Definitive Report - Report No 246, November 1986

Case No 1338 (Denmark) - Complaint date: 24-MAY-85 - Closed

1. 43. The Committee examined this case at its meeting in February 1986 when it presented conclusions to the Governing Body (see 243rd Report, paras. 209-247) .
2. 44. At its meeting in May 1986 the Committee took note that the complainant organisations had, on 19 May 1986, submitted further information in connection with certain matters relating to the case and that the Government, to whom this information had been transmitted, had replied in a communication dated 22 May 1986. The Committee accordingly decided to examine these additional matters at its next meeting in the light of all the information that had been communicated to it and in the light of any further developments that might take place (244th Report, para. 10).
3. 45. Since its last meeting the Committee has received from the complainant organisations further communications dated 23 May, 15 August and 3 October 1986. It has also received from the Government communications dated 3 June, 24 September and 23 October 1986 in response to the matters raised in the aforesaid communications.
4. 46. Denmark has ratified the Freedom of Association and Protection of the Right to Organise Convention 1948 (No.87), the Right to Organise and Collective Bargaining Convention 1949 (No.98) and the Labour Relations (Public Service) Convention 1978 (No.151).

A. Previous examination of the case

1. 47. When the Committee examined this case in February 1986 it made the following recommendations which were approved by the Governing Body:
   • a) the Committee trusts that the Government will, at an early date, give its full attention to the principles of free collective bargaining in the fulfilment of its obligations under Convention No. 98, ratified by it, and that it will take steps, where necessary, to ensure that all questions concerning wage-fixing may be resolved through negotiations between the parties;
   • b) the Committee requests the Government to re-examine with the occupational organisations concerned the possibility of negotiating wage settlements in a manner which is free of interference by the public authorities;
   • c) the Committee requests the Government to keep it informed of the nature and outcome of any discussions directed at promoting the voluntary appraisal and acceptance by the parties to negotiations of the economic policy considerations advanced by the Government in support of the measures relating to the suspension of wage indexation;
   • d) as regards the 1985 Act on the renewal and extension of collective agreements which follows other government interventions in collective bargaining, the Committee points out that such action, involving as it does, statutory intervention in the collective bargaining process, should only be taken in cases of emergency and for brief periods of time. The Committee hopes that, in future, no similar measures will be taken to interfere with free collective bargaining or to restrict the right of workers to defend their economic and social interests through industrial action;
   • e) the Committee draws the attention of the Committee of Experts on the Application of Conventions and Recommendations to aspects of this case relating to the above legislation.

B. Subsequent developments

1. 48. In their communication dated 19 May 1986 the complainants point out that, despite the recommendations made by the Committee following its examination of the case in February and, in particular, the recommendation that the Government examine with the social partners the possibility of negotiating wage agreements in a way not involving intervention by the public authorities, the Government had stated, on 16 May, without any prior consultation with the social partners, that it intended to abolish the provisions concerning wage indexation currently suspended from existing collective agreements. The complainants considered this measure to be incompatible with the Committee's conclusions and requested that consideration be given to sending an ILO representative to Denmark to examine the situation and in particular the interventions by the Government in the right to free collective bargaining.
2. 49. In its further communication dated 23 May 1986 the complainants again urged that a direct contacts mission be carried out, since the Government intended to abolish the automatic cost-of-living indexation at the beginning of June 1986 and the Government's Bill was currently being examined by the Danish Parliament.
3. 50. The complainants added that the Minister of Labour had given a written assurance on 2 May 1986 that the social partners could be consulted on the suspension of the cost-of-living indexation scheme but, on 16 May, representatives of the complainant organisations were convened to a meeting in the Ministry of Labour when they were informed of the Government's intention to submit the Bill in question. This could in no way be considered as consultation. The complainants added that the Government had not informed the Parliament of the conclusions reached by the Committee and adopted by the Governing Body in March 1986 and that it was only now at the request of Members of Parliament that this had been done.
4. 51. In their communication of 15 August 1986 the complainants confirmed that the Danish Parliament, on 26 May 1986, adopted legislation to the effect that existing agreements in the Danish labour market concerning automatic indexation of wages and salaries would lapse on the expiry of the present suspension of the indexation scheme. In the view of the complainants the abolition of existing agreements or parts thereof by governments was inconsistent with the principles of the right to organise and collective bargaining. In addition, the complainants argued that this action had been taken without any consultation with the social partners despite written assurances by the Government that consultation would take place. Referring to the discussion of these matters by the Conference Committee on the Application of Conventions and Recommendations in June 1986, the complainants again requested that a direct contacts mission should take place prior to the next examination of the case by the Committee on Freedom of Association.
5. 52. In their latest communication dated 3 October 1986 the complainants, referring to their meeting with the Minister of Labour on 16 May 1986, state that the social partners were convened to that meeting by telephone on the same day without even being informed as to the purpose of the meeting. At the meeting they were informed that the Government had prepared a Bill on the wage indexation scheme which would be introduced in the Danish Parliament as soon as possible. It was only at that meeting that the Bill was presented to the social partners, and despite protests by the trade unions no consultations or negotiations took place during that meeting. The Government added that it had secured a parliamentary majority for the adoption of the Bill. The complainants stated that if the trade unions had not made use of the opportunity to put forward their views in the Labour Market Committee of Parliament, this was because they considered that the submission of views could not be considered as being negotiations or consultations of the kind that the ILO has asked the Danish Government to initiate with the social partners. In any event, the Labour Market Committee of the Danish Parliament had been kept informed of the views of the trade unions. The complainants continued to believe that there was a need for a direct contacts mission. The complainants submitted that the Minister of Labour had made certain comments in the press which reflected the Government's lack of willingness to observe the recommendations made by the ILO.

C. The Government's reply

1. 53. In its communication dated 22 May 1986 the Government explained that when it came into office, one of the first things it did in the autumn of 1982 was to suspend the automatic cost-of-living indexation of wages and salaries. This was done by Act No. 575 of 27 October 1982. The suspension was later extended by Act No. 237 of 23 May 1984, the result being that indexation of wages and salaries can now at the earliest take place in September 1987. It was the Government's firm conviction that the automatic cost-of-living indexation scheme greatly contributed to maintaining a high rate of inflation. Rather than protecting low-paid workers against erosion of their wages, the automatic cost-of-living indexation scheme contributed to a deterioration of the economic problem and a continuing fall in real wages. The time which had elapsed since then had proved the Government's view to be correct. In 1982 the rate of inflation was more than 10 per cent whereas it was now expected to be about 2 per cent in 1986. Negotiations would take place between the labour market organisations on the renewal of collective agreements with effect from the Spring of 1987 and, as the Government points out, there has been a strong desire on the part of workers' organisations to know at an early stage what the future situation would be with regard to the automatic cost-of-living indexation. These negotiations were now under preparation and the Government had consequently found it appropriate to introduce a Bill in the Danish Parliament concerning the lapse of the automatic regulation of wages and salaries on the basis of the price index. What the Bill proposed was that existing agreements concerning automatic cost-of-living indexation of wages and salaries would lapse when the present suspension of the cost-of-living indexation scheme expired. According to the Bill, no regulations can take place on the basis of existing agreements and all questions concerning indexation of wages and salaries must therefore be made subject to new agreements between the parties. Thus the Act places no restraints on the agreements that may be concluded by the labour market organisations when they conclude future collective and other agreements. Nor does the Bill have any impact on wages and salaries in the present agreement period. By introducing this legislation, the Government considered that it had created a clear basis on which the parties could negotiate and had expected that the parties would on their own conclude new agreements in the spring of 1987. The Government pointed out that the labour market organisations had stressed that they did not want negotiations on a tripartite basis in connection with the coming collective bargaining situation.
2. 54. The Government also pointed out that it had deemed it necessary to adopt legislation in order to cover the whole labour market and thus ensure that the situation would be the same for all employees whether covered by collective or other types of agreement. On 16 May 1986 meetings were held at which the Bill and its background had been explained to the social partners who would have an opportunity to present their views before Parliament in accordance with the traditional legislative procedure. The Government added that this legislation should also be seen as an element of the Government's general policy in the field of indexation. It was the Government's plan to introduce legislation in the Autumn of 1986 which would abolish the automatic indexation of prices. In the Government's view the provisions of the legislation were in full compliance with the principles laid down in Conventions Nos. 87 and 98.
3. 55. In its further communication dated 3 June 1986, the Government supplied a copy of the Bill on the lapse of the automatic adjustment of wages, salaries etc. on the basis of the price index which was introduced by the Danish Government of 20 May 1986. The Government confirms that the Bill was adopted by the Parliament on 30 May 1986 without any amendments. The Law would come into effect on its publication in the Danish Law Gazette.
4. 56. The Government wished, in particular, to stress again that this legislation did not have any impact on wages and salaries in the present agreement period, nor did it place any restraints on the agreements that would be conlcuded by the labour market organisations as regards future negotiations. It was the wish of the Danish Government to follow the recommendations made by the Governing Body and it expected that the parties would on their own conclude new agreements in the spring of 1987.
5. 57. In its communication of 24 September, the Government provided a summary of the circumstances which led to the suspension in 1982 of the automatic indexation of wages and salaries and to the prolongation of that suspension in May 1984, the result of which was that indexation could now at the earliest take place in September 1987. Referring to the legislation on the lapse of automatic indexation, the Government again emphasised that this had been necessary in order to create a clear basis on which the parties could negotiate and conclude new agreements next Spring.
6. 58. As regards the question of consultations, the Government stated that it would take the initiative for tripartite discussions with the social partners in the autumn of 1986 and added that it was expected that a meeting would be held in October 1986. The Government was prepared to comply with the wishes of the social partners for discussions. It added, however, that the labour market organisations had declared that they did not want tripartite negotiations.
7. 59. The Government indicated that the legislation concerning the suspension of the cost-of-living indexation, that is the Acts of October 1982 and May 1984, meant that no automatic regulation of wages could take place as from the price index for January 1983 up to and including the price index for January 1987. The Government repeated that the suspension did not prevent increases in wages and salaries and evidence of this was the renewal of the collective agreement which had taken place in the spring of 1983 following collective bargaining between the social partners. Since the suspension of indexation, and up to the first quarter of 1986, wages and salaries had increased by up to 15 per cent and, as price increases had been considerably reduced, there had been an increase in real wages for the first time in many years. Thus, according to the Government, there had by no means been a freeze on wages and in addition there had been safeguards to protect the living standards of the workers on whom no restraints had been placed in the collective bargaining process. As regards the meetings which took place with the social partners prior to the introduction of the Bill, the Government pointed out that the Minister of Finance had met with representatives of both workers' and employers' organisations in the public sector and the Minister of Labour met with representatives of organisations in the private sector in order to explain the reasons for the introduction of the legislation. After these explanations there had been an opportunity for substantial discussion of the Bill and several organisations availed themselves of this opportunity. The Government added that it was the normal procedure that labour market and trade organisations and other interested parties approach the Parliamentary Committee dealing with a particular Bill - either in writing or by sending a delegation - in order to express their views directly to that Committee. As regards the Bill in question, neither of the complainant organisations had availed themselves of this possibility.
8. 60. As regards the request of the complainants for the establishment by the ILO of a direct contacts mission to Denmark, the Government stated that it was convinced that the situation was simple and clear and that all the factual aspects and developments had been fully elucidated in the written material supplied to the ILO.
9. 61. In its latest communication dated 23 October 1986 the Government points out that the statements of the Minister of Labour, referred to by the complainants, had been taken out of context and at no time had the Government stated that it did not intend to fulfil its obligations as a Member of the ILO. The Government wished to follow the recommendations of the Committee and the Governing Body. It also referred to a statement by the Prime Minister in Parliament on 7 October 1986 in which he mentioned the renewal of collective agreements through negotiations and stated that the Government had invited the social partners to tripartite discussions which would take place on 29 October 1986. The Prime Minister's invitation to these discussions states that the purpose of the discussion prior to negotiations with a view to renewal of collective agreements is a mutual exchange of information on, respectively, the collective bargaining situation and the Government's policy. The Government would also wish to discuss the general economic situation and labour market policy, as well as other matters.

D. The Committee's conclusions

1. 62. The Committee has taken note of all the additional information supplied by the complainants and by the Government of Denmark. It recalls that, at its meeting in February 1986, it examined the original complaint submitted by the complainant organisations concerning these issues and reached definitive conclusions thereon. Since then, however, the complainant organisations have brought to the attention of the Committee further additional information and allegations relating to legislative action taken by the Government in May 1986 concerning the question of wage indexation and on which the Government has provided its observations. In accordance with the decision it reached at its meeting in May 1986, the Committee has examined these subsequent developments and has reached the following conclusions. The Committee has also noted the comments made in 1986 by the Committee of Experts on the Application of Conventions and Recommendations on the questions raised in the complaint as well as the discussion that took place in the Committee on the Application of Conventions and Recommendations of the 72nd Session of the International Labour Conference (June 1986).
2. 63. The Committee recalls that the complaint initially presented by the complainant organisations essentially concerned the suspension in October 1982 of negotiated wage indexation clauses in collective agreements and the prolongation of that suspension, by an Act of May 1984, until 1987. The complainants also stressed the failure on the part of the Government to consult or negotiate adequately with the social partners on such matters. On these questions the Committee reached conclusions at its meeting in February 1986 and again draws attention to these conclusions.
3. 64. The new elements which have since been brought to the attention of the Committee by the complainant organisations concern, in the first place, the placing by the Government of new legislation regarding the suspension of indexation before Parliament in May 1986 (which was enacted by Parliament on 26 May 1986) and, in the second place, failure on the part of the Government to consult or negotiate with the social partners before doing so.
4. 65. As regards the legislation adopted by the Danish Parliament in May 1986, the Committee understands that the result of its adoption was to abolish the already suspended wage indexation clauses in collective agreements until the next round of negotiations which will take place in the spring of 1987. The new agreements negotiated at that time will be able to include indexation clauses which can take effect from the date of the expiry of the suspension of the cost-of-living indexation scheme in September 1987. The Committee also notes that the Act does not place any restraints on any agreements concluded nor does it have any impact on wages and salaries in the present agreement period.
5. 66. The reasons advanced by the Government for introducing this new legislation are that it wished to establish clearly the basis on which the social partners could negotiate in the future; it also wished to establish that the entire labour market would be covered by the legislation and that the situation would be the same for all employees.
6. 67. As regards the question of the suspension of wage indexation clauses in collective agreements, first introduced in the autumn of 1982, the Committee, when it previously examined this case, noted that this measure was not, at least until 1985, accompanied by other measures interfering in collective bargaining and that collective agreements were in fact negotiated and concluded for a two-year period in 1983. The Committee, however, noted that the Committee of Experts on the Application of Conventions and Recommendations, in comments adressed to the Government of Denmark in 1985, had emphasised the principle that the right to negotiate wages and conditions of employment freely with the employers and their organisations is a fundamental aspect of freedom of association and that any restriction on the free fixing of wage rates should be imposed as an exceptional measure, and only to the extent necessary without exceeding a reasonable period; and that such restrictions should be accompanied by adequate safeguards to protect the living standards of the workers. The Committee also recalled that the intervention of a government in areas which traditionally have always been negotiated freely by the parties, could call into question the principle of free collective bargaining recognised by Article 4 of Convention No. 98 if it is not accompanied by certain guarantees and in particular if its period of application is not limited in time.
7. 68. Having regard to these principles, the Committee considers that, although it can be admitted that, in certain exceptional circumstances, restrictions may be imposed on the fixing of wages, free and voluntary collective bargaining should mean that collective agreements, once freely negotiated between the parties, should not be interrupted or interfered with by statutory or other forms of intervention. The Committee notes, however, that according to the Government, the prohibition of wage indexation will terminate in 1987 and that the social partners will be free, should they so wish - and as is the tradition in Denmark - to negotiate the insertion of such arrangements in the collective agreements that will be established at that time. The Committee would again draw the Government's attention to the conclusions it reached in May l986 and would express the hope that the social partners will be able to negotiate these agreements in a manner that is in full conformity with the principles and standards on freedom of association, that is to say, in a manner that is free from interference by the public authorities.
8. 69. With regard to the allegation that the Government introduced the new legislation in May 1986 without having first held appropriate consultations with the social partners, the Committee notes the Government's statement that explanations were given to the social partners about the intended legislative action and that, in accordance with the usual practice in Denmark, the social partners had the opportunity to present their views before the relevant parliamentary committee. While fully respecting the usual practice regarding the legislative process in Denmark, the Committee considers that it is essential that the introduction of draft legislation affecting conditions of employment and, in particular, collective bargaining should be preceded by full and detailed consultations with the appropriate organisations of workers and employers. The Committee would request the Government to give serious consideration to this possibility before taking any future legislative or other action that is of direct concern to the social partners.
9. 70. The Committee notes with interest that, in anticipation of the next round of bargaining, tripartite discussions were planned to take place on 29 October during which the collective bargaining and general economic situation, as well as labour market policy, would be examined.

The Committee's recommendations

1. 71. In these circumstances, the Committee recommends the Governing Body to approve this report and in particular the following conclusions:
   • In drawing the attention of the Government to the conclusions it has reached previously, the Committee would point out, in particular, that it is essential that the introduction of draft legislation affecting collective bargaining or conditions of employment should be preceded by full and detailed consultations with the appropriate organisations of workers and employers.