Definitive Report - Report No 286, March 1993

Case No 1639 (Argentina) - Complaint date: 09-APR-92 - Closed

1. 61. The complaints are contained in communications from the Federation of Ceramic Workers of the Argentine Republic (FOCRA) dated 9 April 1992, in a communication from the General Confederation of Labour of the Argentine Republic (CGT) dated 11 June 1992 and in a communication from the Association of Airline Pilots dated 21 December 1992.
2. 62. The Government sent its observations in a communication dated 23 December 1992.
3. 63. Argentina has ratified both the Freedom of Association and Protection of the Right to Organize Convention, 1948 (No. 87) and the Right to Organize and Collective Bargaining Convention, 1949 (No. 98).

A. The complainants' allegations

1. 64. In their communications of 9 April and 11 June 1992, respectively, the FOCRA and the CGT allege that the Government, through its promulgation on 12 August 1991 of Decree No. 1334/91, is violating the right of collective bargaining.
2. 65. The complainants state that article 14bis of the National Constitution guarantees the right of unions to engage in collective bargaining for the purpose of regulating the pay and working conditions of their members, and that Act No. 14250 of 1953, as amended by Act No. 23545 of 1988, establishes a procedure for the collective negotiation of labour relations between trade unions and employers, with the State acting as custodian of the general interest by verifying the legitimacy of the act of approval and by reserving to itself the powers of observer.
3. 66. The complainants point out that Act No. 23928 on the convertibility of the Austral (the Argentine currency during the period 1985-91), which came into effect in April 1991, prohibited as of that date any index-linking or monetary restatement and abolished all legal or regulatory standards establishing or authorizing price indexing, monetary restatement, cost adjustment or any other means of revaluing debts, taxes, prices, or tariffs in respect of goods, works or services. This decision also applies to existing legal relations and situations, it being prohibited, up until 1 April 1991, when the Austral became convertible, to apply or to use any legal, regulatory, contractual or conventional clause - including clauses in collective labour agreements - from a previous date as grounds for adjusting the size of payments to be made in Australs. According to the authorities, this Act was passed with the aim of halting inflation in Argentina by establishing parity between the Austral and the United States dollar. They explain that the Act prohibits the parties from agreeing automatic wage adjustment clauses based on price indices, monetary restatement or any other form of automatic revaluation.
4. 67. Under Decree No. 1334/91, the parties are obliged, prior to negotiating wage scales, to agree upon the bases for calculation and the method to be used for measuring productivity within the scope of validity of the agreement, it being understood that those bases and that method must be approved by the administering authority prior to the fixing of wage scales. In this connection, the complainants point out that section 3 of the Decree stipulates that, for the purposes of approval, the authority shall ensure: (a) that the agreement does not contain any clauses which infringe the norms of public order and that no index-linking mechanisms are established which are prohibited by the Act on convertibility of the Austral; and (b) that the entry into force of the agreement does not significantly affect the overall economic situation and that any salary increases are granted on the basis of genuine increases in productivity, whether verified or reasonably estimated.
5. 68. The complainants conclude that Decree No. 1334/91 limits wage negotiation to the question of productivity increases, excluding any other parameter, and that the administrative authority intervenes on two occasions, namely prior to any wage negotiation, when approval must be obtained from the Ministry of Labour for the calculation bases and the method used to measure productivity, and in the act of approval, when the Ministry intervenes to verify whether the wage increases agreed to relate to effective increases in productivity.
6. 69. In conclusion, the complainants state that the fact that wage negotiation is based solely upon productivity and that the Ministry of Labour and Social Security has been set up as the supreme judge in respect of any agreement reached by the parties undermines the freedom and voluntariness of the parties that is essential to the collective bargaining process. The complainants indicate their acceptance of the restriction as an emergency measure, but go on to explain that free wage discussion should be the rule. Since, however, the Decree in question presents itself as a decree regulating the Acts on convertibility of the Austral and on collective labour agreements, the exceptional nature of the restrictions on free wage negotiation accepted by the ILO become, in Argentina, a general principle, with no exceptions being made with respect to free negotiation. The aim of Decree No. 1334/91 and of the Act considered by the Executive Power to be the basis of that Decree is the achievement of economic stability and an end to inflation. That aim is widely shared by the working class and its legitimate representatives. The complainants point out, however, that since the Decree has been fully in force, wages have remained frozen, while inflation indices and the cost of living have continued to rise. The means adopted by the Executive Power is not the right one to achieve the proposed aim. Finally, the complainants note that neither in the preambular nor in the normative part of the Decree are its provisions referred to as being of a transitory nature, the effect of this being that regulations of a permanent nature are thus established.
7. 70. In its communication of 21 December 1992, the Association of Airline Pilots (APLA) also presented allegations to the effect that Decree No. 1334/91 violates the right to collective bargaining, adding that in the particular case of pilots the Ministry of Labour omits to set up joint committees to consider situations like that of pilots, who, since decisions as to the number and frequency of flights are wholly a matter for the employer, are unable themselves to effect a direct improvement in productivity. The APLA adds that it has now been over a year since Aerolíneas Argentinas SA, and over six months since Líneas Aéreas Privadas Argentinas SA, requested that a joint committee be set up, without any result having been achieved. The complainants point out that in the case of Aerolíneas Argentinas the number of pilots has been reduced from 561 to 492, resulting in an indirect productivity increase of 14 per cent. They state that by failing to set up a joint committee within the time-limit stipulated in Act No. 23546, the State is intervening in trade union affairs and denying the right to negotiate collective agreements.
8. 71. This complainant organization further alleges that through the promulgation of Decree No. 2184/90 the Government is intervening in trade union affairs by imposing administrative regulations on the right to strike. The complainants likewise point out that the Ministry of Labour does not protect the unionized workers of Aerolíneas Argentinas SA in connection with complaints relating to infringements of the labour laws, such as those involving numerous mass dismissals.

B. The Government's reply

1. 72. In its communication of 23 December 1992 the Government states that it is engaged not only in the implementation of a traditional economic recovery plan, but also in a deep and effective structural transformation of the nation, aimed at removing each and every one of the obstacles which historically have undermined successive economic plans set up to solve the endemic problem of inflation. Thus, the Government has not only embarked upon a deep restructuring of the administrative apparatus of the State, but has also undertaken a complete deregulation of its economy and a modernization and updating of its general legislation, this being the context and scope within which Decree No. 1334/91, questioned by the complainant organizations, was issued. In other sectors, however, that instrument has not given rise to any objection.
2. 73. The economic and social results of this government plan are, for the first time in many years, within reach of all Argentinians. Suffice it to say that after all these years the inflationary process has at last been effectively contained, to the extent that whereas on 1 April 1991 - the date on which, 18 months ago, the Convertibility Plan came into effect - the rate of increase in consumer prices (cost of living) had reached 39 per cent, the corresponding figure for the past 12 months has scarcely risen above 18 per cent. Although it is true that this process has not yet been fully consolidated and that many changes remain to be made in Argentina in order to facilitate a more just salary system through an improved distribution both of wealth and of the contributions required from its citizens, it is no less true that these circumstances cannot be ignored by the legitimate representatives of the Argentine working class, since the first to suffer from inflationary processes are precisely those who, like workers, live on a fixed monthly or fortnightly income, and who experience the degradation which results from the daily and constant reduction in their purchasing power due to inflation. It is therefore impossible to understand why such obstinate attacks are being made upon one of the pillars of current Argentine economic policy by those who, in short, represent one of the sectors which derive the greatest benefit from its implementation, given that the purchasing power of wages is now assured, the level of economic activity of the nation is constantly rising and the previously endemic problem of unemployment is constantly decreasing.
3. 74. The Government asserts that the General Confederation of Labour (CGT) lacks the substantial legitimacy necessary to invoke the right allegedly violated, since the power to negotiate agreements is inherent in the nature of the first-level association, or in any case those which bring together the specific units from the activity in question. This power constitutes, moreover, an essential element of freedom of association, as is the right of negotiation of these first-level associations, constituting as it does the most suitable mechanism for making collective bargaining specific to each sector, according to the particular activity involved. Encouragement is therefore given to horizontality in negotiation, this being a characteristic that is conducive to effectiveness. The principle of horizontality in collective bargaining is reflected in Convention No. 98, which recognizes the respective trade union organization as being the body entitled to engage in collective bargaining on behalf of workers, since it is the most suitable in so far as the representativity of the interests of the sphere of activity in question is concerned. The confederal body may only act by delegation; consequently, the power to negotiate is an inherent right of the first-level association.
4. 75. The CGT should have attached the appropriate documents testifying to a democratic decision by the deciding body of the trade union association to submit a representation of this kind, thus reflecting the mandate of its constituent trade unions, since, as we have already stated, the matter under discussion does not fall within its competence. In the light of the foregoing, the Government requests the Committee not to recognize representations submitted autonomously by the CGT, which is unjustifiably putting itself forward as representative of the majority of its constituent associations, since those associations are engaged in an electoral process.
5. 76. Decree No. 1334/91 does not limit powers of negotiation, but on the contrary serves to encourage collective bargaining concerning the economic conditions of labour agreements, although confining them to the particular circumstances in which the country's general economic activity has been developing subsequent to the promulgation of Act No. 23928 on convertibility, within the framework of which the Decree in question was issued. It is in this context that that Decree establishes specific guidelines to ensure that any collective negotiation of salaries by the contracting parties is in line with the basic thrust of the economic policy and anti-inflationary measures currently in force. In order to ensure that this aim is achieved, it also establishes specific guidelines to be followed by the administrative authority when it comes to analyse the contents of agreements prior to granting them approval. This is how it is and how it should be, given that collective labour agreements are not merely contractual agreements between the signatory parties, but that precisely by virtue of the legal provisions governing current agreements in Argentina (Act No. 14250 and its complementary instruments), those which have received administrative approval acquire erga omnes effects, meaning that they will be binding not only upon the signatory parties, but also upon all those undertakings included within the scope of their commercial or industrial activities. It is precisely this circumstance which gives full legitimacy to the provisions of the Decree in question, since the principles established therein should only be complied with by those agreements to which the parties wish to accord erga omnes effects, since at no time does the legal instrument in question diminish the validity of any other agreements which may have been concluded without falling into line with its provisions, which - as such - and by virtue of the provisions of section 1197 of the Civil Code, shall have full validity and shall be binding upon the signatory parties.
6. 77. The Government explains that the erga omnes effect of approved agreements, as provided in the Argentine legal system, requires that the administrative authority, prior to granting approval, must, as laid down in section 3bis of Decree No. 1334, ensure that the collective agreement does not contain any clauses which infringe the norms of public order or standards issued in the protection of the general interest, that it does not significantly affect the overall economic situation, and that it does not result in a serious deterioration in the standard of living of the population. This provision is not a violation introduced into the Argentine legal system by virtue of Decree No. 1334/91, since the same regulations with the same content were already provided by Act No. 14250, since which time they have been in force, continually and without alteration. The only modification introduced by the Decree in question is that it limits the check on legality to be carried out by the administrative authority prior to approving agreements to the economic guidelines and policies currently in force and flowing from the provisions of Act No. 23928 on convertibility, to which reference has already been made.
7. 78. The Government points out that Decree No. 1334/91 was enacted by the national Executive by virtue of the regulatory powers attributed to it under article 86(2) of the National Constitution. The Supreme Court of Justice has declared that regulatory decrees issued by the national Executive under its constitutional powers become part of, regulating and completing, the corresponding Acts, with any violation or misinterpretation being deemed contrary to the statutory rules established by the relevant Act. The Decree in question simply affirms that indexation is prohibited, as was already established by the Act on Convertibility, and sets out guidelines so that parties may amend negotiating criteria which are incompatible with the aforementioned enactment. If the Decree had not been enacted, then the Ministry of Labour and Social Security would have been unable to approve wage agreements based on inflation, since the Act on Convertibility, which relates to public order, precludes this. The Decree is therefore tenable, since it is a necessary affirmation of or follow-on to the Act on Convertibility, which has at no time been called into question by the complainants. Given the compatibility of the Decree and the Act, the Decree is tenable by virtue of the constitutionality of the Act. Decree No. 1334/91 was enacted with Act No. 14250, which is in line with the convertibility plan, as its specific antecedent. For its part, Act No. 23928 provides for the derogation, prohibition and inapplicability of any indexation procedure as of 1 April 1991.
8. 79. Taking into account the country's state of economic emergency, the Government is constantly seeking to ensure equity in the collective effort, through opening the capital sector up to external competition through economic liberalization and through seeking to establish price equilibrium and thus reduce profit margins. This delicate balance must also include in its equation elements which guarantee the labour supply. It is important to note that it is not the Government which is putting limits on negotiation, but the particular circumstances in which the Argentine economy currently finds itself. Thus it is that while workers find themselves having to negotiate within the context established by the aforementioned standards, employers too are seeing their receipts being limited as a result of economic liberalization. The ILO has, on various occasions, given its opinion on the issues involved and has always recognized that certain economic circumstances could result in conditions being placed upon negotiation, provided this does not involve abusive intervention on the part of the administration and that those conditions arise naturally out of a given economic situation.
9. 80. With regard to the question of approval or act of approval by the administrative authority, the Government states that that act does not imply endorsement or rejection of a collective labour agreement, but merely gives it erga omnes effects. A collective labour agreement which has not been approved remains a valid agreement between the signatories. It can therefore be concluded that Decree No. 1334/91 does not violate the freedom to negotiate between parties but merely instructs the Ministry of Labour and Social Security on how to comply with the Act on Convertibility. In this sense, the function of the Decree is threefold: (1) to instruct the Ministry of Labour and Social Security on which safeguards should be borne in mind when approving a collective labour agreement, so as to ensure compliance with the Act on Convertibility; (2) to draw to the attention of the parties the fact that a condition of approval is that the agreement should respect specific rules (i.e. that agreements must be concluded according to the guidelines specified in the Decree, these having been agreed by the legislators to be the only technically viable ones; and that any agreement concluded which violates the procedures established in the Decree will not be approved, although a collective labour agreement concluded between the signatories remains valid at all times); and (3) to instruct the Ministry of Labour and Social Security to offer technical support to the parties with a view to their varying the negotiating criteria and availing themselves of the opportunity to negotiate on the basis of productivity which, technically, is the only way to achieve real wage increases, as is the case elsewhere in the world.
10. 81. It points out that the powers to grant approval that are vested in the Ministry of Labour and Social Security are, with very few changes, the same as those wielded by the Government since 1953, that is, since the enactment of Act No. 14250 and its regulatory Decree No. 6582/54 brought into being the country's only specific legal system for collective bargaining. In that original legislation, section 3 of the Act provided for ministerial authority to grant approval, whilst section 1 of Decree No. 6582/54 detailed that authority in almost the same way as does the current section 4 of Act No. 14250, in which the only changes, included since 1988, are the "norms of public order" to be guarded by the Ministry of Labour and Social Security. It is not Decree No. 1334/91, but rather the Act itself, which, as specifically mentioned in the third whereas clause of the Decree, provides for the aforementioned checks to ensure the absence of any violations of general public and economic order (section 4(3), Act No. 14250). The preambular part of Decree No. 1334/91 specifically mentions Act No. 23928 (on convertibility), through which the national Government exercised its power to fix the value of the currency (article 67(10) of the National Constitution), thus unequivocally associating itself with public order. One follow-on from that Act was the prohibition of all forms of indexation, that is, of the very practice whose absence, the complainants maintain, amounts to a restriction on the freedom of wage negotiation. But this prohibition is in no way unreasonable, since indexation was one of the practices which undermined the value of the currency and subsequently that of wages, since any increases were, in turn, passed directly on to prices. With indexation prohibited by Decree No. 1334/91, productivity remains the only natural and genuine bargaining factor for a society which has been particularly sensitized by the atypical problem - whose highly unusual characteristics have not been experienced by many countries - of hyper-inflation. In the circumstances, the linking of productivity as a wage-setting guide with monetary stability is not only an obvious move, but is referred to in the original text of the instrument regulating Act No. 14250.
11. 82. In addition to the reference to productivity as having a logical relationship with wages, it must be pointed out that no other possible criterion exists for increasing wages without seriously jeopardizing either production (by completely exhausting the enterprise) or the value of the currency (through price increases). For a short period, or on an occasional basis, it may be possible to consider increasing wages and not prices, but ultimately, if wage increases do not correspond to an increase in productivity, then inevitably - with more money in circulation and an unchanging level of production - those increases will be passed on to prices. That in turn would bring down the value of the currency, or, as stated in Act No. 14250, it would "result in a serious deterioration in the standard of living of consumers".
12. 83. As regards the question of the freedom to negotiate, the Government emphasizes that at no time does the approval of a collective labour agreement, in pursuance of Decree No. 1334/91, serve as a means of restricting collective autonomy, and that, on the contrary, the parties are at complete liberty to negotiate, even outside the terms of the Act on Convertibility. However, the Ministry of Labour and Social Security is in a position to provide the parties with the necessary assistance to enable them to negotiate within the guidelines established by that Act, which, given their technical nature, are a more suitable basis on which to proceed. Decree No. 1334/91 has a reference to productivity which is sufficiently flexible to allow for wages to be negotiated freely, although with due attention being paid to the aforementioned guidelines. This, simply stated, means that the reality of the situation must be borne in mind. So, even though section 1 of the Decree requires the parties to provide information on productivity, section 3bis(b) says that, for the purposes of wage agreements, the productivity increase in question may be checked or merely estimated, thus opening up such a broad and extensive range of possibilities within which to consider the concept of productivity that it is difficult to imagine what could realistically lie outside it. It emerges, therefore, that Decree No. 1334/91 amounts to no more than a logical and necessary follow-on from the provisions of Act No. 23938. In conclusion, it is impossible to challenge a Decree which does not violate the freedom to negotiate and whose content is a direct follow-on from an unchallenged Act relating to public order.
13. 84. Finally, the Government points out that following the promulgation of the aforementioned legal instrument the Ministry arranged a series of meetings under the auspices of the National Directorate of Labour Relations for the purpose both of instructing those of its staff members responsible for conducting wage negotiations on how to proceed within the framework of that instrument, and of informing the parties involved on the scope and content of the standards contained therein. It explains that countless negotiating committees have been and will continue to be set up within the Ministry with a view to improving the economic conditions of many more collective labour agreements within the framework of that legal instrument. In all such cases, moreover, the workers covered by those agreements are and will continue to be represented by the same trade union organizations which were signatories to the agreements that were in force up until that time, and which are the same organizations that the CGT claims to represent. Many of those negotiating committees have already completed their task, having considered wage agreements in which the productivity clause or clauses emerging from the system under analysis have been respected, the majority of those agreements having been approved by the administering authority (the Government encloses a list of the wage agreements approved within the framework of Decree No. 1334/91 up to 13 July 1992).

C. The Committee's conclusions

1. 85. Firstly, as regards the Government's statement rejecting the CGT's authority to submit allegations in the absence of any corresponding authorization from its affiliated organizations, the Committee considers that any national confederation has a direct interest in the issues surrounding the promulgation of legal standards and regulations relating to collective bargaining, and that the complaint of the CGT should thus be deemed receivable from the point of view of the Committee's procedure.
2. 86. The Committee notes that the allegations relate to the promulgation of Decree No. 1334/91, regulating Act No. 23.928 (which provides for the derogation, prohibition and inapplicability of any indexation procedure as of 1 April 1991), in the sphere of contracts of employment or employment relationships. The allegations refer specifically to the requirement under that Decree that wage negotiation be conducted solely on the basis of increased productivity under Decree No. 1334/91, excluding any other parameters, and to the intervention by the administrative authorities, initially when approval is needed from the Ministry of Labour for the bases used for calculation and the method used to measure productivity, and subsequently when approval is granted subject to ministerial verification of whether the wage increases granted correspond to genuine productivity increases.
3. 87. The Committee takes note of the Government's information, and particularly of the economic problems which have been facing the Argentine Republic for many years, and of the fact that the Government has launched an adjustment plan which involves the structural transformation of the economy involving total deregulation and the modernization and updating of legislation in general. The Committee has also taken note of the improvements which, according to the Government, have resulted from the plan.
4. 88. Furthermore, the Committee notes that according to the Government, Decree No. 1334/91 was enacted by the Executive Power by virtue of the regulatory powers vested in it by the National Constitution (article 86(2)), and that it simply reaffirms that indexation is prohibited (as already established by the Act on Convertibility) and sets out guidelines so that parties may amend negotiating criteria which are incompatible with that enactment; that approval by the administrative authority does not imply endorsement or rejection of a collective labour agreement, but merely accords to that agreement erga omnes effects: that is to say that it is applicable to all those undertakings included in the sectors concerned even if they are not parties to the agreement. This approval of a collective agreement, according to the Government, does not limit the freedom to negotiate, since productivity is referred to in a manner that is sufficiently flexible to allow for the free negotiation of wages while still taking the provisions of the Decree into account.
5. 89. The Committee notes that the productivity criterion is a requirement that parties generally take into account during collective bargaining, although its application to specific categories of workers may give rise to very difficult problems, as the Association of Airline Pilots has emphasized in this case, with reference to the pilots it represents. The Committee notes that Act No. 23928 and Decree No. 1334/91 prevent the extension of a collective agreement which would not take into account the prohibition on indexation (as stipulated in the aforementioned Act) and the limitations with respect to increased productivity (as provided for by the Decree). The Committee observes in this respect, that in the Argentinian system of industrial relations, the near totality of the most important collective agreements are subject to approval by the administrative authority. It therefore considers that in the national context, the limitations entailed by the Act and the Decree in question do not allow parties to the collective bargaining process a completely free hand.
6. 90. The Committee is aware that at times, when confronted with economic restructuring in general, and inflation in particular, governments may adopt measures which entail restrictions on the negotiation of wage rates in collective agreements. In this respect, the Committee wishes to point out that it has already had occasion to give its opinion on similar allegations to the effect that collective bargaining is being subordinated to the interests of the Government's economic policy in Argentina, and specifically to productivity criteria (see 279th Report, Cases Nos. 1560 and 1567 (Argentina), paras. 680-716). In November 1991, when it dealt with these cases, the Committee examined a Decree (No. 1757/90) under which "clauses of the agreements may be waived (by the administrative authority in the public sector) if they disrupt productivity, hinder or interfere with the administration of the enterprise" (see 279th Report, para. 707).
7. 91. In the circumstances, the Committee restates the conclusions reached at its November 1991 meeting at which it recalled that both the Committee and the Committee of Experts on the Application of Conventions and Recommendations had insisted "that if within the context of a stabilization policy a government may consider for compelling reasons that wage rates cannot be fixed freely by collective bargaining (in the present case the fixing of wage scales excludes index-linking mechanisms and must be adjusted to increases of productivity), such a restriction should be imposed as an exceptional measure and only to the extent necessary, without exceeding a reasonable period and that it should be accompanied by adequate safeguards to protect workers' living standards. This principle is all the more important because successive restrictions may lead to a prolonged suspension of wage negotiations, which goes against the principle of encouraging voluntary collective negotiation" (279th Report, Cases Nos. 1560 and 1567 (Argentina), para. 714, General Survey on Freedom of Association and Collective Bargaining of the Committee of Experts on the Application of Conventions and Recommendations, 1983, para. 315 and 233rd Report, Cases Nos. 1183 and 1205 (Chile), para. 482).
8. 92. Consequently, taking into account the specific nature of the system of collective bargaining in Argentina and noting that the limitations on collective bargaining go beyond a reasonable period, the Committee expresses the hope that the Government will be able, as soon as possible, to meet the objectives of its economic plan so as fully to restore the right to collective bargaining.
9. 93. With regard to the allegation of the Association of Airline Pilots (APLA), relating to Decree No. 2184/90 on the right to strike, the Committee will examine it in the framework of Case No. 1653, in which detailed allegations have been submitted on this subject. With regard to the alleged lack of protection for workers at the Aerolíneas Argentinas SA enterprise in connection with mass dismissals, the Committee observes that the APLA's allegations refer not to violations of trade union rights but to other rights contained in labour legislation.

The Committee's recommendations

1. 94. In the light of its foregoing conclusions, the Committee invites the Governing Body to approve the following recommendation:
   • Taking into account the specific nature of the system of collective bargaining in Argentina and noting that the limitations on collective bargaining under Act No. 23928 and Decree No. 1334/91 go beyond a reasonable period, the Committee expresses the hope that the Government will, as soon as possible, be able to meet the objectives of its economic plan, so as fully to restore the right to collective bargaining.