Report in which the committee requests to be kept informed of development - Report No 391, October 2019

Case No 3243 (Costa Rica) - Complaint date: 18-OCT-16 - Follow-up cases closed due to the absence of information from either the complainant or the Government in the last 18 months since the Committee examined the cases

Allegations: The complainant organizations allege the violation of two provisions of a public bank’s collective agreement by judgments of the country’s Supreme Court

1. 171. The complaint is contained in communications dated 18 October and 20 December 2016 and 6 and 7 April 2017 presented by the Banco Popular Employees’ Union (SIBANPO) and UNI Global Union.
2. 172. The Government sent its observations in communications dated 20 October 2017 and 13 September 2019.
3. 173. Costa Rica 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. 174. In their respective communications of 18 October 2016, the complainant organizations allege that, by means of Vote No. 201413758 of 20 August 2014, the Constitutional Chamber of the Supreme Court unilaterally amended the scope of article 45 of the fourth collective agreement of Banco Popular y de Desarrollo Comunal (hereafter “the Bank”) in relation to severance pay for the Bank’s employees. The complainants specifically allege that: (i) for decades, industrial relations between the Bank and its employees have been governed by the collective labour agreement, which under article 62 of the Costa Rican Constitution, has force of law in the country; (ii) following an irregular practice adopted by public authorities in recent years, the Office of the Comptroller General of the Republic filed an application for constitutional review of article 45 of the Bank’s collective agreement, requesting its partial annulment; (iii) article 45 of the agreement establishes that the Bank shall provide severance pay to its employees for the years worked when they retire, resign or are dismissed with or without employer liability; (iv) article 45 also provides that severance pay shall amount to a month’s wages for each year worked prior to 1 March 2001, while the calculation for the years worked after that date shall be based on the formula set forth in the Labour Code; (v) the application for constitutional review filed by the Office of the Comptroller alleges that this article is excessive and contrary to the principles of equality, reasonableness and efficient use of public funds; and (vi) although, in the above-mentioned vote, the Constitutional Chamber declared that the application was unfounded and that, therefore, the relevant clause of the collective agreement was not unconstitutional, it ruled that, for the clause to be considered constitutional, the number of years used for the calculation of severance pay must not exceed 20.
2. 175. The complainant organizations allege that this judgment of the Constitutional Chamber is incoherent and contradictory, totally lacks legal basis, is the result of political pressure and interests, and clearly violates the principle of free negotiations between the parties, as well as the principle of legal certainty. The complainants state in this respect that: (i) all the arguments put forward by the Office of the Comptroller in its application for constitutional review were rejected by the Court, as article 45 of the collective agreement does not foster discrimination, violate any fundamental right or undermine the principles of proportionality and reasonableness; (ii) there are no grounds whatsoever for limiting the number of years used to calculate severance pay to 20 years of work; and (iii) by imposing this limit that unilaterally amends the relevant clause of the collective agreement and thus distorts it, the Court is overstepping its mandate, violating the principle of free collective bargaining and disregarding the specific procedure, which respects due process, laid down in the Public Administration Act for the suppression of rights acquired under a collective agreement.
3. 176. In their respective communications of 20 December 2016, the complainant organizations add that: (i) the Bank’s employees are public, non-government employees governed by the private employment regime and that, under article 2 of its constitution, the Bank operates with full administrative and functional autonomy, with its own assets, and is not safeguarded by the Government; (ii) as part of the application for constitutional review, the Office of the Attorney-General of the Republic is requesting that the application be declared as founded and that a limit of 20 years be established for severance purposes; and (iii) the judgment also undermines the approval process for the Bank’s fifth collective agreement, since on 14 December 2016, the Industrial Relations Department of the Ministry of Labour and Social Security asked SIBANPO for clarification about the scope of the clause in the new agreement in relation to severance pay. Lastly, the complainants state that the Court’s judgment is a legal contradiction, since it cannot declare the application for constitutional review of the collective agreement clause to be unfounded and, at the same time, unilaterally amend the same clause.
4. 177. In communications dated 6 and 7 April 2017, the complainant organizations refer to a second judgment from the Supreme Court regarding another provision of the Bank’s collective agreement, a judgment that, according to their allegations, also violates the right to free collective bargaining. The organizations specifically state that: (i) the current article 35 of the Bank’s fourth collective agreement refers to the formula for payment of the Bank’s employees’ wages and states that “Wages are weekly. Any economic benefit affecting wages shall be calculated on the basis of the weekly wage – that is, the monthly amount divided by four over 52 weeks”; (ii) although this article has formed part of the Bank’s collective agreement for over 30 years, the Bank has decided to use a different formula from the standard one and has been dividing by 4.33, which means that the workers’ wages are lower than the agreed wages; (iii) SIBANPO submitted the matter for judicial review, and while the findings were not in its favour at first instance, the first-instance judgments were fully revoked by 13 second-instance judgments issued between 27 February and 15 June 2012, when the Court of Appeal found that the Bank had strayed from the collective agreement; and (iv) the Bank applied to the Labour Chamber of the Supreme Court, which revoked the above-mentioned second-instance decisions by means of 13 decisions issued between 10 and 31 August 2012, finding, without evidence, that the payment formulas would have been included in the salary scales and that the employer had complied with the relevant clause of the collective agreement.
5. 178. With regard to the above-mentioned 13 decisions of the Second Chamber of the Supreme Court, the complainant organizations state that they remove a standard benefit obtained through perfectly legal collective bargaining and therefore run counter to the principles of free and voluntary collective bargaining with legal certainty. They add that, under Convention No. 98, parties may freely determine which matters are subject to negotiation and which may result in improvements for workers in relation to the legislation. The fact that the collective agreement establishes a payment formula that is favourable to the formula provided for in the legislation is therefore perfectly valid.

B. The Government’s reply

1. 179. In a communication dated 20 October 2017, the Government sent its reply to the complainant organizations’ second allegation, which relates to the alleged violation, by the Second Chamber of the Supreme Court, of article 35 of the Bank’s collective agreement in relation to the weekly payment formula for the Bank’s employees. The Government states in this respect that: (i) the Second Chamber of the Supreme Court, which is the highest labour court in the country, revoked the second-instance judgments that found that the Bank had strayed from the terms of the collective agreement; (ii) considering that the Second Chamber had not made adequate use of the evidence at its disposal (the Bank’s salary scales), SIBANPO contested the Second Chamber’s judgments before the Constitutional Chamber of the Supreme Court by means of an application for constitutional review; (iii) in a judgment dated 13 May 2015, the Constitutional Chamber declared the application to be unfounded, as applications for constitutional review are not to be used in cases of mere interpretation of laws or other legal provisions, but only to address matters of constitutional relevance, which was not the case in this instance; and (iv) at the request of the Ministry of Labour and Social Security, with a view to the preparation of the Government’s reply to the Committee, the Second Chamber clarified that its judgments were not based on asset-related consequences or discretionary criteria, but on an objective interpretation of the agreement under examination.
2. 180. In the light of the above, after recalling the case law of the Second Chamber with regard to recognition of the right to collective bargaining in the public sector, the Government states that the actions of the judicial officials have fully adhered to the principles of the ILO.
3. 181. In a communication dated 13 September 2019, the Government sent its reply to the complainant organizations’ first allegation concerning the unilateral amendment, by the Constitutional Chamber of the Supreme Court, of the scope of article 45 of a public bank’s collective labour agreement, which establishes severance pay for the Bank’s employees. The Government states that, by majority, the Constitutional Chamber of the Supreme Court considered that the contested clause was not unconstitutional, provided that the number of years used for the calculation of severance pay did not exceed 20. Referring to the relevant extracts of the judgment, the Government indicates that the Constitutional Chamber: (i) recognized, on the basis of article 75(3) of the Constitutional Jurisdiction Act, the authority of the Office of the Comptroller General of the Republic to file such an application for constitutional review, as it seeks to safeguard public funds; (ii) in a majority vote, recognized the possibility of challenging, through an application for constitutional review, a collective agreement, given that “the obligations assumed by public institutions and their employees may be subject to an assessment of reasonableness, economy and efficiency, either to prevent the rights of the workers themselves from being restricted or undermined through a collective agreement or to prevent excessive use of public funds”; (iii) with regard to higher benefits concerning severance pay in clauses of collective agreements, recalled that it had accepted the setting of higher limits through collective agreements, as the Labour Code establishes minimum standards that may be exceeded, provided that the gains remain within the parameters of reasonableness and proportionality. The Chamber has thus accepted the existence of severance pay limits that exceed eight years, but not 20; and (iv) the final decision of the Court, which declared the clause to be constitutional provided that it did not exceed a maximum limit, sought to prevent the misuse of public funds, to the detriment of the public services that the Bank is required to provide, and also noted that there were no valid grounds for giving the employees of the Bank in question special treatment.

C. The Committee’s conclusions

1. 182. The Committee observes that the present case refers to the alleged violation of two provisions of a public bank’s collective agreement by the country’s Supreme Court. The Committee notes that the complainant organizations refer, first, to the alleged violation of article 45 of the collective agreement, which establishes that the Bank shall provide severance pay to its employees for the years worked when they retire, resign or are dismissed and alleges in this regard that: (i) this article, which has been included in successive versions of the collective agreement for decades, provides that severance pay shall amount to a month’s wages for each year worked prior to 1 March 2001, while the calculation for the years worked after that date shall be based on the formula set forth in the Labour Code (section 29 of the Labour Code provides for compensation of between 19.5 and 22 days’ wages per year worked, depending on length of service, and limits the years used to calculate severance pay to the last eight years worked); (ii) the Office of the Comptroller General of the Republic filed an application for constitutional review of this clause, arguing that it is excessive and contrary to the principles of equality, reasonableness and efficient use of public funds; (iii) although, in its judgment of August 2014, the Constitutional Chamber of the Supreme Court declared that the application for constitutional review was unfounded and that, therefore, the relevant clause of the collective agreement was not unconstitutional, it ruled that, for the clause to be considered constitutional, the number of years used for the calculation of severance pay must not exceed 20; (iv) this judgment is legally incoherent, as it rejects the arguments regarding unconstitutionality put forward by the Office of the Comptroller while unilaterally amending the terms agreed upon by the signatories of the agreement; (v) the establishment of a limit for the calculation of severance pay is not based on any legal argument and is the result of political pressure; (vi) it must be taken into consideration that the Bank in question enjoys full budgetary autonomy, that its employees are governed by the private employment regime and that, therefore, the amount of severance pay has no bearing; (vii) there is a specific mechanism, which respects due process, established in the Public Administration Act for the suppression of rights acquired under a collective agreement; and (viii) in the light of the foregoing, the judgment in question is in clear violation of Convention No. 98, ratified by Costa Rica, and the right of social partners to freely negotiate working conditions and to improve the benefits provided for in the legislation.
2. 183. The Committee notes the Government’s reply, which refers to the content of the judgment of the Constitutional Chamber of the Supreme Court dated 14 August 2014. The Committee observes from the judgment of 14 August 2014 that: (i) the application for the constitutional review filed by the Office of the Comptroller General of the Republic, requesting annulment of article 45 of the collective agreement relating to severance pay, was based on the amount of severance pay as well as the circumstances envisaged for such payments (any type of termination of the employment relationship and not simply dismissal without just cause); (ii) the Constitutional Chamber found that industrial relations between the Bank and its employees is not governed exclusively by private law; (iii) the Constitutional Chamber recognized the authority of the Office of the Comptroller General of the Republic to file such applications for constitutional review, as it seeks to safeguard public funds; (iv) by means of a majority vote, the Constitutional Chamber considered that “the obligations assumed by public institutions and their employees may be subject to an assessment of reasonableness, economy and efficiency, either to prevent the rights of the workers themselves from being restricted or undermined through a collective agreement or to prevent excessive use of public funds”; (v) while it recognized the constitutional nature of the relevant clause of the Bank’s collective agreement, the Constitutional Chamber nevertheless ruled that, for the clause to be considered constitutional, the number of years used for the calculation of severance pay must not exceed 20; (vi) the Chamber found that although it is constitutional to establish, through collective bargaining, benefits that exceed the minimum benefits provided for in the Labour Code, the Chamber is responsible for ensuring that parameters of reasonableness and proportionality are respected to prevent the excessive use of public funds; and (vii) the Constitutional Chamber applied the same solution that it had applied to another public institution in a previous judgment dated 17 May 2006 (Judgment No. 2006-06730) to the Bank.
3. 184. Recalling that agreements should be binding on the parties [see Compilation, op. cit., para. 1480], the Committee considers that the application for constitutional review of article 45 of the Bank’s collective agreement filed by the Office of the Comptroller General of the Republic runs the risk of undermining the confidence of the parties in the existing collective bargaining mechanisms in the country’s public sector or in the usefulness of such mechanisms in finding consensual resolutions to collective disputes. In the light of the foregoing, the Committee requests the Government to take the necessary steps, including legislative measures if necessary, so that the authorities give preference as far as possible to collective bargaining mechanisms in assessing matters of public interest in relation to economic benefits in clauses of public sector collective agreements. Where serious economic concerns may arise calling for the modification of public sector collective agreement provisions, these situations should be handled with preference within the framework of social dialogue. ,. The Committee requests the Government to keep it informed in this regard.
4. 185. Recalling that it has examined allegations of frequent recourse to the Constitutional court to challenge the validity of public sector collective agreement provisions in the past and noting from the information available on the Supreme Court website that article 45 of the Bank’s collective agreement is the subject of further applications for constitutional review, the Committee observes that systematic recourse to the courts to invalidate collective agreement provisions may undermine the confidence of the parties in the collective bargaining mechanisms in the public sector. In this regard, the Committee recalls that a fair and reasonable compromise should be sought between the need to preserve as far as possible the autonomy of the bargaining parties, on the one hand, and measures which must be taken by governments to overcome their budgetary difficulties, on the other [see Compilation of decisions of the Committee on Freedom of Association, sixth edition, 2018, para. 1485] .
5. 186. The Committee notes that the complainant organizations also allege that, by means of 13 judgments issued between February and August 2012, the Second Chamber of the Supreme Court upheld the violation by the Bank of article 35 of its collective agreement relating to the weekly payment of the Bank’s employees. The Committee notes that the complainants’ allege in this respect that: (i) for 30 years, the successive collective agreements of the Bank have provided that “Wages are weekly. Any economic benefit affecting wages shall be calculated on the basis of the weekly wage – that is, the monthly amount divided by four over 52 weeks”; (ii) the Bank has decided to use a different formula from the standard one and has been dividing the monthly wage by 4.33, which means that the workers’ wages are lower than the agreed wages; (iii) SIBANPO submitted the matter for judicial review and obtained, at second instance, 13 favourable judgments that were issued between 27 February and 15 June 2012; and (iv) the Second Chamber of the Supreme Court nevertheless revoked the above-mentioned second-instance judgments, finding, without evidence, that the employer had complied with the relevant clause of the collective agreement. The complainant alleges that the judgments of the Second Chamber of the Supreme Court disregard the improvements that were freely agreed by the parties to the collective agreement and are therefore in clear violation of Convention No. 98.
6. 187. The Committee notes that, after recalling the case law of the Second Chamber of the Supreme Court, which has upheld the right to collective bargaining in the public sector, the Government states that the actions of the judicial officials in the present case have fully adhered to the principles of the ILO. The Government adds that the right to access to justice exercised by SIBANPO entails accepting the decisions of the judicial bodies, even when those decisions are not in their favour. The Committee notes that the Government specifically states that: (i) SIBANPO contested the judgments of the Second Chamber of the Supreme Court before the Constitutional Chamber of the Supreme Court by means of an application for constitutional review, on the grounds that the Second Chamber had misused the evidence; (ii) in a judgment dated 13 May 2015, the Constitutional Chamber declared the application to be unfounded, as applications for constitutional review are not to be used in cases of mere interpretation of laws or other legal provisions; and (iii) at the request of the Ministry of Labour and Social Security, with a view to the preparation of the Government’s reply to the Committee, the Second Chamber clarified that its judgments were not based on asset-related consequences or discretionary criteria, but on an objective interpretation of the agreement under examination.
7. 188. The Committee notes the information provided both by the complainant organizations and by the Government and observes that, according to the relevant judgments of the Second Chamber of the Supreme Court, the Court considered that: (i) the content of the current article 35 of the Bank’s collective agreement dates back to 1983, when it was decided that, as from 1984, the Bank’s salary scales would be prepared on the basis of a weekly wage; (ii) this clause of the collective agreement enabled the Bank at the time to move from monthly wages to weekly wages, by dividing the former by four (and not by 4.33); (iii) this method of calculation established by the collective agreement was immediately put into practice and was incorporated into the Bank’s general salary scale; and (iv) therefore, the Bank’s salary scale and the monthly averages based on the scale already reflect the change arising from the agreement.
8. 189. The Committee observes that the foregoing shows that the debate surrounding article 35 of the Bank’s collective agreement that has been brought before the courts stems from the interpretation of the scope and methods for applying the weekly payment formula contained in this article. Recalling that it has emphasized the importance of settling differences of interpretation of collective agreements by the mechanisms provided for such purpose in the agreement itself, or in any event by an impartial mechanism which should be accessible to both parties signatory to the agreement, such as an independent judicial body [see 382nd Report, Case No. 3162, para. 296], and observing that the difference of interpretation surrounding article 35 of the Bank’s collective agreement has been examined by four successive judicial bodies, the Committee will not pursue its examination of this allegation.

The Committee’s recommendation

1. 190. In the light of its foregoing conclusions, the Committee invites the Governing Body to approve the following recommendation:
   • The Committee requests the Government to take the necessary steps, including legislative measures if necessary, to ensure that the authorities give preference as far as possible to collective bargaining mechanisms in assessing matters of public interest in relation to economic benefits in clauses of public sector collective agreements. Where serious economic concerns may arise calling for the modification of public sector collective agreement provisions, these situations should be handled with preference within the framework of social dialogue. The Committee requests the Government to keep it informed in this regard.