Report in which the committee requests to be kept informed of development - Report No 272, June 1990

Case No 1502 (Peru) - Complaint date: 19-JUN-89 - Closed

1. 220. In communications dated 19 June 1989, 4 January and 9 March 1990, the Federation of Peruvian Light and Power Workers presented a complaint of violation of trade union rights against the Government of Peru. The Government sent its observations on the matter in communications dated 13 and 27 March and 3 April 1990.
2. 221. Peru has ratified the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87), and the Right to Organise and Collective Bargaining Convention, 1949 (No. 98).

A. The complainant's allegations

1. 222. In its communication dated 19 June 1989, the Federation of Peruvian Light and Power Workers states that it is a higher level trade union organisation which represents more than 15,000 workers in the national electricity industry. On 1 September 1978 the Federation signed a collective agreement with all the enterprises in this sector, establishing an automatic quarterly wage-adjustment system, calculated by applying the rate of inflation to the workers' basic income. Attempts have been made to restrict this system since August 1988.
2. 223. The Federation of Peruvian Light and Power Workers says that the Government, by means of a media campaign, is attempting to abolish the automatic wage-adjustment system, arguing that it is an impossible system to maintain given the hyperinflation prevailing in the country. It is endeavouring to limit increases in income to levels significantly lower than present levels of inflation, in this way causing wages to increase more slowly than inflation. From the month of August 1988 onwards the Government tried to repeal certain provisions and collective agreements that established automatic wage adjustment through the promulgation of Supreme Decree No. 041-88-TR, which was later overturned by Supreme Decree No. 042-88-TR as a result of legal struggles and protest movements. From then on the Government has pursued a policy of undermining the collective agreements which established the system of automatic wage adjustment.
3. 224. The Federation states that from December 1988 onwards it became apparent that the Peruvian Electricity Enterprises were seeking to reduce the scope of the current collective agreement and this caused the complainant Federation and non-federated trade unions to seek protective orders to enforce the collective agreements which, under the Constitution of Peru (article 54), are legally binding on the parties. The petitions for protection (amparo) were granted on an interim basis and the undertakings were wary of attacking them even though it is government policy to reduce the scope of the collective agreements in that sector. Given this situation the main enterprise in Peru's electricity sector made its own petition for a protective order to suspend the collective agreement concerning the system of automatic wage adjustment. In April 1989, it modified the collective agreement unilaterally by beginning to make payments in instalments and then by deferring payments until the end of the employment relationship. This is, according to the complainant, a violation of the Protection of Wages Convention, 1949 (No. 95), which prohibits payment in the form of promissory notes, vouchers or coupons, and of the Collective Agreements Recommendation, 1951 (No. 91), which provides that all collective agreements should bind the signatories thereto.
4. 225. The complainant affirms that the above facts were occurring whilst the enterprise was attempting to prove the impossibility of complying with the collective agreement and also when it announced its intention to divide up wage payments whilst maintaining that it was respecting the collective agreement which did not specify any particular form for the payment of the automatic wage adjustment.
5. 226. Should the Committee on Freedom of Association consider it appropriate, the complainant requests the setting up of a commission to investigate the matter at first hand, in order to throw more light on the situation.
6. 227. In another communication dated 4 January 1990, the Federation of Peruvian Light and Power Workers states that the collective agreement concerning the automatic quarterly wage-adjustment system has in effect been unilaterally modified by the State Electricity Company of Peru in collaboration with the Government in line with an economic policy which affects workers directly, in spite of legal decisions in the workers' favour requiring compliance with the collective agreement. The Fourth Civil Court of the Superior Court of Justice of Lima reversed the decision which had permitted the interruption of the automatic wage-adjustment system, and established the irrevocability of labour laws and the full validity of the collective agreement; this decision was confirmed in the judgement handed down by the Third Civil Court of Lima which ordered that the enterprises should comply with the application of the collective agreement. The complainant maintains that the Government and the enterprises refused to comply with these judicial decisions, and therefore the workers of the electricity sector belonging to the complainant Federation called an indefinite national strike defending the system of automatic wage adjustment and demanding its implementation. The complainant includes a copy of the relevant decisions in its communication.
7. 228. In another communication dated 9 March 1990, the Federation repeated its request that a special commission to investigate the matter directly be sent to Peru to shed light on the affair which is the subject of the complaint.

B. The Government's reply

1. 229. In its communication dated 13 March 1990 the Government observes, as the complainant did in its complaint, that inflation is affecting the purchasing power of wages and that attempts have been made to compensate for this, in the case of non-unionised workers by successive wage increases ordered by the Government and with periodic adjustments of the minimum basic wage. In the case of workers who are covered by collective agreements, Supreme Decree No. 025-88-TR of 9 August 1988 provides that in collective agreements which took effect after 1 July 1988, the workers in the private sector could agree with their employers to the granting of two additional wage increases, to be paid at the end of the fourth and eighth months of validity of the collective agreement. If the parties do not agree on the amounts of the increases, these will be calculated by referring to the variation recorded in the consumer price index for metropolitan Lima. One of the recitals to this provision establishes that in accordance with the Government's policy of improving the real income of the population, it would be appropriate to grant the additional increase on up to two occasions during the period of validity of the collective agreement. The aim is to enable remuneration to recover its real value in the face of the rising cost of living.
2. 230. The Government points out that in this specific case, owing to the effects of the national economic crisis, there is no foundation for the implementation of wage indexation and the public electricity companies have found themselves obliged to apply to the courts for protective orders where the matter is now being examined and a final solution is being sought. In this context the labour authorities are precluded from exercising jurisdiction, or interfering in the actions which are the responsibility of the courts.
3. 231. However, the Government points out that in order to be able to comply with the collective agreements of 1978-79 and 1979-80, concerning the payment of the automatic adjustment of wages to the cost of living, the enterprises have made proposals that consist basically in the payment of 50 per cent of the quarterly increase due to each worker from the month of June of the present year, the remaining 50 per cent being considered as debts due to the workers to which will be added the interest accrued at the legal rate, this form of payment being applied from 1 April 1989 onwards. Lastly, the debt of 50 per cent that the enterprises owe to their workers will be paid on the earliest possible occasion in accordance with improvements in the economic and financial situation in the electricity sector, and in conformity with parameters which will be especially established for each case.
4. 232. The Government also indicates that, following on from what has been stated above, the enterprise has proposed various solutions to its workers with the aim of complying with the collective agreements already entered into, in spite of the difficult economic situation caused by the inflationary process. Although they work for a public service enterprise, members of the complainant Federation are in a privileged position as compared to other workers whose wage increases are paid by the people who use their services, that it to say by the general public whose income is not adjusted on a quarterly basis. The Government states that it should also be pointed out that no provisions exist to restrict or limit this type of automatic wage-adjustment agreement that, as has already been pointed out, privileges a special group of workers in periods of inflation. Thus the complainant's declarations are inexact, firstly because Peru is not violating Convention No. 95, which, moreover, it has not ratified, secondly because automatic wage adjustment is not prohibited or limited, and thirdly because the enterprise is proposing alternative solutions to the conflict, and is not reneging on its obligations.
5. 233. In its communication dated 27 March 1990 the Government specifies that the electricity company of Peru (Electro-Peru) sought a protective order questioning the validity of the collective agreement concerning the system of automatic quarterly wage adjustment for workers based on variations in the consumer price index. The court of first instance pronounced in favour of the request, but subsequently the Fourth Civil Court of the Superior Court of Justice of Lima reversed the decision of the lower court declaring the protective order unfounded and thus determining the full validity and applicability of the collective agreement on automatic wage adjustment. As the enterprise lodged an appeal for the annulment of this decision, the case has been brought before the Supreme Court which will pronounce the final decision.
6. 234. In another communication dated 4 April 1990 the Government states that the Federation's problem specifically concerns the requirement that the enterprises in the electricity sector should comply with the collective agreement on wage indexation in accordance with variations in the consumer price index. Electro-Peru, its subsiduaries and Electro-Lima are not paying all the index-linked remuneration that is due to the workers in accordance with the collective agreement, claiming that they do not have sufficient financial resources and proposing as the only possible solution an increase in the price of electricity. Although they are aware that the collective agreements are not being respected, the labour authorities are unable to exercise any authority as this would be an encroachment upon the courts; since these protective orders have been sought by the public electricity enterprises, the labour authorities cannot interfere because such writs are the responsibility of the courts in accordance with the provisions of paragraph 2 of article 233 of the Constitution of the State.
7. 235. The Government's communication also indicates that in spite of the existence of a protective order the enterprises in question have come to recognise the validity of the collective agreement and the future payment of the reimbursements; to this end the workers and the representatives of the enterprises have held several meetings so as to continue and increase the measures and efforts in all cases to overcome the enterprises' problems as a whole and in particular the problem of the workers' situation. Lastly, it should also be added that the Federation's strike took place from 6 to 12 February 1990 on a partial basis, after which the workers had to resume work.

C. The Committee's conclusions

1. 236. The Committee observes that the allegations presented by the complainant refer mainly to the Government's alleged intention to modify a collective agreement signed in 1978 and which established a system of automatic quarterly wage adjustment for all the workers in the enterprises in the electricity sector, calculated by applying the rate of inflation to the workers' basic remuneration.
2. 237. The Committee also notes that the complainant alleges that the principal company of the electricity sector sought a protective order with the aim of unilaterally modifying the collective agreement concerning the system of automatic wage adjustment and that this was suspended in April 1989. This order was contested in court and the Third Civil Court of Lima ordered the enterprises to adhere to the collective agreement in question. The Committee also observes that this decision was upheld by the Fourth Civil Court of the Superior Court of Justice of Lima, which reversed the order which sought to protect the suspension of the system of automatic wage adjustment. In addition, a final appeal is pending before the Supreme Court which is to give the definitive decision in this matter.
3. 238. The Committee takes note of the Government's comments that given the repercussions of the national economic crisis, the public sector electricity enterprises have found themselves forced to take legal action since the index-linked remuneration has no real foundation allowing it to be paid. Likewise the Committee notes that the labour authorities are prevented from exercising authority while the appeal lodged by the public sector electricity enterprises is still under examination.
4. 239. The Committee also notes that in order to adhere to the collective agreements (concerning automatic wage adjustment to the cost of living) the enterprises of the electricity sector have proposed solutions which consist in the payment of 50 per cent of the quarterly wage adjustment to the cost of living and the recognition of the remaining 50 per cent as a debt due to the worker which will be paid with interest at the legal rate, depending on the improvement of the economic situation in the electricity sector.
5. 240. In this connection the Committee considers it necessary to stress that, whilst it is fully aware of the economic situation in Peru, it places great importance on the principle that the public authorities should not, as a rule, intervene in order to modify the contents of collective agreements which have been freely concluded. Such intervention would only be justified for cogent reasons of social justice and the general interest. (See Digest of decisions and principles of the Freedom of Association Committee, 1985, third edition, para. 593.)
6. 241. For these reasons the Committee would like to suggest to the Government that if the public authorities consider that the terms of the agreement were manifestly in conflict with the aims of the economic policy recognised as being desirable in the general interest, the case could be submitted for advice and recommendation to an appropriate consultative body, it being understood, however, that the parties would remain free to make the final decision.
7. 242. The Committee considers that the harmonious development of labour relations would be facilitated if the public authorities, when dealing with the problems concerning the workers' loss of purchasing power, adopted solutions which did not involve modifications of agreements without the consent of both parties. Examining the circumstances of the case, the Committee also considers that if, as part of its stabilisation policy, a government believes that wage rates cannot be settled freely through collective bargaining, such a restriction should be imposed as an exceptional measure and only to the extent that is necessary, without exceeding a reasonable period, and it should be accompanied by adequate safeguards to protect workers' living standards; measures which ensure that all workers enjoy the conditions necessary for a decent existence. (See Digest, para. 641.)

The Committee's recommendations

1. 243. In the light of its foregoing conclusions, the Committee invites the Governing Body to approve the following recommendations:
   • (a) The Committee considers that when dealing with problems in connection with the workers' loss of purchasing power, the harmonious development of labour relations would be facilitated if the public authorities adopted solutions which did not involve the alteration of agreements without the consent of the parties.
   • (b) The Committee suggests to the Government that if the public authorities consider that the terms of an agreement are manifestly in conflict with the aims of the economic policy recognised as being desirable in the general interest, the case could be submitted for advice and recommendation to an appropriate consultative body, it being understood that the final decision in the matter would rest with the parties to the agreement.
   • (c) The Committee recalls the importance of the principle that the public authorities should not alter the contents of freely concluded agreements. It is aware of the economic situation prevailing in the country and urges the Government to ensure that all measures concerning economic stablilisation policies, in this case in particular those affecting workers in the electricity sector, should be imposed as an exceptional measure and only to the extent that they are necessary, without exceeding a reasonable period of time and, most importantly, should be accompanied by adequate safeguards to protect the workers' living standards, assuring them the conditions necessary for a decent existence.
   • (d) The Committee requests the Government to keep it informed of developments in this case, particularly in connection with the legal proceedings taken by the public sector electricity enterprises.