Interim Report - Report No 310, June 1998

Case No 1931 (Panama) - Complaint date: 12-JUN-97 - Closed

Allegations: Legislation restricting the rights of employers and their organizations

1. 474. The complaint appears in a joint communication from the International Organization of Employers (IOE) and the National Council of Private Enterprise of Panama (CONEP) dated 12 June 1997.
2. 475. The Government sent its observations in a communication dated 8 March 1998.
3. 476. Panama has ratified both the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87), and the Right to Organise and Collective Bargaining Convention, 1949 (No. 98).

A. The complainants' allegations

1. 477. In its communication of 12 June 1997, the International Organization of Employers (IOE) and the National Council of Private Enterprise of Panama (CONEP) allege that Ministerial Decree No. 252 of 30 December 1971, published in the Gaceta Oficial (Official Gazette) No. 17040 of 18 February 1972, which was amended by Act No. 44 of 12 August 1995, contains provisions which contradict international labour Conventions Nos. 87 and 98.
2. 478. The complainant organizations point out that section 493 establishes, without the right to any appeal whatsoever, the immediate shutting down or closure of undertakings, establishments, branches or works affected by a strike, in contravention of Article 3 of Convention No. 87, which establishes the right of employers to organize their administration and activities and to formulate their programmes, and of the principle of the inviolability of the domicile of the social partners.
3. 479. In this way, once a strike is initiated, the labour administration authorities immediately seal the doors of the establishments or businesses of employers, including those giving access to the administrative and management offices. The labour administration authorities order the police authorities to "guarantee that the undertaking remains closed and give due protection to persons and property;". In other words, the police authorities must guarantee that employers are not able to enter their businesses.
4. 480. In the same way, section 497 of the above-mentioned Decree orders the closing down of undertakings, establishments, branches or works if a strike is declared by an industrial trade union or even an enterprise union. This affects not only the employer but the other workers who are not on strike. This situation of total closure does not encourage voluntary collective bargaining and makes it more difficult to resolve a dispute. The employer cannot be expected to want to negotiate a rapid and effective resolution of a dispute if he is deprived of his right of free access to his property and his freedom of movement is limited. The situation caused by the closure order does not encourage good faith in bargaining.
5. 481. The complainant organizations believe that such a closing down of enterprises is not a symbolic act. The labour administration authorities apply the concept of "immediate closure" by placing long plastic or paper seals on all doors providing access to all the industrial and commercial installations and offices affected by the strike. These seals may be removed only by the labour inspectors, when the strike is over, or, temporarily, when the workers allow, under their supervision, essential work to be carried out for the maintenance or repair of equipment and machinery. This affects the autonomy of one of the social partners in the bargaining process.
6. 482. Furthermore, the total closure of enterprises prevents the recruitment of third parties to carry out maintenance work. Strikers usually give permission for this in exchange for concessions from the employers.
7. 483. The IOE and CONEP point out that the closing down of enterprises involves the paralysis of all administrative or financial activities, thus jeopardizing the future of the enterprises or businesses. During a strike, employers are not able to use their offices, computer equipment, files, or any of their own facilities which are necessary for the administration of their business. Thus employers have no other alternative but to use their own homes or rented premises to coordinate their negotiations and carry out the transactions which are indispensable to the survival of their enterprises. In doing so, however, they run the risk that the strikers accuse them of having infringed the closure order.
8. 484. Furthermore, the complainant organizations allege that section 510 compounds the infringements of the principle of freedom of action of employers by establishing two suppositions which can be used to force them to pay the wages which strikers do not receive during a strike: the first, if workers have gone on strike to demand fulfilment of a collective labour agreement, direct agreement or arbitration award; and the second, if employers have infringed the order for the total closure of enterprises as described above.
9. 485. The second supposition of section 510 concerns the treatment of legal disputes or those concerning a point of law which, in accordance with the provisions of section 420, shall be bound by the rules established by the Labour Code. However, none of the provisions contained in sections 426 to 447 of Decree No. 252 requires workers' trade union organizations to present a copy of the unfulfilled ruling or award as a requirement for initiating the conciliation procedure. In other words, the workers may subject the employer to a conciliation procedure by accusing him of imaginary or alleged violations or infringements. There is no standard which allows the labour administration authorities to reject the presentation of a statement of claims, and the said presentation automatically initiates the conciliation procedure. Section 433 establishes without exception that "a statement of claims cannot be refused or dismissed". The labour administration authority may point out any flaws or defects in the statement but must do so immediately. In practice, the labour administration authority may insist that these flaws or defects are made good, but at no time and in any circumstance is it empowered to reject outright a defective statement of claims or one in which allegations are made concerning imaginary or unfounded infringements.
10. 486. Section 420 offers the parties to a dispute the option of requesting mediation by the labour administration authorities in the event of a legal collective dispute. However, the workers may commence the conciliation procedure if the dispute is of such a nature as to admit the possibility of exercising the right to strike. But the law does not define which legal disputes may give rise to the exercise of such a right.
11. 487. Decree No. 252 does not contain any standard which indicates how employers may present a statement of claims if a trade union of workers fails to comply with what has been agreed or infringes any legal provision. Decree No. 252 does not contain any conciliation procedure enabling the employers to exercise, as a last resort, their right to lockout.
12. 488. In practice, whenever workers initiate a strike, the order for the total closing down of the establishments of employers prevents the latter from having free access to their property. The closing down of their establishments or offices is a serious interference by the authorities in the activities of employers and an infringement of the right to the inviolability of their domicile; it restricts their freedom of action and their right to free movement; it is incompatible with the principle of bargaining in good faith and the principle of free and voluntary bargaining. All this seriously undermines the guarantees established by Convention No. 87 on behalf of employers.
13. 489. The complainants also allege that section 427 establishes that the statement of claims presented by the workers' trade union organization must contain, amongst other things, the following: "3. Name, identity card number and address of the delegates designated for the conciliation procedure who shall be not less than two in number and not more than five, accompanied, if they think it necessary or advisable, by a trade union adviser and a legal adviser ...". This provision applies by analogy to the composition of the bargaining group of the employers. It directly violates the principle of free and voluntary collective bargaining as established by Article 4 of Convention No. 98. The complainants also refer to the principles of the Committee on Freedom of Association. According to the complainants, employers should have the freedom to establish their own bargaining team and to be assisted by the technical, financial and legal advisers they consider appropriate for the defence of their interests, without any limitations being placed on the number and status of such persons.
14. 490. Finally, the complainant organizations allege that although section 443 of Decree No. 252 provides for the end of conciliation if and when "... the parties come to an arrangement or agree to proceed to arbitration", section 452 establishes that employers have to accept that the dispute shall be submitted, as a whole or in separate parts, for arbitration if the workers "before or during the strike, apply to the regional directorate of labour of the General Directorate of Labour for arbitration". This provision is contrary to the principle of free and voluntary bargaining. In this respect, the complainant organizations refer to the principles of the Committee on Freedom of Association and emphasize that arbitration, in order to be effective and efficient, must be the result of the will of both parties; similar objections could also be made against a provision enabling the employers to impose arbitration, before or during a strike.

B. The Government's reply

1. 491. In its communication of 8 March 1998, the Government states that article 65 of the Political Constitution of the Republic of Panama establishes the right to strike and at a secondary level, as a legal reserve, that "the law shall regulate its exercise". To this end, the Labour Code devotes a title to the right to strike, which comprises sections 475 to 519, in addition to certain references contained in other provisions, which include those relating to the statement of claims, the conciliation procedure, arbitration, etc. All these provisions were subject to analysis in the discussion and preparation of the legal document which became Act No. 44 of 12 August 1995 "to establish standards to regulate and modernize labour relations", which contains some reforms to the Labour Code, including standards respecting collective labour disputes, which is the subject referred to in the present complaint.
2. 492. The Government adds that this Act was the result of a consensus and tripartite negotiation in which the main participants, the employers and the workers, played an active part. Within this process, which was fully carried out, no modification was made of the standards to which reference is made in this complaint, although the subject was sometimes mentioned. The above-mentioned situation makes it difficult for the Government, which is respectful of conciliation and consensus, to discuss the matter to which reference is made in the complaint, which is also a very sensitive one since it deals with the right to strike, a fundamental principle of labour relations and which has been enshrined, protected and preserved in different international labour Conventions.

C. The Committee's conclusions

1. 493. In this case the complainant organizations allege that certain provisions of the Labour Code regulating collective disputes and strikes contradict Conventions Nos. 87 and 98. The Committee notes the observations of the Government and in particular that the provisions to which the complainants are opposed were the result of consensus and tripartite negotiations in which representatives of the employers and workers participated actively as the main parties. However, the Committee notes that the legislative provisions referred to by the Government have been in force since 1971 and have not been amended by Act No. 44.
2. 494. In this respect, the Committee would like to recall that its mandate "consists in determining whether any given legislation or practice complies with the principles of freedom of association and collective bargaining laid down in the relevant Conventions" (see Digest of decisions and principles of the Freedom of Association Committee, 4th edition, 1996, para. 6). The Committee has also considered that "where national laws, including those interpreted by the high courts, violate the principles of freedom of association, the Committee has always considered it within its mandate to examine the laws, provide guidelines and offer the ILO's technical assistance to bring the laws into compliance with the principles of freedom of association, as set out in the Constitution of the ILO and the applicable Conventions" (see Digest, op. cit., para. 8). The Committee believes that these principles also apply to cases in which the legislation in question has been the subject of consultation or negotiations with the social partners before being adopted. For this reason, the Committee will now examine point by point the legislative provisions to which the complainants object. However, the Committee wishes to emphasize in a general manner that the legislation complained of is not sufficiently clear with regard to certain aspects and that it regulates industrial relations in too much detail and constitutes a significant interference.
3. Immediate closing down of the undertaking, establishment, branch or works in the event of a strike, guaranteed by the police authorities
4. 495. The Committee notes that sections 493 and 497 establish the following:
5. Section 493. A strike shall produce the following legal effects:
6. 1. immediate shutting down or closure of the undertaking, establishment, branch or works affected. Once the strike has commenced, the Inspectorate of Labour or the regional directorate of labour or the General Directorate of Labour shall immediately give orders to the police authorities to guarantee that the undertaking remains closed and give due protection to persons and property; (...)
7. Section 497. If the strike is declared by an enterprise or industrial trade union, as prescribed in section 477, it shall result only in the closing down of those undertakings, establishments, branches or works in which the strikers fulfil the conditions laid down in clause 2 of section 476 ...
8. 496. The Committee notes that according to the legislation, and in the event of a legal strike, when strikers constitute the majority of the workers in an undertaking, establishment, branch or works, the closure shall occur immediately and is guaranteed by the police. In this respect, the Committee takes note of the statements by the complainants that this legal regulation is detrimental to workers who are not on strike, prevents the carrying out of maintenance work on the equipment of the enterprise and, by paralysing all administrative and financial activity by the employers -- who are not able to enter their offices and installations -- jeopardises the survival of enterprises. In previous cases concerning the exercise of the right to strike, the Committee has criticized "coercion of non-strikers in an attempt to interfere with their freedom to work" (see Digest, op. cit., 4th edition, 1996, para. 586) and has considered that the minimum services to be maintained in the event of strike, to guarantee the safety of persons and installations and the prevention of accidents (minimum safety service) are normal and acceptable restrictions (see Digest, op. cit., paras. 554 and 555).
9. 497. In these circumstances, the Committee concludes that the closing down of the enterprise, establishment, branch or works in the event of strike as provided for in sections 493(1) and 497 is an infringement of the freedom of work of persons not participating in a strike and disregards the basic needs of the enterprise (maintenance of equipment, prevention of accidents and the right of employers and managerial staff to enter the installations of the enterprise and to exercise their activities). In these circumstances, the Committee requests the Government to take measures without delay to repeal sections 493(1) and 497 of the Labour Code.
10. Payment of wages to strikers in certain cases
11. 498. The Committee notes that section 510 of the Labour Code establishes the following:
12. Section 510. A lawful strike declared for any of the following reasons, duly proven by the workers, shall be deemed to be due to the employer's fault:
13. 1. the reasons specified in clauses 3 or 4 of section 480; or
14. 2. if the employer does not reply to the statement of claims or withdraws from the conciliation procedure.
15. (Sections 514 and 515 establish that if the strike is held to be due to the employer's fault, the latter shall be bound to pay all the wages due to the workers affected by the strike.)
16. 499. The other relevant sections of the Labour Code on the matter under examination are the following:
17. Section 480. A strike shall have one or more of the following objects:
18. 1. to obtain better conditions of work from the employer;
19. 2. to obtain a collective agreement;
20. 3. to demand fulfilment of any collective agreement, direct settlement or arbitration award in an undertaking, establishment, branch or works where it has not been complied with (including (...) compensation, where specified);
21. 4. to obtain fulfilment of and compliance with any statutory provision which has been ignored or infringed once or repeatedly throughout or in any part of an undertaking, establishment, branch or works (including ... compensation, where specified); (...)
22. Section 511. A strike shall also be declared to be due to the employer's fault in cases where he/she fails to perform the duties or infringes the restrictions imposed on him/her by sections 493, clause 1 (this section transcribed above refers to the obligation of closing down the enterprise in the event of a legal strike) (...)
23. 500. The Committee notes that the complainant organization opposes the provision of the Labour Code which requires the employer to pay wages when the strike has the following objects: (1) to demand fulfilment of any collective agreement, direct settlement or arbitration award (section 510(1) of the Labour Code); (2) to obtain fulfilment of and compliance with any statutory provision which has been ignored or infringed once or repeatedly throughout or in any part of the enterprise (section 510(1) of the Labour Code); (3) if the employer does not reply to the statement of claims or withdraws from the conciliation procedure (section 510(2) of the Labour Code); and (4) if the employer fails to comply with the obligation of closing down the enterprise in the event of a legal strike (section 511 of the Labour Code). The Committee notes furthermore that as regards these matters the complainant organizations point out that under the current regulations the labour administration authorities are not empowered to reject a flawed statement of claims which alleges imaginary or unfounded infringements of labour standards; and that according to the complainants, the conciliation procedure would be initiated and the strike could then be declared and the employer would have to pay the strike days in the circumstances referred to above.
24. 501. Before examining the allegations relating to the payment of wages of strikers by the employer, the Committee needs clarification and information on the following points: (1) the manner in which sections 510 and 511 of the Labour Code are applied in practice; and (2) the existence of procedures and competent bodies in the event of violations of the legislation or of collective agreements, in the event of disputes over their interpretation or in the event that the employer fails to cooperate in the collective bargaining process. The Committee requests the Government to supply information in this regard.
25. Legal voids in certain questions
26. 502. The Committee notes that the complainant organizations emphasize the existence of legal voids regarding certain questions concerning collective labour relations (determination of legal disputes which allow the exercise of the right to strike, possibility for the employers to present a statement of claims and the possibility for employers to initiate a conciliation procedure). In this respect, considering that a stable labour relations system should take account of the rights and obligations of both workers' organizations and employers and their organizations, the Committee requests the Government without delay and in consultation with the social partners to take measures with a view to regulating the above-mentioned questions within the framework of the Labour Code.
27. Limitations on the number of advisers by the parties in the conciliation procedure
28. 503. The Committee notes that section 427(3) of the Labour Code establishes the following:
29. Section 427. The statement of claims shall be submitted in triplicate and shall contain the following information:
30. (...)
31. 3. name, identity card number and address of the delegates designated for the conciliation procedure who shall not be less than two in number and not more than five, accompanied, if they think it necessary or advisable, by a trade union adviser and a legal adviser; the delegates shall be accredited with sufficient powers to negotiate, bargain and sign any agreement or enter into any arrangement or conclude a collective agreement;
32. (...)
33. 504. The Committee notes that the complainant organizations state that the above provisions apply also by analogy to employers' delegates and advisers. In this respect, the Committee considers that excessively strict prescriptions on such matters as the composition of the representatives of the parties in the process of collective bargaining may limit its effectiveness and, in particular, believes that this is a matter which should be determined by the parties themselves. The Committee therefore requests the Government without delay and in consultation with the social partners to take measures to amend section 427(3) of the Labour Code accordingly.
34. Submission of disputes to compulsory arbitration
35. 505. The Committee observes that section 452 of the Labour Code establishes the following:
36. Section 452. On conclusion of the conciliation procedure, the collective dispute shall be submitted as a whole or in separate parts for arbitration in any of the following cases:
37. 1. if both parties agree to submit to arbitration;
38. 2. if the workers, at any time before or during the strike, apply to the regional directorate of labour or the General Directorate of Labour for arbitration.
39. (...)
40. 506. The Committee notes that clause 2 of section 452 unilaterally allows the workers to submit collective disputes to arbitration and that section 470 stipulates that "the arbitration award shall be a standard-setting instrument having the force of law between the parties". In this respect, the Committee draws the Government's attention to the fact that "compulsory arbitration to end a collective labour dispute and a strike is acceptable if it is at the request of both parties involved in a dispute, or if the strike in question may be restricted, even banned, i.e. in the case of disputes in the public service involving public servants exercising authority in the name of the State or in essential services in the strict sense of the term, namely those services whose interruption would endanger the life, personal safety or health of the whole or part of the population" (see Digest, op. cit., 515). Thus since compulsory arbitration at the request of only one of the parties is a violation of the principles of freedom of association and collective bargaining, the Committee requests the Government without delay to take measures to amend clause 2 of section 452 of the Labour Code.

The Committee's recommendations

1. 507. In the light of its foregoing interim conclusions, the Committee invites the Governing Body to approve the following recommendations:
   • (a) Observing that the legislation complained of is not sufficiently clear with regard to certain aspects, that it regulates industrial relations in too much detail and constitutes a significant interference, and that certain provisions are contrary to the principles of freedom of association and collective bargaining, the Committee requests the Government without delay and in consultation with the social partners to take the necessary measures to:
   • (i) repeal sections 493(1) and 497 of the Labour Code, which impose the immediate shutting down of the enterprise, establishment, branch or works once a strike has been declared;
   • (ii) amend section 452(2) which permits the imposition of arbitration at the request of one of the parties to the collective dispute;
   • (iii) amend section 427(3) of the Labour Code, which restricts the composition of the representatives of the parties (delegates and advisers) to the collective bargaining process, so that this issue is determined by the parties themselves;
   • (iv) regulate within the framework of the Labour Code matters relating to the determination of legal disputes which permit the exercise of the right to strike, the possibility for employers to present a statement of claims and the possibility for employers to initiate a conciliation procedure.
   • (b) Before examining the allegations relating to the payment of wages of strikers by the employer, the Committee needs information and clarification on the following points: (1) the manner in which sections 510 and 511 of the Labour Code are applied in practice; and (2) the existence of procedures and competent bodies in the event of violations of the legislation or of collective agreements, in the event of disputes over their interpretation or in the event that the employer fails to cooperate in the collective bargaining process. The Committee requests the Government to supply information in this respect.
   • (c) The Committee reminds the Government that the technical assistance of the Office is at its disposal, if it so wishes, to assist it in ensuring that the provisions complained of in this case are amended in line with the principles of freedom of association and collective bargaining.
   • (d) The Committee draws the attention of the Committee of Experts on the Application of Conventions and Recommendations to the present case.