International Labor Relations

The e-Advocate Quarterly Magazine Hebrews 6:10 | Colossians 3:23

International Labor Relations

“Helping Individuals, Organizations & Communities Achieve Their Full Potential”

Vol. VI, Issue XXV – Q-3 July| August| September 2020

The Advocacy Foundation, Inc. e-Advocate Magazine

The Advocacy Foundation

International Labor Relations “Helping Individuals, Organizations & Communities Achieve Their Full Potential

1735 Market Street, Suite 3750 Philadelphia, PA 19102

| 100 Edgewood Avenue, Suite 1690 Atlanta, GA 30303

John C Johnson III, Esq. Founder & CEO

(855) ADVOC8.0 (855) 238-6280 § (215) 486-2120 www.TheAdvocacyFoundation.org

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Biblical Authority ______

Hebrews 6:10 (NIV) 10

God is not unjust; he will not forget your work and the love you have shown him as you have helped his people and continue to help them.

Colossians 3:23 (NIV) 23 Whatever you do, work at it with all your heart, as working for the Lord, not for human masters,

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Table of Contents International Labor Relations

Biblical Authority I.

Introduction: Labor and Industrial Relations

II.

The International Labour Organization (ILO)

III.

Business Ethics: HR; IP; International Issues

IV. Legal & Ethical Issues in International Business Expansion V.

The National Labor Relations Act

VI. The National Labor Relations Board VII. The National Labor Party VIII. Walmart International IX. McDonald’s Corporation Attachments A. Globalization and Industrial Relations in China B. Japanese Labor-Management Relations Laws C. Finnish Labour Legislation and Industrial Relations

Copyright Š 2014 The Advocacy Foundation, Inc. All Rights Reserved.

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Introduction Labor Relations

is the study and practice of managing unionized employment situations. In academia, labor relations is frequently a subarea within industrial relations, though scholars from many disciplines--including economics, sociology, history, law, and political science--also study labor unions and labor movements. In practice, labor relations is frequently a

Industrial Relations

is a multidisciplinary field that studies the employment relationship.

Industrial relations is increasingly being called employment relations or employee relations because of the importance of nonindustrial employment relationships; this move is sometimes seen as further broadening of the human resource management trend. Indeed, some authors now define human resource management as synonymous with employee relations. Other authors see employee relations as dealing only with non-unionized workers, whereas labor relations is seen as dealing with unionized workers. Industrial relations studies examine various employment situations, not just ones with a unionized workforce. However, according to Bruce E. Industrial relations has three faces: science building, problem solving, and ethical. In the science building phase, industrial relations is part of the social sciences, and it seeks to understand the employment relationship and its institutions through high-quality, rigorous research. In this vein, industrial relations scholarship intersects

subarea within human resource management. In the United States, labor relations in the private sector is regulated by the National Labor Relations Act. Public sector labor relations is regulated by the Civil Service Reform Act of 1978 and various pieces of state legislation. In other countries, labor relations might be regulated by law or tradition.

Kaufman "To a large degree, most scholars regard trade unionism, collective bargaining and labormanagement relations, and the national labor policy and labor law within which they are embedded, as the core subjects of the field."

Initiated in the United States at end of the 19th century, it took off as a field in conjunction with the New Deal. However, it is generally a separate field of study only in English-speaking countries, having no direct equivalent in continental Europe. In recent times, industrial relations has been in decline as a field, in correlation with the decline in importance of trade unions, and also with the increasing preference of business schools for the human resource management paradigm. with scholarship in labor economics, industrial sociology, labor and social history, human resource management, political science, law, and other areas.

Industrial relations scholarship assumes that labor markets are not perfectly competitive and thus, in contrast to mainstream

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economic theory, employers typically have greater bargaining power than employees.

Industrial relations scholarship also assumes that there are at least some inherent conflicts of interest between employers and employees (for example, higher wages versus higher profits) and thus, in contrast to scholarship in human resource management and organizational behavior, conflict is seen as a natural part of the employment relationship. Industrial relations scholars therefore frequently study the diverse institutional arrangements that characterize and shape the employment relationship— from norms and power structures on the shop floor, to employee voice mechanisms in the workplace, to collective bargaining arrangements at company, regional, or national level, to various levels of public policy and labor law regimes, to "varieties of capitalism" (such as corporatism, social democracy, and neoliberalism).

When labor markets are seen as imperfect, and when the employment relationship includes conflicts of interest, then one cannot rely on markets or managers to always serve workers' interests, and in extreme cases to prevent worker exploitation. Industrial relations scholars and practitioners therefore support institutional interventions to improve the workings of the employment relationship and to protect workers' rights. The nature of these institutional interventions, however, differ between two camps within industrial relations. The pluralist camp sees the employment relationship as a mixture of shared interests and conflicts of interests that are largely limited to the employment relationship. In the workplace, pluralists therefore champion grievance procedures, employee voice mechanisms such as works councils and labor unions, collective bargaining, and labor-management partnerships. In the policy arena, pluralists

advocate for minimum wage laws, occupational health and safety standards, international labor standards, and other employment and labor laws and public policies. These institutional interventions are all seen as methods for balancing the employment relationship to generate not only economic efficiency, but also employee equity and voice. In contrast, the Marxistinspired critical camp sees employeremployee conflicts of interest as sharply antagonistic and deeply embedded in the socio-political-economic system. From this perspective, the pursuit of a balanced employment relationship gives too much weight to employers' interests, and instead deep-seated structural reforms are needed to change the sharply antagonistic employment relationship that is inherent within capitalism. Militant trade unions are thus frequently supported.

Theoretical Perspective Industrial relations scholars have described three major theoretical perspectives or

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frameworks, that contrast in their understanding and analysis of workplace relations. The three views are generally known as unitarism, pluralist and radical.

Each offers a particular perception of workplace relations and will therefore interpret such events as workplace conflict, the role of unions and job regulation differently. The radical perspective is sometimes referred to as the "conflict model", although this is somewhat ambiguous, as pluralism also tends to see conflict as inherent in workplaces. Radical theories are strongly identified with Marxist theories, although they are not limited to these.

Pluralist perspective In pluralism, the organization is perceived as being made up of powerful and divergent sub-groups, each with its own legitimate loyalties and with their own set of objectives and leaders. In particular, the two predominant sub-groups in the pluralist perspective are the management and trade unions.

Consequently, the role of management would lean less towards enforcing and controlling and more toward persuasion and co-ordination. Trade unions are deemed as legitimate representatives of employees, conflict is dealt by collective bargaining and is viewed not necessarily as a bad thing and, if managed, could in fact be channelled towards evolution and positive change.

Unitarist perspective In unitarism, the organization is perceived as an integrated and harmonious whole with the ideal of "one happy family", where management and other members of the staff all share a common purpose, emphasizing mutual cooperation. Furthermore, unitarism

has a paternalistic approach where it demands loyalty of all employees, being predominantly managerial in its emphasis and application.

Consequently, trade unions are deemed as unnecessary since the loyalty between employees and organizations are considered mutually exclusive, where there can't be two sides of industry. Conflict is percd the pathological result of agitators, interpersonal friction and communication breakdown.

Marxist/Radical perspective This view of industrial relations looks at the nature of the capitalist society, where there is a fundamental division of interest between capital and labour, and sees workplace relations against this background. This perspective sees inequalities of power and economic wealth as having their roots in the nature of the capitalist economic system.

Conflict is therefore seen as inevitable and trade unions are a natural response of workers to their exploitation by capital.

Whilst there may be periods of acquiescence, the Marxist view would be that institutions of joint regulation would enhance rather than limit management's position as they presume the continuation of capitalism rather than challenge it.

Industrial Relations Today By many accounts, industrial relations today is in crisis. In academia, its traditional positions are threatened on one side by the dominance of mainstream economics and organizational behavior, and on the other by postmodernism. In policy-making circles, the industrial relations emphasis on institutional intervention is trumped by a neoliberal emphasis on the laissez faire promotion of free markets. In practice, labor unions are declining and fewer companies

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have industrial relations functions. The number of academic programs in industrial relations is therefore shrinking, and scholars are leaving the field for other areas, especially human resource management and organizational behavior. The importance of work, however, is stronger than ever, and the lessons of industrial relations remain vital. The challenge for industrial relations is to re-establish these connections with the broader academic, policy, and business worlds.

Corporate Social Responsibility Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship or sustainable responsible business/ Responsible Business) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a self-regulatory mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards and international norms. In some models, a firm's implementation of CSR goes beyond compliance and engages in "actions that appear to further some social good, beyond the interests of the firm and that which is required by law." CSR aims to embrace responsibility for corporate actions and to encourage a positive impact on the environment and stakeholders including consumers, employees, investors, communities, and others.

The term "corporate social responsibility" became popular in the 1960s and has remained a term used indiscriminately by many to cover legal and moral responsibility more narrowly construed.

Proponents argue that corporations increase long term profits by operating with a CSR perspective, while critics argue that CSR distracts from business' economic role. A

2000 study compared existing econometric studies of the relationship between social and financial performance, concluding that the contradictory results of previous studies reporting positive, negative, and neutral financial impact, were due to flawed empirical analysis and claimed when the study is properly specified, CSR has a neutral impact on financial outcomes.

Critics questioned the "lofty" and sometimes "unrealistic expectations" in CSR. or that CSR is merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations.

Political sociologists became interested in CSR in the context of theories of globalization, neoliberalism and late capitalism. Some sociologists viewed CSR as a form of capitalist legitimacy and in particular point out that what began as a social movement against uninhibited corporate power was transformed by corporations into a 'business model' and a 'risk management' device, often with questionable results CSR is titled to aid an organization's mission as well as a guide to what the company stands for to its consumers. Business ethics is the part of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment. ISO 26000 is the recognized international standard for CSR. Public sector organizations (the United Nations for example) adhere to the triple bottom line (TBL). It is widely accepted that CSR adheres to similar principles, but with no formal act of legislation.

The notion is now extended beyond purely commercial corporations, e.g. to universities.

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Cost-Benefit Analysis In competitive markets a cost-benefit analysis of CSR initiatives, can be examined using a resource-based view (RBV).

According to Barney (1990) "formulation of the RBV, sustainable competitive advantage requires that resources be valuable (V), rare (R), inimitable (I) and non-substitutable (S)." A firm introducing a CSR-based strategy might only sustain high returns on their investment if their CSR-based strategy could not be copied (I). However, should competitors imitate such a strategy, that might increase overall social benefits. Firms that choose CSR for strategic financial gain are also acting responsibly.

RBV presumes that firms are bundles of heterogeneous resources and capabilities that are imperfectly mobile across firms. This imperfect mobility can produce competitive advantages for firms that acquire immobile resources. McWilliams and Siegel (2001) examined CSR activities and attributes as a differentiation strategy. They concluded that managers can determine the appropriate level of investment in CSR by conducting cost benefit analysis in the same way that they analyze other investments.

Reinhardt (1998) found that a firm engaging in a CSR-based strategy could only sustain an abnormal return if it could prevent competitors from imitating its strategy.

Legal and Ethical Issues in International Business When markets in foreign countries offer a higher profit potential than your home

market, it makes sense to expand internationally. As you prepare your expansion and research target markets in other countries, you will often find that the legal structures and ethical frameworks differ substantially from those in the United States. You have to address the legal and ethical issues of your entering these markets to make your expansion a success.

Employment Wages and the working environment in overseas locations are often inferior to those in the United States, even when you fulfill all local legal requirements.

If you hire workers there, you face the issue of what pay levels and working conditions are acceptable.

Applying U.S. standards is usually not realistic and often simply disrupts the established market. An effective approach is to develop company standards which protect workers while fitting into the local economy. Your standards have to guarantee a living wage, protect the safety of your workers and establish a reasonable number of hours for the work week.

Corruption Companies making payments to secure business that they would not otherwise obtain are guilty of illegal actions under the U.S. Foreign Corrupt Practices Act. The payments, even if they seem to be customary, are usually illegal under local laws as well. When your company makes such payments, it is encouraging a local system of corruption through unethical behavior. Smaller gifts, of a size that would

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not normally influence a major decision, are considered ethical in some societies and may be legal under local and U.S. laws. If you find that large sums are routinely required to do any business in a country, you may want to reevaluate your decision to enter that market.

Human Rights The country into which you are expanding may not respect basic human rights. The ethical issue facing your company is whether your presence supports the current abusive regime or whether your presence can serve as a catalyst for human rights improvements. If you find that you are supporting a regime that oppresses its citizens, engages in discrimination and does not recognize basic freedoms, the ethical action is to withdraw from the market. If you find that the regime allows you to

observe human rights within your organization and that your presence moderates human rights abuses, you may actively work to improve local conditions.

Pollution Not all foreign countries have environmental legislation that makes it illegal to pollute.

Companies may discharge harmful materials into the environment and avoid costly antipollution measures. An ethical approach to your expansion into such markets is to limit your environmental footprint beyond what is required by local laws. An ethically operating company ensures its operations don't have harmful effects on the surrounding population.

Since your company has the knowledge and expertise to operate within U,S. environmental regulations, it is ethical to apply similar standards in your new locations.

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The International Labour Organization The ILO secretariat (staff) is referred to as the International Labour Office.

Governing Body

The International Labour Organization (ILO) is a United Nations agency dealing with labour issues, particularly international labour standards and decent work for all.

185 of the 193 UN member states are members of the ILO. In 1969, the organization received the Nobel Peace Prize for improving peace among classes, pursuing justice for workers, and providing technical assistance to other developing nations.

The ILO registers complaints against entities that are violating international rules; however, it does not impose sanctions on governments.

Governance, Organization, Membership Unlike other United Nations specialized agencies, the International Labour Organization has a tripartite governing structure – representing governments, employers, and workers (usually with a ratio of 2:1:1). The rationale behind the tripartite structure is the creation of free and open debate among governments and social partners.

The Governing Body decides the agenda of the International Labour Conference, adopts the draft programme and budget of the organization for submission to the conference, elects the director-general, requests information from member states concerning labour matters, appoints commissions of inquiry and supervises the work of the International Labour Office.

Juan SomavĂ­a was the ILO's director-general since 1999 until October 2012, when Guy Ryder was elected as his replacement.

This guiding body is composed of 28 government representatives, 14 workers' representatives, and 14 employers' representatives.

Ten of the government seats are held by member states that are nations of "chief industrial importance," as first considered by an "impartial committee." The nations are Brazil, China, France, Germany, India, Italy, Japan, the Russian Federation, the United Kingdom and the United States. The terms of office are three years.

International Labour Conference The ILO organizes the International Labour Conference in Geneva every year in June, where conventions and recommendations are crafted and adopted. Also known as the parliament of Labour, the conference also

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makes decisions about the ILO's general policy, work programme and budget.

Each member state has four representatives at the conference: two government delegates, an employer delegate and a worker delegate. All of them have individual voting rights, and all votes are equal, regardless of the population of the delegate's member state. The employer and worker delegates are normally chosen in agreement with the "most representative" national organizations of employers and workers.

Usually, the workers' delegates coordinate their voting, as do the employers' delegates..

All delegate have the same rights, and are not required to vote in blocs.

Programs

Labour statistics The ILO is a major provider of labour statistics. Labour statistics are an important tool for its member states to monitor their progress toward improving labour standards.

As part of their statistical work, ILO maintains several databases. This database covers 11 major data series for over 200 countries. In addition, ILO publishes a number of compilations of labour statistics, such as the Key Indicators of Labour Markets (KILM). KILM covers 20 main indicators on labour participation rates, employment, unemployment, educational attainment, labour cost, and economic performance. Many of these indicators have been prepared by other organizations. For example, the Division of International Labour Comparisons of the U.S. Bureau of Labor Statistics prepares the hourly compensation in manufacturing indicator.

Training and Teaching Units

The International Training Centre of the International Labour Organization (ITCILO) is based in Turin, Italy. Together with the University of Turin, Faculty of Law, the ITC offers training for ILO officers and secretariat members, as well as offering educational programmes. For instance, the ITCILO offers a Master of Laws (LL.M.) programme in Management of Development, which aims specialize professionals in the field of cooperation and development.

Child Labour The term child labour is often defined as work that deprives children of their childhood, potential, dignity, and is harmful to their physical and mental development.

Child labour refers to work that: 

   

is mentally, physically, socially or morally dangerous and harmful to children; and interferes with their schooling by: depriving them of the opportunity to attend school; obliging them to leave school prematurely; or requiring them to attempt to combine school attendance with excessively long and heavy work.

In its most extreme forms, child labour involves children being enslaved, separated from their families, exposed to serious hazards and illnesses and/or left to fend for themselves on the streets of large cities – often at a very early age. Whether or not

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particular forms of "work" can be called child labor depends on the child's age, the type and hours of work performed, the conditions under which it is performed and the objectives pursued by individual countries. The answer varies from country to country, as well as among sectors within countries.

Not all work done by children falls under the classification of child labour and therefore should not be so readily targeted for elimination. Children's or adolescents' participation in work that does not negatively affect their health and personal development or interfere with their schooling, is generally regarded as being something positive. This includes activities such as helping their parents around the home, assisting in a family business or earning pocket money outside school hours and during school holidays. These kinds of activities contribute to children's development and to the welfare of their families; they provide them with skills and experience, and help to prepare them to be productive members of society during their adult life.

Ilo's Response to Child Labour The ILO's International Programme on the Elimination of Child Labour (IPEC) was created in 1992 with the overall goal of the progressive elimination of child labour, which was to be achieved through strengthening the capacity of countries to deal with the problem and promoting a worldwide movement to combat child labour. IPEC currently has operations in 88 countries, with an annual expenditure on technical cooperation projects that reached over US$74 million, â‚Ź50 million in 2006. It is the largest programme of its kind globally and the biggest single operational programme of the ILO.

The number and range of IPEC's partners have expanded over the years and now include employers' and workers' organizations, other international and government agencies, private businesses, community-based organizations, NGOs, the media, parliamentarians, the judiciary, universities, religious groups and, of course, children and their families.

IPEC's work to eliminate child labour is an important facet of the ILO's Decent Work Agenda. Child labour not only prevents children from acquiring the skills and education they need for a better future, it also perpetuates poverty and affects national economies through losses in competitiveness, productivity and potential income.

ILO's Exceptions Communities

in

Indigenous

Because of different cultural views involving labor, the International Labour Organization (ILO) developed a series of culturally sensitive mandates including Conventions No. 169, 107, 138, and 182 to protect indigenous culture, traditions, and identities. Conventions No. 138 and 182 lead in the fight against child labour, while No. 107 and 169 promote the right of indigenous and tribal peoples and protect their right to define their own developmental priorities. The ILO recognizes these changes are necessary to respect the culture and traditions of other communities while also looking after the welfare of children.

In many indigenous communities, parents believe children learn important life lessons through the act of work and through the participation in daily life. Working is seen as a learning process preparing children of the future tasks they will eventually have to do as an adult. It is a belief that the family's and

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child well-being and survival is a shared responsibility between members of the whole family. They also see work as an intrinsic part of their child's developmental process. While these attitudes toward child work remain, many children and parents

from indigenous communities still highly value education. ILO wants to include these communities in the fight against exploitative child labor while being sensitive to their traditions and values.

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Business Ethics Business Ethics (also corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.

Business ethics has normative and descriptive dimensions. As a corporate practice and a career specialization, the field is primarily normative.

Academics attempting to understand business behavior employ descriptive methods. The range and quantity of business ethical issues reflects the interaction of profit-maximizing behavior with non-economic concerns.

Interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, most major corporations today promote their commitment to non-economic values under headings such as ethics codes and social responsibility charters. Adam Smith said, "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."[2] Governments use laws and regulations to point business behavior in what they perceive to be beneficial directions. Ethics implicitly regulates areas and details of behavior that lie beyond governmental control. The emergence of large corporations with limited relationships and sensitivity to the communities in which they operate accelerated the development of formal ethics regimes.

Business ethics reflects the philosophy of business, of which one aim is to determine

the fundamental purposes of a company. If a company's purpose is to maximize shareholder returns, then sacrificing profits to other concerns is a violation of its fiduciary responsibility. Corporate entities are legally considered as persons in USA and in most nations. The 'corporate persons' are legally entitled to the rights and liabilities due to citizens as persons.

Economist Milton Friedman writes that corporate executives' "responsibility... generally will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom". Friedman also said, "the only entities who can have responsibilities are individuals ... A business cannot have responsibilities. So the question is, do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible? And my answer to that is, no, they do not." A multi-country 2011 survey found support for this view among the "informed public" ranging from 30 to 80%. Ronald Duska views Friedman's argument as consequentialist rather than pragmatic, implying that unrestrained corporate freedom would benefit the most in long term. Similarly author business consultant Peter Drucker observed, "There is neither a separate ethics of business nor is one needed", implying that standards of personal

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different companies include hostile takeovers and industrial espionage. Related issues include corporate governance; corporate social entrepreneurship; political contributions; legal issues such as the ethical debate over introducing a crime of corporate manslaughter; and the marketing of corporations' ethics policies. According to IBE/ Ipsos MORI research published in late 2012, the three major areas of public concern regarding business ethics in Britain are executive pay, corporate tax avoidance and bribery and corruption.

Human Resource Management ethics cover all business situations.

However, Peter Drucker in another instance observed that the ultimate responsibility of company directors is not to harm—primum non nocere. Another view of business is that it must exhibit corporate social responsibility (CSR): an umbrella term indicating that an ethical business must act as a responsible citizen of the communities in which it operates even at the cost of profits or other goals. In the US and most other nations corporate entities are legally treated as persons in some respects. For example, they can hold title to property, sue and be sued and are subject to taxation, although their free speech rights are limited.

This can be interpreted to imply that they have independent ethical responsibilities.

Duska argues that stakeholders have the right to expect a business to be ethical; if business has no ethical obligations, other institutions could make the same claim which would be counterproductive to the corporation.

Ethical issues include the rights and duties between a company and its employees, suppliers, customers and neighbors, its fiduciary responsibility to its shareholders.

Issues concerning relations between

Human resource management occupies the sphere of activity of recruitment selection, orientation, performance appraisal, training and development, industrial relations and health and safety issues. Business Ethicists differ in their orientation towards labour ethics. Some assess human resource policies according to whether they support an egalitarian workplace and the dignity of labor.

Issues including employment itself, privacy, compensation in accord with comparable worth, collective bargaining (and/or its opposite) can be seen either as inalienable rights or as negotiable. Discrimination by age (preferring the young or the old), gender/sexual harassment, race, religion, disability, weight and attractiveness. A common approach to remedying discrimination is affirmative action.

Once hired, employees have the right to occasional cost of living increases, as well as raises based on merit. Promotions, however, are not a right, and there are often fewer openings than qualified applicants. It may seem unfair if an employee who has been with a company longer is passed over for a promotion, but it is not unethical. It is

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only unethical if the employer did not give the employee proper consideration or used improper criteria for the promotion.

Potential employees have ethical obligations to employers, involving intellectual property protection and whistle-blowing.

Employers must consider workplace safety, which may involve modifying the workplace, or providing appropriate training or hazard disclosure.

Larger economic issues such as immigration, trade policy, globalization and trade unionism affect workplaces and have an ethical dimension, but are often beyond the purview of individual companies.

Intellectual property

Intellectual

Property

(IP)

encompasses expressions of ideas, thoughts, codes and information. "Intellectual property rights" (IPR) treat IP as a kind of real property, subject to analogous protections, rather than as a reproducible good or service. Boldrin and Levine argue that "government does not ordinarily enforce monopolies for producers of other goods.

This is because it is widely recognized that monopoly creates many social costs.

Intellectual monopoly is no different in this respect. The question we address is whether it also creates social benefits commensurate with these social costs."

International Standards

relating to Intellectual Property Rights are enforced through Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). In the US, IP other than copyrights is regulated by the United States Patent and Trademark Office.

The US Constitution included the power to protect intellectual property, empowering the Federal government "to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries".

Boldrin and Levine see no value in such state-enforced monopolies stating, "we ordinarily think of innovative monopoly as an oxymoron. Further they comment, 'intellectual property' "is not like ordinary property at all, but constitutes a government grant of a costly and dangerous private monopoly over ideas. We show through theory and example that intellectual monopoly is not necessary for innovation and as a practical matter is damaging to growth, prosperity, and liberty". Steelman defends patent monopolies, writing, "Consider prescription drugs, for instance.

Such drugs have benefited millions of people, improving or extending their lives.

Patent protection enables drug companies to recoup their development costs because for a specific period of time they have the sole right to manufacture and distribute the products they have invented." The court cases by 39 pharmaceutical companies against South Africa's 1997 Medicines and Related Substances Control Amendment Act, which intended to provide affordable HIV medicines has been cited as a harmful effect of patents.

One attack on IPR is moral rather than utilitarian, claiming that inventions are mostly a collective, cumulative, path dependent, social creation and therefore, no one person or ďŹ rm should be able to monopolize them even for a limited period.

The opposing argument is that the benefits of innovation arrive sooner when patents encourage innovators and their investors to increase their commitments. Roderick Long, a libertarian philosopher, observes,

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"Ethically, property rights of any kind have to be justified as extensions of the right of individuals to control their own lives. Thus any alleged property rights that conflict with this moral basis—like the "right" to own slaves—are invalidated. In my judgment, intellectual property rights also fail to pass this test. To enforce copyright laws and the like is to prevent people from making peaceful use of the information they possess.

If you have acquired the information legitimately (say, by buying a book), then on what grounds can you be prevented from using it, reproducing it, trading it? Is this not a violation of the freedom of speech and press? It may be objected that the person who originated the information deserves ownership rights over it. But information is not a concrete thing an individual can control; it is a universal, existing in other people's minds and other people's property, and over these the originator has no legitimate sovereignty. You cannot own information without owning other people".

Machlup concluded that patents do not have the intended effect of enhancing innovation.

Self-declared anarchist Proudhon, in his 1847 seminal work noted, "Monopoly is the natural opposite of competition," and continued, "Competition is the vital force which animates the collective being: to destroy it, if such a supposition were possible, would be to kill society" Mindeli and Pipiya hold that the knowledge economy is an economy of abundance because it relies on the "infinite potential" of knowledge and ideas rather than on the limited resources of natural resources, labor and capital. Allison envisioned an egalitarian distribution of knowledge.

Kinsella claims that IPR create artificial scarcity and reduce equality. Bouckaert wrote, "Natural scarcity is that which follows from the relationship between man and nature. Scarcity is natural when it is

possible to conceive of it before any human, institutional, contractual arrangement.

Artificial scarcity, on the other hand, is the outcome of such arrangements. Artificial scarcity can hardly serve as a justification for the legal framework that causes that scarcity. Such an argument would be completely circular. On the contrary, artificial scarcity itself needs a justification" Corporations fund much IP creation and can acquire IP they do not create, to which Menon and others object. Andersen claims that IPR has increasingly become an instrument in eroding public domain.

International Issues While business ethics emerged as a field in the 1970s, international business ethics did not emerge until the late 1990s, looking back on the international developments of that decade. Many new practical issues arose out of the international context of business.

Theoretical issues such as cultural relativity of ethical values receive more emphasis in this field. Other, older issues can be grouped here as well. Issues and subfields include: 









The search for universal values as a basis for international commercial behaviour.

Comparison of business ethical traditions in different countries. Also on the basis of their respective GDP and [Corruption rankings].

Comparison of business ethical traditions from various religious perspectives.

Ethical issues arising out of international business transactions; e.g., bioprospecting and biopiracy in the pharmaceutical industry; the fair trade movement; transfer pricing.

Issues such as globalization and cultural imperialism.

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 



Varying global standards—e.g., the use of child labor.

The way in which multinationals take advantage of international differences, such as outsourcing production (e.g. clothes) and services (e.g. call centres) to low-wage countries.

The permissibility of international commerce with pariah states.

The success of any business depends on its financial performance. Financial accounting helps the management to report and also control the business performance.

The information regarding the financial performance of the company plays an important role in enabling people to take right decision about the company.

Therefore, it becomes necessary to understand how to record based on accounting conventions and concepts ensure unambling and accurate records.

Foreign countries often use dumping as a competitive threat, selling products at prices lower than their normal value. This can lead to problems in domestic markets. It becomes difficult for these markets to compete with the pricing set by foreign markets. In 2009, the International Trade Commission has been researching anti-dumping laws.

Dumping is often seen as an ethical issue, as larger companies are taking advantage of other less economically advanced companies.

Law and Regulation Very often it is held that business is not bound by any ethics other than abiding by the law. Milton Friedman is the pioneer of the view. He held that corporations have the obligation to make a profit within the framework of the legal system, nothing more. Friedman made it explicit that the duty of the business leaders is, "to make as much money as possible while conforming to the basic rules of the society, both those embodied in the law and those embodied in ethical custom". Ethics for Friedman is nothing more than abiding by 'customs' and 'laws'. The reduction of ethics to abidance to laws and customs however have drawn serious criticisms.

Counter to Friedman's logic it is observed that legal procedures are technocratic, bureaucratic, rigid and obligatory where as ethical act is conscientious, voluntary choice beyond normativity. Law is retroactive. Crime precedes law. Law against a crime, to be passed, the crime must have happened. Laws are blind to the crimes undefined in it.

Further, as per law, "conduct is not criminal unless forbidden by law which gives advance warning that such conduct is criminal. Also, law presumes the accused is innocent until proven guilty and that the state must establish the guilt of the accused beyond reasonable doubt. As per liberal laws followed in most of the democracies, until the government prosecutor proves the firm guilty with the limited resources

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available to her, the accused is considered to be innocent. Though the liberal premises of law is necessary to protect individuals from being persecuted by Government, it is not a sufficient mechanism to make firms morally accountable.

Religious Views In Sharia law, followed by many Muslims, banking specifically prohibits charging interest on loans. Traditional Confucian thought discourages profit-seeking.

Christianity offers the Golden Rule command, "Therefore all things whatsoever ye would that men should do to you, do ye even so to them: for this is the law and the prophets." according to the article "Theory of the real economy", there is a more narrow

point of view from the Christianity faith towards the relationship between ethics and religious traditions. This article stresses about how capable is Christianity of establishing reliable boundaries for financial institutions. One criticism comes from Pope Benedict by describing the "damaging effects of the real economy of badly managed and largely speculative financial dealing." It is mentioned that Christianity has the potential to transform the nature of finance and investment but only if theologians and ethicist provide more evidence of what is real in the economic life.

Business ethics receives an extensive treatment in Jewish thought and Rabbinic literature, both from an ethical (Mussar) and a legal (Halakha) perspective.

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The National Labor Relations Act The National Labor Relations Act of 1935 (49 Stat. 449) 29 U.S.C. § 151–169 (also known as the Wagner Act after NY Senator Robert F. Wagner) is a foundational statute of US labor law which guarantees basic rights of private sector employees to organize into trade unions, engage in collective bargaining for better terms and conditions at work, and take collective action including strike if necessary.

The act also created the National Labor Relations Board, which conducts elections that can require employers to engage in collective bargaining with labor unions (also known as trade unions). The Act does not apply to workers who are covered by the Railway Labor Act, agricultural employees, domestic employees, supervisors, federal, state or local government workers, independent contractors and some close relatives of individual employers.

Unfair labor practices Under section 8 (29 U.S.C. § 158) the law defines a set of prohibited actions by employers, employees, and unions, known as an unfair labor practice. The first five unfair labor practices aimed at employers are in section 8(a). These are, 

(a)(1) "to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7". This includes freedom of association, mutual aid or protection, self-organization, to form, join, or assist labor organizations, to bargain collectively for wages and working conditions through representatives of their own choosing, and to engage in other protected concerted activities with or without a union.



(a)(2) "to dominate or interfere with the formation or administration of any labor organization or contribute financial or other support to it"



(a)(3) "by discrimination in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization"



(a)(4) discriminating against employees who file charges or testify.



(a)(5) refusing to bargain collectively with the representative of the employer's employees.

In addition, added by the Taft-Hartley Act 1947, there are seven unfair labor practices aimed at unions and employees.

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The National Labor Relations Board

The National Labor Relations Board (NLRB) is an independent agency of the United States government charged with conducting elections for labor union representation and with investigating and remedying unfair labor practices. Unfair labor practices may involve union-related situations or instances of protected concerted activity. The NLRB is governed by a five-person board and a General Counsel, all of whom are appointed by the President with the consent of the Senate.

Board members are appointed to five-year terms and the General Counsel is appointed to a four-year term. The General Counsel acts as a prosecutor and the Board acts as an appellate judicial body from decisions of administrative law judges.

As of 2013, the NLRB is headquartered at 1099 14th Street NW, Washington, D.C., with over 30 regional, sub-regional, and residential offices throughout the U.S.

Taft-Hartley A major turning point in the history of the NLRB came in 1947 with passage of the Taft-Hartley Act. Disruptions caused by strikes during World War II as well as the huge wave of strikes

the followed the end of the war fueled a growing movement in 1946 and 1947 to amend the NLRA to correct what critics saw as a pro-labor tilt in federal law. Drafted by the powerful Republican Senator Robert Taft and the strongly anti-union Representative Fred A. Hartley, Jr., the TaftHartley Act banned jurisdictional strikes, wildcat strikes, political strikes, secondary boycotts, secondary picketing, mass picketing, union campaign donations made from dues money, the closed shop, and unions of supervisors. The act also enumerated new employer rights, defined union-committed ULPs, gave states the right to opt out of federal labor law through rightto-work laws, required unions to give an 80days' strike notice in all cases, established procedures for the President to end a strike in a national emergency, and required all union officials to sign an anti-Communist oath. Organizationally, the act made the General Counsel a presidential appointee, independent of the board itself, and gave the General Counsel limited powers to seek injunctions without referring to the Justice Department. It also banned the NLRB from engaging in any mediation or conciliation, and formally enshrined in law the ban on hiring personnel to do economic data collection or analysis.

Herzog publicly admitted the need for some change in the NLRA, but privately he opposed the proposed Taft-Hartley amendments. He felt the communist oath provisions were unconstitutional, that the amendments would turn the NLRA into a management weapon, that creation of an independent General Counsel would weaken the NLRB, and that the law's dismantling of the agency's economic analysis unit deprived the NLRB of essential expertise.

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Nonetheless, Congress overrode Truman's veto of the Taft-Hartley Act on June 23, 1947, and the bill became law.

The Taft-Hartley Act fundamentally changed the nature of federal labor law, but it also seriously hindered the NLRB's ability to enforce the law. The loss of the mediation function left the NLRB unable to become involved in labor disputes, a function it had engaged in since its inception as the National Labor Board in 1933. This hindered the agency's efforts to study, analyze, and create bulwarks against badfaith collective bargaining; reduced its ability to formulate national labor policy in this area; and left the agency making labor law on an ineffective, timeconsuming case-by-case basis. The separation of the General Counsel from supervision by the national board also had significant impact on the agency. This separation was enacted against the advice of the Justice Department, contradicted the policy Congress had enacted in the Administrative Procedure Act of 1946, and ignored Millis' extensive internal reforms.

The change left the NLRB as the only federal agency unable to coordinate its decision-making and legal activities, and the only agency exempted in this manner under the Administrative Procedure Act. Interestingly, the separation of the General Counsel was not discussed by the committee or by any witnesses during the legislation's Structure of the NLRB In 1947, the Taft–Hartley Act created a formal administrative distinction between the Board and the General Counsel of the NLRB. In broad terms, the General Counsel

mark-up. Indeed, there was no basis for it at all in the public record. It was, in the words of sociologist Robin Stryker, "little-noted" and "unprecedented".

The anti-communist oath provisions generated extensive public debate, and generated disputes before the Supreme Court several times. The Taft-Hartley oath first reached the court in American Communications Association v. Douds, 339 U.S. 382 (1950), in which the court held 5to-1 that the oath did not violate the First Amendment, was not an ex post facto law or bill of attainder in violation of Article One, Section 10, and was not a "test oath" in violation of Article Six. The issue again came before the court in Garner v.

Board of Public Works, 341 U.S. 716 (1951), in which the court unanimously held that a municipal loyalty oath was not an ex post facto law or bill of attainder. It came before the court yet a third time in Wieman v. Updegraff, 344 U.S. 183 (1952). This time, the outcome was radically different. The Supreme Court unanimously ruled that state loyalty oath legislation violated the due process clause of the Fourteenth Amendment. In 1965, the Supreme Court held 5-to-4 that the anticommunist oath was, in fact, a bill of attainder in United States v. Brown, 381 U.S. 437 (1965). The Supreme Court essentially overturned Douds, but did not formally do so. is responsible for investigating and prosecuting unfair labor practice claims; the Board, on the other hand, is the adjudicative body that decides the unfair labor practice cases brought to it. While the General Counsel has limited independence to argue

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for a change in the law in presenting cases to the Board, once the Board has decided the issue it is the General Counsel's responsibility to uphold the Board's decision, even if it is contrary to the position he advocated when presenting the case to the Board. The Board is also responsible for the administration of the Act's provisions governing the holding of elections and resolution of jurisdictional disputes.

employees, it has no authority over labor relations disputes involving governmental, railroad and airline employees covered by the Adamson Railway Labor Act, or agricultural employees. On the other hand, in those parts of the private sector its jurisdictional standards are low enough to reach almost all employers whose business has any appreciable impact on interstate commerce.

The General Counsel oversees four divisions: the Division of Operations Management, the Division of Administration, the Division of Advice, and the Division of Enforcement Litigation.

Processing of charges

The Board has more than thirty regional offices. The regional offices conduct elections, investigate unfair labor practice charges, and make the initial determination on those charges (whether to dismiss, settle, or issue complaints). The Board has jurisdiction to hold elections and prosecute violations of the Act in Puerto Rico and American Samoa.

Jurisdiction

Charges are filed by parties against unions or employers with the appropriate regional office. The regional office will investigate the complaint. If a violation is believed to exist, the region will take the case before an Administrative Law Judge who will conduct a hearing. The decision of the Administrative Law Judge may be reviewed by the five member Board. Board decisions are reviewable by United States Courts of Appeals. The Board's decisions are not selfexecuting: it must seek court enforcement in order to force a recalcitrant party to comply with its orders. (For greater detail on this process see the entry for unfair labor practice).

The Board's jurisdiction is limited to private sector employees and the United States Postal Service; other than Postal Service

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The National Labor Party

The National Labor Party was formed by Australian Prime Minister Billy Hughes in 1916.

Hughes had taken over as leader of the Australian Labor Party and Prime Minister of Australia when anti-conscriptionist Andrew Fisher resigned in 1915. He formed the new party for himself and his followers after he was expelled from the ALP a month after the 1916 plebiscite on Conscription in Australia. Hughes held a pro-conscription stance in relation to World War I. On 15 September 1916 the executive of the Political Labour League (the Labor Party organisation in New South Wales at the time) expelled Hughes from the Labor Party. When the Federal Parliamentary Labor caucus met on 14 November 1916, lengthy discussions ensued until Hughes walked out with 24 other Labor members and the remaining (43) members of Caucus then passed their motion of no confidence in the leadership, effectively expelling Hughes and the other members.

Hughes and his followers formed a minority Government. Believing the Labor Party was no longer sufficiently nationalist, they began laying the groundwork for a new party that would be both socially radical and nationalist.

The National Labor Party had to depend on support from the Commonwealth Liberal Party, led by another Labor dissident, Joseph Cook. In 1917, Hughes and Cook turned their confidenceand-supply agreement into a formal party, the Nationalist Party of Australia, with Hughes as leader.

The National Labor Party was never formally constituted a party and had no organizational structure, although some trade union officials and Labor Party branches, particularly in Western Australia and Tasmania, supported it.

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Walmart Walmart International As of January 2014, Walmart's international operations comprise 6,337 stores and 800,000 workers in 26 countries outside the United States. There are wholly owned operations in Argentina, Brazil, Canada, and the UK. With 2.2 million employees worldwide, the company is the largest private employer in the U.S. and Mexico, and one of the largest in Canada. In the financial year 2010, Walmart's international division sales were $100 billion (equivalent to $108 billion in 2014), or 24.7 percent of total sales.

Walmart has operated in Canada since its acquisition of 122 stores comprising the Woolco division of Woolworth Canada, Inc in 1994. As of January 2014, it operates over 370 locations (including 100 Supercentres) and employs 90,000 Canadians, with a local home office in Mississauga, Ontario.

Walmart Canada's first three Supercentres (spelled as in Canadian English) opened on November 8, 2006, in Hamilton, London, and Aurora, Ontario. The 100th Canadian

Supercentre opened on July 10, 2010, in Victoria, BC. In 2010, Walmart Canada Bank was introduced in Canada with the launch of the Walmart Rewards MasterCard.

In the mid-1990s Walmart tried with a large financial investment to get a foothold in the German retail market. In 1997 Walmart took over the supermarket chain Wertkauf with its 21 stores for DEM750 million (equivalent to DM909 million in 2014) (â‚Ź375 million) and in 1998 Walmart took over 74 Interspar stores for DEM1.3 billion (equivalent to DM1.55 billion in 2014) (â‚Ź750 million).

The German market at this point was an oligopoly with high competition among the companies which also used a similar low price strategy as Walmart. As a result, Walmart's low price strategy yielded no competitive advantage. Also Walmart's corporate culture was not viewed positively among employees and customers in Germany, particularly Walmart's "statement

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of ethics", which restricted relationships between employees and led to a public discussion in the media, resulting in a bad reputation for Walmart among customers.

In July 2006, Walmart announced its withdrawal from Germany due to sustained losses. The stores were sold to the German company Metro during Walmart's fiscal third quarter. Walmart did not disclose its losses from its ill fated German investment, but they were estimated around €3 billion.

In 2004, Walmart bought the 118 stores in the Bompreço supermarket chain in northeastern Brazil. In late 2005, it took control of the Brazilian operations of Sonae Distribution Group through its new subsidiary, WMS Supermercados do Brasil, thus acquiring control of the Nacional and Mercadorama supermarket chains, the leaders in the Rio Grande do Sul and Paraná states, respectively. None of these was rebranded. As of January 2014, Walmart operates 61 Super-Bompreço stores, 39 Hiper-Bompreço stores. It also runs 57 Walmart Supercenters, 27 Sam's Club stores, and 174 Todo Dia stores. With the acquisition of Bompreço and Sonae, Walmart was in 2010 the third largest supermarket chain in Brazil, behind Carrefour and Pão de Açúcar. Walmart Brasil, the operating company, has its head office in Barueri, São Paulo State, and regional offices in Curitiba, Paraná; Porto Alegre, Rio Grande do Sul; Recife, Pernambuco; and Salvador, Bahia.

In November 2006, the company announced a joint venture with Bharti Enterprises to open retail stores in India. As foreign corporations were not allowed to directly enter the retail sector in India, Walmart operated through franchises and handled the wholesale end. The partnership involves two joint ventures; Bharti manages the front end

involving opening of retail outlets, while Walmart takes care of the back end, such as cold chains and logistics. Bharti Walmart operates stores in India under the brand name "Best Price Modern Wholesale". The first store opened in Amritsar in May 2012.

On September 14, 2012, the Government of India approved 51 percent FDI in multibrand retails, subject to approvals by individual states, effective September 20, 2012. Scott Price, Walmart's president and CEO for Asia, told The Wall Street Journal that the company would be able to start opening Walmart stores in India within two years. Expansion into India faced some significant problems. In November 2012, Walmart admitted to spending $25 million (equivalent to $25.7 million in 2014) lobbying Congress lobbying is conventionally considered bribery in India.

Walmart is conducting an internal investigation into potential violations of the Foreign Corrupt Practices Act. Bharti Walmart suspended a number of employees, which are rumored to include its CFO and legal team, to ensure "a complete and thorough investigation." The suspension focused attention on Bharti Walmart as a part of the broader debate surrounding the desirability of allowing multi-brand FDI into India. The September 20, 2012 approval of FDI was challenged by opposition parties and narrowly passed in a contentious parliamentary vote in early December.

Sales in 2006 for Walmart's UK subsidiary, Asda (which retains the name it had before acquisition by Walmart), accounted for 42.7 percent of sales of Walmart's international division. In contrast to the US operations, Asda was originally and still remains primarily a grocery chain, but with a stronger focus on non-food items than most UK supermarket chains other than Tesco. As of January 2014, Asda had 573 stores, including 147 from the 2010 Netto

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acquisition. In addition to small suburban Asda stores, larger stores are branded Asda Walmart Supercentres, as well as Asda Superstores and Asda Living.

In addition to its wholly owned international operations, Walmart has joint ventures in China and several majority-owned subsidiaries. Walmart's majority-owned subsidiary in Mexico is Walmex. In Japan, Walmart owns 100 percent of Seiyu as of 2008. Additionally, Walmart owns 51 percent of the Central American Retail Holding Company (CARHCO), consisting of more than 360 supermarkets and other stores in Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica.

In 2008, Walmart named German retailing veteran Stephan Fanderl as president of Walmart Emerging Markets-East in an effort to, "explore retail business opportunities in Russia and neighboring markets." The market is estimated to be worth more than US$140 billion per year in food sales alone.

In January 2009, the company acquired a controlling interest in the largest grocer in Chile, Distribuci贸n y Servicio D&S SA. In 2010 the company was renamed Walmart Chile.

On September 28, 2010, Walmart announced it would buy Massmart Holdings Ltd. of Johannesburg, South Africa in a deal worth over $4 billion (equivalent to $4.33 billion in 2014), giving the company its first stores in Africa.

In December 2011, Walmart neither confirmed nor denied speculation that it was

eyeing opportunities in Pakistan. "We have not made any announcements concerning Pakistan," said Megan Murphy, Walmart's international corporate affairs manager in an e-mail. Walmart does not comment on market entry speculation, she added.

Murphy, however, said their priorities are to "concentrate on the markets where we already have operations and look for growth opportunities in markets where customers want to see us and where it makes sense for our long-term growth."

In February 2012, Walmart announced that the company raises its stake to 51 percent in Chinese Online Supermarket Yihaodian to tap rising consumer wealth and help the company offer more product. The stake expansion is subject to Chinese government regulatory approval.

Walmart Global e-Commerce Based in San Francisco, California, the Global e-Commerce division provides online retailing for Walmart, Sam's Club, ASDA UK and all other international brands spread across different countries. The mission is to combine technology and world class retailing to provide seamless online shopping experience through websites like www.walmart.com, www.samsclub.com, www.wal-martchina.com, www.asda.com, www.walmart.com.br, www.walmart.com.ar, and www.walmart.ca.

There are 3 locations in the United States which are all located in California. They are San Bruno, Sunnyvale, Brisbane. Other locations outside of the United States include Shanghai (China), Bangalore (India).

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McDonald’s Corporation The McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving around 68 million customers daily in 119 countries across 35,000 outlets. Headquartered in the United States, the company began in 1940 as a barbecue restaurant operated by Richard and Maurice McDonald; in 1948 they reorganized their business as a hamburger stand using production line principles.

Businessman Ray Kroc joined the company as a franchise agent in 1955.

He subsequently purchased the chain from the McDonald brothers and oversaw its worldwide growth.

A McDonald's restaurant is operated by either a franchisee, an affiliate, or the corporation itself.

McDonald's Corporation revenues come from the rent, royalties, and fees paid by the franchisees, as well as sales in companyoperated restaurants. In 2012, McDonald's Corporation had annual revenues of $27.5 billion, and profits of $5.5 billion.

McDonald's primarily sells hamburgers, cheeseburgers, chicken, french fries, breakfast items, soft drinks, milkshakes, and desserts. In response to changing consumer tastes, the company has expanded its menu to include salads, fish, wraps, smoothies, fruit, and seasoned fries.

McDonald's has become emblematic of globalization, sometimes referred to as the "McDonaldization" of society.

The Economist newspaper uses the "Big Mac Index": the comparison of a Big Mac's cost

in various world currencies can be used to informally judge these currencies' purchasing power parity. Norway has the most expensive Big Mac in the world as of July 2011, while the country with the least expensive Big Mac is India (albeit for a Maharaja Mac—the next cheapest Big Mac is Hong Kong).

Thomas Friedman once said that no country with a McDonald's had gone to war with another.

However, the "Golden Arches Theory of Conflict Prevention" is not strictly true. Exceptions are the 1989 United States invasion of Panama, NATO's bombing of Serbia in 1999, the 2006 Lebanon War, and the 2008 South Ossetia war.

McDonald's suspended operations in its corporateowned stores in Crimea after Russia annexed the region in 2014. On 20 August 2014, as tensions between the United States and Russia strained over events in Ukraine, and the resultant U.S. sanctions, the Russian government temporarily shut down four McDonald's outlets in Moscow, citing sanitary concerns. The company has operated in Russia since 1990 and at August 2014 had 438 stores across the country. On 23 August 2014, Russian Deputy Prime Minister Arkady Dvorkovich ruled out any government move to ban McDonald's and dismissed the notion that the temporary closures had anything to do with the sanctions Some observers have suggested that the company should be given credit for increasing the standard of service in markets

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that it enters. A group of anthropologists in a study entitled Golden Arches East looked at the impact McDonald's had on East Asia, and Hong Kong in particular. When it opened in Hong Kong in 1975, McDonald's was the first restaurant to consistently offer clean restrooms, driving customers to demand the same of other restaurants and institutions. McDonald's has taken to partnering up with Sinopec, the second largest oil company in the People's Republic of China, as it takes advantage of the country's growing use of personal vehicles by opening numerous drive-thru restaurants.

McDonald's has opened a McDonald's restaurant and McCafĂŠ on the underground premises of the French fine arts museum, The Louvre.

The company stated it will open vegetarianonly restaurants in India by mid-2013.

Space exploration McDonald's and NASA explored an advertising agreement for a planned mission to the asteroid 449 Hamburga; however, the spacecraft was eventually cancelled.

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References ______

1. http://en.wikipedia.org/wiki/Industrial_relations 2. http://en.wikipedia.org/wiki/International_Labour_Organization 3. http://smallbusiness.chron.com/legal-ethical-issues-international-business-expansion68066.html 4. http://en.wikipedia.org/wiki/Labor_relations 5. http://en.wikipedia.org/wiki/Business_ethics#International_issues 6. http://en.wikipedia.org/wiki/Corporate_social_responsibility 7. http://smallbusiness.chron.com/legal-ethical-issues-international-business-expansion68066.html 8. http://en.wikipedia.org/wiki/National_Labor_Relations_Act 9. http://en.wikipedia.org/wiki/National_Labor_Relations_Board 10. http://en.wikipedia.org/wiki/Walmart 11. http://en.wikipedia.org/wiki/McDonald%27s

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Attachment A

Globalization and Industrial Relations in China

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GLOBALIZATION AND INDUSTRIAL RELATIONS OF CHINA, INDIA, AND SOUTH KOREA: AN ARGUMENT FOR DIVERGENCE MOHAMMAD A. ALI University of Rhode Island Driven by technological advances, improved communications, economic liberalization, and increased international competition, globalization has brought in an era of economic, institutional and cultural integration. Under globalization the workplace practices are under a constant state of flux. Academics are not only analyzing the benefits and the deleterious effects of this phenomenon on the employment relations of developed and under-developed nations. They have also stirred up the old controversy regarding the longer-run trajectory of employment relations systems under the pressures of globalization. The debate is on the question that whether the industrial relations systems of countries are converging or diverging. This paper analysis employment relation systems of three Asian countries-China, India, and Korea- and makes a case for diversion in employment relation systems.

Globalization can be defined as a process of rapid economic, cultural, and institutional integration among countries. This unification is driven by the liberalization of trade, investment and capital flow, technological advances, and pressures for assimilation towards international standards. Globalization has reduced barriers between countries, thereby resulting in intensification of economic competition among nations, dissemination of advanced management practices and newer forms of work organization, and in some cases sharing of internationally accepted labor standards. On the other side globalization has evidently contributed to unemployment, increase in contingent labor force and a weakening of labor movements.

The biggest question today is regarding the impact of this economic phenomenon on employers, employees and industrial relations of developed and under-developed countries.

Supporters of globalization say that free trade and increasing foreign direct investment will increase employment and earnings in advanced and developing countries. Critics argue that globalization, in reality has a deleterious effect on the wages, employment, working conditions of most, though not all developing country workers. These negative effects they believe are resulting from competition of multinationals and selective opening of markets to international trade in favor of industrially advanced countries.

The debate on the impact of globalization is not restricted to the above-mentioned areas. It has also stirred up an old controversy regarding the longer-run trajectory of employment relations systems. John Dunlop in his book “Industrialism and Industrial Man (1960)� took technological development as the main force and said that industrialism has commanding logics of its own and these logics result in advanced industrial societies becoming more alike, despite political and cultural differences, and certainly more alike than any one of them is like a less developed country. Other scholars like Doeringer (1981), Piore (1981) have taken rulemaking processes and regulatory institutions respectively as the main focus and concluded that all countries show tendencies to institutionalize their arrangements of rule making and there is convergence as far as regulatory institutions are concerned.

Developing countries under global pressures are trying to stay on the economic map. In order to do so these countries are taking steps to make sure that compared to other developing countries their economic environment provides more incentives to multi-national companies and attracts more foreign direct investment. The argument is that the developing nations, in an attempt to achieve these overall goals are making legal changes and adopting new employment practices which are similar to each Š Mohammad Ali, 2005

Mohammad Ali – Globalization

other and their employment relations are moving towards the same direction. These similarities can range from lay off policies, collective bargaining structures, and legal rights of workers to worker safety legislation. At the workplace level this convergence, according to the scholars, is taking two forms: functional flexibility aimed at increasing the skills of workers and making them multi-task for producing complex goods and services, and numerical flexibility characterized by lack of unionization, increased contingent workers and Taylorist work practices.

On the other hand, Ira Katznelson and Aristide Zolberg in their book “Working-Class

2

Formation (1986)” took formation of the working class as a major and crucial outcome of industrial development and concluded by their case studies of industrialized countries that there are as many variations as there are cases. They attributed these distinctions to the differences to political and legal backgrounds, and the character of the regime within each of these countries. Derbishire and Katz (1997) coined the phrase ‘converging-divergence’ to describe commonalities in the changes underway in employment relations across countries (Bamber, 2001).

Figure 1 Influencing Variables • Political History.

• Form of Government.

• Economic System.

Divergence in levels and types Pressures • Economic Integration.

• Reduced Barriers.

• -Intense Economic • Competition.

• Advanced means of • Communication.

• Institutional Integration.

• Technological Advances.

• Influence of International • Bodies.

Influencing Variables • Labor Influence.

• Employer Influence.

• State Influence.

• Industrial Stage.

• Exposure to Globalization

Policies • Privatization.

• Industrial Laws.

• Bargaining Process.

• Conflict Resolution.

• Unions (Recognition & Structure)

They believed that there is little evidence of convergence, in fact there are variations and they categorized the emerging patterns as low wage (managerial discretion, hierarchical work patterns, piece-rates, anti-union, and high turnover), HRM (corporate culture, directed teams, better wages, contingent pay, individual careers, and union substitution), Japanese oriented (Standardized procedures, problemsolving teams, high pay linked with seniority, and enterprise unionism), and joint team based (joint decision making, semi-autonomous teams, high pay career development and union and employee involvement).

Finally, the institutionalists believe that institutional influences remain important in shaping employment relations. They see the importance of the interaction of several factors, including economic strategies, culture, and the role of the state, in the debate of convergence and divergence. They see employment relations systems as strongly institutionalized within wider business systems that are, in effect, specific to the particular societies in which they take shape, making convergence unlikely.

Due to the enormity of the task it was not possible to discuss the issue of convergence and divergence at the global level in this paper.

Therefore, I will try to answer this question with reference to three countries -China, India and South Korea- representing three different political systems in Asia. I will attempt to analyze what type of policy changes these countries are making to attract foreign investments and whether these policies are resulting in similar employment relations systems or not. The choice of these countries was made not only because of the fact that they have different political traditions, but also because of their high level of exposure to globalization, and their levels of economic and industrial development. The argument in my paper is that pressures of globalization tend to change the employment relations of countries.

These pressures, however, interact with domestic factors of economic systems, political histories, forms of government, legal histories, industrial stages, exposure to globalization, labor influence and state influence in each country and different variations of policies regarding industrial relations are manifested, leading to

divergence, as shown in figure 1. I will also, in the discussion of the countries, try to establish how these changes are affecting the relative influence of the actors of employment relationsstate, employer and employees- in these countries.

CHINA China with the largest population in the world has a labor force of 778.1 million (2003 est.). By occupation 50% of the country’s labor force is in agriculture, 22 % in industry and 28% in services. The share of these sectors in the total GDP does not commensurate to the percentage of people employed: agriculture contributes 14%, industry 52.9% and services 32.3%. It has an inflation rate of 1.2% and an unemployment rate of 10.1%.

The arrival of socialism in the underdeveloped regions, Lenin argued, meant that Marx’s prediction of the “withering away of the state would be necessarily protracted and that a “dictatorship of the proletariat” (that is, the communist party) would have to first carry out the unfinished tasks of industrialization as a precondition for building socialism. This argument provided the justification for rejecting syndicalist arguments about “workers’ control” over factories in favor of the organization of the economy under a single party apparatus that would manage production and distribution in the name of the proletariat (Chen, 2001).

Based on the above, the Chinese industrial relations were characterized by: rejection of autonomous forms of workers’ organizations in favor of single, centralized trade union federation, importance of the state enterprises (danwei) as the center of productivity and distribution of basic necessities and services.

Although the Chinese Communist Party (CCP) was publicly committed to the welfare of workers, the party nevertheless opposed any independent action by workers and designated the All-China Federation of Trade unions (ACFTU) as the official intermediary between the workers and the party-state.

The Chinese economic planning was done as the whole economic system was one large firm.

The economic system was dominated by the SOEs (State owned enterprises), however the © Mohammad Ali, 2005

Mohammad Ali – Globalization

China also had COEs (owned by responsible collectives), and DPEs (owned by individuals).

The government support was for the SOEs, therefore, other types of firms were fewer in number and were less developed (Zhu, 1995). In the traditional system there were two kinds of employees: permanent employees (based on iron rice bowl system i.e. lifelong employment) and temporary employment. Majority of workers were permanent employees with the control of all aspects of their employment under the control of the state labor personnel departments (Zhu, 1995).

Recent Changes While the industrial relations in China have undergone significant change since the implementation of the “Four modernizations” reform program in 1978, the Chinese party has remained firmly entrenched in power (Chen, 2001). The Chinese economic reform leading to transformation of labor relations has proceeded in two directions. First, newly formed nonpublic-owned sectors such as joint ventures and private enterprises encompass public owned sector and attack the latter’s privileges (Baek, 2000). These new enterprises have brought in stricter worker discipline, numerical flexibility by bringing in labor contract systems and have distanced themselves from the social burdens of unemployment, over-employment and worker welfare. Second, the internal structures-which would be discussed later in detail- of the state owned enterprises (SOEs), have also undergone considerable change.

To achieve the above mentioned goals the Chinese government has pursued three interrelated labor policies: first, it has introduced labor contract systems. The experiment started in 1983 but was made into a law in 1986. The new system introduced the “contract system employees”. The contract must be for at least one year and had provisions covering major topics of probation, job requirements, working conditions, remuneration, discipline and penalties. In addition to this, the old style temporary workers-seasonal industrial workers working under a labor agreement of limited duration- remained intact. In state and collective

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owned enterprises there are permanent, temporary and contract workers. In foreigninvested enterprises (FIEs), there is a mix of temporary and contract employees, and in individual owned there are only temporary employees (Zhu, 1995).

Second, the wage system has been changed to bring in wage disparities. The idea behind the wage reform is that the performance should be linked with enterprise productivity and individual performance (Zhu, 1995). Third, the government has marketized the social security by transferring the responsibility of social welfare from work units to individuals (Baek, 2000). This policy has disintegrated the work unit based socialist safety net that has guaranteed full and lifetime employment and has brought in insurance systems.

Ideological Issues The concept of nation-state and nationalism is deeply embedded in the Chinese communist party ideology. It had its roots in the resistance to the occupation of China by the western powers in the mid nineteenth century. Mao Zedong accepted that the world is “divided along ideological fault lines but he believed that it was still a world of nation-states. His aim was that the Chinese nation-state should take its rightful place in this “inter-national” world” (Knight, 2003). The split from Communist Russia and the Cultural Revolution reduced China’s contact with the world and the emphasis was made on self reliance and independence.

After Mao’s death in 1978, Deng Xiaoping made it legally possible to introduce economic measures based on capitalist thought to gain rapid economic (Knight, 2003). This “opening to the outside” (duiwai kaifang), or the “open door policy” not only meant western economic policies, but also the opening to western ideas and culture. Even with this major shift in policy the Chinese party leaders still considered that the world consists of nation-states.

Since the Asian economic crisis of 1997, and the return of Hong Kong to China, the Chinese leadership has started looking at the world as ‘global’ (Knight, 2003). The new concept is that China needs to engage in the

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process of globalization so as to benefit the Chinese nation-state. Nick Knight in his article “Imagining globalization: The world and Nation in Chinese Communist Party Ideology” has described the Chinese Communist party orientation to globalization in five points. First, globalization has developed out of the imperative need of capitalist enterprises to seek the most profitable site of investment. Second, while the term “globalization” might be new, the tendency of capitalism to become global is not.

Third, globalization is not driven by technology, but development of requisite technology has led to mobility of capital and expansion. Fourth, globalization leads to homogenization, but this phenomenon would not lead to assimilation as local cultures would counterbalance the erosive effects. Lastly, the nation-state will remain in existence and would exist central to the contest between the forces for and against the neoliberal economic agenda.

Owing to the recent changes in the Chinese economic system, academics like Harry Williams believe that if socialism is defined as equality and democracy in society, politics and economy then China has ceased to be a socialist state. Whether China is still a socialist state or not is a question for another research paper but the economic changes discussed above and the Chinese view on globalization has initiated a debate in China on the effects and policies related to globalization. Some writers like Nick Knight believe that engagement with global economy will lead China to a capitalist system and would not lead to realization of socialist goals as seen by the communist party. On the other hand, there is also a strand of thought expressed by academics like James Petras (2000), which is also supported by the view of the Chinese communist party as discussed above that neo-capitalism would lead to social cleavages, fragmentations and enhanced control of Western nations and in particular the US, on the Chinese economy. Therefore, the opportunity of globalization should be used to initiate a socialist renewal by a new strategy of development from below, structural adjustment policy where property is re-socialized, rural cooperatives are re-introduced, illicit wealth is confiscated and the policy of selective openings is pursued.

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Privatization Thousands of state owned enterprises (SOE) were sold as stress was put on privatization in the fifteenth session of the Chinese Communist Central Party Committee in 1997, (Taylor, 2002). This policy is seen as an important element in increasing efficiency and achieving ‘market socialism’. In China, privatization can take several forms, but it essentially entails transfer of control (though not always ownership) from public to private interests (Taylor, 2002). Ideologically, privatization is considered as an attempt to increase compliance to reforms by workers and managers aimed at financial self-reliance. Privatization does not, however, mean that the Chinese economic system is becoming more capitalist, but on the other hand, the emphasis is on financial self reliance of the enterprises with political accountability in tact (Taylor, 2002).

Numerous bankers and economists consider ‘big bang’ or ‘shock therapy’-whereby state swiftly and indefinitely withdraws from ownership and market forces fill the vacuum- as the only solution to overcome the evils of socialism. However, China’s privatization has occurred with an intact authoritarian system and by adopting a gradualistic and incremental approach. In a study done by Bill Taylor (2002) on seven enterprises in Guangdong and Shanghai, the writer has come to the conclusion that “while in some cases, the state sold significant ownership rights over its enterprises, the picture of privatization is complex than mere share ownership. Ownership and control remain largely aligned, and control is maintained within the firms”. Except for joint ventures where clear identifiable partners are visible and directorships were according to the percentage of shares owned, enterprises mostly had internal cadres and managers as board of directors and these enterprises represented a continuation of existing interests rather than a transformation in the ownership structure. In enterprises owned 100% by the corporate management, there was an agreement that the senior managers will run the enterprise according to a contract and with specific targets set by state agencies.

According to the managers of these enterprises the state still exerted direct pressure

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in the shape of forced mergers into larger enterprise groups controlled by state authorities.

The state also had indirect influence, such as following the government cadre system in reorganizing enterprise’s management.

According to Bill Taylor these cases do not make clear that if there was any privatization at all. But one thing from these cases is clear that the state no longer underwrites an enterprise’s finance. Privatization has given some autonomy to the plant to operate independently from direct outside interference. This independence has led to policies by managers in which market is now being used as primary criterion by which organizational and individual performance is measured.

There has been a gradualist reform movement, in which privatization has very limited but definite impact on reconstitution of industrial relations. There is increased pressure, discipline and threat of redundancies. There is removal of state guarantees. Market is now seen as real. Mangers are now freer to take decisions, but they are also responsible of their actions and financial decisions to the state. Party is still very important and central to the whole system as “the cadre’s career is still decided largely by the party, the workers still have a say over the performance of cadres, and the material and market are still largely determined by the state and other SOEs” (Taylor, 2002).

The process of marketization, which puts emphasis on privatization, also includes reform of the SOEs. These reforms started with a report in 1997 by the State Commission for Economic Restructuring. The report envisaged that 15 to 20 million surplus workers in the state sector would loose jobs by 2000. With the latest reforms the enterprises have made some significant gains in autonomy over the recruitment and retention of employees. The needs for efficiency and flexibility have been met by mass lay-offs and this has created the problem of a large surplus of workers laid-off from the SOEs. To overcome the problem an internal market has developed within many large SOEs. Workers are shifted from overmanned core production units and into new subcompanies set up for the absorption of surplus

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labor (Sheehan, 2000). Some SOEs have set up labor pools for surplus labor where they can undergo retraining and can be absorbed in new jobs, also there is a movement of labor from semi-skilled to unskilled service industry jobs.

Since 1995 labor law has also made local governments to find work for the laid-off workers so as not to leave the entire burden on the SOEs. Although the role of the government in determining SOEs levels of employment has reduced considerably, still the government has some influence or authority. Enterprises may still be compelled to employ workers (often those laid off by other enterprises) whom they do not need or want, or loss making enterprises may be merged with more successful ones against the latter’s will (Sheehan, 2000).

Collective Bargaining In a planned economy the reconciliation of interests of the managers and the workers is conducted under an administrative framework and through guarantees from the government.

The recent attempts of the Chinese government to integration with the world economy have resulted in growing divergence between the interests of the managers and workers. This divergence was expressed by an increase in labor disputes-the number of registered labor disputes went up from 33,000 in 1995 to 155,000 in 2001. Owing to this, a new institutional framework was introduced that centered on: legal and contractual regulations of labor relations, a system of tripartite labor disputes, development of workplace ‘collective consultation’ between trade unions and employers and most recently a system of tripartite consultation (Clarke, 2004).

The 1994 Labor Law formalized the individual labor contracts. However, legal foundation for the collective contracts was laid down in 1992 Trade Union Law. Initially, the stress by the government and the enterprises was on individual contracts but the ACFTU-All Chinese Federation of Trade Unions- led a campaign and was able to secure the approval of the state and the party, which eventually led to an increase in collective contracts. In these collective contracts the parties make sure that

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guidelines given by local labor bureaus and government directives are followed. The government bodies check the legality of the contracts but enterprises develop their own practices. The ACFTU is performing a dual role in the arrangement. On the one hand it is defending the rights of employees and on the other it is assigned by the party to promote reform and maintain social stability.

To ensure that the rights and interests of workers and staff members are represented by trade unions the traditional method of ‘consultation’ is still in use. The proposals of management or trade unions are referred to lower levels of discussion, and comments and suggestions are reported back to the enterprise trade union. The process has its deficiencies but it has been found that when properly implemented this was a good method to illicit opinion (Clarke, 2004). Wage negotiations are usually conducted separately from the collective contract, although sometimes, minimum wages are specified. In joint ventures the trade unions tend to take a position that is a little more independent of management than in the SOEs. This was primarily because of its role in ensuring that the management adhered to the provisions of the labor laws and regulations (Clarke, 2004). Despite the often gross exploitation of the workers in foreign enterprises, local government and trade unions have kept themselves largely out of them so as not to frighten off foreign investors. The party and the labor administration also do not have any power over them to agree to a contract.

To sum up, it can be said that collective consultation has not introduced a new system for labor negotiations because it has been integrated in the traditional system of consultation. The system is less participatory and the trade unions normally defers to the management’s judgment in the name of interests of the enterprise. No substantive details are incorporated in the collective contracts; at best these contracts remind the employers of their legal obligations and monitoring and implementation of labor legislation in the workplace. The trade unions do not provide an effective channel through which members aspirations or grievances could be expressed. According to the system, the trade

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union organizations may not be subject to the routine intervention of the party and state. The social and the institutional structure within which labor relations are regulated have not changed radically and they will not change until the enterprise trade union develops into an organization that, in its structure and practice, disengages from management and represents interests of its members.

Conflict Resolution According to Seung Wook Baek (2000) in China, beginning in the early 1990s there was a growing incidence of wildcat strikes without any union presence or organization, especially in MNCs. The economic reforms initiated by the government had taken the safety net away from the workers and had put many vulnerable enterprises into bankruptcy and this resulted in a rapid increase in labor disputes. Between 1987 and 1992 collective labor disputes increased six times. In the first half of 1994, 1104 collective petitions and strikes were reported to have occurred (Baek, 2000). One of the responses of the Chinese government was to recognize the need for establishing collective bargaining structures. As the second response, the State Council promulgated the Provisional Regulations on the Settlement of Labor Disputes in State-owned enterprises on July, 1987. This was the first attempt to establish labor disputes through institutional procedures since 1955, when formal procedures to handle labor disputes were abolished and the department of letters and visits (Xinfang) was made responsible to handle disputes.

The regulations established a three level basis of settling disputes: internal mediation within the enterprise, arbitration at local levels based on tripartite principle and final resolution

by People’s Courts. Later on July 6, 1993, the Regulations of the People’s Republic of China on the Settlement of Labor Disputes in Enterprises were introduced. The new regulation inherited the three tier system but was widened to include all enterprises beyond state owned enterprises, and the range of items of labor disputes was also widened (Baek, 2000).

Arbitrators and arbitration tribunals were also created. However, the enterprise mediation

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committee was changed from a mandatory to advisory requirement (Baek, 2000). With the institutionalization of mediation and arbitration process the trade unions were given an additional role in the procedure. The chairmen of enterprise trade unions presided as the chair of mediation committees, and the higher level trade unions participated in arbitration committees (Baek, 2000). However, in such situations the unions are more in the role of mediators rather than organizers of workers. The implication of procedures to handle labor disputes is that where the official system to handle labor disputes is observed, collective action is prohibited in principle (Baek, 2000).

Due to the union’s lack of organization of workers the other problem is that such mediation and arbitration bodies mostly exist in stateowned enterprises and in the private sector such bodies do not exist.

Industrial Law Article 35 of the Chinese Constitution states “Citizens of People’s Republic of China enjoy freedom of speech, of press, of assembly, of association, of procession and of demonstration”. The extent of these rights is limited by Article 1 which states “The People’s Republic of China is a socialist state under the people’s democratic dictatorship led by the working class and based on alliance of workers and peasants”. These two articles put together give rise to a complication, workers point to the Article 35, and the state responds with Article 1, to justify arrests and imprisonments on the ground that strikes and other such industrial unrest threatens the existence of worker’s state, and more recently , to the implementation of rule of law (Chen, 2003).

China had no unified labor law until 1 January, 1995. Prior to 1995, Model Outline of Intra-Enterprise Discipline Rules (MOIDR) was prevalent, and as is clear from the title this was only aimed at industrial peace and definition of worker’s legal rights. The 1995 law applies to all employing units, state organs, public institutions and laborers ‘who form a labor relationship’ with the employer. The law however, does not define laborer and in practice domestic workers,

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senior government officials, civil servants, rural laborers and sex workers are left outside the scope of the law. The law defines individual contract as an ‘an agreement that establishes relationship between a laborer and an employing unit i.e. it is the legal basis of labor relations’. If the relationship can be established then the employer is legally bound to fulfill the requirements of the labor law even without a contract. However, the existence of a contract does not guarantee compliance with its terms.

Collective contracts present a unique problem. A genuine collective contract is one which is between independent organ of workers and the employer, but Article 10 of the Trade Union Law particularly outlaws freedom of association. Collective contracts are approved by the labor bureau and if they violate any regulation they are rendered invalid. The law does not give any further explanation. It also does not have any provisions for changes and cancellation of the collective contract. Although there is a high coverage of the collective contracts but high rate of incidents of disputes gives a different picture as to the efficacy of these contracts.

Coming to individual workers, the law provides grounds for summary dismissal of probationary employees due to various offences.

The concept of labor discipline is not explained.

Employees can be dismissed simply for under investigatio for criminal charges. The law also gives great scope for blacklisting militants and also provides provisions for mass lay-offs.

Wages for most of China’s employees are determined by a mixture of market forces and government intervention (Chen, 2003). States implement a system of minimum wages based on local conditions, average number of family, lowest expenses needed to live, productivity, labor market and regional differences in employment. Working hours are limited to 40 hours a week. Overtime is limited to three hours per day. However, there are a number of clauses in the law that allows the management to extend working hours in ‘special circumstances’.

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Trade Unions After 1949, Chinese trade unions, which had been strong in urban sectors before 1949, were weakened through a series of successive historical upheavals, such as the down fall of the vice-chairman of ACFTU, in the late 50s, the Great Leap Forward when the slogan of ‘abolish trade unions’ appeared, and the Cultural Revolution when the trade unions were abolished (Baek, 2000). In the mid 1980s the ACFTU started to reorganize itself and made efforts to represent workers’ interests by participating in policy making process e.g. the 1994 Labor Law. However, it is quite evident that the economic reform gives trade unions a secondary importance. Also the support of trade unions by ordinary workers is not so active.

There has been a recent trend towards increase in trade unions mostly in SOEs. But the trade unions in SOEs are still dependent organizations directly under the control of state and party with least involvement of rank and file. Also the expenses of enterprise unions are very dependent on their income provided by the enterprises as their main source of income (Baek, 2000). The prominent characteristic of Chinese enterprise union is its range of membership. On one extreme the party secretary or the factory director can also join the same union as marginal workers, including contract and provisional workers. This particular feature impedes the development of unions in China into truly rank and file workers’ organizations.

There is also a shortage of full time union cadres, as in a recent change in the law in 1994 the union cadres are now paid by the enterprises, which makes it beneficial for the enterprises to further keep the number low.

The purpose of the unions has always been to educate and organize the masses of the workers to support the laws and regulations of the government. The new law provides a lot of changes but still unions are not considered as a vehicle of social change and reform. The three tier union system-enterprise union, county level and nationwide organization (ACFTU) - still is being used as an organ to improve production efficiency. Chinese trade unions, in reality, have taken the role of department of labor management in enterprises. The quality of cadre

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was always low and still is, and the economic reforms have not changed anything in this practice. The discretionary power of trade unions has gradually been reduced.

INDIA The Republic of India with a population of just over a billion is the second most populous state in the world after China. It has a population growth rate of 1.4% and literacy rate of 60%.

Ethnically the Indian is dominated by IndoAryan race that is 72% of the total population.

On religious lines the population is dominated

by Hindus who are 81.3%. The Indian labor force is 406 million, with 60% in agriculture, 17% industry and 23% services.

Industrial Relations before 1991 Like most of the countries with colonial origin, India based most of its laws on the colonial structure left by the British. Industrial law was no exception, the Indian government built on colonial labor institutions and regulations to fashion an industrial relation system that sought to control industrial conflict through a plethora of protective labor legislation, influenced by the strong ties between the major political parties and labor forged in the struggle of independence (Kuruvilla, 2002). These laws covered a wide range of aspects of workplace industrial relations; including detailed laws on safety and health, dismissals and layoffs and industrial disputes. The basic purposes of these laws, like under the British colonial rule, were to contain industrial disputes within the framework provided by the laws and maintain continuity of production. One example of this strategy was the Industrial Disputes Act. This act allowed employers to layoff employees only temporarily, with compensation up to 180 days and employer was also required to get permission from the government which was rarely given because of the close ties of the unions with the political parties. On the other hand the right to strike existed but all strikes needed due notices and strikes could be brought to an end with either party requesting for a third party intervention through government conciliation offices. If conciliation failed the government had the right to refer the dispute to compulsory arbitration or

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to a labor court or industrial tribunal for a final decision (Kuruvilla, 2002).

In addition to the above policy, the Indian industrial relations were also tilted more towards the workers. In the absence of social security legislation the burden of social policy like retirement, medical care and even child care was left on the employers. During this period the economic policy emphasized on the growth and long-term development of heavy industries in the public sector with largely indigenous technology, coupled with the policy of industrial licensing, import controls, and restrictions on foreign ownership that protected public and private sector firms from international competition(Kuruvilla, 2002).

These protectionist policies created an atmosphere that led to increased inefficiency in the firms, over employment –especially in public sectorinability to introduce efficient and labor saving methods of production. These problems were enhanced by the fact that there was a relatively high incidence of labor strikes and also competition among various unions as there was no sole-bargaining agent legislation. The unions themselves were not united and at the same time there was not much of a spirit of cooperation between the employees and the employers.

There was diversity not only in unions but also in industrial relations laws, each state had the right to enact its own labor laws. This feature produced a variety of local colors of unions with varying orientations to labor relations and for the most part kept the labor movement from become national.

Union density was about 38% in the formal sector workers. As can be ascertained from above, the unions had an influential voice due to their links with political parties, in fact all political partied had their union wings. Unions were mostly structured on enterprise, industrial, political or regional lines. Bargaining structure during this period was industrial or enterprise based, although there was provision in the laws for tripartite structures and works council type institutions but these were not followed in practice (Kuruvilla, 2002). There was interunion rivalry and adversarial relationship with the employers. Although the employers were

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protected by the state policies of protectionism, still they faced the problem of high costs and rigid systems of production.

Since 1991 As long as the protectionist policies were in place the higher cost and the relative lack of flexibility imposed by the industrial relations systems regulations did not pose a serious problem because Indian manufacturers did not have to compete in the international market.

With the coming of globalization, the 40 year old policy of protectionism proved inadequate for Indian industry to remain competitive.

Therefore, in 1992 the process of liberalization started. The balance of power shifted in the favor of the employers. Apart from the pressure from the international market, international bodies like IMF also exerted pressure to change labor policies in India. Employers pushed for workforce reduction, given their inability to retrench employees, they introduced policies of voluntary retirement schemes. There has been an increase in the demand for functional and numerical flexibility in the workplace by the employers.

Globalization has also brought in the beginning of a government-employer coalition.

This coalition is quite obvious keeping in view the enthusiastic support of the government for economic liberalization. In Maharashtra for example for the first time the government has declared several private sector firms as ‘essential and public utilities’ permitting a ban on strikes in these sectors (Kuruvilla, 2002).

In a study by Hiers and Kuruvilla in 1997, they discuss the changes in the industrial relations in India and bring out the following dimensions: • Collective bargaining in India has mostly been decentralized, but now in sectors where it was not so, are also facing pressures to follow decentralization.

• Some industries are cutting employment to a significant extent to cope with the domestic and foreign competition e.g. pharmaceuticals. On the other hand, in

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other industries where the demand for employment is increasing are experiencing employment growths.

• In the expansionary economy there is a clear shortage of managers and skilled labor.

• The number of local and enterprise level unions has increased and there is a significant reduction in the influence of the unions.

• Under pressure some unions and federations are putting up a united front e.g. banking.

• Another trend is that the employers have started to push for internal unions i.e. no outside affiliation.

• HR policies and forms of work are emerging that include, especially in multi-national companies, multi-skills, variable compensation, job rotation etc.

These new policies are difficult to implement in place of old practices as the institutional set up still needs to be changed.

• HRM is seen as a key component of business strategy.

• Training and skill development is also receiving attention in a number of industries, especially banking and information technology.

Keeping in view the above analysis, it is quite evident that the industrial system right now is trying to shift from the old system to the new.

In the process, it is experiencing tension between the workers who are trying to keep jobs and the employers who are trying to achieve flexibility so as to cope with the domestic and international market competition. In essence, these practices have accentuated the diversity existing in the Indian industrial system considerably. Some analysts like Bhatacharjee (2001) suggest that there is so much variation in the Indian industrial relations that it is no longer appropriate to think of one “national” Indian industrial relations system. However, the shift is now away from maintaining labor peace and towards the increase in firm level competitiveness through basically numerical

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flexibility as India becomes more integrated into the world economy (Kuruvilla, 2002).

Actors The role of the state in the industrial relations depends on the ideological (socialist, communist, or neo-capitalist persuasion), political (neo-colonial, democratic, dictatorships) and socio economic (protectionist and neo-liberal policies) orientation (Sivananthiran, 1999). In India the role of the state may be studied over four time periods: colonial period, post colonial period, emergency era (1975-77), and post liberalization era.

During the colonial period under the British the industrial relations were just another means of keeping the colonies in line, the labor law and the power of the state was used to maintain peaceful industrial relations so as to have continued production.

In the post colonial era, the Indian government more or less built its labor relations structure on the pre-existing colonial law; the main purpose was again to achieve industrial peace. At the same time, in India there was political support for the Indian unions and there were laws that protected the rights of the worker but the main purpose again was that industrial peace should be maintained. The Indian state was tolerant of unions and recognized the value of labor management cooperation in the context of planned economic development. There was more burden on the employers but protectionist policies kept the employers complacent. During the emergency rule the rights of the unions were restricted, but this era did not have a lasting effect on the industrial relations. In the era of globalization and liberalization, the government has realized that in order to keep India competitive, policies should be implemented that result in flexible workplace practices. The employers are now facing the pressures of global competition, and they also want to remain competitive. For this purpose the stress is now on more pro- employer policies.

The role of the state has always been pervasive in Indian industrial relations. There have always been detailed laws on collective bargaining, dispute resolution, employee participation and employment security. There is

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also a court system, the independent labor courts in India are the main mechanism for the implementation of labor law.

During the independence movement, the political leaders also held leadership positions in major trade unions, they led and supported trade union movements in major industries. After the independence (1947) many trade union leaders held important positions in the government.

Besides, under Prime Minister Jawaharlal Nehru the Indian government opted for socialistic ideology based on the principles of controlled economy. During this period the government had three basic policies: industrialization through public sector, creation of democratic institutions and protecting the interests of working class. Therefore, during this period and till liberalization the union membership increased. The verified membership of the All India Central Trade Union Organizations (CTUOs) –includes a total of 12 central trade union organizations- increased from about 2 million to over 12 million between 1960-1989 (Sivananthiran, 1999). This membership data, however, did not include unions which are not affiliated to CTUOs. An important aspect of union influence is union finances, in India, unlike China, the unions are financially independent. The main source of income of trade unions is union dues from their members, which account for 70% of the total income. The second major source of income is donations, which account for 16% of the income. The rest of the income is from sale proceeds of publications, interests of investments and miscellaneous receipts (Sivananthiran, 1999). One problem faced by the Indian unions in finances is that the dues taken from the union members are not huge as the wages are not as high as in industrial countries, and even these minimal dues are difficult to collect in the absence of any “check-off” system.

The Trade Union Act of 1926, which guides and protects trade unions, provides that all unions should have a constitution and should be governed by democratic principles. The purpose of the act was to promote transparency and democracy in union structures. In practice, however, legal requirements mandated by the act

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are not fully complied with. There are elections for union officials but in most of the cases same people keep on getting elected. Rank and file participation is not adequate, the general membership only comes in the scene when there is a pending issue regarding wages etc involved.

During normal times the membership participation is very low. One issue related to less membership participation is the lack of professionalism of the union leaders. The leaders and organizers do not make strategies regarding succession plans, development of leadership and proper propaganda to involve rank and file members. Finally, non-participation of women in union work is also a sign of the absence of union democracy.

As already discussed, most of the unions are affiliated with political parties of different political orientation ranging from socialist to Hindu fundamentalist. These political parties have their issues among themselves and these issues are also reflected in their union wings.

Due to this reason there is very little unity in the trade unions in India. There have been some attempts to unify the unions, mainly by leftist trade unions but they have not been so successful. Along with the lack of unity another issue that has kept unions from becoming more influential is that they have not really involved themselves in social issues. There are few unions who take up non-bargaining activities like population control or adult literacy programs, but there is no major effort in this direction.

With liberalization the greatest fears faced by unions are: privatization, redundancy in the public sector and unemployment, flexibility and multi-skilling leading to inadequate skills in present workers, and changing structure of the labor market making it more profitable for the employer to employ part-time workers. The introduction of National Exit Policy, which allows industry to rationalize their workforce by paying previously agreed upon compensation for separation, is a new cause of concern for the unions. The government has under National Renewal Fund policy proposed to close sick units, bring in MNCs, and abolish licensing and restrictive controls in order to create a free

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market economy. Labor unions are generally opposed to these measures and believe that these would adversely affect the unions. In view of the above there is a clear and urgent need for unions to reorganize themselves. They should try to achieve unity, better organization, propaganda, development of leadership and stress on professionalism.

Processes As we have seen earlier, the main purpose of the Indian state was to maintain industrial peace therefore, the state intervention by means of dispute settlement acts was imperative and important. The Industrial Disputes Act passed in 1947 had its basis in two laws of United Kingdom: The Conciliation Act (1896) and the Industrial Courts Act (1919). The main objectives of the act was to preserve good relations between the workers and employers, investigate and settle industrial disputes, prevent illegal strikes and lock-outs, provide relief to workers in matters of lay-offs and retrenchment and promotion of collective bargaining. The principle techniques of settlement provided in the act were; collective bargaining, mediation and conciliation, investigation, arbitration, and adjudication. All disputes have to go through the process of conciliation, the issue should be trade union related, and requires disputes to be referred by the appropriate government.

Adjudicators have the power to create, alter and modify, vary and set aside contracts, and can direct reinstatements in cases of wrongful termination. The awards need to be published and the government has the right to reject or modify the award. Failure to implement the award is an unlawful practice and the party can be prosecuted for the same. Final award can only be challenged by filing a petition to the High Court or the Supreme Court.

Although the process and the Industrial Disputes Act are quite comprehensive, the biggest problem with it is the delay. The process itself is so long and tedious that cases are delayed for years and even if they are decided the awards are not often implemented by the employers especially when the litigant is a government or a public sector unit (Ghose, 2003). To overcome the problem of delays, court

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costs, procedural formalities and adversarial justice a new approach to dispute resolution has emerged. This system is called the Lok Adalat System, literally translated this would mean ‘Peoples Courts’. The origins of this system are in the age old institutions of village Panchayat (village courts) and Baradary (Community) system. The first experiment of Lok Adalats was done in Kalyan near Bombay in 1978(Ghose, 2003). Chapter VI, of the Legal Services Authority Act addresses the establishment of Lok Adalats, and states that they would be served by retired judges or judicial officers.

Cases can come to these courts when the courts decide that there is a chance for conciliation, parties have agreed to approach the Lok Adalat and the court is satisfied that the matter is fit for the forum. The drawbacks of these courts are that they are still sponsored and controlled by authorities, the cases are decided by the same judges who have served in courts and the Adalat can not decide any case without consensus.

Therefore, all that is needed to scuttle the process is that either of the parties refuse to agree to conciliation. This new alternate to dispute resolution is basically an attempt to provide one more forum for conciliation but under the control of the authorities, so that the pressure on courts and costs of the process could be reduced.

The process of collective bargaining in India is going towards decentralization. This movement is very much consistent with what is happening in other parts of the worlds, especially in European countries and America.

The purpose of this decentralization is to give more flexibility to the employer to face the competition from abroad. The unions are not organized at the national level and there is no unity among them anyway to go for a centralized bargaining. Like the process of collective bargaining, the process of wage determination is also controlled by the state. In industries, where the public sector dominates, the government naturally plays a central role in determining wages. In other industries that are dominated by private sector, it chooses to play a major role by establishing wage boards. In all these industries there is little space for collective bargaining (Sivananthiran, 1999). The trend towards flexibility is not only evident from

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collective bargaining, it is also apparent from the changes in work practices. Now more and more firms are introducing new manufacturing technologies. Total quality management, leaner organizations by eliminating middle management and supervisors and more HR practices are becoming the norm in industrial set ups. The predominant effort of the Indian companies is to restructure themselves. Often their focus is primarily on numerical flexibility, although these efforts are accompanied by more dynamic and flexible HR practices that are in tune with a long-term orientation to competitiveness based on higher technology intensive production (Sivananthiran, 1999).

To sum up, it can be said that the Indian state has and is still playing an important role in the country’s industrial relations. The basic purpose of the state intervention has been to maintain industrial peace, but recently with the advent of globalization the policy is changing towards a more competitive approach.

KOREA The Republic of South Korea (hereafter Korea) has a population of 45 million; by the late 1990’s almost 80 % was urban, an increase from only 30% in 1962 (Bamber, 2001). Korea is ethnically homogenous, about half of the South Korean population is Buddhist although there is significant Christian presence, all have inherited Confucian values. In the late 1990’s the labor force was 20 million with a participation rate of 20%, unemployment was not much above 2% yet weekly working hours remained the longest for any country reported by the ILO. Rapid industrialization through export oriented manufacturing has resulted in Korea’s per capita gross national product increasing from $87 in 1962 to more than $10,000 in 1997.

Korea is the world’s twelfth largest economy and it became a member of the Organization for Economic Cooperation and Development in 1996(Bamber, 2001).

Korea was a 500 year old feudal kingdom before it was opened to the outside world by the Kangwha Treaty of 1876. Under the feudal system, Korea was ruled according to the Confucian code of personal, socio and civic

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behavior. The society was rigidly stratified into a class system where workers belonged to the lower classes and wage labor was rare (Bamber, 2001). From 1910 to 1945, Korea was under the Japanese colonial administration and industrial relations were restricted under the Japanese authority. After WWII there were several changes in the Korean industrial relations regulations, the 1953 legislation regarding trade unions and labor disputes formally established industrial relations in Korea. During the 19451960 period workplace industrial relation in major conglomerates known as Chaebols was modeled closely on the Japanese system and has been described by various authors as “paternalistic” or “authoritarian” (Kuruvilla, 2002). After the liberation in 1945 there was a brief renaissance of unionism but in 1947 the leftist unions were banned by the American Military Government and were replaced by General Federation of Korean Trade Unions (GFKTU). In 1961 unions were obliged to affiliate to industry federations under a government sponsored national center known as Federation of Korean Trade Unions (FKTU). To summarize the Korean industrial relation system in the 15 years after WWII, it can be said that the system was set up for the subordination of workers and trade unions to the combined institutionalized interests of a repressive state and monopolistic capitalism (Kuruvilla, 2002).

Under the new martial law in 1981 the economic development strategy turned towards higher value added exports. To cope with the neo-economic policy changes were made in the legal system and Japanese style enterprise unions were formed. However, the government ensured its system of political control by forcing all unions to be part of the FKTU. Further, given the involvement of both students and church organizations, the government prohibited the involvement of third parties in unions. While these actions are clearly politically motivated, they also helped the chaebols to contain or avoid industrial conflict and continue their authoritarian management styles. The Korean Industrial relation system during the period of martial law continued to have dispute prevention and dispute avoidance as a primary focus of its

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policies as part of the overall goal of maintaining stability. Also the workplace HR practices were similar to those of Japan which included implicit employment guarantees, seniority based wages, and formalized recruitment from good schools as well as cultural and ideological programs as part of a strategy to weaken independent trade unions and to purport company loyal unionism (Kuruvilla, 2002). In the pre 1987 system the union density was about 9%, unions were enterprise based with compulsory affiliation to FKTU. Collective bargaining was limited and was largely enterprise based and there was a general focus on stability and general flexibility.

Korean Industrial Relations after 1987 With the democratization in 1987, the Korean industrial relations underwent considerable change. With the liberalization of the labor law, the labor movement started to come out of the shadows of chaebols and the government. The union density increased (18.6 % in 1990) and there was also an increase in industrial strikes. With the formation of Korea Confederation of Trade Unions (KCTU)-an independent union federation- the dominance of FKTU also reduced. Bargaining also increased with the increase in union strength.

Korean economy had always been heavily dependent on the Chaebols. In the 1990s the top 50 Chaebols accounted for nearly 20% of the gross national product and employment and 40% of sales in manufacturing (Kim, 2003).

Therefore, the chaebol response to union activism was very important. The chaebol response to this new union militancy was a mixture of more suppressive polices and progressive HR practices. The main response since the 1980s, however, has been the adoption of hard line methods e.g. hard bargaining, dismissal of union activists, and blacklisting (Kim, 2003). During this period the labor movement was also divided, unions favoring the FKTU, keeping in view the need for Korea to be competitive, opted for more moderate methods.

On the other hand independent unions did not agree with FKTUs policies and favored KCTUwhich continued to be illegal till 1999.

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The erosion in competitive position also saw an increase in Korean investment abroad in lowcost areas, particularly in Asia and Latin America (Kuruvilla, 2002). The employers in order to meet the competition increased demands for restructuring and flexibility in the workplace. The old Japanese style system of life long employment was also challenged. These demands were met by some degree of resistance by the unions but there was some progress towards functional flexibility and increasing skills as well as restructuring (Kuruvilla, 2002).

The Government of Kim Young-Sam responded to the growing union militancy in 1996 with a predawn clandestine reform of labor legislation, which on the one hand allowed union participation in politics and allowed multiple unions at the workplace by 2002, and on the other hand avoided recognition of the other peak federations until 2000, and most important, increased the authority of the employer to lay off employees.

The Crises of 1997 and Recent Changes The Asian economic crisis that began in 1997, led to major changes in Korean industrial relations. In 1996 the government had already initiated a new approach to industrial relations, towards more liberal economic policies and against the old paternalistic workplace practices.

The new bill was strongly opposed by the unions and was revised after the largest general strike in Korea (Kuruvilla, 2002). However, there were more changes in the sane direction, due to the IMF bailout of the Korean economy after the crisis and the accession of Kim Dae-Jungviewed as more friendly to the labor movement than his predecessor (Kuruvilla, 2002).

With IMF’s help the Korean economy was able to have a quick recovery. Foreign currency reserves increased from $3.9 billion in 1997 to $48.5 billion by the end of 1998, while the exchange rate, also stabilized around 1,204 won/US$ (Chang & Chae, 2004). However this unexpected quick recovery was done at the expense of a vast majority of population. The policies during the recovery period had led to bankruptcy of the so-called non-competitive firms, massive growth of unemployment, deterioration of living standards of a huge

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percentage of population. The most devastating impact was on the working class as there was an increase in job insecurity, cutting down of wages, downsizing of production scale, major layoffs. About a million lost their jobs in the first half of 1998 (Chang & Chae, 2004).

The results of the IMF bailout, and coming to power of a relatively moderate leader led to the 1998 reforms, which brought far reaching changes in the Korean employment relations.

For the first time labor was given participation in national decisions through the creation of the Tripartite Commission. The Commission issued a social pact for dealing with the economic crisis, with several key decisions on industrial relations (Kuruvilla, 2002). The “February Agreement” covered corporate, public, and financial sectors and the labor market as well (Chang & Chae, 2004). On the labor’s side the reforms recognized the KCTU, established an unemployment insurance fund coupled with the amount and periods of unemployment benefits as a part of a social safety net package. It also included collective bargaining rights for the public sector from 1999, gave freedom to labor unions to be active politically, revised labor laws to permit layoffs, gave employers the right to use temporary labor for periods up to 1 year with obligation to give advance notification of layoffs and various other obligations in case of layoffs.

The leadership of KCTU had to face massive criticism from its affiliate unions for agreeing to the introduction of flexible measures at the workplace, particularly the layoffs. The agreement was voted down by the affiliates, and the affiliates moved for a general strike. The labor movement had already lost its basis of militancy due to the increasing job insecurity, so the strike was not a success. Also the social net that was supposed to support the unemployed was not very effective (Chang & Chae, 2004).

Actors Korean unions are represented on three levels. There are local unions based on the plant, an enterprise, a region or an occupation, most commonly at the plant or enterprise. Thus all union members at a particular plant or enterprise, regardless of their occupation, join

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the one local union (Bamber, 2001). The local unions make up occupational federations and regional councils, the right to negotiate is vested in the local unions with regional councils and industrial federations having only the right to consult and discuss.

The Korean government only recognized the FKTU after it had dismantled the communist labor movement in 1949 (Kim, 2003). The FKTU, as the only labor union since 1960, has received financial support from the government and it has remained under government influence.

Economic success and substantial wage increases were used by the government to justify authoritarian IR policies. However, “fast industrial growth, emergence of a middle class population and rising level of education provided the political basis for workers” (Kim, 2003). Therefore, in the late 1970s a strong labor movement developed. There was a great proliferation of strikes in the 70s and 80s. There was also a movement towards independent unions that resulted in the formation of Korea Confederation of Trade Unions (KCTU). The KCTU was recognized as a union federation after the largest general strike in Korea in 1997.

Soon after the contentious ‘February Agreement’, the state started to intervene in industrial conflicts and declared that structural adjustments can be a matter of discussion but cannot be a matter of struggle, therefore, all strikes related to structural adjustments were treated as illegal and trade unions leaders were imprisoned. In the five year period of restructuring after the agreement the government has facilitated marketization of control over labor-creating a large scale reserve army with job insecurity, competition based personnel management, and capability based wage systems- it has also removed obstacles in order to facilitate marketized labor control and ensured a smooth operation of the deregulated labor market (Chang & Chae, 2004).

Although the above discussed situation of labor is quite bleak, there are some developments that can be termed as major watershed in Korean labor movement. The public sector, which is 9.28%-70% out of this are government employees- of the total

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workforce, represented a tranquil sector. When the crisis of 1997 took away from public sector employees, the well developed welfare system and permanent employment system, they also started to protest. The largest protest, which was in fact a unified effort from the five independent power plant companies, led to a strike and an agreement in April 3rd 2002. In the agreement the state got what it wanted but the struggle showed that the public sector can also be organized and there can be an alliance between the public and private sector as the agreement was negotiated by KCTU. There have also been attempts to organize temporary workers.

Although there is opposition between the temporary and permanent workers, but there have been occasions in which irregular workers were successfully organized with the cooperation with regular workers (Chang & Chae, 2004).

The financial crisis and the recognition of KCTU as a legal labor federation led to a sharp decline in the membership of FKTU. Due to the competition from KCTU the older federation had to change its stance to being more aggressive, which in itself is a good development. Another significant development is the trend towards industrial unionism was that “the financial crises and the massive layoffs led union leaders to realize inherent limitations of enterprise unionism” (Kim, 2003). They have realized that enterprise level unions cannot respond effectively to national level issues and crisis. Earlier industrial unions were prohibited by law, but two revisions of labor law in 1987 and 1997 made it lawful and easier to establish industrial unions. The shift to industrial unions is decisive and quick. In the two year period 1998-2000, almost 20 industrial unions were formed (Kim, 2003). In the long run, the movement towards industrial unionism is expected to improve the organizing potential of Korean labor movement.

The state, before 1987 acted as a ‘benevolent dictator. It had an extensive legal setup to provide protection to the employees but at the same time independent labor movement was suppressed. Since democratization its approach has mostly been a reaction to certain developments, first it was democratization, then

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the 1997 crisis and in between there were labor upheavals, which led to hasty and controversial structural changes. It is still experimenting with policies and strategies. One very important feature of the Korean industrial relations is the dependence of the country’s economy on the chaebols. The state cannot ignore them, and now with the increase in union organization the chaebols are also becoming more suppressive.

The Korean government will at some point have to decide what role they want to play in the industrial relations and how they can achieve balance.

Processes Collective bargaining in Korea is regulated by the Trade Unions Act. Representatives of a union or other appropriate groups can negotiate an agreement with the employer or employers’ organizations. A union can also entrust the negotiation to a union federation with which it is affiliated. The law allows multi employer bargaining to be conducted at enterprise and industry level. Most bargaining takes place at the enterprise level, but multi-employer regional and national wage bargaining is conducted in transport and textile, where there are smaller companies and fewer employees. Since 1987, collective bargaining has become more important in regulating industrial relations, however, more than 90% of small enterprises have no collective arrangements.

Another issue with collective arrangement is that “since the piece rate was higher than the wage increase through collective bargaining in the aftermath of the 1997 crisis, workers have increasingly accepted the capability based wage system” (Chang & Chae, 2004). The result has been that the trade unions have faced a decline in the collective bargaining process as there is less support of it at the floor level. Also “continual reformulation of workplace organization also undermines trade union delegates’ leadership on the shop floor, replacing it with increasing authority of foremen and team leaders” (Chang & Chae, 2004).

The Labor Management Council Act 1980 stipulates that a Labor Management Council (LMC) should be created to meet four times a year in any establishment employing 50 or more

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employees (Bamber, 2001). The councils are required to consult with employee representatives on issues related to welfare, education and training and grievance handling.

Firms are required to submit the rules of their LMCs to the Minister of Labor, who has the authority to dissolve them or order the reselection of the council. These bodies have remained more symbolic in nature and before 1987 they were used to legitimize the power of the enterprise over the workers.

Mechanisms for resolving disputes have long been formalized in Korea. In 1953, a labor Relations Commission was established to provide conciliation, mediation and arbitration of labor disputes. However, disputes in ‘essential public enterprises’ require longer cooling off periods and compulsory arbitration.

The regulations for ‘major defense industries’ is such that a legal strike by their employees is virtually impossible (Bamber, 2001).

In summary we can say that Korean industrial relations are in a period of transition: the independent labor movement has been recognized recently. It is still at embryonic stage but on the other hand it is also militant, has started to organize more efficiently and has been a major source of concern for the government.

Labor market has changed its outlook; now the labor is facing problems of job insecurity, capability based wage system, more working hours and the use of more HR practices.

Temporary and daily contracted workers have increased tremendously, accounting for a total of 52% of the total workforce in 2001 (Chang, 2004). There have been attempts to organize this huge portion of workers but the unions are obviously facing problems in this matter.

The transition to democracy coincided with the international need for flexibility. This led to the erosion of competitive advantage in several sectors, particularly in low cost sectors of textile, shoes and electronics, which has led to migration of Korean firms to other low cost areas in the world. The IMF bailout and the accession of Kim Dae-Jung have facilitated the employers push towards more functional and numerical flexibility. This movement has met considerable resistance from the labor

movement and is getting stronger and more vociferous. Industrial unionism is also growing, which has been important in recent labor organization.

DISCUSSION Changes in organization and workplace practices are nonstop under globalization.

According to Professor Rene Ofreneo, if we look at this phenomenon we can see some drivers behind it: First, technology, which is changing how certain products are produced and at the same time altering the size and the quality of labor that is required to produce those products. Second, policies of economic liberalization that lead to the opening up of the economy, free flow of goods and capital, and integration with the world economy. It is also leading to privatization policies by governments, deregulation of entire sectors, tariff reduction and import liberalization. Third, pressures of competition, businesses have to adjust to the ever increasing global and domestic competition. The competition is cut throat and companies which are not prepared or undercapitalized should either try to upgrade themselves or be destroyed by bigger global transnational corporations.

Under the above mentioned pressures we have seen that the countries which have been discussed have taken a number of steps to link them with the world economy. From the cases we can, however draw certain conclusions: First, in all three cases the initial strategy of the state was to achieve industrial tranquility. In China industrial stability was imposed by the state in the name of the people’s state. In India, first the colonial law was implemented, which was aimed at keeping colonial workers in line and then later through a dispute resolution system, the state aimed at keeping the conflict out of the realm of strikes. In South Korea the same goal was achieved by a coalition between the state and the major industry conglomerates.

Second, in all three cases major structural changes started to happen in the 1980s and 90s.

In India and China it happened because of the governmental policies of economic liberalization. In Korea it was due to the

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beginning of the process of democratization that led to major industrial relations changes. Third, the changes that have occurred in a couple of decades are basically in the legislative frameworks and more importantly in the strategies of the parties. In China there have been a lot of changes in the structure of the law governing industrial relations. However, in industrial relations the most powerful and influential party is the state and it can be ascertained that there has been a change in the strategy of the party that matters the most. The Chinese state wanted to enter globalization, increase financial viability of the huge state owned sector, attract more foreign capital and benefit from the whole process, while remaining at the centre of the power structure. In India, the Indian government has changed its policy since the liberalization of the economy; the state is now concentrating more on competition and attracting foreign capital rather than the previous aim of stability. There have not been major changes in the legal structure but the strategy of the employer has changed drastically. Earlier the employers had rigid workplace practices but they were complacent because of protectionist policies of the government. Now, with the increase of global competition the employers want flexibility and encouraged by the recent changes in the state’s stance they have in fact become more vocal for flexibility. In Korea there is not much change of strategy as far as the state and the employers are concerned, but there have been legal changes and the strategy of the unions has changed. The unions are now more militant than ever, they are trying for labor movement unity, industrial unionism and experimenting with tripartism.

Fourth, the most consistent theme in the recent changes is the need for flexibility. This need is a direct corollary of the global competition. The employers want to be flexible numerically or functionally or both so that they can change and adjust to the changing patterns of production. In China, we find that the trend is towards both types of flexibilities. In the foreign owned sector the Chinese government does not interfere at all, in the state owned sector there has been a lot of privatization and rationalization of redundant workers. Due to these steps there have been a lot of layoffs, as a certain amount of

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autonomy has been given to the managers in SOEs. In India there is primarily numerical flexibility, there is an increase in the irregular worker and part time jobs. In Korea, like there is a trend towards both types of flexibility.

The fifth conclusion is actually related to the previous point. We have argued that the most salient constraint in the 1990s has been the need to enhance firm level competitiveness by increasing numerical and functional flexibility.

An alternative explanation is that it is not a shift in constraints that we are seeing but rather a reassertion of the employer control (Frankel, 1999). In China, the state has always been at the helm of affairs, there is a lot of privatization but it is more of control rather than of ownership. As we have seen there are direct and indirect pressures the state can put on the firms.

Flexibility in China is just a method of making the firms realize that they have to be financially viable units or they will cease to exist, and to achieve this, have been given some autonomy in decision making at the firm level. In Korea, the state-employer partnership still exists. The Korean state is still strong but it would seem that in the recent years the state is losing some control over the workers, as in some recent situations where the workers were able to pressurize certain reforms and changes. In Korea, policymakers’ attempts to balance employer and worker interests in the face of globalization faced major obstacles and attracted widespread condemnation (Frankel, 1999). Still state has been and is facilitating smooth working of the industrial relations in the favor of the chaebols. The chaebol system has existed since 1945 and even with a lot of changes has a lot of importance and power. In India the situation is a little different the employers did not have total control before economic liberalization, but now under the competitive environment the employer is gaining more control in the name of flexibility. To sum up we can say that flexibility in the three cases that we have seen is translated in the employer having more control over the workers and unions.

Sixth, in all the three countries discussed, there are weak and fragmented union movements. In China, the union movement as such does not exist, there have been a lot of

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strikes over the last couple of decades but those were reactions to bad conditions and low wages.

Labor unions are not considered in the Chinese party vocabulary as an important factor in industrial relations. The party considers-in good times- the unions as training facilities for the workers and in bad times there is outright prohibition. In India, the situation is a little different, unions have existed before independence, and many union leaders were also fighting the British for independence. After independence these leaders became important figures in the Indian politics. Therefore, unions had the support of the political parties, they were financially independent and had the legal system behind them. Even with all of these factors in their favor the Indian unions were fragmented and got more fragmented under the pressures of globalization and competition.

Korean independent labor movement though started in the 1970s got recognition by the state in the late 1990s with the acceptance of KCTU as independent union federation by the state. The labor movement is still at an embryonic stage trying to define itself and trying to find its proper niche in the Korean industrial relations. It is faced with the daunting task of employer movement towards more suppressive measures, the increasing number of irregular workers and global and domestic competition. Seventh, as discussed above the state still is an important player in the industrial relations of all three countries. The state as an important actor has mostly played a role to facilitate the employers.

In promoting and reacting to globalization, governments in the three countries have sponsored legislation strengthening workplace managerial control and reducing workers’ job security, although political considerations have required that workers’ interests cannot be totally ignored(Frankel, 1999).

From the above discussion it is clear that in the three cases under discussion there are a number of similarities, which strengthen the case for convergence. In most of the analytical work that I have come across on the three countries I have observed that as domestic forces industrialization and democratization often lead to development of unionism, tripartism and joint

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regulations. On the other hand globalization and economic liberalization, as international forces tend to have an opposite effect. They lead to employer and state resistance to unions, flexibility, employer control, job insecurity and worker redundancy. In the interaction between the two forces it is reasonable to assume that there is a tussle between the domestic forces and international forces. These domestic forces include a lot of factors including political systems, economic policies, culture, history and influence of unions. Even in countries where state is all powerful, its strategies are influenced by the domestic considerations aimed at institutional legitimacy.

The following discussion would now make the case for divergence in the industrial relations of the three countries studied.

A CASE FOR DIVERGENCE While discussing the effects of globalization the analytical questions that are frequently discussed by academics include analysis of whether globalization is leading towards liberal economic policies as opposed to regulated. Is the collective bargaining system in the countries going towards decentralization or centralization?

And lastly, the most important question as far as industrial relations are concerned is whether the systems are going towards functional or numerical flexibility as opposed to remaining rigid.

As far as regulation v. deregulation is concerned, I believe that the Chinese system is still very much regulated, there are some changes and some autonomy at the enterprise level, but decision making is still a part of the major functions of the party structure. Economic policies are decided at the highest level as they have been since 1949. The liberal economic policy in China primarily means attracting foreign investment and providing foreign investors with the environment that would make them stay in China. In Korea, the business was already in the hands of private conglomerates, which is still the case; economic policy was a matter to be decided by the state for the most part, for the benefit of the chaebols. The system is more or less still the same except one change

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that now the unions have started to assert themselves and some recent legislative changes now help them to organize. Due to worker pressure there have been attempts at tripartism.

The Indian economy was regulated from the beginning, but now it has changed to liberal. So in the three countries China is at one extreme with India at the other and Korea is between the two.

Coming to centralized or decentralized collective bargaining we can say that in China the concept of individual and collective consultation is new. The system, at the moment, is decentralized with emphasis on enterprise level contracts and individual contracts. In Korea collective bargaining has always been decentralized. In fact there is a recent trend towards industrial bargaining and tripartite agreements. India, even though it had strong individual unions, has always had a decentralized collective bargaining system and the bargaining structure has remained the same.

There is however some industry wide bargaining like in the banking sector in India. Unlike the industrialized countries in the west flexibility in the three countries discussed does not mean decentralization as there was no centralized bargaining to start with. In fact as seen in the Korean case there is some evidence of centralization.

Coming to the most important question of workplace flexibility, it can be observed that the general movement is towards greater flexibility in all three countries. But owing to differences in the structures and systems of the countries, different forms of flexibility dominates in all three. In India, the movement is towards numerical flexibility. For this purpose retirement schemes and ‘Greenfield’ strategies are dominant. There is also union avoidance and increase in suppressive policies in the country.

China is experiencing increased external labor market flexibility and at the firm level has been witnessing increase in both functional and numerical flexibility ever since deregulation of the economy(Kuruvilla, 2002). In Korea also, there is trend towards both types of flexibility.

The biggest effect of strategy for numerical flexibility is that more than 50% of the total work force is now composed of irregular

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workers. On the other hand, the Korean government had in the past and still is spending money to educate its workers and increase their skill level.

The difference is not only in the form of flexibility but also in the level of flexibility. In India, we have the strongest movement towards workplace flexibility at the workplace level. Not only that, HR practices is now considered to be an important element to enhance flexibility and prepare businesses to be able to face global competition. In China, as we have already seen, the flexibility and autonomy that the state has given the SOEs and the newly privatized SOEs is primarily aimed at the strategy that the state will not now give financial support to the enterprises. In other words the enterprises will have to be viable economic units in order to survive. This aim is achieved by giving some autonomy to the managers, but the overall control is in the hands of the state. The situation in the foreign investment companies is different; the state leaves such enterprises with complete autonomy, so as not to scare foreign capital off.

In Korean industrial relations the trend towards greater flexibility is dominant like India. They have reverted from the Japanese style paternalistic system to HR practices. One difference between India and Korea is that in Korea the attempts to achieve flexibility by the employers have met stiffer resistance from the workers.

The increased impetus for flexibility has different reasons for different countries. In India, when the planned and protectionist system came to an end with the liberalization policy, the employers for the first time faced global competition and realized that their rigid workplace practices were not adequate to deal with this situation. Therefore, they campaigned for more flexibility. In China too, the process of liberalization of the economy in order to integrate it to the world economic system was the primary reason for the demand for flexibility. In Korea however, the process of democratization increased the militancy in the labor movement and this eroded Korean competitive advantage in large industries leading to the demands of greater flexibility.

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What influences the choices for different types of flexibilities? Kuruvilla and Erickson (2002) have come up with four factors that affect decision making regarding flexibility: First, they believe that in states where there was greater emphasis on job security in the past; there is greater level of numerical flexibility.

They also believe that this tendency was evident even if the ability to layoff and retrench employees was difficult. In this regard they gave the Indian example, where the employers would find very difficult to lay off employees, therefore the employers came up with voluntary retirement schemes.

The second influencing factor is the source of competitive advantage of the country in question. Kuruvilla and Erickson believe that numerical flexibility strategies tend to dominate in countries where the source of competitive advantage is low labor costs, as is the case of Indian industrial relations. There will also be numerical flexibility in industries that are labor intensive. In firms and nations that seek to capitalize on low costs, there is little incentive to invest in long-term training and continuous upskilling, associated with functional flexibility (Kuruvilla, 2002). The third factor associated with the choice of flexibility is the existence of governance institutions that encourage long-term investments in technology, research and development, and HR development (Kuruvilla, 2002). In Korea for example the education system has been reformed by the state, there are also incentives for training and upskilling via tax incentives. In addition the Korean government has funded massive infrastructure projects for training necessary for competing in the global economy.

Unions, is the fourth factor, it also plays an important role in the decision regarding the form and level of flexibility. Kuruvilla, Das, Kwon and Kwon (2002) have assessed decline of the union growth in Asia. For their analysis they had taken the variables of union density, and union influence-bargaining centralization and coverage. After an exhaustive study of seven Asian countries including China, India and Korea, they have come to the conclusion that over all there is a decline in union density

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figures in Asia. The data also suggest that , while Asian labor movements, on average, do not lag behind their Western European or North American counterparts in terms of union density, they certainly do so in terms of union influence (Das, 2002). In terms of influence they see two trends in Asia: one pattern where union influence corresponds somewhat to union density-like in the case of Korea and India- and a second pattern where union density differs dramatically from union influence score-China where the union density is 61% while coverage is 15%- (Das, 2002). Although, from the above analysis the influence of the unions can be termed as weak, but it is reasonable to expect that strong unions will push firms and countries in the direction of functional flexibility strategies Kuruvilla, 2002). It is true that stronger unions in Korea have affected and continue to influence, the ability of Korean Chaebol to adopt numerical flexibility strategies despite the obvious need of chaebols to cut labor cost.

I believe that to the above four factors given

by Kuruvilla and Erickson three more can be added: First, is the exposure of not only the individual countries to globalization but also the exposure of different sectors of the industry in the same country. In India, there is a clear distinction between sectors facing competition due to globalization and sectors that are not, for example, in computer software industry there is immense international and domestic competition, therefore there is a much stronger trend towards flexibility and the state is also supporting these workplace practices. On the other hand agriculture sector that is not exposed to globalization still gets protection, and subsidies. Korea is the only country of the three discussed whose industry is actually going out of the country to low cost countries. Second, is the role played by the state. We have seen that the state plays a pervasive role in all three countries, but still there are levels of control.

The state power can also overshadow the influence of the unions, for example, in Korea there has been greater resistance to the demands of flexibility by the unions than China, but the level of flexibility achieved in both the states

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differs. It is higher in Korea, because the unions are militant but the state-chaebol coalition is stronger. On the other hand in China, the unions are controlled by the state but still the trend towards flexibility is weaker than Korea because the state wants to bring in gradual changes and wants to remain in control of the change process.

The third factor is the influence of international bodies like the International Monetary Fund (IMF) and World Trade Organization (WTO) and some transnational companies (TNCs). The process of assimilation to the global standards is not an automatic one.

It is not just the market forces that are bringing the changes towards convergence of industrial relations, but there are also pressures from the world organizations and TNCs towards liberal economy and free trade. At the center of WTO are giant corporations wishing to extend their power. This power is already enormous. It is shocking to learn that 52 of the world’s 100 largest financial bodies are not countries but transnational corporations (Shepherd, 1999). On the other hand there is the IMF. We have seen in the Korean example that when the IMF helped Korea out of economic troubles in 1997 the restructuring program led to quick recovery but it also increased unemployment, working hours and reduced the social net. In countries where the pressure of these international entities is great, the likelihood of opting for deregulation, decentralization and flexibility would increase.

CONCLUSION Globalization is here to stay, it would be ridiculous on the part of the nations of the world to close their eyes to it and wish it away. Any country that wants to be on the economic map of the world would have to enter this competitive environment. In order to face the competition flexibility is imperative; therefore we see in the three countries that there is a trend towards flexibility. But we have also seen that the needs, types and levels of flexibility in different countries is different based on the factors discussed. There is no doubt that in the short run there is convergence towards workplace flexibility owing to the pressures of international competition, but in the long run in the three countries that we have discussed the future of

23

flexibility will depend on the interaction of the key players in their respective industrial relation systems.

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Baek, Seung Wook. “The Changing Trade Unions in China” Journal of Contemporary Asia, Vol. 30, Issue 1, 2000.

Bamber, Greg J. and Russell D. Lansbury (Editors). “International and Comparative Labor Relations” SAGE Publications, London, 2001.

Block, Richard N., Karen Roberts, Cynthia Ozeki, Myron Roomkin. “Models of International Labor Standards” Industrial Relations, Vol. 40, No. 2, April 2001.

Chang, Dae-oup, and Jun-Ho Chae. “The Transformation of Korean Labor Relations since 1997” Journal of Contemporary Asia, Vol. 34, Issue 4, 2004.

Chen, Calvin, and Rudra Sil. “The Transformation on Industrial relations in China and Russia: Diverging Convergence?”

Annual Meeting of American Political Science Association, San Francisco, USA, September 1, 2001.

Chen, John. “Reflections on labor law in China” ALU, Issue 46, Jan-March 2003.

Choi, Hae Won. “South Korea’s Union Strife Presents Challenge to Roh; As Strikes Idle Production, Nervous Foreign Investors Wait for Seoul’s Response” Wall Street Journal, July 22, 2004.

Clarke, Simon, Chang Hee Lee, Qi Li. “Collective Consultation and Industrial Relations in China” British Journal of Industrial Relations, 42:2, June 2000.

Dae Oup, Chang. “Foreign Direct Investment and Union Busting in Asia” ALU, Issue 48, July-September 2003.

Dae-oup, Chang, and Chae Jan-Ho. “Market Controls and Flexibility in Korea”.

Mohammad Ali – Globalization

Das, S. S. Kuruvilla, H. Kwon, S. Kwon.

“Trade Union Growth and Decline in Asia” British journal of Industrial Relations, Vol. 40, Issue 3, sep 2002.

Doraine, Olivier. “Interview: WTO and China” Asian Labor Update, 1999.

Dunlop, John T. Fredrick H. Harbison, Clark Kerr, Charles A. Myers. “Industrialism and Industrial Man Reconsidered” The InterUniversity Study of Labor Problems in Economic Development (Final Report).

1975.

Eshvaraiah, P.. “Liberalization the State and Agriculture in India” Journal of Contemporary Asia, Vol. 31, Issue 3, 2001.

Frankel, Stephen, and David Peetz.

“Globalization and Industrial Relations in East Asia: A Three country Comparison” Industrial relations, Vol. 37, No. 3, July 1998.

Frankel, Stephen, and Sarosh Kuruvilla. “Logics of action, Globalization, and Changing Employment Relations in China, India, Malaysia, and the Philippines” Industrial and Labor relations Review, Vol. 55, Issue 3, April 2002.

Ghose, Sanjoy. “Alternate Dispute Settlement Mechanisms in India; A Study of industrial Adjudication” Heller, Patrick. “The Labor of development: Workers and the Transformation of Capitalism in Kerela, India” Cornell University Press, Ithaca, 1999.

Hyun, Roo Moo. “Asia the President and the Unions; South Korea” The Economist, Vol. 370, Issue 8361, February 2004.

Katznelson, Ira, and Aristide R. Zolberg.

“Working-Class Formation: Ninteenth Century patterns in Western Europe and the United States” Princeton University press, 1986.

Kim, Dong-One, and Seongsu Kim. “Globalization, Financial Crisis, and Industrial Relations: The Case of south

24

Korea” Industrial Relations, Vol. 42, No. 3, july 2003.

Knight, Nick. “Imagining Globalization: The World and Nation in Chinese Party Ideology” Journal of Contemporary Asia, Vol. 33, Issue 3, 2003.

Kuruvilla, Sarosh, and Christopher Erickson.

“Change and Transformation in Asian Industrial relations” Industrial Relations, Vol. 41, No. 2, April 2002.

Lieten, G.K.. “The Human development Puzzle in Kerala” Journal of Contemporary Asia, Vol. 32, No. 1, 2002.

Nuruzzaman, Mohammad. “Economic Liberalization and Poverty in the Developing Countries” Journal of Contemporary Asia, vol. 65, No. 1, 2005.

Ofreneo, Rene. “Changing Labour Markets in a Globalising Asia: Challenges for Trade unions” ALU, Issue 45, October-December 2002.

Petras, James. “China in the Context of Globalization” Journal of Contemporary Asia, Vol. 30, Issue 1, 2000.

Prithiviraj, S. M.. “Flexibility in Indian Workplace” ALU, Issue 45, OctoberDecember 2002.

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Sheehan, Jackie, Jonathan Morris, John Hassard.

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Shepherd, Ed. “World Trade Organization”.

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25

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Zhu, Ying. “Major Changes underway in China’s Industrial Relations” International Labor Review, Vol. 134, Issue 1, 1995.

Attachment B

Japanese Labour-Management Relations Laws

Page 45 of 49

Administration of Labour Relations

I. Labour Administration The basic aim of labour administration is to create stable industrial relations based on mutual understanding and trust between labour and management. The following are the kinds of policies being implemented to achieve that aim.

(Reference 1) Schematic Diagram of Labour Administration Policy Aim of labour administration (Creation on stable industrial relations based on mutual understanding and trust between labour and management)

Development of the environment for industrial relations (1) Creation of a proper awareness about labour issues through labour education (2) Promotion of a better understanding between labour and management

Prevention and resolving of industrial disputes (1) Consultation, mediation, and arbitration by labour relations commissions (2) Consultation on labour matters by labour administration offices

Guarantees of the three rights of labour (right to organize, right to bargain collectively and right to act collectively (right to strike)).( Article 28 of the Japanese Constitution, Trade Union Law, Labour Relations Adjustment Law)

[1] Japanese Labour-Management Relations Laws 1.

Guarantee of Labour Rights

Article 28 of the Japanese Constitution guarantees the right of workers to organize a trade union, to engage in collective bargaining and to strike (the three basic rights of labour).

(Reference) Number of trade unions

27,226(2007)

Number of members of trade unions

10.080 million (2007)

Organized labour as a proportion of the total

18.1 % (2007)

2.

Trade Union Law

(1)

Criteria for trade unions a)

Positive criteria Trade unions are organizations for the purpose of enabling workers to independently improve their working conditions.

b)

Negative criteria If any of the following conditions apply to an organization, it is not a trade union. i.

An organization that allows participation of management personnel

ii.

An organization that accepts financial assistance from the employer

iii.

An organization whose main aim is to conduct a political campaign or form a social movement

(2)

Unfair labour practices In order to guarantee the three basic rights of labour, employers are prohibited from the following: a)

To treat a worker detrimentally (including dismissal) due to the fact that the worker is a member of a trade union, was intending to organize a trade union or undertook the reasonable actions of a trade union

b) To refuse collective bargaining with the representatives of a trade union c) To control or intervene in the formation and operation of a trade union, or to provide assistance towards the operating expenses of a trade union d) To treat a worker detrimentally (including dismissal) due to the fact that the worker had made claims to the labour relations commission.

(3)

Labour Agreement

Parts of a labour contract that contravene a labour agreement between a trade union and an employee are deemed null and void. Inapplicable parts should be settled through a labour agreement.

1

(4)

Labour Relations Commission a)

The Central Labour Relations Commission comes under the Ministry of Health, Labour and Welfare and the Local Labour Relations Commission comes under each prefectural government.

b)

The labour relations commissions consist of an equal number of representatives of employers, employees and public interests.

c)

The Local Labour Relations Commission conducts the following administrative work. i.

Examination of claims of unfair labour practices and the issuance of orders to support employees

ii.

Conciliation, mediation and arbitration in relation to labour disputes is based on the Labour Relations Adjustment Law

d)

The Central Labour Relations Commission reexamines orders concerning unfair labour practices from the Local Labour Relations Commission and coordinates labour disputes extensively.

3.

Labour Relations Adjustment Law

There are three types of arrangement ①mediation ②arbitration and ③conciliation in relation to labour disputes taken place by the adjustment Labour Committee.

(1) Conciliation Conciliator will be nominated by the chairman among the men of learning and experience. He will listen to the complaints of the both sides, confirm the point of problem. The conciliator tries to deepen the understanding of both groups concept and situation by informing each other the point of problem when necessary.

(2) Mediation Mediation Commission consisted by public interests, labourers, and employers, will listen to the opinion of the concerned parties and inform them the idea of mediation. Though he will recommend both parties to admit the mediation plan, the concerned parties have no obligation to accept the mediation plan.

The Labour Relations Commission mediates if one or both parties apply for mediation.

(3) Arbitration Arbitration Commission formed only by members representing the public interests, will listen to the opinion of the concerned parties. The commission proposes them the idea of Judgment Arbitration for the solution of the dispute. (The Judgment Conciliation has the same effect as the Labour agreement.)

2

[ďź’] 1.

Labour Relations Commission Outline of the Labour Relations Commission

Labour Relations Commission is an administrative commission based on the Trade Union Law, and consisting of representatives of the public interests, employees and employers for the settlement of collective labour management disputes and guarantee of labour rights.

It has the following independent authority in relation to the Minister of Health, Labour and Welfare or prefectural governors.

2.

Types of Labour Relations Commissions

(1)

Central Labour Relations Commission External organ of the Ministry of Health, Labour and Welfare Commissions (Public, Employee, Employer each has 15 members)

(2) Local Labour Relations Commission (47)(Public, Employee, Employer each has members 5 to 13) 3.

Main affairs of the Labour Relations Commission

(1)

Judgments of unfair labour practices (questioning and investigation)

(2)

Coordination of collective labour-management disputes (conciliation, mediation and arbitration)

3

【Process of the procedures】

○Examination of unfair labour practices

Local Labour Central

Relations

Labour

Commission Parties concerned

Reexamination

○Cases within a single prefecture

Relations Commission

○Cases involving nationally important issues (priority) ○Cases spreading over two or more prefectures (priority)

○Coordination of collective labour-management disputes

Local Labour

Parties concerned

Relations

Central

Commission

Labour

Cases related only to a single prefecture

Relations Commission

○Cases involving nationally important issues (priority) ○Cases spreading over two or more prefectures (priority)

4

Trend in the Number of Cases of Unfair Labour Practices Handled (1)

Local Labour Relations Commission Years

Average of 1949-54

(2)

Number of cases filed 411

Central Labour Relations Commission Years

Number of cases filed

Average of 1949-54

38

Average of 1955-59

402

Average of 1955-59

30

Average of 1960-64

447

Average of 1960-64

32

Average of 1965-69

646

Average of 1965-69

72

Average of 1970-74

858

Average of 1970-74

79

Average of 1975-79

727

Average of 1975-79

87

Average of 1980-84

717

Average of 1980-84

75

Average of 1985-89

489

Average of 1985-89

82

Average of 1990-94

296

Average of 1990-94

56

1995

313

1995

53

1996

327

1996

50

1997

332

1997

52

1998

354

1998

51

1999

405

1999

51

2000

384

2000

64

2001

341

2001

64

2002

394

2002

66

2003

363

2003

65

2004

311

2004

83

2005

294

2005

90

2006

331

2006

77

Source: Central Labour Relations Commission office (Annual report of the Labour Relations Commission)

Source: Central Labour Relations Commission office (Annual report of the Labour Relations Commission) (ďź’)Central Labour Relations Commission (Number of cases filed)

(1)Local Labour Relations Commission (Number of cases filed)

.1 Av 949 e. -5 1 4 Av 960 e.1 6 4 Av 970 e.1 -7 4 Av 980 e.1 8 99 4 094 19 96 19 98 20 00 20 02 20 04

Av e

5

Av e.

1 Av 949 e. -5 1 4 Av 960 e. -6 1 4 Av 970 e. -7 1 4 Av 980 e.

19 84 90 -9 4 19 96 19 98 20 00 20 02 20 04

100 90 80 70 60 50 40 30 20 10 0

1000 900 800 700 600 500 400 300 200 100 0

Trend in the Number of Disputes Years

1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975

Number of disputes

Years

259 920 1,035 1,517 1,414 1,487 1,186 1,233 1,277 1,247 1,345 1,330 1,680 1,864 1,709 2,222 2,483 2,287 2,016 2,422 3,051 3,687 3,024 3,882 5,283 4,551 6,861 5,808 9,459 10,462 8,435

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Number of disputes

7,974 6,060 5,416 4,026 4,376 7,660 7,477 5,562 4,480 4,826 2,002 1,839 1,879 1,868 2,071 1,292 1,138 1,084 1,136 1,200 1,240 1,334 1,164 1,102 958 884 1,002 872 737 708 662

Source: Central Labour Relations Commission office (Annual report of the Labour Relations Commission) 12000 10000 8000 6000 4000 2000

6

19 46 19 48 19 50 19 52 19 54 19 56 19 58 19 60 19 62 19 64 19 66 19 68 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02 20 04 20 06

0

Trend in the Number of Labour Disputes Coordinated Continued coordination in the Local Labour Relations Commission

Continued coordination in the Central Labour Relations Commission

Conciliation Mediation Arbitration Total

Conciliation Mediation Arbitration Total

1949

1,047

185

4 1,236

1949

14

16

0

30

1954

948

81

2 1,031

1954

55

21

1

77

1959

1,135

60

4 1,199

1959

166

6

0

172

1964

1,247

72

2 1,321

1964

145

17

0

162

1969

1,449

46

2 1,497

1969

144

7

0

151

1974

1,900

93

3 1,996

1974

208

45

0

253

1979

819

5

0

824

1979

28

2

0

30

1984

656

17

3

676

1984

13

0

0

13

1989

405

9

2

416

1989

2

10

9

21

1993

496

21

0

517

1993

17

9

9

35

1998

555

19

9

583

1998

16

9

9

34

1999

606

14

3

623

1999

19

10

9

38

2000

550

22

4

576

2000

17

11

9

37

2001

571

8

0

579

2001

2

11

9

22

2002

578

2

0

580

2002

3

32

9

44

2003 2004

567 516

3 4

2 1

572 521

2003 2004

6 10

18 0

9 0

33 10

2005

550

4

0

554

2005

5

0

0

5

2006

510

4

1

515

2006

3

0

0

3

Source: Central Labour Relations Commission office (Annual report of the Labour Relations Commission)

2,500

300

250

2,000

200

1,500 Arbitration Mediation Conciliation

150

1,000 100

500

50

19 49 19 59 19 69 19 79 19 89 19 98 20 00 20 02 20 04 20 06

7

19 49 19 59 19 69 19 79 19 89 19 98 20 00 20 02 20 04 20 06

0

0

Arbitration Mediation Conciliation

II. Present Status of Labour and Management Relations in Japan 1. Present organizational situations of unions in Japan (1) Present situation (2) The number of union members in Japan totaled approximately 10.08 million persons at the end of June 2007, which accounted for an estimated 18.1 percent of the total employees.

Organized labour by percentage in Japan is lower than can be found in the U.K. or Germany, but is higher than that of the U.S. The estimated ratio of organized labour has been decreasing in recent years. The main reason for this decline seems to be the growing number of workers in the tertiary industry, in which the ratio of organized labour is low (refer to tables 1-5).

(2) The organizational format While studying how labour unions are organized, it becomes clear that the majority of unions are enterprise based. Enterprise based unions are characterized by their autonomy for their management and business affairs within their union. These unions are also financially independent in principle. In other words, although many enterprise-based unions belong to one of the federations classified by a specific industry or area, they receive very few restriction or challenges for control from the upper level labour organizations, compared to union in the United States and European countries. Therefore, their decision making and activities are seldom restricted by the upper levels of labour organizations.

(3) Function The relationship between enterprise-based unions on the one hand, and the upper levels of labour organizations (such as industrial unions), and centralized labour organization on the other hand, in term of their functional role, is quite extensive. It can be said that the upper levels of labour organizations first of all address problems which enterprise based unions have difficulty to solve, such as policy or systemic problems.

8

Table 1

Recent Number of Individual Labour Unions and the Number of Members Year 2000 2001 2002 2003 2004 2005

Number of Unions 31,185 30,773 30,177 29,745 29,320 28,279

Number of Members 11,538,557 11,212,108 10,800,608 10,531,329 10,309,413 10,138,150

2006

27,507

10,040,580

2007

27,226

10,079,614

Source: “Basic Survey of Labour Unions” by MHLW Notes: Numbers are those of 2007.

9

Table 2 Year 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Changes of the Number of Employees, Union Members and the Percentage of Organized Labour Total number of employees; in 10,000 persons *1 1,256 1,259 1,193 1,251 1,336 1,421 1,631 1,712 1,764 1,931 2,014 2,134 2,248 2,382 2,422 2,582 2,693 2,803 2,914 3,042 3,100 3,159 3,196 3,277 3,388 3,469 3,659 3,676 3,662 3,710 3,746 3,796 3,899 4,012 4,055 4,102 4,209 4,282 4,301 4,383 4,448 4,565 4,721 4,875 5,062 5,137 5,233 5,279 5,309 5,367 5,435 5,391 5,321 5,379 5,413 5,348 5,373 5,371 5,416 5,517 5,565

Total number of union members; in 1,000 persons *2 5,692 5,677 5,655 5,774 5,687 5,720 5,927 6,076 6,286 6,463 6,763 6,984 7,221 7,662 8,360 8,971 8,357 9,800 10,147 10,404 10,566 10,863 11,249 11,605 11,798 11,889 12,098 12,462 12,590 12,509 12,437 12,383 12,309 12,369 12,471 12,526 12,520 12,464 12,418 12,343 12,272 12,227 12,227 12,265 12,397 12,541 12,663 12,699 12,614 12,451 12,285 12,093 11,824 11,539 11,212 10,801 10,531 10,309 10,138 10,041 10,080

Source:(*1) Total number of employees’ is in “Labour10 Force Survey” by MCA (*2) (*3) “Basic Survey of Trade Unions” by MHLW

Estimated percentage of organized labour *3 45.3 53.0 55.8 46.2 42.6 40.3 36.3 35.5 35.6 33.5 33.6 32.7 32.1 32.2 34.5 34.7 34.7 35.0 34.8 34.2 34.1 34.4 35.2 35.4 34.8 34.3 33.1 33.9 34.4 22.7 33.2 32.6 31.6 30.8 30.8 30.5 29.7 29.1 28.9 28.2 27.6 26.8 25.9 25.2 24.5 24.4 24.2 24.1 23.8 23.2 22.6 22.4 22.2 21.5 20.7 20.2 19.61 19.2 18.7 18.2 18.1

Table 3

Percentage of Organized Labour

Name of Industry Average (All Industries) Agriculture, Forestry, and Fisheries Mining Construction Manufacturing Electric, Gas, Heating Supply and Water Service Communication Services Transportation Wholesale, Retail Sales Banking, Financial and Insurance Services Realtors Restaurants and hotels Medical services and Welfare Educational services Compounding services Service Industry Government

Estimated percentage of organized labour (2007) 18.1 2.7 12.2 21.3 25.2 59.4 20.1 26.8 10.2 50.3 2.8 4.1 8.5 23.1 40.7 6.2 44.0

Source: “Basic Survey of Labour Unions” by MHLW (as of the end of June 2007) Notes: Estimated percentage of organized labour was calculated by dividing the total number of union members by the total number of employed workers.

Table 4

Estimated Percentage of Organized Labour Classified by the Size of Firms in the Private Sector

Size of firms Total 1,000 and more employees 100 to 999 employees 99 and less employees

Estimated percentage of organized labour (2007) 16.2 47.5 14.3 1.1

Source: “Basic Survey of Labour Unions” by MHLW (as of the end of June 2007) Notes:

Estimated percentage of organized labour was calculated by dividing the total number of union members by the total number of employed workers.

11

Table 5 Number of Employees, Union Members and the Ratio of Organized Labour in Selected Countries

Name of Country

Year

Total number of Employees

Total number of union members

Estimated ratio of organized labour %

(Remarks) National labour organization

(1,000 persons)

(1,000 persons)

Japan

2007

55,650

10,080

18.1

(10 Thousand persons)

JTUC

660

USA

2005

125,889

15,685

12.5

AFL-CIO

884

UK

2005

24,848

6,390

29.0

TUC

700

Germany

2005

34,320

8,360

24.4

France

2003

24,692

1,845

8.2

DGB DBB CGB CGT CFDT CGT-FO CFTC CFE=CGC

678 128 30 65 77 30 22 19

JTUC : Japanese Trade Union Confederation AFL-CIO : American Federation of Labor and Congress of Industrial Organizations TUC : Trades Union Congress DGB : German Confederation of Trade Unions DBB : German Federation of Civil Servants CGB : The Christian Trade Union Federation of Germany CGT : The General Confederation of Labour CFDT : French Democratic Confederation of Labour CGT-FO : General Confederation of Labour "Force-ouvrière" CFTC : French Confederation of Christian Workers CFE=CGC : French Confederation of Management - General Confederation of Executives CFE-CGC ) Source: Japan - “Labour Force Survey” by MCA for the total number of workers employed; “Basic Survey of Labour Unions” by MHLW for the number of union members; and “Annual Report on Health, Labour and Welfare Report of Overseas Situation(2005~2006)”

by MHLW U.S.A - “Employment and Earnings” by the Department of Labour U.K. - “Labour Market Trends” by National Statistical Office Germany - “Statistisches Jahrbuch” by Statistisches Bundesamt for the number of union members; and “WOCHENBERICHT” by DEUTSCHES INSTITUT FÜR WIRTSCHAFTS-FORSCHUNG for the total number of workers employed

12

2.

Special factors in labour-management relations in Japan Following are three items which are general features of labour-management relations in Japan which receive international attention.

(1) Enterprise-based unions The unions in Japan are generally organized by individual enterprises. Collective bargaining between management and its enterprise-based union used to negotiate issues such as working conditions, wages, etc. (refer to Table 1).

Enterprise-based unions have been common due in

large part to the practice of life-long employment based on the seniority system.

Enterprise-based unions join forces to form industrial unions and centralized national organizations. These larger organizations deal especially with policy problems and system improvement which are difficult to be solved by enterprise union alone.

(2) “Spring Offensive” Every year between March and May (most active during the period from late March to mid-April), each enterprise-based union initiates negotiations with management in the so called “Spring Offensive”. These negotiations are carried out under the direction and coordination of the industrial unions and centralized national labour organizations. Items discussed include wages and other working conditions. The “Spring Offensive” is the biggest event of the year for labour movements and labour-management relations in Japan as most workers in organized labor unions participate in wage negotiations at that time.

Since nowadays, the ratio of private negotiation of each companies focusing their achievements are rising, the former structure of same kinds of base up negotiations from different companies collapsed.

(3) Stable labour-management relations The relationship between labour and management in Japan has been stable in the past due to conditions of steady employment, improvement in working conditions, salary increase, and the high rate of growth in the economy. The occurrence of labour disputes such as long term strikes has been low in recent years as the permeation of a viable labour-management consultation system contributes to their mutual understanding (refer to Table 6, Figure 1 ).

13

Table 6 Lost Working Days Due to Labour Disputes of Each Countries

Japan Total Number of Working days lost (thousand days)

6 (2005)

USA

UK

1,736 (2005)

157 (2005)

Germany

France

19 (2005)

691 (2001)

Source: “Annual Report on Health, Labour and Welfare Report of Overseas Situation(2005~2006)”

by MHLW , “Yearbook of Labour Statistics” published by ILO and materials from each country Notes: Because the definitions and methods of surveys are different in each country, it is impossible to compare them.

Figure 1

Companies which have Labour-Management Consultation Systems

Chart of the percentange of companies which have labour-management consultation systems 5000 or more employees

1000 to 4999 employees

2004 1999 1994 1989

300 to 999 employees

100 to 299 employees

50 to 99 employees

Companies with company-based unions Companies without company-based unions

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

Source: “Survey on Labour-Management Communications” by MHLW

14

Attachment C

Finnish Labour Legislation and Industrial Relations

Page 46 of 49

Finnish Labour Legislation and Industrial Relations

Contents 1 Introduction............................................................................................................ 4 2 Labour Legislation.............................................................................................. 5 General................................................................................................................... 5 The Employment Contracts Act (55/2001)....................................................... 6 The Pay security Act (866/1998) and The Seamen’s Pay Security Act (1108/2000).............................................................................. 11 The Collective Agreements Act (436/1946)...................................................... 12 The Posted Workers Act (1146/1999)................................................................. 13 The Non-Discrimination Act (21/2004) and the Act on Equality between Women and Men (609/1986).............................................................. 13 Young workers....................................................................................................... 16 Protection of privacy in working life................................................................. 16 The Act on Checking the Criminal Background of Persons Working with Children (504/2002)..................................................... 17 Working hours and annual holiday.................................................................... 18

The Working Hours Act (605/1996)............................................................. 18

The Annual Holidays Act (162/2005)........................................................... 19 Job-sharing and studying..................................................................................... 22

The Act on Job Alternation Leave (1302/2002).......................................... 22

The Study Leave Act (273/1979)................................................................... 23 Personnel Involvement Systems ........................................................................ 24

The Act on Cooperation within Undertakings (334/2007)...................... 24

Cooperation within groups........................................................................... 26

The Act on Personnel Representation in the Administration of

Undertakings (725/1990, Act on Administrative Representation)......... 27

The Act on Personnel Funds (934/2010)..................................................... 28

The Act on Employee Involvement in European Companies (SE)

and European Cooperative Societies (SCE) (758/2004)........................... 28

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Industrial Peace and the Right to Industrial Action...................... 29 Interest disputes and legal disputes.................................................................. 30 Arbitration procedure for conflicts of interest disputes................................ 30 Negotiations regarding legal disputes.............................................................. 30 The Labour Court.................................................................................................. 30

4 Occupational Safety and Health............................................................... 31 5 Social Security...................................................................................................... 32 6 Organisations Participating in Tripartite Labour Negotiations........................................................................................................... 32 Wage and salary earners’ organisations........................................................... 32 Employer organisations....................................................................................... 33 Entrepreneur organisations................................................................................ 33

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2 Labour Legislation This brochure aims to outline the basic principles of Finnish labour legislation, while giving a general overview of the Finnish labour market system.

1 Introduction In Finland, the unionisation of workers began in the late 19th century.

The Civil War in 1918 interrupted such nascent negotiation practices right after Finland had gained independence in 1917. The strained relations between workers and employers did not relax before the Second World War, with the labour market organisations only acknowledging each other as negotiating parties in 1940.

The number of labour market organisation members started to grow, and the systems developed towards the end of the 1940s. Since the end of 1960s, labour market relations have been shaped through tripartite cooperation, and the labour market system has become an important national institution.

Today, cooperation between the government and labour market organisations is characteristic of Finnish labour market relations. This means that the drafting of almost all labour and social policy legislation related to working life is prepared in a tripartite process in collaboration between the government and labour market organisations representing employers and employees.

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There are approximately 2.2 million wage and salary earners in Finland (86.6 per cent of those who are working). The share of women of those employed is only slightly lower than that of men. The rate of unionisation is about 75 per cent, which is one of the highest in Europe.

General Labour legislation consists, on one hand, of the norms that regulate the legal relationship, in other words the employment relationship, between the employer and the employee (individual labour legislation) and, on the other hand, the collective labour legislation. The most important acts applying to the employment relationship of an individual employee include the Employment Contracts Act, the Working Hours Act, and the Annual Holidays Act. The key acts representing collective labour legislation are the Collective Agreements Act and the Act on Cooperation within Undertakings.

The starting point for labour legislation is the principle of employee protection. Because of this, labour legislation includes mandatory provisions, which cannot be deviated from by agreement to the disadvantage of the employee. These include provisions created for the employee´ protection of against unlawfull dismissals, the preconditions of concluding a fixed-term contract, and the duty to apply the provisions of a generally applicable collective agreement.

Labour legislation also includes provisions that can be altered by collective agreement, such as the provision on sick leave compensation, and certain provisions concerning working hours. In addition, these laws contain provisions that become applicable only when no other arrangements have been agreed upon.

Collective agreements play a pivotal role in the system by which the terms of Finnish employment relationships are determined. The Collective Agreements Act governs the rights of employers and their employer organisations on one side and employee organisations on the other to agree on the terms applied to employment relationships in a way that binds employers and employees. The collective agreements cover quite comprehensively, among other things, compensation paid for work carried out and working hours.

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The terms of an employment relationship may in practice be determined by several different norms, such as the provisions of a law, the collective agreement, the employment contract or some another agreement concluded at the workplace. The norm applied in each individual case is determined by the order of priority decreed by law. Since both the provisions of law and the regulations of collective agreements have minimum mandatory status, it is always possible to apply norms of a lower degree in order to agree on terms that are more favourable for the employee.

Other regulations than those laid down in the collective labour legislation are supervised by the officials of the Regional State Administrative Agencies' occupational safety and health area of responsibility (occupational safety and health authorities).

The Finnish legislation can be found at www.finlex.fi and English translations of labour legislation are also available on the Ministry of Employment and the Economy’s website, at www.tem.fi. The descriptions of legislation given in this publication are based on data from 2011.

The Employment Contracts Act (55/2001) The Employment Contracts Act is a basic working life law to be applied to work performed in an employment relationship regardless of the nature of that work or the form of employment.

The Employment Contracts Act is applied to employment relationships in which an employee or employees together make a personal commitment to work for the employer under the employer’s direction and supervision against a wage or salary or other compensation. The establishment of an employment relationship requires that all of the above-mentioned criteria are fulfilled. In practice, overall consideration is practiced to determine whether an employment relationship exists, taking into account the intentions of the contracting parties, the name of the contract, the contract’s terms and the actual working conditions.

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Finnish labour legislation, or at least its minimum conditions, will be applicable to work done in Finland, regardless of the nationality of the employee.

The Employment Contracts Act decrees entering into an employment contract; the obligations of the employer and employee; the prohibition of discrimination (both in the employment relationship and the recruitment process); the determination of the minimum terms of employment; the employee’s right to family leaves; laying off an employee; terminating the employment contract; liability for damages; employment contracts of an international nature; and the position of employee representatives.

Prohibition of discrimination and obligation of equal treatment During the employment relationship or the recruitment process, the employer may not place employees in a discriminatory position, unless there is a justified reason for doing so. The employer shall also otherwise treat employees equally, unless making an exception is justified on the basis of the tasks and position of the employees.

Minimum terms of employment The minimum terms of employment to be applied in employment relationships are determined by the mandatory provisions of law and the generally applicable collective agreement. The employer has to at least adhere to the stipulations of the national collective agreement considered representative in the sector in question.

A Commission appointed by the government confirms whether a national collective agreement can be considered generally applicable.

The decision of this Commission may be appealed against in the Labour Court. The decision regarding the general validity of a collective agreement will be published in the Regulations Collection maintained by the authorities. Collective agreements confirmed as generally applicable are available free of charge on the Internet at www.finlex.fi/ normit.

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The duty to comply with generally applicable collective agreements applies mainly to unorganised employers. An employer who, under the Collective Agreements Act, is bound by such a collective agreement where the concluding party is a national employee federation, is not obliged to observe the generally applicable collective agreement of the field, but the collective agreement of the sector in question.

Family leaves The purpose of family leave is to help employees reconcile their family commitments and the obligations of their employment. They enable parents with small children to take leave from work for a fixed period to take care of their children.

Family leaves include the following: maternity, special maternity and paternity leave, as well as full-time and partial parental leave; full-time, part-time and temporary childcare leave; an employee’s right to be absent from work for a compelling family reason; and absence from work to take care of a family member or other person close to the employee.

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Termination of an employment relationship and lay-offs The prerequisite for terminating an employment relationship by giving notice is the existence of a proper and weighty reason. This condition applies to giving notice due to reasons relating to the employee’s person or arising from changes in the employer’s operating conditions. An employment contract can only be cancelled for an extremely weighty reason. Such an acceptable reason would be such a serious breach of contract or act of negligence by one of the contractual parties that the other party could not be expected to continue the employment even to observe the period of notice.

Apart from reasons due to the employee, the employer may terminate the employee’s contract on the basis of financial or production-related grounds to do with their operations. In such a case, the work that the employer has available must have been reduced both substantially and permanently for financial or production-related reasons or reasons arising from a reorganisation of the employer’s operations. Such grounds do not exist if the employer, either before giving notice or soon after the employment contract has been terminated, hires a new employee for tasks similar to those performed by the dismissed employee.

The childcare leave allows a parent to stay at home to take care of children full time for a fixed period. Partial childcare leave makes it easier for parents to combine work and family life by making shorter their daily or weekly working hours. Partial childcare leave is subject to agreement with the employer.

The compensatory system for groundless terminations of employment is uniform. The minimum amount of compensation is equivalent to three months' pay and the maximum to 24 months’ pay. The maximum compensation in case of termination of the employment contract of a shop steward, an occupational industrial safety and health representative or an elected representative without grounds can be the amount equal to 30 months’ pay. However, the provision concerning the minimum amount of compensation is not applicable if giving notice is based solely on financial or production-related reasons.

Temporary childcare leave entitles the parent of a child aged under ten to stay at home to take care of a child in case of an acute illness for a maximum of four working days. Absence from work to take care of a family member or other person close to the employee refers to absence from work for a specific period and its use is subject to agreement with the employer.

The re-employment of employees dismissed for financial or productionrelated reasons is supported by means of the policy of change security.

Under certain conditions, it also concerns fixed-term employees that have worked for the same employer. During the period of notice, employees are entitled to free time on full salary to look for a job or to participate in other measures that promote re-employment. The amount

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of this leave depends on the length of the dismissed person’s period of notice and can vary from five to 20 working days. The employer also has duties to inform and report to the personnel and the Employment and Economic Development Office.

Furthermore, pursuant to the provisions of the Act on Cooperation within Undertakings, the employer must prepare an action plan in collaboration with the personnel. The purpose of this plan is that during the cooperation negotiations concerning redundancies, the enterprises establish a chain of events that proceed logically, consisting of gathering information, dissemination, joint planning and talks supporting the employment of the employees, which involve the representatives of the employer and employees and the labour authorities. The employment authorities are also tasked with providing information about their services and assistance in the planning of operating principles related to employment. A dismissed employee has, on certain conditions, the right to an individual employment programme. The operating model of change security also includes the right to an employment programme benefit (an increased unemployment benefit) for a maximum of 185 days. The dismissed employee is only entitled to this in case an employment programme has been prepared for him/her and he/she participates in, for example, labour policy adult education as outlined in the employment programme.

Lay-offs refer to the temporary termination of work and payment of salaries on the employer’s initiative. Employees can be laid off until further notice on the same grounds as they can be given notice for financial or production-related reasons. If it is deemed that work has only temporarily diminished, the lay-offs can be implemented for a fixed period for the duration the lack of work is expected to last.

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Temporary agencies The use of the services of temporary agencies refers to a contractbased arrangement by which a private employment agency places its employees at the disposal of a customer company (user company) against a payment, when the work is performed under the user company’s direction and supervision. The minimum terms of employment of temporary agency workers are determined primarily in accordance

with the collective agreement binding the temporary agency under the Collective Agreements Act (known as a normally applicable agreement) and the generally applicable collective agreement for temporary agency businesses. If such an agreement does not exist, the terms are determined in accordance with a collective agreement binding the user company either under the Collective Agreements Act or the generally applicable collective agreement.

Mandatory nature of the Act The Employment Contracts Act is basically mandatory by nature. The employer and the employee may only agree otherwise in an employment contract when it comes to provisions that expressly state the possibility to do so. In addition, national employer and employee organisations may conclude collective agreements deviating from the Act in matters that have been specifically stated in the Act.

The Pay security Act (866/1998) and The Seamen’s Pay Security Act (1108/2000) Pay security is based on the Pay Security Act, in accordance with which the state will ensure payment of employees' claims arising from an employment relationship in the event of the employer's bankruptcy or other insolvency. The maximum amount of pay security for one employee for work carried out for the same employer is EUR 15,200.

The pay security authority will investigate the employer’s insolvency and the conditions for paying pay security on the basis of an employee’s application. Any claims the employer would be obliged to pay to his or her employee can be paid as pay security. An application for unpaid claims to be paid as pay security must be filed within three months of the date they fall due. Pay security is only paid to workers with a valid employment contract.

The Unemployment Insurance Fund compensates the state annually for the difference between capital paid as pay security and capital collected from employers. The funds needed for the purpose are collected from employers in the form of unemployment insurance contributions.

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The Collective Agreements Act (436/1946) The central principles on collective bargaining have been recorded in the Collective Agreements Act. Collective agreements have two important functions: they guarantee the employees minimum-level terms of employment and, on the other hand, they contain a duty to maintain industrial peace. The Collective Agreements Act includes provisions regarding the conclusion, applicability and observance of collective agreements, as well as a duty to maintain industrial peace. The duty to maintain industrial peace concerns the term of validity of the collective agreement and requires refraining from industrial action against the collective agreement.

The employer party may be one or more employers or a registered association of employers. On the employee’s side, only a registered employee union is eligible as a party to the collective agreement. One of the main purposes of these associations must be to look after the interests of either employers or employees in employment relationships.

In collective agreements, the bargaining parties agree on the stipulations to be applied to employment contracts and relationships. A collective agreement must be drawn up in writing and it may be either of a fixed duration or agreement for an indefinite period subject to notice of termination. A collective agreement binds the employers and organisations who concluded the agreement as parties, and is solely binding on the affiliated associations of the parties and their individual members (this is known as normal applicability). It also binds those that endorse it at a later date by the consent of those involved.

Disagreements deriving from the interpretation of the collective agreement and breaches thereof are tried and settled in the Labour Court.

If any part of an employment contract is in conflict with the provisions of the collective agreement applicable to the employment relationship, such part of the employment contract shall be null and void and the relevant provisions of the applicable collective agreement shall be observed instead, in cases where this is more advantageous to the employee.

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Provisions on the rights of employees and employers to take collective industrial action are laid down in the Act on Mediation in Labour Disputes (420/1962). A national conciliator, assisted by other conciliators, has been appointed for the purpose of mediation of labour disputes between employers and employees and the promotion of relations between labour market parties.

The Posted Workers Act (1146/1999) The Directive of the European Parliament and Council concerning the posting of employees in another EU Member State when providing services (96/71/EC) implemented in Finland by the passing of the Posted Workers Act. This Act applies to work performed in Finland based on an employment contract. A posted worker refers to a worker who ordinarily works in a Member State other than Finland and whose employer company based in another country has posted him or her in Finland for a limited time while engaged in an employment relationship for the provision of cross-border services. The Act does not apply to seafaring employees on ships practicing merchant shipping.

The purpose of the Act is to ensure the posted worker certain minimum working conditions, such as a salary in accordance with the working conditions of the country in which the work is performed.

Regardless of the law otherwise applicable to the employment contract of the worker posted in Finland, certain provisions and regulations of the Finnish legislation shall apply insofar as they are more favourable to the employee than the terms of employment otherwise applicable.

The Non-Discrimination Act (21/2004) and the Act on Equality between Women and Men (609/1986) The right to equal and non-discriminatory treatment is a basic human right. The purpose of the Non-Discrimination Act and the prohibitions of discrimination contained in labour legislation is to ensure equal treatment of all jobseekers and employees and to protect them from discrimination in working life. The Non-Discrimination Act requires authorities to promote equality in all their activities.

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The Non-Discrimination Act applies to the basis of recruitment, working conditions, terms of employment, career advancement, education and the prerequisites of enterprising and support for industrial activities.

The Non-Discrimination Act prohibits both direct and indirect discrimination on the basis of age; ethnic or national origin; nationality; language; religion or belief; opinion; state of health or disability; sexual orientation; or other personal characteristics.

Under the Non-Discrimination Act, harassment, an instruction or order to discriminate and counter-actions are also prohibited. The person subjected to discrimination or a counter-action may claim compensation, the maximum amount of which is EUR 16,430 (revised against the certain index every three years).

A person may not be treated differently because of their ethnic origin in social and health care services, social security benefits or other benefits and advantages granted on social grounds. This also applies to the offer or availability of housing and movable and immovable property and services to the general public other than legal actions falling within the scope of private affairs and family life.

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The Act on Equality between Women and Men (the Equality Act) imposes a prohibition of discrimination on the basis of gender. The purpose of the Act is the practical implementation of equality between women and men, and it is aimed in particular at improving the position of women in working life.

The Equality Act includes a general prohibition of direct and indirect discrimination based on gender.

Discrimination under the Equality Act means treating women and men differently on the basis of gender; treating women differently for reasons related to pregnancy or childbirth; or treating women and men differently on the basis of parenthood, family responsibility or any other gender-related reason.

Discrimination also includes actions which, because of the above reasons, in real terms result in people ending up with unequal status.

The Equality Act specifically defines what constitutes discrimination in working life. Prohibited discrimination may be manifested, for example, in recruitment, selecting employees for different tasks or training, working conditions, compensation and other terms of employment, neglecting the duty to eliminate sexual harassment and molestation, deteriorated working conditions or terms of employment after the employee has made an appeal to the rights provided in the Equality Act, or terminations or lay-offs. An employee who has been discriminated against has the right to claim compensation from the employer, amounting to a minimum of EUR 3,230 but not exceeding EUR 16,210 (revised against the certain index every three years).

The Act also imposes the general duty on every employer to make focused and systematic efforts to promote equality. Employers are obliged to promote the equal positioning of women and men in different jobs and provide them with equal opportunities to advance in their careers. Workplaces with more than 30 employees must prepare an equality plan.

Compliance with the Equality Act is supervised by the Ombudsman for Equality and the Council for Equality.

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Young workers Special provisions for the protection of young workers are enacted in the Young Workers’ Act (998/1993). This Act applies to work carried out by a young person under 18 years of age (a young worker) in an employment or civil service relationship. The occupational safety and health provisions of the Act also apply to students aged under 18 in an apprenticeship or training exercises carried out at school. Furthermore, general labour legislation shall apply to the employment of young people, unless specifically stated otherwise in the above-mentioned special law concerning young people.

The Act includes provisions concerning the conditions of admitting young people to work; the regular working hours of young workers; the maximum working hours; the distribution of working hours; the periods of rest given to young workers and occupational safety and health; the employers’ responsibilities to provide training and guidance; special responsibilities concerning specific safety measures; and arranging medical examinations.

In terms of their permissibility, jobs can be divided into prohibited jobs, hazardous jobs, work to which no specific provisions are applicable and duties suitable for young workers. Other legislation applicable to young workers includes the Government Decree on Work Especially Harmful and Hazardous to Young Workers (475/2006), the Decree of the Ministry of Social Affairs and Health on the List of Work Hazardous to Young Workers (302/2007), and the Decision of the Ministry of Labour on light duties suitable for young workers (1431/1993).

Protection of privacy in working life

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The aim of the Act on the Protection of Privacy in Working Life (759/2004) is to implement the protection of privacy in working life.

This Act lays down provisions on what kind of personal data the employer is allowed to process about employees. The Act complements the Personal Data Act (523/1999), which is a general Act on the processing of personal data, and the Act on Data Protection in Electronic Communications (515/2004).

The employer may only process personal data that is directly necessary for the employee’s employment relationship and concerns the rights and duties of the parties in the employment relationship or the benefits offered by the employer for the employee or arises from the special nature of the job’s duties. The employer may not make exceptions to this provision of necessity, even with the employee’s consent.

The Act prescribes the procedures to be followed by the employer when collecting and processing personal data relating to the employment or civil service relationship. The Act also lays down provisions on personality and aptitude assessments and other testing and examinations, as well as the processing of information concerning the employee’s state of health and personal credit data. Furthermore, the Act contains provisions on drug tests, camera surveillance, and the protection of e-mail messages. The employer has no right to handle any genetic testing results of the employee.

In accordance with the law, issues to be handled in the cooperation procedure between the employer and the employees include the data collected at the beginning and during the employment relationship as well as procedures for the technical monitoring of the employees, and the employees’ use of data network and e-mail.

The Act on Checking the Criminal Background of Persons Working with Children (504/2002) The purpose of the Act on Checking the Criminal Background of Persons Working with Children is to protect the personal integrity of minors. The Act provides a procedure by which the criminal background of persons selected to work with minors, i.e. persons under 18 years of

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age, is checked. This procedure for checking the criminal background is part of the aptitude assessments of jobseekers.

This procedure is applied to work performed both in employment and civil service relationships which involve, on a permanent basis and to a material degree, raising, teaching, caring for or looking after minors, or other work performed in personal contact with minors, without the attendance of a guardian. In order to be recruited for a job involving work with children, a private person can obtain information concerning him/herself in the criminal record free of charge.

An employer should ask the person selected for the above duties to show the extract from the criminal record referred to in the Criminal Records Act, showing whether the person concerned has been sentenced to punishments for sexual, violent or drug offences. The entry in the extract from the criminal record does not prevent the recruitment of the person, but the aptitude of the person will always be assessed by the employer.

Working hours and annual holiday The Working Hours Act (605/1996) The Working Hours Act shall be applied to all work performed in an employment or civil service relationship. The Act also includes a list of types of work it shall not apply to. The Act is basically mandatory by nature, but national labour market organisations may deviate by collective agreements from several provisions of the Working Hours Act.

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According to the Act, regular working hours may be based either on the general provision of an eight-hour working day or 40-hour working week, the provisions of a collective agreement, or agreements based on them relating to a particular workplace. The employer and an individual employee may also agree on regular working hours within certain limits. Regular working arrangements can be based on the average use of working hours, which means that the daily and weekly hours may vary as long as the working hours average 40 hours a week over a predetermined period. This period may be no longer than 52 weeks in duration.

Work may also be organised in periods so that the total working hours amount to 80 hours in two weeks or 120 hours in three weeks. The fields in which work in periods is possible are listed in the Working Hours Act. In addition, the use of periodic work may also be allowed by provisions of the workers' or civil servants' collective agreement or contract.

In accordance with the Act, overtime may be carried out per day or per week. Daily overtime refers to work that goes beyond what is permitted by law to be the regular daily working hours. Correspondingly, weekly overtime means work that exceeds the regular weekly working hours as decreed by the Act, done during days off, for instance. Daily overtime normally begins after a person has worked for eight hours during the daily 24-hour period. Weekly overtime consists of any hours exceeding a 40-hour week and excluding daily overtime. Overtime is compensated with a higher rate of pay.

The Act also determines limitations on overtime. The employer can have the employees working a maximum of 138 hours of overtime during each four-month period. During a calendar year, the employer can have the employee do a maximum of 250 hours of overtime. In addition, it is also possible to agree at the workplace on doing an additional 80 hours of overtime. Even in this case, the 138-hour limit over four months must be observed. The specific consent of the employee is required each time overtime is required. The specific consent of the employee is required each time overtime is required.

Besides regular and overtime working hours, the employer may have the employees work emergency hours based on certain provisions in the Act. The reason for emergency work has to be an unforeseen event which has interrupted the normal operation of a business, a plant or an establishment or seriously threatens to lead to such an interruption or constitutes a serious threat to life, health or property.

The Annual Holidays Act (162/2005) The Annual Holidays Act applies with certain restrictions to work in an employment or civil service relationship. The Act lays down provisions on the length of annual leave, holiday pay, holiday compensation

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and the granting of annual leave. The Annual Holidays Act is mainly based on the principle of earning: the leave is earned by working during the holiday credit year, i.e. the period starting on 1 April and ending on 31 March. There are two rules governing the accrual of annual leave. Those who work for a minimum of 14 days during all months according to their contract are within the scope of the 14-day rule. Those who work for a minimum of 35 hours during at least one month according to their contract and who are outside the scope of application of the 14-day rule are covered by the 35-hour rule.

The accrual of annual leave is calculated according to the holiday credit months and it is dependent on the length of the employment relationship. In employment relationships that have lasted for less than a year, two working days of leave and in employment relationships having lasted at least a year, two and a half working days are earned for each full holiday credit month before the end of the holiday credit year. A full holiday credit month is considered to be a calendar month during which workers covered by the 14-day rule have accrued at least 14 working days or days comparable to working days, and persons covered by the 35-hour rule have accrued at least 35 working hours or hours comparable to working hours.

When calculating a full holiday credit month, specifically detailed days of absence are considered comparable to working days or hours. These include periods such as annual leave or sick leave, maternity, paternity or parental leave, days of temporary childcare leave, study leave, and lay-offs with restrictions prescribed in the Act. Those employees falling outside the scope of the earning rules (in other word those who, based on their contracts, work for less than 35 hours every month) are entitled to a leave equivalent to the annual leave. Two working days of leave can be obtained for each month the employment relationship has been valid. In employment relationships that have lasted at least a year, the employee has the right to four weeks’ leave. For the time of the leave, holiday compensation is paid.

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Those employees within the 14-day rule that work for a weekly wage or monthly salary receive their normal pay during the annual leave.

The holiday pay of those employees within the 14-day rule being paid by the hour is determined based on coefficients determined by the average daily wage and the duration of the holiday in number of days.

Those employees within the 35-hour rule receiving a weekly wage or a monthly salary, who according to their contract work a minimum of 35 hours a month during all months, also receive their normal pay during the annual leave. The holiday pay of employees covered by the 35-hour rule being paid by the hour or receiving performance pay is determined as a percentage share of the wages paid during the holiday credit year. If the employment relationship has lasted for a year by the end of the leave qualifying year, the holiday conpensation is 11.5 per cent, and in employment relationships shorter than this, it is nine per cent of the earnings. The percentage-based calculation of holiday pay also includes those employees covered by the 35-hour rule who receive a weekly or monthly salary who, according to their contracts, only work a minimum of 35 hours in some months.

On top of the basic holiday pay calculated on percentage-based manner, any pay not received during absences due to maternity, special maternity, paternity and paternal leave and temporary childcare leave or absence due to a compelling family reason is payable. In these calculations, pay not received during sick leave or rehabilitation and periods of lay-offs up to the amount prescribed in the law is also taken into consideration.

The holiday pay must be paid before the start of the holiday. Holiday pay for no more than six days of leave (such as the pay for a winter holiday) may be paid on the usual pay day.

Holiday compensation paid to the employee at the end of the employment relationship for any holiday entitlement earned but not yet received is calculated in accordance with the rules concerning holiday pay as described above.

The annual leave is earned and taken in working days. 24 working days of annual leave, or the summer holiday, shall be taken during the holiday season, the period between 2 May - 30 September. The remainder of the leave, the winter holiday, must be granted no later than by the beginning of

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the following holiday season. The employer and the employee may agree on the time of the annual leave within the limits prescribed in the Act. The employee has the right to save the part of leave exceeding 24 days as carried-over leave. The employer may forbid the saving of the leave for a justified reason only. In addition, the employer and the employee may agree on saving the part of the leave that exceeds 18 days and taking the part of leave exceeding twelve working days by no later than in connection with the annual leave of the following holiday season.

Job-sharing and studying

In the recruitment of substitutes, priority should be given to young people, the long-term unemployed, or an unemployed person who has recently attained an academic or vocational qualification. The unemployed person need not be employed for the same duties from which the job alternator has taken leave.

The Act on Job Alternation Leave (1302/2002)

The Study Leave Act (273/1979)

The purpose of the Act on Job Alternation Leave is to promote the worker’s well-being at work through short-term absence from work, simultaneously providing an unemployed jobseeker an opportunity of acquiring work experience through fixed-term employment. It also gives the employer an opportunity to provide the working community with new skills.

The purpose of the statutory study leave system is to improve the opportunities for training and studying available to the working population. Studies do not need to relate to the employer's operations, and the employee may freely choose what to study. In accordance with the Act, study leave is unpaid. However, it is possible to receive financial aid for vocational studies or training as decreed under the Act on Adult Education Allowance (1276/2000). The aid is paid by the Education Fund. An employee taking study leave has the right to return to the same or corresponding job, but there is no special protection from termination to guarantee the return.

An employer and the workers can agree that the worker takes job alternation leave to be used in the way the worker wishes. The requirement for getting job alternation leave is that the employers bind themselves to recruiting an unemployed jobseeker from the employment office as a substitute during the job alternation leave. Another prerequisite for getting job alternation leave is that the person is a full-time employee (working time exceeds 75 per cent of the working time for full-time workers in the field) and that his or her time at work and employment relationship with the employer have lasted a consecutive period of at least 13 months before the beginning of job alternation leave. In addition, the employee should have a work history of at least ten years as prescribed by the employment pension legislation.

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of any other employee. The employee will receive job alternation allowance for the period of the leave. The full amount of this allowance is 70 per cent of the amount the employee would receive as unemployment benefit in the case of unemployment. If the employee has a work history of at least 25 years, the allowance is 80 per cent.

The job alternation leave must last no less than 90 and no more than 359 calendar days. After the leave, the employee has the right to return to his or her previous job or a job comparable to it. An employee may not be dismissed because of the job alternation leave, but in other respects the job alternator's protection from termination is no better than that

The right to take study leave concerns all employees, whether in an employment or civil service relationship. Employees whose full-time employment with the same employer has lasted for one year in one or more periods are entitled to study leave.

The maximum length of study leave is two years over a period of five years, and it can be taken in one or more instalments. If the employment has lasted for less than a year but at least three months, the maximum length of study leave is five days.

In principle, during study leave the employee does not accumulate benefits that would otherwise be part of the employment relationship.

Study leave can be interrupted on certain conditions.

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Personnel Involvement Systems The Act on Cooperation within Undertakings (334/2007) The purpose of the Act on Co-operation within Undertakings (the Act on Co-operation) and its various provisions concerning co-operation procedures emphasise the spirit of co-operation and seeking consensus. The Act is applied, subject to certain exceptions, to undertakings that normally employ at least 20 persons.

All enterprises and other organisations and foundations, regardless of whether their operations are intended to make a profit, and of which party finances them, fall within the scope of the Act on Co-operation.

However, the Act does not apply to the State or municipalities. Parties to co-operation include the employer and personnel of the enterprise, and, in certain cases, the employee him- or herself. The Act defines personnel groups and their representatives, who, in general, are either shop stewards or elected representatives as referred to in the Employment Contracts Act. In certain cases, it is also possible to elect a specific co-operation representative. Hence, personnel representatives’ rights to represent employees in co-operation negotiations are clearly based on the Act. However, the Act does not oblige the personnel or the enterprises to elect personnel representatives.

The Act on Co-operation is divided into chapters in line with different co-operation procedures, as follows: Information provided to representatives of personnel groups Undertaking’s general plans, principles, and objectives Agreement and decisions by personnel Changes in business operations affecting the personnel and arrangement of work Co-operation procedure in connection with a business transfer Co-operation procedure in reducing the use of personnel Miscellaneous provisions

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The Act is divided into chapters, for clarity. Special attention has been paid to the broad scope of co operation, because undertakings must engage in co-operation on a number of issues, not only during the procedure in dismissals.

In co-operation negotiations, the undertaking shall each year prepare a plan related to personnel and training objectives. In addition to the development of the breakdown and number of personnel in the undertaking, these must include at least the principles for use of various forms of employment relationships and assessment of any changes occurring in the employees’ professional skills requirements and reasons for them, as well as annual training objectives based on this assessment. Realisation of the plan, and attainment of objectives, must also be monitored in cooperation. In addition, the employer must each quarter provide personnel groups’ representatives with information on the number of employees in fixed-term and part-time employment relationships in the undertaking.

In addition to information on the financial position of the undertaking, the employer shall each year, at regular intervals, present the representatives of personnel groups with a report of the principles applied within the undertaking for the use of subcontracted labour insofar as subcontracted work is performed on the employer’s work premises or work site. If the use of external labour (subcontracted labour and temporary-agency work) is estimated to affect the personnel, this must be handled separately in a co operation procedure. The Act also includes provisions on co-operation procedure for matters having to do with the use of temporary-agency work.

Each chapter of the Act includes provisions on negotiation procedures for co-operation, from initiation of negotiations to their termination.

The employer must provide personnel representatives both with an initiative to commence negotiations and with information on each matter at hand in time to enable, depending on the matter, employees or personnel group representatives to prepare for negotiations and handle matters among themselves and/or with the employees they represent, before the negotiations commence. In cases of reduction in workforce, the initiative must be presented five days before the negotiations commence. No provisions on other time limits are given.

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The minimum period for negotiations concerning the notice of termination, layoffs, or reduction of a contract of employment to a part-time contract is 14 days, if such negotiations affect fewer than 10 employees. If they concern at least 10 employees, the negotiation period is six weeks. In enterprises employing 20–29 employees, the negotiation period is 14 days even in the latter cases.

The maximum amount of indemnification as sanction for dismissing or laying off an employee or reducing the employee’s contract to a part-time contract without complying with co-operation procedure is 30,000 euros. In 2011, adjusted by index, this value comes to 31,570 euros. Factors influencing the amount of indemnification include the degree of neglect and the size of the undertaking. The employee is further entitled to other compensation due to illegal termination of employment. The indemnification is exempt from tax.

In addition to imposing a fine as a penalty, the Act on Co-operation includes a coercive measure in case the employer neglects to provide information falling within the scope of the duty to inform, such as financial statements or a report on the undertaking’s financial situation or fixed-term and part-time employees, or salary information.

Personnel group representatives may require a decision by a court of law to oblige the employer to provide such information under threat of penalty payment (fine). If an employee fails to prepare a plan regarding personnel, or training objectives, the co-operation ombudsman supervising the law may apply for a corresponding decision.

International regulations that are binding for Finland – in particular, the EU Directive on informing and consulting employees (2002/14/EC) – have been observed in the preparation of the Act. The co-operation ombudsman supervises compliance with the Act on Co-operation and other acts pertaining to the involvement of employees.

Cooperation within groups

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In accordance with the Act on Cooperation within Finnish and Community-wide Groups of Undertakings (335/2007), a Finnish

group that has at least 500 employees in Finland has to conclude an agreement on cooperation within the group with those affiliated companies that have at least 20 employees. The agreement may involve the management of all arrangements necessary for cooperation within the group, such as dissemination of information, negotiation procedures, personnel representation, and realising inter-personnel interaction.

If an agreement regarding cooperation within the group cannot be reached, the cooperation has to be arranged following the minimum requirements included in the Act (national cooperation within groups).

In addition, in accordance with the European Council Directive 45/94/ EC, the above-mentioned Act also applies to the establishment of a European Works Council or another procedure for informing and consulting with the employees in multinational undertakings (international cooperation within groups).

The Act on Personnel Representation in the Administration of Undertakings (725/1990, Act on Administrative Representation) The Act on Administrative Representation gives the personnel the right to take part in the handling of matters that involve company business and the position of personnel on the administrative board, the board of directors or the management group of the company. The representation is to be agreed between the company and the personnel. If no agreement can be reached regarding personnel representation, representation nevertheless has to be organised in compliance with the minimum requirements of the Act. The Act is applicable to companies that have at least 150 employees.

The personnel representatives have basically the same rights, duties and responsibilities as the members elected by the company in the relevant organ. However, they do not have the right to take part in the handling of matters that involve the election or dismissal of the company management, the terms of managerial contracts, the terms of personnel employment relationships or measures in case of industrial action.

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The Act on Personnel Funds (934/2010) The purpose of personnel funds is to reward the entire personnel for the achievement of goals and to improve the productivity, efficiency and competitiveness of the company. The establishment of personnel funds is voluntary and requires, in practice, mutual understanding between the employer and personnel on the matter. The personnel decide on the establishment of the fund, and the employer on the performance or profit bonus system. The scope of application of the Act is wide, as it is possible to establish funds quite comprehensively regardless of the field of operation of the employer, as long as the employer has at least ten employees.

Various performance and profit bonus items may be deposited into the personnel fund. The Act prescribes the personnel fund contribution, which the employer decides in advance after cooperation negotiations with the personnel on the grounds for bonuses. The personnel fund contribution must concern all employees, and its maximum amount will be determined on the basis of equal conditions for all. The personnel fund contribution may also be determined as a personal share of the total, if the determination conditions meet the above criteria. A special supplement to a personnel fund contribution may also be deposited into the fund if it concerns all employees or a clearly specified part of the organisation. The supplement to a personnel fund contribution may not exceed one month’s pay. Annually, a maximum of 15 per cent of the employee’s capital is transferred into the funds that can be withdrawn.

A personnel fund is not liable to pay taxes. For the company, performance and profit bonus items are tax deductible expenses. The items withdrawn from the personnel fund capital by the member are taxed during the year of withdrawal. The member will pay income tax for 80 per cent of the item, and a share of 20 per cent of the withdrawn funds is left untaxed.

The Act on Employee Involvement in European Companies (SE) and European Cooperative Societies (SCE) (758/2004) A European company is a company form through which it is possible to engage in business over the whole European Economic Area in the

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name of one company. In Finland, the Act on Employee Involvement in European Companies (SE) and European Cooperative Societies (SCE) imposes the European Union Directive on complementing the regulations on European Companies with personnel representation. Personnel representation refers to a system through which staff representatives can influence decisions made in the company.

For the purposes of negotiating personnel representation, a specific negotiation group representing the staff of the European company is set up. The task of this group is to negotiate an agreement concerning personnel representation. If no agreement is reached within the time limit or if the parties so agree, the secondary provisions of the Act shall be applied in personnel representation.

Similar provisions also apply to European Cooperative Societies.

3 Industrial Peace and the

Right to Industrial Action The employer and employee parties bound by a collective agreement may not, during its validity, take industrial action that is directed against the collective agreement as a whole or any of its provisions.

The parties and their subordinate associations have the duty to supervise the preservation of industrial peace. A single employer and/or an employer and employee association may be ordered to pay a compensatory fine for breaking the industrial peace.

Once the collective agreement has expired, i.e. during a period with no valid agreement, the employees´ party may put pressure on the employer through strikes or other measures of industrial action. The employer, on the other hand, may use a lockout. Political strikes and sympathy strikes are permitted.

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Interest disputes and legal disputes A permanent arbitration procedure for labour disputes has been created to deal with interest disputes arising from working life by the Act on Mediation in Labour Disputes (42/1962). Legal disputes concerning the contents of collective agreements or breaches thereof can be taken to the Labour Court. Legal labour disputes that do not concern collective agreements can be taken to public courts.

Furthermore, the Labour Court handles certain complaints concerning derogation permits related to working hours, as well as appeals on committee decisions concerning the general applicability of a collective agreement.

Arbitration procedure for conflicts of interest disputes

4 Occupational Safety and Health

The purpose of the arbitration procedure is to help labour market organisations reach a collective agreement when the negotiations have stalled. At the moment, there is one Public Conciliator and six part-time regional conciliators appointed by him or her to arrange the arbitration procedures. By law, the parties have the duty to be present at the arbitration, but they do not have the duty to accept the arbitration proposal the conciliator may present.

Supervision of compliance with the provisions of labour legislation is mainly the statutory duty of the occupational safety and health authorities. The Ministry of Social Affairs and Health manages the occupational safety and health administration at the national level. At the local level, the Regional State Administrative Agencies' occupational safety and health areas of responsibility supervise occupational safety and health.

Negotiations regarding legal disputes If disagreements arise at workplaces regarding the contents of the collective agreement or its interpretation, or if it appears that the agreement may have been breached, attempts are usually made to solve the dispute in workplace level negotiations. If the matter cannot be resolved between the employees and the employer, negotiations will continue between the employer and the shop steward representing the trade union. If the negotiations still do not produce a solution, the matter will be forwarded to be negotiated between the employer´ associations and trade unions. If no solution can be found at this level, either one of the unions may take the matter to the Labour Court.

The Labour Court

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interpretation of a certain provision. The Labour Court also decides on the amount of a compensatory fine for an illegal strike. The decision of the Labour Court is final.

The Labour Court was established in 1947. Its jurisdiction comprises the settling of matters concerning the legitimacy, validity, contents and scope of collective agreements and contracts, as well as the correct

The inspectors of occupational safety and health carry out inspections as often and as efficiently as necessitated by the supervision. A written inspection report is given in connection with the inspection. Depending on the nature of any shortcomings, the inspectors may also give written guidance and advice or give an order to eliminate or mend the state of affairs failing to meet occupational safety and health regulations. As the final measure, the occupational safety and health authority may oblige the employer to take measures ordered in an inspection within the stipulated deadline and enforce the order with a conditional imposition of a fine. The occupational safety and health authority may also interrupt a work process or prohibit it completely.

The central laws relating to occupational safety and health include the Occupational Safety and Health Act (738/2002), several more specific regulations issued on the basis of this, and the Occupational Health Care Act (1383/2001).

The Ministry of Social Affairs and Health (www.stm.fi and www.tyosuojelu.fi) is responsible for the preparation of national legislation related to occupational safety and health.

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5 Social Security The Finnish social security system covers the entire population. The social security system is divided into earnings-related social security and basic social security. Central earnings-linked social security benefits include pension security, sickness benefit, maternity, paternity, parental and special maternity benefits, as well as unemployment benefit. In cases where an employee has not accrued earnings-related social security, he or she will be paid a minimum amount allowance; in unemployment allowance it will be labour market support; in health insurance, the minimum allowance and in the pension system, the national pension.

The Ministry of Social Affairs and Health (www.stm.fi) is responsible for the preparation of social security legislation.

6 Organisations Participating in Tripartite Labour Negotiations Wage and salary earners’ organisations Central Organisation of Finnish Trade Unions – SAK was founded in 1907. With some 1.04 million members, it is the biggest central organisation in terms of membership. It has 21 affiliated organisations.

Members include workers in the industries, the public sector (municipalities and the state), the transport sector and private service industries. Less than one-half of all SAK members work in the industrial sector, about one-third in private services and a quarter in the public sector. Some 46 per cent of SAK members are women. (www.sak.fi)

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The Finnish Confederation of Professionals STTK was founded in 1946. It has some 615,000 members and 20 affiliated unions. STTK’s membership consists of white-collar employees of the state, munici-

palities, parishes, the services sector and industries. About two-fifths of the members work in the municipal sector, two-fifths in the private sector, and one-fifth in state administration. Approximately two-thirds of the members are women. (www.sttk.fi) AKAVA – The Confederation of Unions for Professional and Managerial Staff in Finland was founded in 1950. It is the central labour market organisation for highly educated salary earners and professionals. It has 34 affiliated associations with 552,000 members. Some 55 per cent of the members work in the private sector and 45 in the public sector. 42 per cent of its members are women. (www.akava.fi)

Employer organisations The Confederation of the Finnish Industries EK started operating in 2005, when the Confederation of Finnish Industry and Employers and the Employers’ Confederation of Service Industries united to form one organisation. EK has 27 affiliated associations with some 16,000 member companies. These companies have some 950,000 employees.

EK offers blanket representation for all private industries and companies of all sizes.

Public sector employer organisations include The Local Government Employers KT (there are 431,000 civil servants and employees working in the municipal sector), the Office for the Government as Employer VTML (the government sector has some 86,000 civil servants and employees), and The Commission for Church Employers KiT (slightly over 21,000 civil servants and employees).

Entrepreneur organisations The Federation of Finnish Enterprises FFE has been operating in its current form since 1996. It is an organisation for small and mediumsized companies, involved in entrepreneurship, economic, and employer policy. It has more than 400 local associations of companies, 21 regional organisations, and 53 trade organisations, and through the affiliated organisations the membership amounts to 112,000 enterprises. Of these, some 45,000 are employer companies with about 450,000 employees.

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Contact information Post address Ministry of Employment and the Economy Labour and Trade Department P.O. Box 32, FI-00023 GOVERNMENT Telephone exchange: 010 606 000 Official email address: kirjaamo@tem.fi The e-mail addresses of the staff are of form: forename.surname@tem.fi www.tem.fi January 2012

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