political traditions, traditions connected with the role played by the organisations on both sides as political pressure groups promoting legislation, and as rule making agencies through the procedures of collective bargaining (p.20).”

Indeed, the aforementioned postulations will help us with our conclusions regarding the main points of this study:

“The public sector is the sole remaining sector in which trade unions have influence in the employment relationship. Discuss this statement with regard to the practices and outcomes of private and public sector industrial relations in at least four European countries.”

To begin with, let us take a look at the comparison of labour practices among the four countries that we have chosen in the European Union.

The following is a table that shows prominent features of the comparative features of the four EU Countries:

Germany

Britain

France

Hungary

Relevant Provisions of the Civil Code

Distinguishes employees from independent contractors

Puts emphasis on subordination, socialization, integration and social criteria

No national minimum wage but minimum pay levels in a business effectively set by any relevant and applicable collective agreement

Also prohibition on wage dumping, precluding usurious wages that are 2/3 or less than agreed wage in collective agreement for particular sector or industry

24 days paid leave based on 6-day week

20 days paid leave based on 5-day week excludes bank holidays

Various legal categories:

employee, worker (in position of dependence analogous to employees, employment

determine extent of statutory protection

National minimum wage (currently £5.93 for 21 and over; £4.92 for 18-20 yr olds; £3.64 rate for 16-17 yr olds)

New rate for apprentices is set at £2.50 an hour (applying to 16-18 year-old apprentices, and first-year apprentices aged 19 and above)

Pay otherwise set by incorporation of collectively agreed terms or individual contracts

In principle, 48-hour maximum working week

4.8 weeks’ paid annual leave (based on 5-day week) to 5.6 weeks on 1 April 2009 with maximum of 28 days includes bank holidays if employer wishes

Distinguishes employees from independent contractors

Puts emphasis on link of subordination or bond of obedience

Employees in employment relationships established by employment contracts & governed by Labour Code

Employee works in a position which is dependent on the employer, because he or she has to appear at the place and time specified, in a condition fit for work and spends working hours performing work, or at the employer’s disposal for the purpose of performing work

Self-employed independent contractors engaged under appointment contracts governed by the Civil Code

Following growing concern at the use of sham self-employment contracts, the Labour Code was amended in 2003 to provide: The type of employment contract may not be chosen with a view to restricting or violating provisions for the protection of the employee’s rightful interests.

Provision for mandatory minimum wage to be set for a specific field or area if required in view of employment conditions

30 working days or five weeks paid leave per annum based on six-day week usually excluding Sunday while bank holidays are additional

Labour Code (Act No. 22 of 1992) as subsequently amended

Interpreted and applied in relevant domestic Labour Courts (see s.199 of Labour Code)

Termination of employment:

In case of ordinary dismissal statutory minimum notice from employer is 30 days

In such cases, employees are entitled to a severance payment of:

One month pay for at least three years service

two months for at least five years

three months for at least ten years

four months for at least fifteen years

five months for at least twenty years

six months for at least twenty-five years

Extraordinary dismissal (summary dismissal without notice) is permitted if other party has willfully or through gross negligence violated his or her essential contractual obligations, or behaved in such a way that the continuation of his or her employment becomes impossible

Unfair dismissal

In cases of ordinary dismissal, an employee may be dismissed only for reasons in connection with his/her ability, his/her behavior in relation to the employment relationship or with the employer’s operations

The employer must similarly prove the authenticity and substantiality of the reason for an extraordinary dismissal

If the employer cannot justify a dismissal as required, the employee can seek reinstatement. If this is not possible or is not requested by the employee, the court can order the employer to pay the employee no less than two and no more than 12 months’ average earnings.

The employee will additionally be reimbursed for lost wages and other emoluments and compensated for any damages arising from such loss unless these are recovered elsewhere this prevents double recovery.

Employees who are unlawfully terminated other than by ordinary dismissal (those who are subject to extraordinary dismissal) are further eligible to receive the average earnings payable for the notice period and severance pay

Basic maximum of 20 workdays or equivalent pro rata in order to comply with requirement in EC Working Time Directive for at least four weeks with paid leave increasing with age of employee to maximum 30 days over age 45

Analyses:

For Germany, the absence of a distinct law or policy on national minimum wages makes it seemingly unfair to the labourers or employees although there are minimum pay levels in a business effectively set by any relevant and applicable collective agreement. The country is strict regarding wage dumping to prevent usurious wages to protect welfare of workers. In the UK, there is a definite law on minimum wages to safeguard the interests of the work force. In France, while there are clear-cut labour laws and civil code provisions, the employees are subservient to employers based on the collective arrangements. Hungary has strict labour laws and places weight on termination issues. Wage structures for all the four nations are almost similar and in compliance with the labour standards.

Role of the State – Industrial Relations in the Public Sector

We will now shift our attention to the public sector which is the bigger segment and where trade unions have considerable influence on the contemporary employment relationships. The public or government sector has employees that come from national, local, state, federal, judiciary, police forces, military, health, education, public works, social services and other sectors. There may be almost 20 million coming from the countries of the UK, Germany, France and Hungary.

There is an entirely different concept as well as practices in industrial relations in the public sector compared to that of the private domain mainly because of the varying parliamentary systems and institutions, legal interferences in industrial relations, economic goals and political conditions of nations.

The concept alone of public management is very complicated. Based on the Paper for the Conference organized by the SOG and the QoG Institute, “the World Bank defines Governance as the manner in which power is exercised in the management of a country’s economic and social resources for development” (World Bank, 1992), or “the manner in which public officials and institutions acquire and exercise the authority to shape public policy and provide public goods and services” (World Bank, 2007) (definitions cited by Kaufmann and Kraay, 2007). The latest definition given by the World Bank bears the mark of the New Institutional Economics (NIE): “Governance consists of the traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them. In the opinion of the World Bank, governance consists of 5 key dimensions:

The structure of government, the legal and practical separation of the executive, legislative, and judicial powers;

The structure of the accountability and contestability of political leaders, the quality of the public policies;

The public sector management, the behaviour and efficiency of civil servants (and of contractors if delivery of public services is outsourced) in managing public resources, carrying out regulatory functions, and implementing public policy;

Open entry and competition in the private sector, the degree to which the governance system allows, or prevents, a limited business elite to consolidate economic power that it then transforms into political power, including influencing officials and laws in ways that further consolidate and protect its economic power.”

According to Hemerijck et. al, “the European Social Model is based on the normative ambition that no one will be abandoned to cope on their own in a competitive market system, a normative heritage closely related to the long-term influence of Christian Democratic and Social Democratic thought in Europe. At the cognitive level, the policy theory that lies behind the European Social Model is based on the recognition that the normative objective of social justice can be made to contribute to economic progress. This goes against the prevailing view of the big trade-off between economic efficiency and social justice in advanced welfare states. The idea that social justice can be made to support economic efficiency, and vice versa, that economic competitiveness is likely to foster social cohesion, is not necessarily an overly naive view in an era of economic internationalization (2002, p.7).” According to them, in terms of public policy, the European Social Model is “made up of three features: Coverage of basic social security is very extensive, almost universal, the EU is marked by a higher degree of interest organisation and policy concentration between the government and social partners in the areas of employment relations and collective bargaining and, the majority of EU economies preside over a more equal wage and income structure than elsewhere (2002, p.8).”

In short, the European Social Model provided a framework for the role of the state in the wide scope of industrial relations in the public sector. It is in the EU where governments exert a lot of influence on employment relations and collective bargaining.

Hemerijck et. al further explained that “in nearly all EU countries, reforms of public sector employment relations and industrial relations have been underway for some time, as early as the 1970s in some countries. This is well before the public sector reforms described in previous chapters of this report, let alone the introduction of EMU. To start, a simple test is presented here of the impact of EMU on reforms of public sector employment and industrial relations as expressed in major changes in labour laws or innovative and basic collective agreements. We try to establish whether the impact in the selected countries is absent, moderate or profound (p. 85).”

The following is a very important consideration to answer our basic question: “There is a crucial distinction in employment relations between the public and private sectors, with a special employment status attached to employees in the public sector as public servants or employees under a public service statute. In most cases, many reforms in employment relations have no clear distinction between private and public sector reforms. Some of the relevant public sector reforms include: 1992: delegation of pay (level) negotiation to departments/agencies, except senior civil servants; (Managements Functions Act) 1996: delegation of pay structures and systems to departments/agencies; and, 1997: reform of bargaining structure of local government (an integrated national framework agreement with local bargaining). The idea of the State as the representative of the general interest was not only applied in the relationship between the State and its citizens, but also between the State and its employees. The statute was complemented with the mechanism of unilateral regulation of the terms and conditions by the State as employer through laws or administrative measures (often referred to as the denial of collective bargaining rights). In some countries, nearly all or a large majority of employees in the public sector are employed under a single civil service statute (the single status model). In other countries, apart from the civil service statute, employees in the public sector are salaried employees under special contracts or under contracts similar to the private sector (the two status model). A development in nearly all selected countries in the 1990s has been a further restriction of the civil service statute to core groups like senior executives, the army and judges, while other employees are increasingly employed under contracts similar to the private sector (pp. 85 – 90).”

Bescusson provides additional inputs regarding the European Social Model. In his dissertation, he states salient points, “employers’ organisations and trade unions play a principal role in most member states of the Union. Their institutional forms and interactions at various levels reflect the European Social Model of working life, a central component of social citizenship. Rather than decisions taken up unilaterally by management, there is a mandatory representation by workers in such decisions through representatives of work councils, enterprise committees and trade union bodies. This is prevalent in almost all member-states except the UK and Ireland (2002, p. 216).

This means that democracy is being practised and as provided for in this model, the workers are always represented to ensure that their voices, opinions and views concerning labour issues and concerns and most importantly, their rights and privileges are heard at all times.

With regards to the integration of political, legal, economic and social processes in the European Union, there are two opposing concepts that should also be understood and these are regime competition and the Europeanisation of labour market regulation.

Marginson theorizes that “the scope that an integrated European market and production space opens up for countries and companies to engage in regime competition, and the potential for this to result in widespread social dumping in which labour standards and wages and conditions are progressively undercut in the search for competitive advantage, has been a continuing concern for trade unions, several national governments and the European Commission. At macro-level, although Economic and Monetary Union served to deepen European economic integration, it has not been accompanied by parallel measures aimed at social integration. Instead, regime competition between the different labour market systems of member states is widely held to have been further exacerbated by the onset of EMU, from the beginning of 1999. Overall, the evidence that European integration has unleashed widespread social dumping is limited (Ferner, 1997a: Marginson and Sisson, 2004: 221-23). This is because even confining our focus to labour considerations, the process of regime competition is multi-dimensional, ranging across labour quality, skills and productivity; different forms of labour flexibility – qualitative as well as quantitative; as well as labour regulation and costs, both direct and indirect. It is unit labour costs – a compound of these different elements – which matter to producers, rather than labour costs per se. Accordingly, regime competition is giving rise to rather more nuanced outcomes (2006, pp. 4 -6).

Collective Bargaining in the Public Services Sector

It is not only in private companies where collective bargaining which is defined by the EIRO as “the process of negotiations between unions and employers regarding the terms and conditions of employment of employees, and about the rights and responsibilities of trade unions. It is a process of rule making, leading to joint regulation.”

McKay cites the “European Federation of Public Service Unions (EPSU) Social Dialogue and Collective Bargaining Conference in November of 2006 wherein key issues in relation to collective bargaining at both European and national levels were discussed. The conference played a major role in EPSU’s ongoing efforts to build its collective bargaining network and to coordinate policy on a number of key areas, such as young workers, migrant workers and older workers. A draft policy document considered how collective bargaining could be used to improve the recruitment and retention of young workers. The document underlined the challenge facing both public service employers and trade unions in this regard. It argued that collective bargaining could help the recruitment process by achieving real improvements for young workers in terms of pay and working conditions. With the pressures of demographic change, many public service employers are hoping to end the trend towards early retirement and even to retain some employees beyond the normal retirement age; thus, the conference also considered how affiliates could negotiate policies aimed at older workers (2007).”

According to the European Foundation for the Improvement of Living and Working Conditions (2007, pp. 24 -25), “the right of collective bargaining in several countries is subject to more restrictions than the right to constitute and freedom to join trade unions, especially for career civil servants or sub-groups of them. In some cases this also applies to the all central government if not all public sector employees. In the UK, the salary increases of approximately 3,850 senior civil servants are determined through the pay review body system, and not through collective bargaining. On the whole, however, the terms and conditions of service for both civil servants and employees under contract are agreed within a unitary agreement at central level (the Collective Agreement for State Civil Servants and Employees under Contract) and in separate agreements for civil servants and contractual employees at agency level. There is limited or no right to bargaining in Germany. The central government employees do not have the right of collective bargaining nor the right to strike. Perhaps the clearest example of the uncertain legal status of the right of collective bargaining for government and public sector employees, at least over pay issues, is that of France. Since the 1983 Law on the Rights and Obligations of Civil Servants, trade unions are recognised as capable of conducting preliminary negotiations with the government at national level over pay increases, but these negotiations are not compulsory. If these negotiations do take place, they may lead to an agreement, but not necessarily. Ultimately, the government may use this possible agreement when determining wage increases, but is also free to disregard it.”

Again, the Foundation maintains that the “system of industrial relations at EU level reflects many of the qualities of national systems of the Member States. For example, employee representation is rooted in the member states’ labour laws on trade unions and representation of workers, in the form of organs based on the workplace or based on corporate structures. Promotion of collective employee representation is now a cornerstone of employment and industrial relations in the EU. An EU system of collective industrial relations implies a system which is transnational. However, the member state’s presence in the institutions of the transnational system of collective industrial relations is crucial. An EU system of collective industrial relations, therefore, engages industrial relations at both the transnational and national levels. There must be mutual adaptation of collective industrial relations at EU level and in national systems of industrial relations. The EU has adopted a strategy of enabling the representatives of the two sides of industry, employers and trade unions, to play an active role in EU labour regulation. Collective agreements between the social partners have an essential function in the regulation of employment. For example, according to Article 137(4) of the EC Treaty, Member States may entrust labour and management with the implementation of directives by collective agreement, and many directives allow for derogation by collective agreement from the provisions of the directive.”

Role of Trade Unions

What then are the roles of trade unions? How do these unions affect employment relationships particularly those that are happening in the public sector? Since the right to join organizations and associations is now allowed among employees of governments in the EU, there lies a conflict because of conventional controls in local and national bureaucracies and military and police establishments.

The European Foundation for the Improvement of Living and Working Conditions say that “the duality of the regulation of the employment relationship also affects institutions and the functioning of labour relations and collective bargaining in the sector. The right of association is almost universally permitted to both career civil servants and contractual employees, without distinction from private sector employees. In the UK, between 1919 and 1979 civil servants were encouraged to join a union as a part of the model employer tradition, a recommendation which was removed in the 1984 Civil Service Handbook under the conservative government of Margaret Thatcher, but reintroduced in 1997 under the new Labour government. Trade union density is traditionally higher among public sector employees than among their private sector counterparts. This tendency seems to be confirmed in EU countries, both for career civil servants and employees under ordinary employment contracts, despite difficulties to measure union density rates in the public sector. This is due to the fact that, in several cases, unions organise both private and public sector employees. There are also marked differences between countries. Density rates are well above 70% in Austria, Finland, the UK, and also in Romania and probably Ireland, between 40% and 55% in Germany, Italy and Belgium while France has probably the lowest rate of unionisation but still higher in the private sector (2007, pp. 21 -22).

Industrial Relations in the UK

In order to get a more comprehensive view of the present state of industrial relations in the United Kingdom, we have to be familiar with the history of the Industrial Relations Act. Lewis narrates that, “The Industrial Relations Act was passed by a Conservative Government in

1971 and after holding the centre of the political stage for much of its existence, it was repealed by a Labour government in 1974. The Act was not the product of pressure group activity by employers but originated from within the Conservative Party. The Enactment swept away the Trade Union Act and Trade Disputes Act as well as the powerful Trade Unions and Employers Associations with whom organisations had to register to bring themselves within the legal definition of a trade union. These were the restrictions of industrial conflict, the reform of collective bargaining, and the promotion of individual liberties. The Act sought to restrict industrial conflict by reintroducing the principle of Tariff Vale, whereby union organisations could be made liable to injunctions and damages