Firing at Will – the Employers’ Response to the Crisis

Klaus Lörcher

The ILO convened a tripartite expert meeting in April 2011 to discuss obstacles to the ratification of Convention No. 158 on termination of employment. This is the most important international treaty on basic principles for the protection of workers against unjustified dismissal and on basic rights in the case of the termination of employment. At the end of the meeting, the employers suggested a simple but totally unacceptable and even unpredictable ‘solution’: abrogating the Convention. 

This incredible demand has to be put into context. It should in particular be clarified whether it reflects the general opinion of employers. An analysis shows that they display a remarkable inconsistency in their approach to this Convention. At the time of adoption, in 1982, the employers’ spokesperson had thrown his weight behind the Convention: “[S]ome employers will abstain or vote against the adoption of the instruments, in particular of the Convention [...]; I nevertheless hope that a great majority will come out in favour of adopting the proposed Convention and Recommendation.” (ILC 68th Session, 1982, Record of Proceedings p. 35/3).
In 1987 they had agreed that it should be promoted as a priority convention. However, after the fall of the Berlin Wall, employers started to change their attitude. Indeed, in 1995 they refused to recognise the Convention as “up to date”. Conversely, in 2009 they confirmed its relevance in the ILO’s Global Jobs Pact and in 2010 they fully supported the ILO HIV and Aids Recommendation No. 200 that refers to Convention No. 158 as the relevant provision to protect workers suffering from HIV/Aids against unjustified dismissal. This year, they changed their attitude once again and opposed the promotion of the Convention and have even called for its abrogation. These glaring inconsistencies are obvious and cannot be considered as a ‘good faith’ approach.

This is even more striking when looking at the substance of what employers are opposing. Convention No. 158 edicts a number of very basic principles concerning the termination of employment which can be considered as fairly modest and which are often supplemented by further flexibility clauses:

• The employer has to give a valid reason for termination of employment. Trade union activity, race, sex, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin are explicitly defined as not being valid reasons. The burden of proof for the existence of a valid reason for the termination shall not rest on the worker alone.
• A worker whose employment is to be terminated shall be entitled to a reasonable period of notice or compensation in lieu thereof.
• A worker who considers that his or her employment has been unjustifiably terminated shall be entitled to appeal to a court or another impartial body.
• A worker whose employment has been terminated shall be entitled, in accordance with national law and practice, to a severance allowance or other separation benefits or benefits from social security provisions or a combination of both.
• When the employer contemplates layoffs for reasons of economic, technological, structural or similar nature, the employer shall provide the concerned workers' representatives with the relevant information in good time and consult on measures to be taken to avert or to minimise the layoffs. The employer shall also provide measures to mitigate the adverse effects, such as help to find alternative employment.

While these principles shall in general apply to all workers in states party to the Convention, they can exclude certain groups of workers; enterprises of a certain size; those working under contract; or those who are temporarily or casually employed. However, they shall provide adequate safeguards against recourse to contracts of employment for a specified period of time. The aim of this measure is to deprive workers of the protection afforded by the Convention. Furthermore, when submitting their first report after ratification to the ILO, governments have to declare which other specified groups they exclude (but they cannot exclude anymore groups after this point in time).

Against this background, employers are arguing that in the 21st century it is too much of a burden on them to tell workers why they are being fired. Giving workers advance notice about dismissal could also create unsustainable costs. Furthermore, there should be no possibility for workers to appeal against a dismissal as this would imply inappropriate third party interference in the employment relationship and more generally in entrepreneurial freedom. Moreover, governments should have the right to exclude new groups of workers from the scope of the convention at any time after ratification. This would mean at the end of the day that governments could ratify without the necessary transparency and legal certainty. Finally, employers oppose the Convention because the ILO supervisory bodies, in particular the Committee of Experts for interpreting the Convention, are allegedly not taking into account the employers’ needs. However, the Convention is about protection of workers and does not mention employers’ needs. Thus, they ask the Committee to deviate from the Convention itself which is against the very substance of its mission.

This is not an isolated attack on the ILO’s standard setting and supervisory mechanism. It is well known that employers are vigorously opposing the right to strike. Particularly in times of crisis, these two elements obviously play a key role in their overall strategy against international standards.

For those who think that collective bargaining, labour law in general and the protection against unfair dismissal in particular are essential for ensuring that workers in modern societies are not proletarians but citizens, this hostile attitude against Convention No. 158 is an attack on a key pillar of social peace and human dignity.

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Klaus Lörcher is former legal adviser of the European Trade Union Confederation (ETUC)[, former head of the International and European Law Department of the United Serives Union (ver.di),] Germany, and former Legal secretary of the Civil Service Tribunal of the European Union.

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Where is the Trade Union Reform and Labour Legislation in China heading to?

An interview with two labour and trade union activists

A wave of workers’ resistance swept China in 2010, with suicides by some Foxconn workers, and a large workers’ strike at Honda drawing immense social attention, local and global alike. This has compelled the Chinese government to come up with some new policy initiatives to contain the labour unrest, including trade union reform and collective bargaining legislation. Given these labour reforms a few questions arise:

• Where is this labour reform heading to?
• What are the crucial factors that can make workers benefit from this reform?
• Can the party-led state trade unions be transformed to serve workers’ interest?

In an interview conducted on 10th March 2011, Monina Wong, the Director of the International Trade Union Confederation/Global Union Federation Hong Liaison Office[1] (IHLO) and Mr. Parry Leung, the Chairperson of Students and Scholars Against Corporate Misbehavior[2] (SACOM), shared their viewpoint on these issues.

Elaine Sio-ieng Hui [E]: What kinds of labour issues have been raised by the series of workers’ suicides in Foxconn in 2010?

Parry Leung [P]: Although it hardly violates any laws, Foxconn, a supplier to many global electronic brands, has a highly oppressive production regime under which workers have no means at all to voice out their discontent. They felt so desperate that they resorted to suicide as a silent demonstration of their defiance. My observation is that no matter how much internal migrant workers from the rural areas have been exploited in urban factories, in general they still have room, however little it is, to show their resistance, for example, by means of strikes, road blockades and so forth. But in Foxconn this is not possible. It does not only strictly control the production process in factories, but also the private life of workers. For instance, all workers must stay in the dormitory provided by the company, but those coming from the same home province or working in the same production line are not allowed to share a dormitory room; this is a tactic to prevent the building up of rapport and support among workers. Another example of Foxconn’s infringements on workers’ private lives is that all calls from the dormitory to the police hotline in the city will be automatically diverted to the security station in the dormitory; Foxconn has formed a small kingdom of its own which is basically not subjected to outside interference.

E: The Honda workers’ strike in 2010, which lasted for 17 days and involved over 1800 workers to demand a wage increase, is seen as starting on a new stage of labour resistance in China. What are its implications for labour relations in China?

Monina Wong [M]: This strike ended with a 32.4% wage increase for the Honda workers, who have demonstrated a high level of consciousness concerning their positions in production and are aware of the serious impact of their strike on the overall production of the enterprise. They have also manifested a clear consciousness regarding the proper function of trade unions; they were exasperated when they found that the enterprise trade union was on the side of the management, instead of supporting the strikers. In the past decades, we used to treat Chinese migrant workers as exploited objects that needed outside help to protect them. But now we see that they are active agents who have the labour consciousness needed for advancing their interests with collective means. And so far, the Honda workers’ strike is the most effective and powerful strike launched by migrant workers that is capable of upsetting the regional production of a transnational company.

The physical confrontation between trade union officials (who leaned towards management) and workers during the strike has triggered immense social discussion on the proper role of the Chinese trade unions. After the strike, the official party-led All China Federation of Trade Unions (ACFTU) and the government tried to alleviate labour discontent by speeding up the pace of trade union reform and by introducing collective bargaining legislation. It is good that these two issues have become the agenda of the ACFTU. However, at present most trade union education, if there is any, is solely conducted by the ACFTU while other relatively independent agents (e.g. international trade unions, labour NGOs) have no role to play in the process. The degree of democracy and accountability available to members inside trade unions and the ACFTU at the moment is still at a low level. Therefore, we need relatively independent trade union education among trade union officers so as to ensure the effective and genuine implementation of trade union reform and the collective bargaining mechanism.

E: Recently the Chinese government and the ACFTU were promoting legislation on collective bargaining. In your opinion, what are the driving forces for that?

M: In 2004, the government attempted to build up a workplace collective bargaining mechanism by means of ministerial regulations issued by the Labour and Social Security Bureau, but it was not very effective as not many enterprises followed the instructions. In 2005, the ACFTU started to unionize the Fortune 500 corporations in China. Subsequently, trade unions were established in Wal-Mart and many other foreign enterprises, but many people know that they are paper unions only and that the collective contracts they signed with the enterprises remain a formality.

After the world economic crisis broke out in 2008, many enterprises in the Pearl River Delta have been shut down. The central government and many local governments realized that the country’s economy could no longer depend entirely on export-oriented industries and that it had to develop a consumption-based economy. It is in this context that the ACFTU and the government have again picked up momentum to push forward collective bargaining legislation, which they hope will lead to better wages, and thus to higher consumption by workers. It is also hoped that such measures can help reduce labour unrest and maintain political stability.

P: The legislation on collective bargaining is related to the waves of labour resistance occurring in the country, especially in South China, in the past decades. The government is aware of the increasingly intense labour discontent, which it has been trying to alleviate with an individualized legal approach; this explains why the Labour Contract Law and the Labour Dispute Mediation and Arbitration Law focusing on individual legal rights were passed in 2008. However, after the breaking out of the world economic crisis in 2008, it is evident that this individualized legal approach no longer works. On the one hand, the number of labour disputes increased dramatically at the time, and the fact that so many workers went for arbitration led to the overburdening of courts; workers had to wait, on average, for 9 months to have their claims dealt with. On the other hand, many of the labour disputes are beyond the scope of existing laws, and thus could not be effectively settled by the court. Since the individualized legal approach cannot properly handle workers’ grievances, many workers resort to collective means, such as strikes and road blockades, to defend their interests. In order to pre-empt labour unrest and prevent it from erupting into social rebellion, the government is trying to absorb workers’ discontent through the use of collective bargaining.

Although the proposed collective bargaining legislation has given some room for the collective organizations of workers, it remains constraining in some areas. For example, the proposed legislation only allows workers to negotiate certain items (such as wages, working hours, welfare etc.) with employers. Besides, collective bargaining can only be carried out by the trade unions, despite the fact that many trade union officers are appointed by the enterprises or by higher-level trade unions; workers are not allowed to elect their own representatives for bargaining. The government is trying to eradicate factors that can cause social unrest through developing collective bargaining legislation; it tries to divert aggrieved workers from open resistance to the bargaining procedures. And, most importantly, it has delegated the party-led trade unions to take charge of the bargaining so as to ensure everything is within its control.

E: What is the role of party-led trade unions in promoting the collective bargaining mechanism?

M: A genuine collective bargaining system should include the process of consulting their members before trade unions negotiate with employers. However, in China, a top-down approach has been used by the ACFTU. It is a common practice for it to send invitations for collective negotiations to employers and to reach agreements without informing or consulting its members. Democratic participation is a process to educate workers about true unionism. But “negotiation” in China is usually ends- oriented and the ends (e.g. the wage increment) should not contradict the conditions of the “larger context”. Priority to the “larger context”, according to the Party and the government’s definition, results in “negotiations” led by the administration, not workers. In view of this, in order to build up a genuine collective bargaining system in China, trade unions should initiate a proper reform first, enabling democratic and grassroots participation, so that they could truly represent workers’ interests. At the moment, there are many “fake” trade unions at the enterprise level; to tackle this problem, it is very crucial that workers’ trade union consciousness be cultivated properly, so that they understand the importance of having their trade union representatives being able to represent their interests and accountable to them. A very critical foundation for achieving this is to make trade unions financially independent from the companies or the government. In the past, most enterprise trade union officials are paid by the enterprises, while the current trend is that the government is paying their salaries. Neither of these practices is ideal; they will either make the enterprise trade unions a management-union or a party-union.

[1] The IHLO is the Hong Kong Liaison Office of the international trade union move ment, which has a mandate to support and represent the international trade  union movement in Hong Kong and to monitor trade union and workers' rights  and political and social developments in China. Readers can learn more about it  from its website http://www.ihlo.org/
[2]  SACOM aims at bringing concerned students, scholars, labor activists, and con sumers together to monitor corporate behavior and to advocate for workers’  rights. It teams up with labor NGOs to provide in-factory training to workers in South China. Readers can learn more about it from its website http://sacom.hk/mission

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Elaine Sio-ieng Hui is a PhD candidate at Kassel University, Germany, and she also works as a research assistant in the City University of Hong Kong.
Monina Won is currently the Director of the International Trade Union Confederation/Global Union Federation, Hong Kong Liaison Office.
Parry Leung is the Chairperson of Students and Scholars Against Corporate Misbehavior and a researcher on labour issues in China.

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European Integration at the Crossroads: Deepening or Disintegration?

Elmar Altvater

Birgit Mahnkopf

Are the member states of the Eurozone responsible for the Euro crisis the ones having problems servicing their debt? The majority of people in Europe believe that this is the case. Therefore, indebted countries like Greece, Portugal and Ireland must subject themselves to a brutal austerity program of savage cuts in welfare spending, diminishing public sector wages, and further privatisation measures in education, health care and in the pension system. In short, the social and cultural rights of trade unions and citizens are being trampled upon, triggering on the one hand applause and on the other social protest.

The austerity imposed is driven by an attempt to free up funds of the primary budget that could then be used in the secondary budget to service the debt and bail out financial institutions on the brink of bankruptcy that are defined as being ‘systemically relevant’. However, the system, i.e. the project of European monetary integration, can only be saved if there is a fundamental reversal in political direction. There are only two paths we can take right now, and they lead in opposite directions: one towards the disintegration of the Eurozone, another towards the strengthening of European statehood. Conservative and neoliberal economists and politicians are playing with the idea of regrouping the monetary union into two (or more) tiers. On one side a strong, monetarily and financially integrated ‘Core Europe’, on the other side the countries that shall be excluded from the Eurozone, with their own national currencies. Thus it would be Germany, France and a few others that would continue using the Euro, but Greece might have to reintroduce the Drachma, Portugal the Escudo, Spain the Peseta and Italy the Lira.

Splitting up the Eurozone would create another area of economic chaos and social and political turmoil. The new currencies that would replace the Euro would most likely suffer an immediate drop in value. Devaluation would increase the value of Euro-denominated debts (which therefore also need to be serviced in Euros). Rating agencies would downgrade the countries’ credit rating. While devaluation would increase monetary competitiveness, this advantage is unlikely to be very useful if real competitiveness does not increase as well. The relevant export industries are missing here.

To the extent that the new currencies are devalued, the remaining Euro will appreciate. This revaluation would limit the competitiveness of the so-called ‘real economy’ in the Eurozone’s member states and encourage financial capital to speculate. What sort of equilibrium would then be achieved after a period of economic turbulence is impossible to predict.

The other path leads towards deeper political integration. The minimal rules on government debt set by the Maastricht Treaty are obviously insufficient to prevent Europe-wide imbalances and crises. These are inevitable if countries like Germany reduce unit labour costs at the same time as they are increasing in other European countries. The current system of crisis management requires indebted countries to adjust, but not surplus countries. The structural flaw that already contributed to the collapse of the Bretton Woods system in the 1970s is being replicated in the Eurozone. The steps required to correct this flaw would be as follows: on the income side of state budgets, develop rules for fiscal policy and for tax competition, and balancing mechanisms for countries with current account deficits and surpluses, respectively. If the Eurozone is to have a future, it is European statehood that needs to be strengthened, not the market.

Today the unequal distribution of income and wealth in Europe together with the rating agencies’ ratings generate large interest rate differentials between indebted and ‘wealthy’ countries. Within countries this applies only to owners of money wealth, not to waged workers. In debtor countries the results are negative capital account balances; as long as the current account generates no or only small surpluses these can only be resolved through inflows of new capital. The compulsion to generate a current account surplus is instrumentalized to justify austerity measures, i.e. cutbacks in wages and social spending. People affected by these policies do not accept this justification, and are taking to the streets in loud and determined protest.

However, it has to be understood that money is always a mutual and contradictory social relationship – this is true also on European and global financial markets. Where there are debtors there are also creditors, and if deficits have to be cut, surpluses cannot grow. Therefore, current public debt levels can not only be blamed on ‘loose’ fiscal and budget policies in today’s crisis-ridden Eurozone countries. Responsibility also lies with a policy of redistribution that encourages the formation of large private asset holdings. Furthermore, we cannot ignore the fact that public debts in the Eurozone are so high mostly due to the giant bailouts of private banks and funds. That states have to pay ever more money to service their debt has a flipside: private financial market actors have to pay ever less. The European Central Bank clearly showed this in its expressively titled report “The Janus-Headed Salvation”: After the collapse of Lehman Brothers in September 2008, endangered banks were able to dump much of their worthless assets in publicly financed ‘bad banks’. In addition, their capital stocks were boosted from public funds, notably without governments asserting any kind of control over the now socialised banks’ business operations. States guaranteed the banks’ debts, as the latter were given almost unlimited access to cheap money from the central bank.

One result of banks being saved by public funds is that the credit default risk of financial institutions is reduced while that of the public sector increases. The above mentioned ECB report refers to a “credit-risk transfer from the banking sector to the government”.

Whenever debts are being rescheduled, governments have to pay correspondingly higher risk premiums, but to whom? To the very banks that were just recently bailed out of lots of cheap money by those governments, and – indirectly – to those owners of money capital who have invested into these banks and funds. In this they are assisted by the rating agencies that downgrade the ‘quality’ of government bonds because of their increasing debt levels. This is a profound encroachment on democratic prerogatives. A lower rating makes it more expensive to borrow and to reschedule debt and it allows private creditors to collect higher interest rates. We are basically dealing with a self-fulfilling prophecy here: predictions of an impending debt default lead to more expensive debt-servicing, which in turn increases the likelihood of this default: Rating agencies have to be subjected to democratic control. Against this background, doubts about the legitimacy of public debt come up in countries such as Greece.

To be sure, the reduction of debts and of monetary wealth can also be achieved through inflation. The inflation feared by many has already been rearing its head in the form of increasing commodity and gold prices. The causes are complex, and are not exclusively related to financial and currency markets, but also to commodity and energy markets, and they are subject to catastrophic developments such as the explosion of the oil-platform Deepwater Horizon in the Gulf of Mexico, the nuclear meltdown of Fukushima, or the conflicts in the Arab world. Inflation would drastically increase distributional inequality. Central banks fight the so-called secondary effects of price increases. How? By preventing wage increases with a tight monetary policy. This strategy is not addressing the root causes of inflation thus it is unacceptable for trade unions.

The reasonable demand to reduce public debt needs to be complemented by demanding a corresponding reduction in monetary wealth, either by way of a ‘haircut’, regulated by insolvency rules, i.e. getting creditors to play their part in the reduction of debt, or through the effective taxation of wealth, or a combination of both. Wealth taxes have to be reintroduced in all European countries, just as the amount of taxes paid by corporations (especially corporate income taxes) in general will have to go up: by way of a European convergence of the taxable base and tax rates, and through tougher controls of tax havens, tax evasion and money laundering. Insolvency rules are also important for an orderly debt cancellation. Especially in the case of sovereign debts, this is necessary for social and political peace to be secured.

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Elmar Altvater is a retired Professor of International Political Economy at the Free University of Berlin, who has written extensively on political economy, ecology, globalisation and financial markets. He has been an active trade unionist for many years.

Birgit Mahnkopf is Professor of European Politics at the Berlin School of Economics and Law. She has published extensively on globalisation, the informal economy, industrial relations and European politics. Both are members of the Academic Council of ATTAC Germany.

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This paper is based on a declaration of the Scientific Council of Attac Germany from March 2011 on the crisis of the Euro and its political, economic, and social consequences. The authors participated in the writing of the declaration; they are responsible for the modifications which have been made. The complete version can be found in German and English language on the website of ATTAC Germany: http://www.attac-netzwerk.de/das-netzwerk/wissenschaftlicher-beirat.

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