Interim Report - Report No 323, November 2000

Case No 2049 (Peru) - Complaint date: 03-AUG-99 - Closed

Allegations: Restrictive collective bargaining legislation; detentions and bodily harm in the course of a strike to protest at the negative consequences for railway workers of the leasing to a private consortium of the principal relevant state enterprises' infrastructure; and the sanctioning of a trade union leader

1. 431. The complaints are contained in communications from the General Confederation of Workers of Peru (CGTP) and the Unified Trade Union of Petroleum, Energy, Oil and Refinery Workers of the Grau Region (SUTPEDARG), dated 3 August and 1 June 1999 respectively, and in a communication from the Federation of Petroleum Workers of Peru (FETRAPEP), dated 13 April 2000. The CGTP forwarded fresh allegations by letters of 31 August 1999 and 9 June 2000, and the FETRAPEP in a communication of 6 June 2000. The Government responded by letter of 1 February, 27 April and 12 September 2000.
2. 432. Peru has ratified 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. 433. In its communication of 3 August 1999, the General Confederation of Workers of Peru (CGTP) alleges that article 11 of Emergency Decree No. 011-99, published on 14 March 1999, established that, in 1999, state enterprises would conduct their pay policy for staff, whether covered by collective bargaining or not, through the award of a single productivity bonus which would not constitute a part of their basic remuneration and would be governed by resolution of the Ministry of Economics and Finance. In accordance with the aforementioned article, Ministerial Resolution No. 075-99-EF was published on 10 April 1999; this set the guidelines for the award of the Single Productivity Bonus (BUP), as well as the guidelines for simplifying the pay system of workers in state enterprises. The requirements established by the resolution for the award of the bonus in state enterprises were as follows: (a) the amount to be awarded should be set in accordance with the worker's level of responsibility, contribution and commitment, as reflected in an evaluation process conducted prior to the award; the evaluation criteria may be approved solely by the directorate, i.e. without the involvement of the trade union; (b) the resulting amount may be paid in instalments; (c) prior to this, the pay system must have been simplified on the basis of only two structural components (basic remuneration and consolidated bonus) and the integral remuneration agreements must have been signed in cases where remuneration exceeds 5,600 nuevo sols; (d) in the case of staff covered by collective bargaining, bonuses must be set and awarded as part of the collective bargaining process; and (e) a worker's total present income plus bonus (which as such may not be considered as a pay increase) may under no circumstances exceed the Maximum Income Level (TMI) established for the general manager or equivalent official in each enterprise. Similarly, the award of the BUP will depend in the last instance upon the extent to which the management objectives have been achieved, as set out in the management agreement concluded between the state enterprise and the Office of State Institutions and Bodies (OIOE), as stipulated by articles 10 and 11 of the aforementioned Ministerial Resolution. Those agreements specifically state the enterprise's commitments and the productivity bonus entitlement, provided that a high percentage of the planned objectives for 1999 are achieved, failing which, no authorization will be issued to make bonus payments subject to the limits set in the agreement.
2. 434. Furthermore, in accordance with the regulations applicable to collective bargaining, as cited by the CGTP, the directorates of state enterprises must submit to the OIOE, for its approval, the agreements signed with trade unions; this is required by Act No. 27012, the Public Sector Budget Act; this constitutes a further encroachment upon the parties' collective independence, above and beyond the constraints imposed by that instrument.
3. 435. According to the CGTP, the strategy of placing the productivity bonus award exercise within the collective bargaining process is part of a policy gradually to replace the increases or compensation agreed upon with the workers. This constitutes an attempt to obviate the bargaining phase which, at present, addresses increases in remuneration, with implications in terms of compensation for service time, allowances, leave and others, in an endeavour to move on to the stage of regulating non-remuneration-related increases without any positive implications for workers' rights and, apparently, without any extra labour costs for enterprises and with a further reduction in the Peruvian workers' standard of living.
4. 436. Accordingly, organizations such as the Federation of National Ports Enterprise Workers (FENTENAPU) and the Union of SEDEPAL Workers (SUTESAL) were coerced into signing their collective agreements with the respective state enterprises under the conditions imposed by the aforementioned instructions which, hence, limit the agreements regarding wage increases and, in particular, remuneration-related increases for the benefit of their members.
5. 437. Furthermore, the members of the National Unified Federation of Health Workers (FENUTSSA) received a clear refusal from the Ministry of Health to negotiate upon the list of claims they presented this year, with the argument that, this year, the education sector required extra finances for the purpose of increasing the pay of administrative staff in various regions of the country. Similarly, the list of claims presented to the Ministry of Education by the United Education Trade Union of Peru (SUTEP), the Unified Trade Union of Education Centre Workers (SUTACE) and the National Federation of Education Administrative Workers (FENTASE) was disregarded upon grounds similar to those invoked in the health sector. All of this occurred despite the fact that salaries of public servants in health and education have been frozen for several years.
6. 438. In its communication dated 31 August 1999, the CGTP alleges that on 19 July 1999 the Government handed over the railways of the state enterprise ENAFER S.A. to a consortium of private companies with domestic and foreign capital. This meant the dismissal of all workers already having undergone three staff rationalization operations involving more than 4,000 lay-offs since 1991. The dismissals constitute a case of abuse by the Government, given that a technical study by the World Bank indicates that the staff necessary for the enterprise to function is 1,859 workers. The new operator is only required to recruit former ENAFER S.A. workers to meet its own needs; the recruitment is for one year and may be carried out directly or through third parties. In this way, the majority of the 1,772 workers will lose their jobs whereas they are above 40 years of age and, also, the majority of those that manage to be recruited will be so by third parties. The CGTP points out that the offers made to the trade unions by ENAFER S.A. to bring about their acceptance of the terminations was to pay compensation to the tune of 186 nuevo sols (less than US$60) in respect of each year of service - which is equivalent to the present basic wage of an ENAFER S.A. worker with 25 to 30 years of service. This remuneration is lower than the minimum remuneration for the purpose of calculating compensation, which is currently set at 370 nuevo sols per year of service and an indemnity of $1,000. The enterprise's proposals were turned down.
7. 439. The railway union representatives made a counter-proposal: recruitment guarantees for a minimum of five years; an increase in basic remuneration comprising 186 nuevo sols of basic wage, an "economic package" of 500 nuevo sols per month that had already been paid; a compensatory bonus of $5,000, etc. This counter-proposal was rejected and ENAFER S.A. sent out notarial letters to each of the 1,772 workers. These letters invited them to accept its proposal, setting a deadline of 19 August 1999 for the return of the signed letters, failing which they were threatened with termination as part of a collective dismissal already accepted by the Ministry of Labour, with the loss of the $1,000 indemnity and with not being included in the list of workers to be supplied to the new operator for recruitment purposes. The CGTP adds that, in these circumstances, it was agreed to call a strike on 20 August 1999. On 25 August, the Government initiated indiscriminate, unjustified and brutal repression of railway workers, their spouses and children camping out around the railway stations of Chosica (Lima), Cuzco and Arequipa. This violent repression left many people injured with contusions and instances of asphyxia, above all amongst the children and women on account of the large quantity of tear gas used by the police. In Cuzco, 75 workers were detained. On 26 August, there was industrial action in Lima, organized jointly by the telephone- and dockworkers' unions, as well as in Arequipa and Chosica to protest at the police repression. Meetings were held with the chairpersons of the National Congress Labour and Transport Committees as well as with the Deputy Minister of Transport although, to date, the Government's position has remained unchanged and it has declared the strike illegal.
8. 440. In its communication of 1 June 1999, the Unified Trade Union of Petroleum, Energy, Oil and Refinery Workers of the Grau Region (SUTPEDARG) alleges that its member, Mr. José Fernández Guzmán, was sanctioned by a two-day suspension without pay by the administration of "Petróleos del Perú" for having taken part in the strike declared by several trade unions on 28 April 1999, which called for the Government to rectify its economic policy, including the demand for free collective bargaining. The complainant organization attaches the letter of dismissal in which the aforementioned member is admonished for having taken part in the strike whereas his post was considered essential for the upholding and continuity of minimum services and he had put the refinery's activities at grave risk.
9. 441. In its letters of 13 April and 6 June 2000, the Federation of Petroleum Workers of Peru (FETRAPEP) alleges that the trade unions of the state enterprise Petróleos del Perú (PETROPER), after several months of negotiations during which the workers resisted the enterprise's proposal (award of a Single Productivity Bonus with acceptance of the consolidation of existing working conditions in a consolidated bonus on the basis of Emergency Decree No. 011-99), entered into a conciliation procedure presided over by the Ministry of Labour with the parties agreeing to take the collective bargaining to arbitration. FETRAPEP adds that the arbitration award was based on the workers' proposal, inasmuch as it set a wage increase and threw out the enterprise's proposal. Nevertheless, the enterprise challenged the arbitration award before the Labour Chamber of the High Court of Justice of Lima, invoking Emergency Decree No. 011-99. The Labour Chamber decided, as a precaution, to put the award in abeyance. The complainant adds that on 6 February 2000, the Government extended Emergency Decree No. 011-99 by Emergency Decree No. 004-2000. FETRAPEP points out that the Lawyers' College of Lima questioned the constitutionality of Emergency Decree No. 011-99 before the Constitutional Guarantees Tribunal.
10. 442. In its communication of 9 June 2000, the CGTP also alleges that Emergency Decree No. 004-2000 extends the application of Emergency Decree No. 011-99 beyond the year 2000 and restricts collective bargaining in the public sector.

B. The Government's reply

1. 443. In its communications of 1 February, 27 April and 12 September 2000, the Government states that Emergency Decree No. 011-99, published on 14 March 1999, was issued in keeping with article 118(19) of the Political Constitution of Peru. That constitutional text empowers the President of the Republic to issue extraordinary measures, in the form of emergency decrees with the force of law, when the national interest so requires and she/he is called upon to report to Congress; these emergency decrees constitute extraordinary measures that the President may issue in respect of economic or financial matters as required by the country's circumstances. The emergency decree in question awarded a "special bonus" to public administration workers within the framework of the law on administrative careers and public sector remuneration (Legislative Decree No. 276). In article 11 of the same text, there is indication that the bodies covered by article 12 of the 1999 Public Sector Budget Act (No. 27013), i.e. the state-run enterprises and all enterprises in which the State has a majority holding, will conduct their pay policy for 1999 through the award of a Single Productivity Bonus which will not be part of basic remuneration and will be determined by resolution of the Ministry of Economics and Finance.
2. 444. The Government goes on to say that Ministerial Resolution No. 075-99-EF/15 was published on 1 April 1999, which confirmed the award of the aforementioned bonus as well as the streamlining of the remuneration system for workers in state enterprises. The requirements established in the text for the award of the Single Productivity Bonus are:
   • (a) the amount shall be established with account being taken of the worker's level of responsibility, contribution and commitment, as reflected in an evaluation process. The criteria for this evaluation shall be set by the director, directorate or board of the relevant enterprise;
   • (b) the resulting amount may be paid in instalments;
   • (c) the remuneration system shall already have been simplified by restructuring, although without any variation in staff income. Similarly, the system's simplification should be agreed to in the course of collective bargaining;
   • (d) in the case of staff covered by collective bargaining, the bonus will be awarded within the collective bargaining process;
   • (e) the total amount of worker remuneration, including the bonus, will not exceed the maximum annual income established for the general manager or equivalent official in the relevant body.
3. 445. The Government believes that none of these requirements violates any constitutional provision; moreover, the Ministerial Resolution does not stipulate that collective agreements must be approved by the OIOE but states that the internal control offices of the respective enterprises shall supply the OIOE with a report containing details of the remuneration received by the workers in the sector. Similarly, it points out that the directors, directorate or boards shall provide the OIOE with the 1998 budget evaluation. The sole instance of prior approval required by the OIOE applies to an official receiving remuneration higher than that of the general manager or equivalent official. In that case, if it were decided to maintain that level of remuneration, the grounds for it being upheld should be submitted to the OIOE for approval. However, that is unrelated to the approval of the collective agreement.
4. 446. The Government stresses that: (1) the legal machinery for the issue of Emergency Decree No. 011-99 and Ministerial Resolution No. 075-99-EF/15 were respected; they are constitutional and in keeping with the standards applicable to public sector and state enterprise workers; (2) the procedures applicable to the award of the Single Productivity Bonus are an integral part of the collective bargaining and, in this way, are in compliance with the provisions of the Constitution and relevant international conventions; and (3) the Ministerial Resolution does not make the applicability of collective agreements contingent upon OIOE approval.
5. 447. With regard to the limitation applicable to remuneration above the maximum annual income for the general manager or equivalent official in the relevant sector, there are precedents (and the Government supplies examples) in which, by collective agreement and arbitration award, the remuneration established by the OIOE has been exceeded. Similarly, it should be emphasized that the rights recognized by collective agreement or arbitration award take precedence over any other text, maintaining the agreement's effective application and independence.
6. 448. Furthermore, the streamlining of the remuneration system addressed by Ministerial Resolution No. 075-99-EF/15 does not imply any variation in staff income and there is no wage freeze or elimination of other rights, in view of the fact that the simplification involves restructuring of the components but no change to income levels. As concerns the allegations of FETRAPEP, the Government states that the order of the High Court may be appealed in accordance with the legislation in force and that, according to the same complainant, the High Court decided in its favour.
7. 449. With regard to the allegation that Mr. José Fernández Guzmán, a SUTPEDARG member, was suspended for two days without pay for having taken part in the strike called in "Petróleos del Perú", the Government states that this was on account of his failure to report for work on 28 April 1999 despite the fact that the trade union and the said worker had been notified that he was part of essential staff. In this regard, the right to strike is recognized in the Collective Industrial Relations Act, but that text stipulates in article 82 that: "Whenever the strike affects essential public services, or in the instance addressed by article 78, the workers engaged in the dispute shall guarantee the availability of essential staff for the purpose of preventing a total stoppage and for securing the continuity of the necessary activity (...)."
8. 450. With regard to the allegations concerning ENAFER S.A., the Government explains in detail the legal procedures applied under the Promotion of Private Investment in State Enterprises Act up to and including the publication of Supreme Decree No. 014-98-TR on 24 September 1998, authorizing the directorate of ENAFER S.A. to implement the staff rationalization programme approved by the Private Investment Promotion Commission (COPRI) at its meeting of 6 October 1998. The Government goes on to say that ENAFER S.A. carried out a staff rationalization programme on account of the company's unsound economic and financial situation necessitating administrative reorganization. The ENAFER S.A. directorate, in Agreement No. 1 of Session No. 023/98, authorized the administration to take all necessary action for the due application of the aforementioned Decree. Having authorized the said Agreement's implementation as of 21 January 1999, the application for staff reductions was presented to the Ministry of Labour and Social Protection which issued Order No. 066-99-DRTPSL-DPSC-SDNC for the withdrawal of all of the company's workers; this was done in compliance with article 46 and following Legislative Decree No. 728 "Labour Productivity and Competitivity Act", with no appeal being lodged. It should be pointed out that, by public auction on 19 July 1999, the Railway Consortium of Peru was granted the operating licence for ENAFER S.A. assets. This transfer involved the recruitment by the Railway Consortium of Peru of 60 per cent of the staff having worked for ENAFER S.A. The above infers that the programme implemented by ENAFER S.A. was conducted within the relevant legal framework, with the Government reaffirming its respect for the international conventions to which it is party.

C. The Committee's conclusions

1. 451. The Committee observes that in the present complaint the complainant organizations allege the publication and application of standards contrary to the principle of collective bargaining as foreseen in Convention No. 98, refusal by the authorities to negotiate with public sector organizations, pressure exerted by ENAFER S.A. upon workers to accept termination with the payment of insufficient compensation, as part of a privatization process, as well as the sanctioning of a SUTPEDARG member for having taken part in a strike.
2. 452. With regard to Emergency Decree No. 011-99, Ministerial Resolution No. 075-99-EF/15 and Emergency Decree No. 004-2000, the Committee notes that the Government states, contrary to the allegations, that these texts do not encroach upon the right to collective bargaining in the public administration, given that these texts: (1) do not stipulate that collective agreements must be approved by the Office of State Institutions and Bodies (OIOE); the sole requirement is that a report be supplied to the said Office regarding the details of remuneration received by workers in the sector; (2) stipulate, with regard to the special bonus as a function of productivity as registered in the worker's evaluation and following the streamlining of the remuneration system, that it will be awarded within the collective bargaining context; and (3) the OIOE alone must give its approval to cases in which the total remuneration of workers (including the bonus) exceeds the remuneration level of the general manager of the respective enterprise. In order that the Committee may be in a position to make a fully informed decision, it requests the Government to indicate whether the affiliates covered by the collective agreement and who have received a negative evaluation have the right to receive the special bonus negotiated by the parties. The Committee further requests the Government to provide additional information on the other points in the Decrees which had been mentioned by the Government and by the complainant.
3. 453. With regard to the allegations in respect of the privatization of ENAFER S.A. and pressure exerted upon workers to accept termination with the payment of insufficient compensation, the Committee takes note of the Government's explanations on the lawfulness of the privatization process and that, in the first instance, all workers were laid off and, subsequently, the Railway Consortium of Peru recruited 60 per cent of the staff that had worked for ENAFER S.A. The Committee notes that there was no appeal lodged against the resolution in question. In this regard, the Committee wishes to recall the following principle:
   • The Committee can examine allegations concerning economic rationalization programmes and restructuring processes, whether or not they imply redundancies or the transfer of enterprises or services from the public to the private sector, only in so far as they might have given rise to acts of discrimination or interference against trade unions. In any case, the Committee can only regret that in the rationalization and staff-reduction process, the government did not consult or try to reach an agreement with the trade union organizations. (See Digest of decisions and principles of the Freedom of Association Committee, 4th edition, 1996, para. 935.)
4. 454. With regard to the allegations in respect of the two-day suspension without pay of Mr. José Fernández Guzmán, a SUTPEDARG member, for having taken part in the strike in "Petróleos del Perú", the Committee takes note of the Government's statement to the effect that this was on account of his failure to report for work on 28 April 1999, despite the fact that the trade union and the said worker had been informed that he was part of essential staff. In these circumstances, given that it is legitimate to secure a minimum service in the petroleum sector, the Committee will not pursue the examination of this allegation.
5. 455. Furthermore, the Committee regrets that the Government has not replied to the other allegations regarding: (1) the refusal by the authorities to negotiate with the public sector trade unions FENUTSSA, SUTEP, SUTACE and FENTASE, whose workers' wages have been frozen for several years; and (2) the declaration that a strike in ENAFER S.A. was unlawful, as well as physical attacks upon, and the detention of, strikers. The Committee urges the Government to send, without delay, its observations on these allegations.

The Committee's recommendations

1. 456. In the light of its foregoing interim conclusions, the Committee invites the Governing Body to approve the following recommendations:
   • (a) The Committee urges the Government to send, without delay, its observations regarding the following allegations:
     • - the refusal by the authorities to negotiate with the public sector trade unions FENUTSSA, SUTEP, SUTACE and FENTASE, whose workers' wages have been frozen for several years;
     • - the declaration that a strike in ENAFER S.A. was unlawful; physical attacks upon, and the detention of, strikers.
   • (b) As regards Emergency Decrees Nos. 011-99 and 004-2000, and Ministerial Resolution No. 075-99-EF/15, which have been criticized by the complainant, in order to make a fully informed decision the Committee requests the Government to indicate whether those affiliates covered by the collective agreement and who have received a negative evaluation, are entitled to the special bonus negotiated by the parties. The Committee further requests the Government to provide additional information on the other points in the Decrees which had been mentioned by the Government and by the complainants.