Definitive Report - Report No 243, March 1986

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

1. 209. The complaint is contained in communications dated 24 May and 5 July 1985. The Government's reply was contained in communications of 7 October 1985 and 20 February 1986. Additional information was communicated by the Government on 20 and 23 December 1985 and 6 February l986 and by the complainants on 20 December 1985, 24 January and 12 February 1986.
2. 210. Denmark has ratified the Freedom of Association and the Protection of Right to Organise Convention, 1948 (No.87), the Right to Organise and Collective Bargaining Convention, 1949 (No.98) and the Labour Relations (Public Service) Convention, 1978 (No.151).

A. The complainants' allegations

1. 211. The complainants state, in their communication of 24 May 1985, that they are concerned at the non-compliance by the Government with Conventions Nos. 87 and 98, which it has ratified, and with the principles of freedom of association as a result of its intervention by applying and enacting legislation on three occasions since 1982 affecting collective agreements which had been negotiated between trade unions and the relevant employers' organisations.
2. 212. According to the complainants, the first such intervention, in October 1982, involved the suspension by the Government of wage indexation; even at that time they had been of the view that this might be at variance with Conventions Nos. 87 and 98, but were aware of ILO decisions allowing restrictions on the free fixing of wages as an exceptional measure, and only to the extent necessary without exceeding a reasonable period.
3. 213. When the Government had intervened for a second time in May 1984 to prolong this suspension, the complainants had sought the opinion of the Committee of Experts on the Application of Conventions and Recomendations. In their view the remarks of that Committee on the subject in its 1985 report to the International Labour Conference confirmed their opinion that the actions of the Government had violated Conventions Nos. 87 and 98.
4. 214. The complainants go on to state that they had no alternative but to resort to a complaint to the Committee on Freedom of Association following the enactment, on 30 March 1985, of the Act on the Renewal and Prolongation of Collective Agreements, etc., as this was the third occasion in less than three years of government intervention in matters regulated by collective agreements.
5. 215. The complainants point out that, although the social partners had already agreed to the exclusion of essential services from industrial action, the restrictions involved in the last-mentioned measure applied to virtually the entire labour market.
6. 216. As regards the private sector, the complainants state that the Government's action had put an end to legal strikes for which due notice had been given after strikes and lock-outs had twice been postponed by the Conciliation Board. In addition, collective bargaining had only just begun in the public sector and had been interrupted by the passage of the legislation, so that public employees had no real opportunity of exercising their right to negotiate and had been prevented by the legislation from applying their right to strike.
7. 217. In their communication of 5 July 1985, the complainants refer to the absence of any consultations with the trade union movement before the suspension of wage indexation in 1982, and to a request by the Danish Parliament on 20 March 1984 to the Government, "as part of a tight incomes policy", to organise tripartite consultations concerning the reduction of working hours in the private and public sectors, as well as investment and employment policies. The complainants state that this was ignored by the Government before it acted in May 1984 to prolong the suspension of indexation until 1987. They state that only after it had taken this action did the Government convene the social partners in May and September 1984 to discuss the economic situation, but that these talks had not led to the initiation of tripartite negotiations of the kind envisaged in the parliamentary resolution referred to above; and that in fact no such negotiations or consultations had taken place between the Government and the trade union movement on collective bargaining matters from September 1984 to the date of the adoption of the legislation prolonging collective agreements. They are accordingly of the view that the intervention had thus been undertaken without the opportunity for negotiations between the trade union movement and the Government.
8. 218. The complainants also provide information on the attempts which they made at a meeting of the ILO standing committee in Denmark to secure the establishment of a tripartite subcommittee to examine whether the Government's intervention was in accordance with ILO Conventions, which in their view would have been in keeping with the Tripartite Consultation (International Labour Standards) Convention, 1976 (No. 144) and Recommendation (No. 152). The complainants state that the Government declined to support such an examination as it did not consider its intervention to be at variance with Denmark's obligations under ILO Conventions. The Government was also of the view that the Convention and the Recommendation do not contain any obligations concerning the examination at a national level of the application of ILO Conventions.
9. 219. In their communication of 20 December 1985, the complainants refer to a meeting called by the Government at their request on 24 October 1985 for the purpose of an exchange of views on labour market policies. At the meeting, the complainants expressed the wish to discuss the suspension of the wage indexation scheme as had inter alia been recommended by the ILO Committee of Experts on the Application of Conventions and Recommendations and the Conference Committee on the Application of Conventions and Recommendations. The complainants state that the Government declined to do so, and that the Minister would also not give any indication as to whether wage indexation would continue beyond the expiry of the date in 1987 of the latest suspension. The complainants do not regard this attitude as conforming to the recommendations of the Committee of Experts; nor do they regard the meeting of 24 October as a step in the implementation of those recommendations, as the Minister had made it clear that the discussions were not designed to reach a mutually agreed conclusion.

B. The Government's reply

1. 220. The reply of the Government in its communication of 7 October 1985 starts by referring to the economic difficulties with which it was confronted on coming into office in September 1982. These, it says, included heavy and growing deficits in the budget and balance of payments, increasing unemployment, falling employment in the private sector, a high rate of inflation and big increases in wages and salaries. One element of the package of measures which it introduced to remedy these was the suspension of wage indexation until 28 February 1985: others included incomes policy measures such as abolition of wage-drift compensation schemes, restraints on dividends, bonuses and various types of fees and remuneration; a profits freeze; and a freeze on wages and salaries from 5 October 1982 to 1 March 1983. Finance policy measures introduced at the same time involved the lapse of automatic indexation of a number of public transfer payments and of tax scales; a waiting period of one day for sickness benefit claims; an increase in unemployment insurance contributions of 246 per cent for employers and 60 per cent for employees; and a capital levy on pension funds (hitherto exempt from tax). Changes had also been introduced on the capital market.
2. 221. In May 1984 as part of a compromise on the budget the Parliament had extended the suspension of indexation to 1987 in continuation of the same policy; the Government had requested this ten months before the expiry of the first suspension in order to give the social partners the time to consider negotiations in the absence of indexation.
3. 222. The Government explains that its policy is not one of short-term regulation of demand but one which is directed towards the long-term restoration of confidence on the basis of widespread acceptance of lower rates of increase in wages, interest, and prices; and that the breaking down of the automatic indexation mechanism was a necessary element in securing a reduction in the rate of cost increases.
4. 223. The Government continues by indicating the various respects in which it believes the policy has been successful, e.g. in reducing real labour costs, increasing employment, lowering unemployment, higher total incomes with consumer prices and wages rising at more or less the same rate. If this turnabout had not occurred, the Government states, it would have been necessary to pursue a policy involving tax increases for wage and salary earners which would have meant a reduction in real wages as fixed by collective agreements. It further points out that this would not have affected any ILO Conventions, which cannot anyway be obstacles to the passing of legislation regulating conditions of work and pay and that free collective bargaining must take place within a general framework.
5. 224. The Government goes on to state that its policy has at no time encroached on the right of employers' and workers' organisations to bargain collectively, to safeguard the interests of their members or otherwise to exercise their rights. It had recommended in 1983 that wage and salary increases be kept within a framework of 4 per cent, and on the whole agreements concluded had observed this without industrial disputes or statutory intervention; the suspension of indexation had not led to a wage freeze, only to the stopping of the automatic pay increase mechanism as regards not only collective agreements but also wage adjustments under individual agreements and in respect of wages fixed unilaterally, etc.
6. 225. As regards the intervention in the collective bargaining situation in the spring of 1985, the Government points out that under the Danish system nearly all collective agreements are renewed in odd years on 1 March or 1 April and that very little bargaining takes place in between. Denmark is thus in a "collective bargaining situation" in the spring of every second year. It adds that, as a number of the main matters in the agreements are negotiated by central organisations rather than in relation to particular fields, a breakdown in negotiations will normally lead to industrial action at the national level, and that this is what had happened in 1985.
7. 226. According to the Government, the Official Mediator declared on 21 March 1985 that there had been an irretrievable breakdown in negotiations between the central employers' organisation (the Danish Employers' Federation, DA) and the central workers' organisation (the Federation of Danish Trade Unions, LO), and this was followed by an outbreak of industrial disputes affecting 300,000 workers in the fields which they covered (about 25 per cent of the total number of persons employed in the private sector). Some of these disputes affected vital social functions such as electricity works, and the distribution of fuel and petrol. Partly as a result of this breakdown, negotiations concerning collective agreements in other sectors (principally, the public sector) had come to a standstill and there was a risk that industrial action involving a further 200,000 workers would occur, with the disputes affecting inter alia hospitals and abattoirs. A conflict of these dimensions could, in the Government's view, very quickly lead to a situation in which the general welfare and lives would be at risk and would also mean the probable loss of the improvements in competitiveness and in the national economy which had been generated by its policy.
8. 227. Against this background the Parliament had found it necessary to intervene in the bargaining situation by adopting the Act on the renewal of collective agreements and other agreements (a copy of which is appended to the Government's reply), which applied the following measures to both the public and the private sectors: it
   • a) extended for a two-year period all collective agreements and other agreements expiring before 1 April 1986;
   • b) reduced working time by one hour per week with full wage compensation as from 1 January 1987; and
   • c) fixed a general framework of wage and salary increases of 2 per cent and 1.5 per cent respectively for the two-year period. The Act also introduced an "adaptation clause" as regards public employees, guaranteeing that their wages and salaries are regulated in relation to the development of wages and salaries on the private labour market: in this regard, the Government also appends to its reply a translation of a letter by the Minister of Finance dated 30 April 1985 replying to inquiries from public employees and explaining the intervention in collective bargaining and the background thereto.
9. 228. The Government states that it has taken note of the consideration at the 71st Session of the International Labour Conference of the observations submitted by the LO and the FTF concerning the suspension of the cost-of-living indexation scheme in connection with the submission of Denmark's report for the period ending 30 June 1984 on the Conventions concerned, including the ILO's request that consultations take place with the social partners prior to taking decisions relating to the automatic cost-of-living indexation and similar questions concerning the fixing of wages and salaries.
10. 229. The Government states further that it has also noted the observations of the complainant that it has not complied with the request by Parliament on 20 March 1984 to hold tripartite consultations concerning, among other things, the effects of a reduction in working time. On this subject, it provides information concerning tripartite meetings on working time which were held between May and September 1984 and states that it had been agreed with the social partners that the tripartite meetings should come to an end before the start of the collective bargaining rounds in order not to mix up the two things.
11. 230. The Government adds that in August and September 1985 a number of meetings had taken place between the Government and labour market organisations as well as other organisations in trade and industry to deal with economic policy issues; that the Prime Minister had stated that the Government was willing to convene such meetings in the future; and that the Minister of Labour has decided to invite the social partners to tripartite meetings to discuss a number of labour market issues, including questions concerning the cost-of-living indexation of wages and salaries.

C. Additional information

1. 231. In a communication dated 23 December 1985, the Government states further that at a meeting which was held on 24 October 1985 between the Minister of Labour and the Presidents of the Danish Employers' Confederation and the Presidents of the two complainant organisations the Minister stated that the Government was still deliberating the situation concerning the indexation of wages and salaries after the expiry of the Act on suspension in 1987 and that it would consult the social partners at a later stage on this matter, probably in the early autumn of 1986.
2. 232. In its latest communication dated 6 February l986 the Government, referring to the suspension of the automatic cost-of-living indexation scheme in 1982, and again in 1984, states that this was a technical limitation on wages in order to avoid the harmful effects of this automatic mechanism. No other restrictions were introduced to limit the possibilities open to the two sides of industry to make agreements on the adjustment of wages during the currency of collective agreements. The Government stresses that collective agreements were concluded in the spring of 1983 without industrial disputes or statutory intervention.
3. 233. The Government explains that in Denmark almost all collective agreements are renewed in March or April in odd years for the following two-year period. Any break-down in negotiations will normally lead to industrial action at the national level. As regards the intervention in collective bargaining in the spring of 1985, the Government points out that negotiations in the private sector between the Danish Employers' Confederation (DA) and the Danish Federation of Trade Unions (LO) broke down. On 21 March 1985 the official Mediator abandoned further mediation and declared that the negotiations had broken down irretrievably.
4. 234. The Government adds that negotiations for the renewal of collective agreements will take place in the spring of 1987. It also supplies statistics showing the developments in wages, prices, employment and unemployment during the period 1982-85.
5. 235. For their part, the complainants refer in a communication dated 24 January 1986 to a letter addressed to the Minister on the same day in which they pointed out that they had made it clear at the meeting in question that if they did not learn soon of the Government's plans regarding the possible lifting of the suspension of the wage indexation, they would raise the matter once more with the ILO. The letter went on to state that at no stage during the meeting did the complainants agree to wait until the autumn of 1986 for a reply on this point, and the complainants request the Minister to provide them with one at the earliest opportunity.
6. 236. In a further communication dated 12 February 1986 the complainants emphasise that the indexation scheme formed part of the collective agreements in Denmark. Free bargaining was interfered with as a result of the suspension of the scheme, and the Government would not discuss lifting the suspension. In the spring of 1985 the legislative intervention of the Government involved the entire labour market, despite the fact that the unions had excluded essential services from the industrial action that was taken.
7. 237. In a communication of 20 February 1986 the Government stated that it had no further observations to make on the case beyond those it had already made in its previous communications.

D. The Committee's conclusions

1. 238. The Committee has taken note of the information contained in the reply of the Government explaining the considerations which have led it to adopt the measures which are the subject of the complainants' allegations. It is clear that these were taken against the background of the economic policy which the Government has adopted, and the Committee appreciates the care which has been taken to explain in detail not only the long-term objectives of this policy but also the specific steps which have been taken to give effect to it. These are matters which, however, fall outside the competence of the Committee, whose function it is to consider the nature of the measures taken in so far as they affect the principles of freedom of association.
2. 239. In that context, it would appear to the Committee that there are three principal matters which require consideration, i.e a)the suspension of wage indexation on successive occasions from 1982, most recently in May 1984 for a period until 1987; b)the extent of the Government's willingness to enter into discussions in tripartite or other fora with trade unions on this question; and c)the legislative intervention by the Government in 1985 which extended collective agreements in the public and private sectors and which also entailed the termination of industrial action by statutory means.
3. 240. Concerning the suspension of wage indexation, the Committee notes that the action which was initially taken by the Government in 1982 for a period of three years, and its extension in 1984 for a further period to 1987, received attention from the Committee of Experts on the Application of Conventions and Recommendations which also addressed itself to the question of the need for discussions between the social partners on such measures and the manner in which account might be taken of economic policy considerations.
4. 241. That that the right to negotiate wages and conditions of employment freely with the employers and their organisations is a fundamental aspect of freedom of association and that any restriction on the free fixing of wage rates should be imposed as an exceptional measure and only to the extent necessary, without exceeding a reasonable period; and that such restrictions should be accompanied by adequate safeguards to protect the living standards of the workers. The Committee of Experts requested the Government to examine with the occupational organisations concerned the possibility of persuading the parties to take voluntary account in their negotiations of the imperative reasons of economic policy that may be advanced by the Government.
5. 242. It would appear to the Committee from the arguments put forward by the Government that the measures taken to suspend indexation for a total period of five years are directed at the achievement of long-term goals rather than at dealing with an emergency. The suspension of automatic indexation was not, however, accompanied by other measures interfering in free collective bargaining, and indeed the bargaining that took place in the spring of 1983, led to the conclusion of agreements in that year.
6. 243. The Committee draws the Government's attention to the principles which have guided the Committee's decisions on these matters (see Digest of Decisions and Principles of the Freedom of Association Committee of the Governing Body, 3rd Edition, 1985, pp. 116-118, paras. 639 to 644), and in particular to the decision that where government measures had fixed the base reference for the indexation of wages whereas the parties had fixed another indexation system, the Committee recalled that the intervention of a government in areas which traditionally have always been negotiated freely by the parties could call into question the principle of free collective bargaining recognised by Article 4 of Convention No. 98 if it is not accompanied by certain guarantees and in particular if its period of application is not limited in time (Digest of Decisions, 1985 3rd Edition, para. 642; see 230th Report of the Committee, Case No. 1182 (Belgium), para. 265). The Committee trusts that the Government will, at an early date, give its full attention to these principles in fulfilling its obligation to promote free collective bargaining, and that it will take steps, where necessary, to ensure that all questions concerning wage-fixing may be resolved through negotiations between the parties.
7. 244. The Committee also recalls the suggestion of the Committee of Experts on the Application of Conventions and Recommendations regarding the desirability of re-examining with the occupational organisations concerned the possibility of negotiating wage settlements in a manner that is free of statutory or other restrictions. It requests the Government to keep it informed of the nature and the outcome of any discussions which are directed at promoting the voluntary appraisal and acceptance by the parties to negotiations of the economic policy considerations advanced by the Government in support of the measures relating to the suspension of wage indexation.
8. 245. With regard to the 1985 Act on the renewal and extension of collective agreements, the Committee has noted the information provided by the Government as to the circumstances which preceded its enactment but also observes that one of its principal effects is to render impossible collective bargaining in the public and private sectors for the period of two years by which collective agreements were extended. In this regard, the Committee draws the attention of the Government to the principle that the public authorities should refrain from any interference which would restrict or impede the lawful exercise by trade unions of their right, which the Committee regards as an essential element in freedom of association, to seek to improve the living and working conditions of those whom they represent through collective bargaining or other lawful means; and that any such interference would appear to infringe the principle that workers' and employers' organisations should have the right to organise their activities and formulate their programmes. (Digest of Decisions, 1985 3rd Edition, p. 108, para. 583; see 172nd Report of the Committee, Case No. 877 (Greece), para. 92.)
9. 246. The Committee also notes that the legislation appears to have been designed both to terminate industrial action which was already taking place and to prohibit other industrial action which might occur, including that in the public sector, for the period by which the operation of collective agreements were statutorily extended. In this regard, the Committee would wish to draw the attention of the Government to its view that measures suspending the right to strike should be limited in time and scope to the immediate period of any emergency (Digest of Decisions, 1985 3rd Edition, p. 391); and that, while the right to strike may be restricted or even prohibited in the civil service - the civil service being those who act on behalf of the public authorities - or in essential services in the strict sense of the term, i.e. services the interruption of which would endanger the life, personal safety or health of the whole or part of the population, it would not appear to be appropriate for all state-owned undertakings to be treated on the same basis in respect of limitations on the right to strike without distinguishing in the relevant legislation between those which are genuinely essential and those which are not. (Digest of Decisions, 1985, 3rd Edition, paras. 394 and 395: see 236th Report of the Committee, Case No. 1140, (Colombia) para. 144 and 142nd Report, Case No. 753, (Japan) para. 150.) The Committee is of the view that the 1985 Act involved statutory intervention in the collective bargaining process, action which should only be taken in cases of emergency and for brief periods of time. The Committee hopes that in future, no similar measures will be taken to interfere with free collective bargaining or to restrict the right of workers to defend their economic and social interests through industrial action. The Committee also draws this aspect of the case to the attention of the Committee of Experts on the Application of Conventions and Recommendations.

The Committee's recommendations

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