Report in which the committee requests to be kept informed of development - Report No 343, November 2006

Case No 2452 (Peru) - Complaint date: 04-OCT-05 - Closed

Allegations: Non-compliance with the provisions of the collective agreement and the legislation on remuneration and payments; refusal to grant union leave to union officials; actions preventing collective bargaining

1049. The complaint is contained in communications from the Federation of Peruvian Light and Power Workers (FTLFP) dated 30 May and 4 October 2005. The Government sent its observations in communications dated 30 March 2006 and 4 August 2006.

1. 1050. 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. 1051. In its communications of 30 May and 4 October 2005, the Federation of Peruvian Light and Power Workers (FTLFP) alleges that the enterprise Electro Sur Medio S.A.A. (ESM S.A.A.) is undergoing insolvency proceedings based on the General Act on the Insolvency System of 5 August 2002, jeopardizing the rights of 285 workers, the rights of freedom of association, collective bargaining, the right to employment and the labour entitlements of the workers. The aforementioned Act – which the complainant encloses – provides that “insolvency proceedings are intended to promote a conducive environment for negotiation between the creditors and the insolvent debtor, enabling them to reach an agreement on reorganization or, if not, to exit the market in an orderly fashion with low settlement costs”. These insolvency proceedings are an attempt to cover up the failure of the privatization exercise carried out in 1997 under the Fujimori dictatorship, non-compliance with privatization and investment commitments, the plunder of the economic/financial resources of the enterprise and the dismantling and deterioration of its premises, headquarters and infrastructure.
2. 1052. The FTLFP reports that the rights and benefits that have been systematically and illegally infringed upon include the following:
3. – failure to pay wage;; those that have been paid were up to a month late;
4. – failure to make Length of Service Compensation (CTS) payments; those that have been made were months late;
5. – failure to pay contributions to the Pension Fund Administrators (AFP); those that have been made were months late;
6. – failure to make timely payment of bonuses; those that have been made were a month late;
7. – delay in handing over the basic and national union dues, collected from union members through the check-off system;
8. – delay in handing over money deducted from workers’ pay as loan repayments to banks and financial institutions;
9. – delay in handing over to beneficiaries sums deducted from worker’s pay for pension contributions and to FINISTERRE (funeral services); and
10. – Argentine investors and the alleged creditors who are taking turns managing the enterprise ESM S.A.A., have established an alleged order of priority for settling its obligations, which places the payment of the labour entitlements and obligations last in order of importance.
11. 1053. The FTLFP adds that an appropriate opportunity is being sought to dismiss unionized workers. In addition, the enterprise ESM S.A.A., under the pretext of the insolvency proceedings, is failing to observe the workers’ fundamental rights of workers, in particular:
12. – it is not addressing the list of claims for the period from July 2004 to June 2005, disregarding the intervention of the Ministry of Labour;
13. – it is not addressing the list of claims for the period from July 2005 to June 2006, disregarding the intervention of the Ministry of Labour;
14. – it refuses to grant union facilities (union leave, travel expenses and travel allowances) to union leaders at local, regional and national levels from ESM S.A.A., as provided for in the collective agreements.
15. 1054. The FTLFP states further that there has been a systematic and sustained effort by the management of ESM S.A.A. to undermine the union’s legitimate activity and representation, and with this anti-union objective, and under the pretext of the insolvency proceedings, they are trying to reduce the number of unionized workers covered by collective bargaining.
16. 1055. The documentation provided by the complainant shows that the union of the enterprise has filed a criminal proceedings with the public prosecutor’s office and civil proceedings with the civil judicial authority, seeking to obtain the payment of to workers’ entitlements.
17. B. The Government’s reply
18. 1056. In its communication of 30 March 2006, the Government encloses a communication from the enterprise Electro Sur Medio S.A.A. (ESM S.A.A.) dated 10 February 2006, which is reproduced below:
19. In this matter, we would point out that these complaints fundamentally challenge the following:
20. 1. The privatization process adopted by the Peruvian Government and in particular the sale of Electro Sur Medio S.A.A.
21. Regarding the privatization of ESM S.A.A., this was a process adopted by the Peruvian Government in March 1997, and responses have already been given in that regard by the relevant bodies. In any case, we cannot say that it has been a failure, as this enterprise is working very hard to recover from the economic mismanagement of previous administrations and, precisely on 25 November 2005, INDECOPI approved the ESM restructuring plan, in which it was agreed to give priority to the schedule of payments to creditors, which has been strictly complied with since 15 December 2005.
22. 2. The alleged failure to make wage payments, failure to make Length of Service Compensation (CTS) payments, failure to pay contributions to the Pension Fund Administrator (AFP), and others; accusations made without any proof.
23. Regarding this aspect, we must say that both the current administration (Restructuradora de Empresas S.A.C.) and the previous ones (Consultoría “A” S.A.C. and TRECA S.A.C.), upon undertaking the administration of the enterprise, made tireless efforts between 31 October 2003 and January 2004 to update the CTS and AFP payments, and that since February 2004 these payments have been made on time in accordance with the payment schedule established by the relevant bodies.
24. Regarding the payment of wages, these are being paid on time. This can be shown easily using the information contained in our accounting records and the copy of the report of the scheduled visit of 11 October 2005 (Reference No. 083-2005-VPG-SDI-ICA), which prove that we are pursuing a policy of compliance with labour provisions.
25. 3. Failure to address the list of claims corresponding to the periods from July 2004 to June 2005 and from July 2005 to June 2006.
26. Regarding the accusation of unwillingness to address the list of complaints corresponding to the aforementioned periods, we would make the following clarifications:
27. The trade union organization presented the list of claims corresponding to the period 2004-2005 to the enterprise; which, after being examined, was, pursuant to article 54 of the Collective Labour Relations Act, returned for not meeting the legal requirements: for example, it did not enclose the general assembly record showing the election of the executive committee, the appointment in that assembly of a committee to negotiate the claims and its powers, and the corresponding notification to the enterprise of the new executive committee.
28. After it was sent back and the parties had expressed their views, the labour authority issued two subdirectorate orders on 17 and 20 June by which it would initiate collective bargaining, in spite of the company’s observations. At the same time, the enterprise began investigations on the trade union and determined that, not only had it not complied with the requirements for valid commencement of collective negotiation, but that it had also not renewed its executive committee in accordance with the law and its own by-laws.
29. To reach these conclusions, two things happened: (i) the Ministry of Labour was asked for a copy of the current by-laws governing the trade union which, upon verification by the enterprise, was found to contain express provisions related to the election process of its executive committee, which had not been complied with by the trade union; and (ii) the Ministry was asked for a copy of the last union registration of the current executive committee to check whether they had in fact complied with their by-laws and with the procedure provided for in the Ministry’s Compendium of Administrative Procedures (TUPA), there being reasonable doubt concerning the way in which the enterprise had been notified of the initiation of collective bargaining.
30. In the end it was concluded that the aforementioned collective bargaining had been brought to, a standstill by circumstances beyond the enterprise’s control, caused by the lack of legitimacy of the union leaders who had assumed the representation of the Single Union of Workers of ESM S.A.A. in Ica Nazca and Allied Workers, without observing the requirements of their own by-laws, and non-compliance with the basic minimum standards for registration that are required by our current labour legislation, a situation that has warranted a statement, in the final instance, by the Dispute Prevention and Settlement Directorate of the Ministry of Labour and Employment Promotion of Ica, through Directorate Order No. 074-2005-DPSC/ICA, on 28 November 2005, of which we enclose a copy.
31. The effect of this resolution was to cancel the recognition of the executive committee, thus leaving the trade union without legal representation. All things considered, this proves that the enterprise has at no time displayed anti-union behaviour, in fact, on the contrary, it has acted pursuant to the resolutions issued by the administrative labour authority itself.
32. Therefore, considering that both collective bargaining processes were initiated at enterprise level, in accordance with article 5 of the single consolidated text of the Act on Collective Labour Relations approved by Presidential Decree No. 010-2003-TR, in strict compliance with the regulations in force, we have the obligation to ensure due process, negotiating with those who demonstrate that they have complied with the formalities required by our current labour legislation.
33. 1057. The enterprise also sends a copy of the decisions of the Ministry of Labour showing that the bargaining committee did not enclose, with the record of the union assembly, with the agreements and decisions (collective bargaining proposals for 2004-05, amendment of by-laws, change in executive committee), that the union is made up of ten secretariats instead of 12 as established in its by-laws and that there is no record of any changes to the executive committee, to the by-laws or to the composition of the bargaining committee
34. 1058. In its communication of 4 August 2006, the Government stated that the collective bargaining mentioned by the complainant could not be undertaken as the individuals comprising the complainant’s executive committee could not legally represent it, according to Order No. 074-2005-DPSC/ICA of 28 November 2005, which nullifies Order No. 030-2005-SD-NCRGP of 31 October 2005, which in turn had ruled that the union had respected the provisions of paragraph 40 of the Compendium of Administrative Procedures (TUPA) of the Ministry of Labour, which establishes the obligation of depositing relevant documentation, so that the labour authority may register unions’ executive committees. The documents required of unions by the labour authority are: a copy of the union assembly record indicating the number of participant; a copy of the communication addressed to the employer and duly received; and a certified copy reflecting the assembly’s approval of changes to the by-laws and the designation of a new executive committee – which would attest to the legitimacy of the officers representing the union in collective bargaining.

C. The Committee’s conclusions

1. 1059. The Committee observes that in the present case (occurring within the context of insolvency proceedings involving the privatized enterprise, Electro Sur Medio S.A.A. (ESM S.A.A.)), the complainant alleges: (1) non-compliance or delays in compliance with the provisions of the collective agreement and legislation on remuneration and other payments; (2) refusal by the enterprise to grant facilities to union leaders (union leave, travel expenses and travel allowances); (3) refusal by the enterprise to negotiate the lists of demands since July 2004; and (4) the enterprise’s intention to reduce the number of unionized workers covered by collective bargaining. The complainant points out that these insolvency proceedings and the economic downturn that the enterprise has experienced jeopardize not only the labour entitlements of the workers but also their right to employment.
2. 1060. The Committee notes that the Government has only provided the point of view of the enterprise, which: (1) denies that the privatization was a failure, saying that it was in response to the economic mismanagement of previous administrations; (2) affirms that, since February 2004, the wage and other payments referred to by the complainant have been made on time in accordance with the payment schedule; (3) the lists of demands presented by the trade union of the enterprise were returned because they did not comply with legal formalities, which require the submission of the general assembly record showing the election of the executive committee of the union, the appointment in that assembly of the bargaining committee and the notification to the enterprise of the new executive committee; this was noted by the administrative authority in a resolution. The Committee observes that the enterprise has not made any comment on the allegations of refusal to grant union leave, travel expenses and travel allowances for union leaders, or the alleged intention of the enterprise to reduce the number of unionized workers, covered by collective bargaining or the enterprise’s failure to deduct union dues.
3. 1061. The Committee notes that, according to the Government, the union – before it is able to engage in collective bargaining – must fulfil certain requirements by submitting the following documents: a copy of the union assembly record indicating the number of participants; a copy of the communication addressed to the employer and duly received; and a certified copy reflecting the assembly’s approval of changes to the by-laws and the designation of a new executive committee.
4. 1062. In these circumstances, the Committee invites the complainant to rectify its non-compliance (noted by the administrative authority) with the legal requirements for collective bargaining, in particular, those relating to the submission of the union assembly record indicating the changes in the executive committee and in the by-laws, as well as of the appointment of the bargaining committee. The Committee observes that in the circumstances described, the Government and the enterprise do not recognize the union representation and, therefore, it is possible that the enterprise does not grant union leave and other facilities for union representatives.
5. 1063. In addition, the Committee requests the Government to ensure that the deduction of union dues is carried out by the enterprise, and that wages and other payments provided for in law and in the collective agreement are paid to the workers of ESM S.A.A. effectively and without delay. The Committee hopes that once the trade union has complied with the legal requirements, it will be able to engage in collective bargaining and obtain union leave, which is extraordinarily important in the current insolvency proceedings affecting the enterprise. The Committee requests the Government to keep it informed in this respect.

The Committee's recommendations

1. 1064. In the light of its foregoing conclusions, the Committee invites the Governing Body to approve the following recommendations:
   • (a) The Committee invites the complainant to rectify its non-compliance (noted by the administrative authority) with the current requirements for collective bargaining, in particular, those relating to the submission of the union assembly record indicating the changes in the executive committee and in the by-laws, as well as the appointment of the bargaining committee.
   • (b) The Committee requests the Government to ensure that the deduction of dues is carried out by the enterprise and that wages and other payments provided for in law and in the collective agreement are paid to the workers of Electro Sur Medio S.A.A. effectively and without delay. The Committee hopes that once the trade union has complied with the legal requirements, it will be able to engage in collective bargaining and obtain union leave which is extraordinarily important in the current insolvency proceedings affecting the enterprise.
   • (c) The Committee requests the Government to keep it informed in this respect.