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MPIfG Working Paper 05/9, October 2005
Collective Bargaining Practices in Eastern Europe:
Case Study Evidence from Romania
Aurora Trif
, University College Dublin, Department of Industrial Relations and Human
Resources
Abstract
There are several studies on recent developments in
collective bargaining in Eastern Europe, but there is still a debate about the
extent to which collective bargaining practices resemble those in continental
Western Europe. This paper aims to contribute to this debate, by examining
primary data on collective bargaining practices in Romania using an
actor-centred institutionalist approach. It focuses on collective bargaining in
four large chemical companies. Comparisons are made to other countries in order
to highlight the developments in Romanian cases. Unexpectedly, the study's
findings point to an increase in state intervention in establishing the terms
and conditions of employment after 1989, due to the state’s new roles during the
transformation process that affected job security. The study suggests a
considerable increase in the influence of top managers in determining pay and
working conditions, while trade unions retained the considerable influence over
social benefits in large companies. The findings show continuance of certain
pre-1989 practices, such as a persistence of high state intervention and a
limited independence of the trade unions from the management. This paper
contributes to a deeper understanding of institutional changes in the context of
a shift from a centrally planned economy to a market-based economy.
Zusammenfassung
Trotz einer Vielzahl von Studien über die
Entwicklungen der Tarifverhandlungen in Osteuropa in den letzten Jahren herrscht
Uneinigkeit darüber, inwieweit die osteuropäischen Verhandlungspraktiken mit den
westeuropäischen übereinstimmen. Dieses Papier trägt zu dieser Debatte bei,
indem es die Ergebnisse empirischer Analysen von Tarifverhandlungen in Rumänien
auf der theoretischen Grundlage des akteurzentrierten Institutionalismus
analysiert. Die Untersuchung konzentriert sich auf vier Großunternehmen der
chemischen Industrie. Es werden Vergleiche zu anderen Ländern gezogen, um die
Entwicklungen in den rumänischen Fallbeispielen hervorzuheben.
Unvorhergesehenerweise zeigen die Untersuchungsergebnisse, dass nach 1989
staatliche Eingriffe in der Bestimmung der Arbeitsbedingungen zugenommen haben.
Dies ist auf die neuen Aufgaben des Staates zurückzuführen, die dieser während
des Transformationsprozesses im Bereich der Beschäftigungssicherung übernommen
hat. Die Studie zeigt einen merklichen Anstieg der Einflussnahme des
Topmanagements auf Tarif- und Arbeitsbedingungen, während Gewerkschaften im
Bereich der Sozialleistungen in großen Unternehmen einen weiterhin großen
Einfluss ausüben. Die Ergebnisse deuten auf eine Weiterführung bestimmter
Praktiken hin, die vor 1989 üblich waren, wie zum Beispiel die starke staatliche
Intervention sowie die begrenzte Unabhängigkeit der Gewerkschaften vom
Management. Dieses Working Paper trägt zum besseren Verständnis des
institutionellen Wandels im Rahmen des Wechsels von einer Zentral- zu einer
Marktwirtschaft bei.
Contents
There are several studies on recent developments in
collective bargaining in Eastern European countries (Janssen/Galgoczi 2004;
European Commission 2004; Schulten 2005), but there is still a debate about the
degree to which collective bargaining practices resemble those in continental
Western Europe. This paper aims to contribute to this debate, by examining
institutional continuity and change for collective bargaining in Romania after
the fall of the communist regime. It focuses on the structure, the process and
the outcome of collective bargaining in four large chemical companies.[2] It
evaluates to what extent collective bargaining practices in Romania resemble the
basic features of collective bargaining in continental Western Europe.[3]
Additionally, comparisons are made to other Central and Eastern European
countries (CEECs) in order to highlight and contrast the developments in Romania.
Differently from Poland and Hungary, the transformation
process in Romania started from scratch in 1989, as it had one of the most
centralised politico-economic systems in Eastern Europe. The unfavourable
initial conditions and a gradual approach to the transformation process led to a
very long economic recession. In contrast to most CEECs, Romania achieved the
1989 level of Gross Domestic Product only in 2004. The changing environment
since 1989 has dramatically affected the chemical sector to which the case
studies belong, resulting in a decline of about 60% in its output (OECD 1998).
Thus, this study provides an insight on collective bargaining practices from a
country and an industrial sector that have been under great pressure to change.
The paper is based on primary data (qualitative and
quantitative) collected in Romania. A similar semi-structured interview was used
to interview (one-to-one) seven officials from national (transectoral)
institutions, nine officials from the chemical sector and 65 respondents at
company level. At national and sectoral levels, the respondents were key
informants representing the state, employers' associations and trade unions. In
addition, union officials, shop stewards, human resource managers and employees
from four large companies from the chemical sector were interviewed. Different
from most studies, this paper provides evidence on the perception of workers on
collective bargaining beside interviews with key informants.
Apart from interviews[4], a survey was conducted in the four
case studies. 125 questionnaires were distributed in each company via the
personnel department, which led to a very high rate of responses (over 70%).[5] Two
of the case studies, namely S1 and S2, were privatised companies and two of them,
P1 and P2, were state owned enterprises (SOEs). Company S1 was profitable, while
the other three were experiencing loses for several years. Each company had at
least a union to which more than 85% of the labour force was affiliated. The
survey findings are considered representative for each company investigated, but
it is acknowledged that bias might have occurred due to the fact that the
personnel department distributed the questionnaires.
Also, the validity of the findings is limited by the fact
that they reflect the perception of respondents and they could not be
systematically compared to previous data. The author found neither case studies
concerning collective bargaining in the chemical sector in Eastern Europe nor
any case study research on industrial relations in Romania. Thus, the primary
data could only be compared to evidence from different sectors in other CEECs.
Although the company is the most important bargaining level in Eastern Europe
(Schulten 2005), case study evidence on collective bargaining practices is very
scarce.
This paper utilizes the actor-centred institutionalist
approach as an analytical framework. Müller-Jentsch (2004) particularized the
actor-centred institutionalist approach developed by Scharf (1997) to industrial
relations (IR). The author indicates that institutions ought to be the main
focus of IR, but they need to be understood as an interaction between actors and
institutional context (Müller-Jentsch 2004: 27). Müller-Jentsch (2004) indicates
that this approach consists of three analytical layers. The first layer is the
historic-constitutional analysis of actors and institutions. The
historic-constitutional analysis emphasises the co-evolution of collective
actors and institutions. The second and the third analytical layers identified
by the author are the arena and negotiation concepts (Müller-Jentsch 2004:
31-32). The arena refers to the forum where negotiations and conflicts between
the actors takes place (e.g. collective bargaining, works councils etc), whilst
the negotiation deals with the process of exchange between capital and labour.
The arena limits the choices of the actors, but the actors have some discretion
to negotiate. The negotiation concept refers to cooperative and conflictive
interactions between the actors. This paper focuses on arena and negotiations
process, because a historic-constitutional analysis of actors and labour
institutions in Romania was examined by other studies (Trif 2004).
In order to assess collective bargaining practices in
Romania, three key features are examined, one referring to the arena and two
dealing the with negotiation process. Firstly, the structural characteristics of
collective bargaining are explored, in particular the perception of respondents
on how the mechanism of collective bargaining was established after 1989.
Secondly, the process of negotiation between parties is examined, by
investigating the influence of the parties in determining selected conditions of
employment. It was expected that the adoption of pluralist legislation[6] after
1989 that allows trade unions and employers to negotiate voluntary collective
agreements, would lead to a decrease of the role of the statutory legislation,
while the influence of employers and trade unions would increase. Finally, the
outcome of collective bargaining process in terms of substantive and procedural
rules is examined. Additionally, the functions of collective bargaining for the
state, employers and employees are analysed. The paper examines the structure,
the process and the outcome of collective bargaining in Romania, subsequent to
outlining its basic features in Eastern and Western Europe.
The term collective bargaining was first introduced by
Sidney and Beatrice Webb during the late nineteenth century. They define it as a
method whereby trade unions could maintain and improve their members' terms and
conditions of employment (Webb/Webb 1920). Flanders (1965) criticized the Webbs'
definition suggesting that 'joint regulations' is a more adequate term for
collective bargaining, because it refers to both making and applying the rules
established. Nevertheless, the term collective bargaining has continued to be
used by scholars and practitioners of industrial relations. In this study,
collective bargaining refers to the process of decision making between parties
representing employer and employee interests involving negotiation and
continuous application of the agreed set of rules to govern the substantive and
procedural terms of employment relationship (Windmuller et al 1987: 3). In line
with other studies on the topic, the term collective bargaining is also used to
refer to the mechanism for setting the terms and conditions of employment before
1989 in CEECs (Hethy 1991; Lado 2002), although there were significant
differences in its functions as compared to those in Western Europe (see Table
1).
Despite large variation in collective bargaining mechanisms across countries,
there are some basic common characteristics specific to a politico-economic
system or region. Table 1 outlines the main common features of collective
bargaining in a centrally planned economy and a market-based economy. During the
communist period, collective bargaining was not an essential mechanism for
setting the terms and conditions of employment. Generally, the state determined
wages directly by setting for instance, wage scales and wage funds for
enterprises, or indirectly by regulations based on the central plan (Hethy 1991:
135). Moreover, there were neither independent unions nor autonomous employers.
In countries such as Hungary and Poland (where there was a degree of
decentralisation) limited collective bargaining at company level had taken place
(Hethy 1991:130-131; Pravda/Ruble 1986), but in Romania there was no tradition
of voluntary collective bargaining. Therefore, by and large, there was no real
collective bargaining during the communist period in the CEECs.
In contrast, collective bargaining has been the main mechanism of establishing
terms and conditions of employment in Western Europe since the Second World War
(Traxler/Behrens 2002). Collective bargaining is primarily a voluntary process
involving autonomous employers and trade unions aiming primarily to determine
the terms and conditions of employment and to settle conflicts between the two
parties (Farnham 2000: 71). However, certain procedural rules (e.g. the
extension mechanism and enforcement procedure) are determined through statutory
legislation to various degrees in different in western countries
(Traxler/Behrens 2002).
The structure of collective bargaining also varies greatly across countries, but
multi-employer bargaining is predominant in Western Europe (Schulten 2005).
Employers have generally more power than unions (as they own the resources),
while the relations between the two parties may vary from co-operative to
adversarial (Crouch 1993). If the parties achieve a common position, the outcome
of the bargaining process is a collective agreement, covering usually
substantial and procedural rules. The main functions of collective bargaining in
a market-based economy are to ensure social peace and to enhance efficiency for
the state and employers, while for employees it provides a protective function
(Traxler 1998: 207-208). Voluntary collective bargaining with similar basic
features as in Western Europe was expected to emerge in CEECs after 1989, as
part of the democratisation process (Lado 2002).
Published studies indicate that the establishment of collective bargaining in
the CEECs after 1989 was based on the idea of free collective bargaining, but in
practice there is a considerable degree of continuity from the communist period
(Aro/Repo 1997; Lado 2002). Throughout the CEECs, voluntary collective
bargaining was made legally possible from the beginning of the 1990s, but it is
still heavily regulated (Aro/Repo 1997: 44-46; Lado 2002: 3). For instance, the
legislation stipulates the representativeness criteria for the social partners
and the (minimal) content of the collective agreements (Draus 2001: 22-24). Thus,
in spite of major differences among CEECs, depending on the inherited legacies
and the choices taken during the transformation process, these countries share
important common trends.
As Table 1 shows, collective bargaining coverage is far lower in CEECs (except
Slovenia which has an industrial relations system similar to that in Austria,
with compulsory membership of the Chamber of Commerce for employers) than in
Western Europe and single-employer bargaining prevails. The coverage of
collective agreements varies in the CEECs, from below 20% in Latvia and
Lithuania to 100% in Slovenia (Table 2). There are no data available for Romania,
but it is likely to be closer to Slovakia, since union density is around 35% and
collective agreements cover all employees from the bargaining unit. The low
coverage in the CEECs is associated with the decentralized structure of
collective bargaining and low level of organisation of both employees and
employers (Table 2). The weak development of sectoral collective bargaining is
generally explained in terms of inherited institutional legacies (e.g. strong
legal intervention, trade unions based within companies and a lack of autonomy
of the social actors) as well as employers' preference for single-employer
bargaining (Toth 1997; Draus 2001: 24-25; Lado 2002: 6). Nevertheless,
collective bargaining coverage increased slightly in 2003 in Hungary, the Czech
Republic and Slovakia (Janssen/Galgoczi 2004), which indicates that the decline
trend might be reversed.
However, according to Casale (1997: 2), "collective bargaining ends all too
often with a signature of a text - a collective agreement - which represents
nothing more than the transposition of what has already been fixed by law". In
the unstable economic and structural environment, characterised by economic
recession for many years, an increase of the informal sector and unemployment,
collective bargaining is not well consolidated. Collective bargaining in the
CEECs appears to have a reduced effectiveness for all three actors, particularly
in countries such as Romania, which had a very long period of economic recession.
In Romania, the legislation regulates the mechanism of collective bargaining to
a higher degree than in other CEECs (Clarke/Cremers/Janssen 2003). The law
allows only a single collective agreement to be negotiated at national, sectoral
and company levels, which should cover all employees from the bargaining unit.
The law also stipulates the requirements which should be fulfilled by the
parties to be allowed to negotiate the single collective agreement at a
particular level. Additionally, it indicates the minimal scope of a collective
agreement and the fact that provisions included in collective agreements at
lower levels have to be similar or more favourable for employees than those
agreed at higher levels. Thus, company collective agreement is very likely to be
the most important, while the legislation ensures a minimum coherence between
different levels.
Interviewees revealed that the legislative framework for the collective
bargaining mechanism was negotiated between the government and trade unions.
Both parties have achieved certain advantages. For the government, the
establishment of (more or less) free collective bargaining was part of the
democratisation process that enhanced their legitimacy. For (representative)
trade unions, it guaranteed that each employer (in companies with more than 21
employees) or representative employers' association is obliged to negotiate with
them. However, the legal provision that all employees in the bargaining unit
should be covered by the collective agreement could discourage employees from
joining a union. In order to avoid free riding in the chemical sector, the
social partners have agreed that employers would deduct 1% of the wages of all
employees. The fees collected from union members are given to the unions, while
those collected from non-members constitute a fund managed by both trade unions
and employer' representatives, to support the collective bargaining process.
Therefore, the mechanism of collective bargaining appears to be in favour of
trade unions, but in practice individual employers (or top managers) are often
in a stronger position, as will be shown in Section 4.1.
The centre-right government elected in 2004 in Romania has tried to change the
Labour Code of 2003. The government proposal was in line with employers call for
more flexibility and less rights for employees. Trade unions have been fighting
against these changes, and the legislation was only slightly changed in 2005.
For instance, it allows employers and employees representatives to establish the
overtime at company level (this used to be stipulated in the Labour Code). In
spite of the major constrains during the shift from centrally planned economies
to market based economies, the developments in Romania show that unions and
employers have certain influence on the establishment of labour institutions.
National, sectoral and company collective agreements cover employees in the four
companies investigated. In conformity with the legislation, collective
bargaining at company level took place after a collective agreement was
concluded at the chemical sector level, which was signed subsequent to the
national collective agreement. Trade union officials interviewed indicated that
national and sectoral agreements are minimal frameworks, while generally
collective bargaining at company level sets the actual terms and conditions of
employment. In three (out of the four) companies examined respondents revealed
that the company is the most important level where terms and conditions of
employment are established. In company P1, interviewees indicated that since
1997 the collective agreement of the Petrom holding group is the most important,
as managers have very limited decision making power at company level. Therefore,
evidence confirmed previous studies in the CEECs (Aro/Repo 1997: 147; Draus
2001; Lado 2002: 2) that the strategic level where terms and conditions of
employment are established is usually the company (or holding group) level.
A decentralized structure of collective bargaining is very common in CEECs, due
to both old and new circumstances (Aro/Repo 1997; Pollert 2000: 186). On the one
hand, the inherited legacies, particularly the existence of company unions
alongside a weak development of employers' associations, frequently made company
collective bargaining the only option available (Lado 2002). Moreover, in
Romania a single collective agreement that covers all employees seems to be a
continuation of the pre-1989 era ideology, which did not tolerate pluralism and
competition. On the other hand, the policy to introduce a market-based economy
along with the increase of unemployment, have strengthened employers' bargaining
power. Additionally, in the ambiguous transition context, they preferred to
determine the terms and conditions of employment at the company level.
Furthermore, there has been an increase of single-employer bargaining even in
Western Europe (Schulten 2005), to allow more flexibility at company level to
adapt to changes in the economic environment. Therefore, inherited legacies
along with a general economic and political environment that supports market
forces resulted in a collective bargaining structure far more decentralised in
the CEECs (except Slovenia) than in Western Europe.
Since collective bargaining at company level sets the actual terms and
conditions of employment, the bargaining process at this level is examined in
detail. In each company investigated, collective bargaining takes place between
a negotiation team consisting of top managers and company trade union
representatives. On the employer side, the management board appoints the team
responsible for collective bargaining. On the employees' side, respondents
reported that shop stewards initially have meetings with all members to discuss
their demands. Subsequently, union representatives gather to decide the
collective bargaining proposal and the negotiation team. Apart from company S2,
union officials appointed the members of the negotiating team. Thus, evidence
suggests that unions make an effort to find out members' demands, but the
procedure used to decide the negotiation teams on both sides is generally
top-down.
In the two companies that had more than one union (S2 and P1), each (representative)
trade union had their own bargaining agenda. This seems to be different than in
other CEECs, where usually unions from the same bargaining unit agreed their
position before negotiations with the employer (Aro/Repo 1997: 69). As the
companies S2 and P1 unions had weak legitimacy, it appears that they had
different proposals to justify their separate existence to their members.
Besides, in company S2 all 40 trade union representatives participated to the
collective bargaining round in 2001. However, a shop steward indicated that this
was just a fake bargaining process, as trade unions officials had agreed with
the management proposal before this 'public negotiation'. Therefore, evidence
suggests a lack of trust between different unions belonging to the same
bargaining unit as well as between different layers in union hierarchies in
Romania.
A precondition for collective bargaining is the existence of independent parties
whose members are willing to delegate authority to the representative
organisations (Farnham 2000: 71). In three out of the four companies
investigated, respondents have doubts about the degree of independence of the
unions from the management. Their suspicions are substantiated by the facts. For
example, in company S2 the management provides similar facilities for officials
of the two trade unions as for top managers, and pay their wages. In addition,
in company P2, the leader of the union negotiation team in 2000 was part of the
management negotiating team in 2001 (as he was not re-elected as a union
official). These practices appear to be a heritage of the pre-1989 era, but
generally, trade unions are not totally subordinated to the management and
employees can change union officials, as the case of company P2 demonstrates.
Nevertheless, evidence indicates that the lack of a clear line between the
management and trade unions has remained in some companies as well as between
their representatives at the sectoral level (which have the headquarters in the
same building). Therefore, despite being formally representative[7], both unions
and employers' associations appear to have weak representativeness in practice.
Evidence indicates that the authority given to the negotiating parties to make
concession during the (local) bargaining process varies across companies. Trade
unions could make independent decisions and alter the claims drafted in advance
in all four case studies, while employer' representatives adjusted their
original claims only in two cases. In the case of company P1, respondents
revealed that top managers did not have the mandate to modify the decisions
defined in advance, while in the case of company S2, top managers could impose
their will. This evidence substantiates the findings of Aro/Repo (1997: 72) in
other CEECs, by demonstrating that employer' representatives have at times
sufficient bargaining power to refuse any concessions. With regard to the
authority given to the trade unions, it appears that Romanian unions are closer
to the Hungarian ones, having a high degree of freedom to adjust their initial
claims (Aro/Repo 1997: 70). Therefore, findings suggest that trade unions adjust
their initial claims more often than employers' representatives, probably
because unions do not have any other choice.
Bargaining resulted in a collective agreement in each company investigated.
Collective agreements were recorded in a written form and they did not seem to
be approved by any body other than the negotiation team in the companies
examined. In conformity with the legislation, the collective agreements were
validated and registered by the appropriate district labour inspectorate and
subsequently they covered all employees. Most CEECs have a written form of the
collective agreement and they have to register collective agreements with a
specialized state agency (Schulten 2005). However, it is not clear if this
reflects a persistence of bureaucratic routines which existed during the
communist period, because this practice is also found in some Western European
countries (e.g. Germany and France) (Schulten 2005).
Considering that the state established the terms and conditions of employment
before 1989, it was expected that its influence on the terms and conditions of
employment would decrease with progressive adoption of pluralist legislation.
However, survey data presented in Table 3 indicates that the influence of
statutory legislation on terms and conditions of employment increased in the
opinion of 43% respondents on average in the four companies investigated, while
only 12% considered that it decreased. Thus, respondents perceived that even the
state has more freedom to intervene in industrial relations than before 1989 due
to its new roles during the transition.
Nevertheless, survey data shows that less than one third of respondents consider
that the state still has a high influence on pay, while more than two thirds
perceive that the state has a strong influence on working hours and working
conditions (Figure 1). Accordingly, findings indicate a decrease of state
intervention on pay after 1989, while its influence on working hours and working
conditions remained high. Overall, respondents consider that the impact of the
state on the terms and conditions of employment increased rather than decreased
after 1989.
Moreover, the largest number of respondents who indicated that the state
influence increased was in the private company S1 (Table 3). It appears that
almost two thirds of respondents in the company S1 consider that state influence
increased, because the state had a huge impact on job security on two occasions.
Firstly, in 1997, the company was almost closed down by the government as it was
making huge losses. Secondly, in 2000, the state agencies managed the
privatisation process which resulted in a privatisation contract that obliged
the new owner to preserve the existing number of jobs for the next five years.
Taking into account that between 23% and 55% of employees lost their jobs after
1989 in the four companies investigated, it is natural that employees are more
concerned with job security than with the level of pay or other terms and
conditions of employment.
Although the Romanian state does not always enforce financial discipline,
employees consider intensely the threat of losing their jobs after 1989, when
companies such as S1 temporarily stopped operating or were closed down. The lack
of implementation of financial discipline occurs also in private enterprises,
such as company S2, and is often connected to corruption (Dochia 2000). Findings
indicate that indirect intervention of the state via (lack of) financial
discipline may also have an important impact on the terms and conditions of
employment. Therefore, employees' perception of the increase in the state
intervention at company level after 1989 seems to be linked with an expanding
state jurisdiction in other areas, such as to manage the privatisation process
and to enforce financial discipline, which are closely linked with job security.
There are two employers' associations in the chemical sector that have
negotiated collective agreements after 1989. The largest federation, named
Fepachim, concluded three sectoral collective agreements, each of them for a
period of five years (1990-1996, 1996-2001 and 2001-2005), while supplementary
agreements dealing particularly with pay were negotiated annually. The other
employers' association, the Aperom Federation, negotiated two collective
agreements for a group of enterprises (including company S1) in 1993 and 2001,
while wages have been negotiated annually. The framework agreements negotiated
appear to be in a similar fashion as the five-year and annual plans that
operated before 1989, suggesting that inherited legacies affected the new labour
institutions.
Evidence revealed that in Romania (as in other CEECs) the role and effectiveness
of the employers' associations in collective bargaining is rather modest (Deppe/Tatur
1997: 266; Toth 1997: 340). In 2001, the main difference between the sectoral
collective agreement concluded for the chemical industry and the national
collective agreement (which covers all industrial sectors) was an increase with
35% as compared to the national minimum wage. Nevertheless, a union official
indicated that there are companies which cannot afford to pay this wage level.
In these companies, the local actors 'negotiate' a lower minimum wage at company
level than at the sectoral level, although this is illegal. A union
representative indicated that they can sue employers who pay lower wages than
those established in the sectoral agreement, but they prefer to accept lower
wages in order to save the jobs of their members, which would be lost if
companies go out of business. Among the four case studies, the collective
agreement concluded in the company S2 included provisions below those in the
sectoral agreement, according to the respondents. The fact that the sectoral
agreement is not implemented in companies that have a poor financial situation
indicates a weak effectiveness of collective bargaining.
The case of the public oil sector demonstrates that the state representatives
dominate certain employers' associations. The national oil corporation Petrom[8],
to which the company P1 belongs, is affiliated to the representative employers'
association for the energy industry, named the Elpega. Nevertheless, a trade
union official (who was part of the negotiation team in 2001) revealed that the
Elpega is only 'on paper' the partner in collective bargaining, while in
practice collective bargaining takes place between the government and trade
union representatives. It appears that the state has a covert control over the
oil sector, because an (uncontrolled) increase of wages is likely to influence
the level of inflation. Additionally, the (public) oil sector represents a 'pace
maker' for the level of wages, according to a trade union official. The Elpega
appears to be an extreme case, but this evidence supports Draus' (2001: 5)
findings that many employers' associations are artificial players dominated by
the state representatives. Thus, evidence revealed that the independence of
employers' associations from the state is questionable, particularly of those
organisations consisting of top managers of the SOEs.
Another issue revealed during interviews was the reluctance of the members of
the employers' associations to make compromises in order to achieve a common
bargaining position. According to a Fepachim official, "it is more difficult to
achieve an agreement among the employers' association members, than it is to
negotiate with the trade unions". This is not an atypical case. A state official
working with the Economic and the Social Council (the national tripartite body)
indicated that generally, employers' associations are not able or not willing to
have a common view either vis-à-vis trade unions or towards the state. Thus, an
important obstacle in the development of voluntary collective bargaining appears
to be the unwillingness of employers to delegate power to employers'
associations to negotiate on their behalf.
It appears that employers delegate little power to employers' associations
because they have enough authority at company level to determine the terms and
conditions of employment as they desire. Table 4 indicates that the influence of
the top managers increased in the opinion of 55% of the respondents on average
in the four companies examined, while only 14% considered that it decreased.
Additionally, more than 75% of the respondents indicated that top managers have
a strong influence over specific terms and conditions of employment, such as pay
and working conditions, as Figure 2 shows. Therefore, findings confirm the
expectation that the influence of employers or their representatives (top
managers) over terms and conditions of employment would increase with the
progressive adoption of a pluralist legislation. This research substantiates
other findings in CEECs which indicated that poor development of the employers'
associations is associated with strong employers' influence at company level,
particularly in the private sector (Lecher/Optenhogel 1995; Martin 1999; Pollert
2000: 202).
The collapse of the communist regime gave unions the opportunity to negotiate
collective agreements with employers. Survey data presented in Table 5 shows
that on average, more than 50% of the respondents consider that trade union
influence on the terms and conditions of employment increased in the four
companies investigated. Aro/Repo (1997: 160) found a similar trend in other
CEECs. Their findings indicate that trade union influence on collective
bargaining increased between 1992 and 1995 in more than 30% of the bargaining
units investigated in five CEECs (Aro/Repo 1997: 160). A Romanian trade union
representative indicated that immediately after 1989 trade unions were very
strong and some of them had extreme demands, but as they got more experience,
they became more realistic and constructive. In addition, the economic recession
and the increase of unemployment determined a decrease of trade union power in
the second half of the 1990s. Thus, the findings confirm that the influence of
the trade unions on the terms and conditions of employment has increased
following the adoption of the pluralist legislation in very large companies,
while they indicate a decline in trade union influence during the 1990s overall.
Collective bargaining is generally the most important function of trade unions
in a market economy system. Evidence in the chemical sector and the four
companies examined suggests that collective bargaining has become one of their
main functions after 1989. A union official of the representative federation
indicated that their main function is to negotiate the collective agreement at
sectoral level with the employers' association Fepachim. Nevertheless, the
sectoral agreement is just a minimal framework and it is sometimes not
implemented. Thus, it is unlikely to have an important effect on the terms and
conditions of employment at company level.
Figure 3 indicates that on average, more than 50% of respondents consider that
trade unions have a high influence on specific terms and conditions of
employment. Their highest impact is on social benefits, followed closely by
working conditions and pay. It appears that the influence of trade unions on pay
increased, but in line with Vickerstaff/Thirkell's (2000) findings, the case
studies evidence revealed that despite changes in the companies' environment,
both private companies and SOEs still have a social role.
The largest difference in trade union influence on the terms and conditions of
employment is between the two private companies S1 and S2, as Figure 3 indicates.
Considering that company S1 is part of a profitable and growing corporation,
while the holding group to which company S2 belongs has serious financial
difficulties, it appears that the financial situation of the company has an
important impact on trade union influence. Respondents from company S2 indicated
that trade union influence decreased after 1997, when the company profits were
declining. Findings suggest that trade union power is more associated with the
economic situation of the company than with the ownership.
Nevertheless, other factors may affect the influence of trade unions,
particularly the commitment of the union leaders to protect workers interests.
Respondents revealed that the employer pays trade union leaders in the company
S2 and they have similar facilities with the top managers. As a result, they are
not enthusiastic to protect employees' interests, considering that they may lose
the benefits provided by the employer. Furthermore, the fact that company S2 was
privatised six years earlier than company S1 may indicate that privatisation has
induced a decrease of trade union power. Therefore, evidence in the four
companies investigated suggests that the financial situation of the company has
an important effect on trade union power, while it is not clear if privatisation
causes a decline in trade union influence as some studies suggest (Pollert
1999).
Company collective agreements include substantive and procedural issues.
Interviewees revealed that the main issues negotiated were wages, social
benefits, working conditions, job security, working hours, holiday, facilities
for trade union activities and disciplinary and grievances procedures. All
provisions are based on the conditions stipulated in the sectoral collective
agreement. Respondents indicated that wages and social benefits were the most
common issues on which compromises were made, substantiating the survey of Aro/Repo
(1997: 71) in other CEECs. Therefore, the findings demonstrate that the scope of
collective bargaining has been extended, but it appears that there is a degree
of continuity from the pre-1989 era, as social benefits continue to be among the
most important issues negotiated.
In Romania, working hours are heavily regulated by the Labour Code. It
stipulates that generally, employees should work eight hours per day and 40
hours per week (Codul Muncii 1999: 48). The law also establishes maximum working
hours, which are nine hours per day and 48 hours per week (Codul Muncii 1999:
48-52). Working hours have been an issue in all companies investigated, but
generally, employees did not request a reduction of working hours, as could have
been expected. On the contrary, they asked management to provide sufficient raw
materials to work continuously to receive their full wage. Trade union officials
indicated that it has been very difficult to negotiate the terms and conditions
of employment in a context where companies had to stop (temporarily) operating
due to a shortage of raw materials. Therefore, in the transition context with a
poor living standard and problems with supply and demand chains, the findings
suggest that employees request employers to ensure sufficient work for the
working time stipulated in the legislation, not a reduction of working time as
happens in Western Europe.
As the legislation leaves little room to modify working time, wages are the main
issue on which compromises can be made. In all four companies, the wage was
negotiated during collective bargaining. Remuneration clauses referred in
principle to the basic wage based on qualification[9], bonuses for special
conditions and individual bonuses based on seniority rights (up to 25% of the
basic wage) (Contractul colectiv de munca - Ramura chimie si petrochimie
2001-2005 2001: 10-11). In addition, in companies S2 and P2 there were
collective or individual bonuses related to the performance. In the
petrochemical complexes S1 and P1, where production is primarily dependent on
technology and the quality of the raw materials, it was a time-based wage
system. Therefore, the wage structure has changed to a certain extent (being
linked to collective or individual performance when possible), but
qualifications, seniority rights and working conditions are still important
criteria in establishing remuneration, as it was before 1989.
A major issue during the communist period was the fact that managers could not
motivate employees due to low wages and small wage differentials (Hethy 1991:
136). Evidence suggests that this problem still exists in the three (out of the
four) companies investigated. Apart from company S1, employees' wages barely
cover the cost of living. Furthermore, managers have the authority to penalise
workers, but not to reward them. A line manager said "I can only sanction
employees, but I cannot give them any bonus. As a result, I use less strict
sanctions. In addition, the wage is so low that I think their family would not
have enough money for the basic needs, so often I do not penalize them at all".
However, those with disciplinary problems were the first made redundant in all
companies and the threat of losing the job is very real for most employees.
Therefore, like before 1989, it is generally very difficult to motivate
employees, since wages are very low, but job insecurity is likely to make
employees work harder as those with poor performance can be easily made
redundant.
Survey data revealed that the top management and unions are the main actors that
determine wages. In each company more than 80% of respondents consider that top
managers have a high influence on wages (Figure 2), while around half of
respondents indicate that on average trade unions have a strong influence on
wages (Figure 3) in the four companies. Only one third of respondents reported
that the state has an important influence over wages (Figure 1). This indicates
that state influence in determining wages has decreased a great deal, as the
state had a predominant influence in determining wages before 1989 (Hethy 1991:
135). Consequently, as in Western Europe, the findings indicate that collective
bargaining is the main mechanism that sets the wage in large companies with a
unionised labour force, with employers having a higher influence on wages than
the other two parties. Despite disparity in the power between capital and labour,
collective bargaining does take place in unionised companies.
Social benefits are another key issue negotiated in the companies investigated.
The collective agreement in each company included clauses regarding subsidies
for around 50% of the price of holiday tickets, premiums for Easter and
Christmas, and food vouchers. Medical services are provided in all four
companies and in two of them the facilities have been improved since 1989. In
addition, company P1 had a leisure complex for employees. Nevertheless, all
companies stopped providing flats for employees, but two of them still had
hostels where employees could get a room for a cheap rent (S1 and S2). Therefore,
empirical data indicates that very large companies continue to provide
substantial social benefits.
As in the case of wages, survey data indicate that top managers have the highest
influence in determining social benefits (Figure 2), but they are followed
closely by trade unions (Figure 3). It appears that management and employees had
a common interest in providing certain social benefits at company level.
According to a human resource manager, in the context of a low living standard,
a lunch meal is likely to improve the labour productivity. In addition, the
legislation supports the supply of food vouchers by the employer, exempting them
from taxation (Law No. 142/1998). Also, health services with staff specialized
in dealing with company-specific illnesses were likely to reduce absenteeism, as
there are frequent accidents in the production sections. A blue-collar worker
said that "almost everybody had a work accident. I inhaled ammonium in 1991 and
I was burned with hot water 1993". In addition, health services in Romania are
theoretically free of charge, but in practice it is very common to give a large
'compensation' in order to have an adequate treatment. Consequently, employers'
representatives and trade unions considered that in the existing environment,
providing social services at company level is likely to have benefits for both
parties.
The persistence of social benefits distributed by the company was found in other
CEECs (Aro/Repo 1997; Vickerstaff/Thrikell 2000). For instance, Aro/Repo (1997:
141) found that health services existed in more than 70% of the units
investigated in Slovakia, the Czech Republic and Bulgaria. Nevertheless, social
benefits found in the four companies investigated are likely to be more
extensive than the average in Romania, as these companies are very large and
almost totally unionised. Therefore, empirical data in Romania substantiate
other studies in CEECs, indicating that large enterprises have maintained their
social role in guaranteeing a minimum social protection in the unstable and
unpredictable environment, with the state failing to provide a safety net.
Although industrial action due to collective bargaining issues at company level
is relatively rare in Romania (Martin 1999; Trif/Koch 2004), there have been
collective disputes in the companies investigated. In company P2, no agreement
was reached after two months of negotiations in 2001, because the management did
not want to conclude the agreement, according to a trade union official. The
trade union informed the Ministry of Industry that they had a conflict of
interests and a week later the management signed the collective agreement.
Therefore, collective agreements are generally concluded through dialogue and
compromise between trade unions and employers' representatives, but mediation or
arbitration are used when necessary, as in Western European countries.
Also, there was a collective dispute in company S2 in 2001 because wages and
bonuses stipulated in the collective agreement were not paid on time. It started
with a legal demonstration (a march) organized by the trade unions, but
subsequently the majority of employees refused to start working until they had a
response to their demands. Interviewees indicated that trade unions were not
involved in the strike[10]. After three days of the strike and a three-day lockout,
almost nothing was achieved by the employees, while the employer did not suffer
major losses since there was a shortage of raw materials at that time. Finally,
wages and bonuses were given to employees, but later than stipulated in the
collective agreement. The strike and the lock-out in the private company S2
represent an atypical case, which took place in a context where employees were
used to working discontinuously due to lack of raw materials.
The majority of the interviewees, including trade union representatives,
considered that a strike should be used only in extreme cases (e.g. against
closing down the company), while all the other issues should be solved through
dialogue. The opinions of respondents regarding the use of strike action might
be a linked to the pre-1989 unitarist culture, but it may also be due to the
problems of survival of companies during transition and the high uncertainty
regarding their jobs. In addition, stopping the chemical installations which are
supposed to work continuously is generally a lengthy process, but to make them
work again at the specified parameters is a long and difficult process. In
contrast to Western Europe, evidence suggests that the (potential) use of strike
to improve terms and conditions of employment is generally not supported by
employees, but it may be different in other sectors.
It appears that the minimal frameworks agreed at national and sectoral levels
along with decentralized collective bargaining rarely result in positive
outcomes for the three parties. For the state, sectoral collective agreements
did not ensure an increase of efficiency in the chemical sector, as companies
which did not implement even the minimal terms and conditions of employment are
neither forced by the state nor by trade unions to go out of business. The
impact of collective bargaining on social peace is not clear, as the number of
strikes has generally been decreasing during the 1990s, while the coverage of
collective agreements has also been diminishing in most CEECs (Schulten 2005).
For employers in three companies investigated, it did not result in a profitable
business, although it is possible that it contributed to an increase in labour
productivity and conflict resolution. For employees, collective bargaining has
given them a voice in establishing the terms and conditions of employment, but
in the three non-profitable companies they have low wages and high job
insecurity. Nevertheless, the employees' situation may be even worse without
collective bargaining and trade union representation.
Furthermore, in company S1 virtually all respondents were content with their
terms and conditions of employment, while the company had considerable profits.
A blue-collar worker revealed that their wages are around five times higher than
the average wage in Romania. Additionally, the collective agreement ensures job
security, individual health insurance as well as the improvement of medical
services and work conditions. Taking into account that a positive outcome for
capital and labour was found in the company where there has been the strongest
union, it could be considered that the findings substantiate Crouch's (1993)
expectation that a balanced power relationship between capital and labour is
likely to result in benefits for both parties.
Nevertheless, the evidence suggests that is not enough to have a strong trade
union to get a positive outcome in the exchange between labour and capital. In
company S1, both parties have had a negative outcome during the 1990s when the
company experienced huge losses, despite having a strong independent union. The
company has become profitable and could afford to pay high wages only after an
employer who had the resources to make it profitable bought it. Also, the
strategy of the new managerial team was to achieve a committed labour force by
providing high wages and training as well as involving employees collectively
and individually in the organisational changes. In the other three companies,
the outcome of the exchange between capital and labour was negative for both
parties, as they were not profitable for several years, while employees had low
wages[11] and high job insecurity. Despite over 85% union density, top managers had
a far stronger influence than the trade unions on wages in these three companies.
Therefore, the evidence suggests that the company context and the management
approach to employment relations have an important effect on the outcome of
collective bargaining at company level.
This study evaluates change and continuity in collective bargaining practices in
Romania after 1989. The main difference as compared to the pre-1989 era is the
decentralisation of collective bargaining, reflected in the larger scope for
establishing the terms and conditions of employment at company level and more
authority delegated to both parties, trade unions and top managers. In addition,
the use of the strike as a (potential) power resource for the unions is a new
phenomenon. Nonetheless, there is a persistence of high state intervention and
the unitarist culture from the pre-1989 period. Additionally, the unclear
boundaries between employers' and employees' representatives indicate that
features of collective bargaining in Romania are different from those in Western
Europe. Collective bargaining in Romania was built on the existing structures
and practices, which led to a continuance of the pre-1989 features.
The main contribution of this paper is to provide primary data on collective
bargaining practices after the fall of the communist regime, in the typical type
of companies that operated before 1989 in Romania. The study aimed to verify if
the adoption of pluralist legislation would lead to a decrease of the state
intervention in establishing the terms and conditions of employment, while the
influence of the employers and trade unions would increase. The findings
confirmed that the influence of the top managers and trade unions in setting the
terms and conditions of employment increased, while the state intervention on
pay decreased. Nevertheless, respondents in the large companies investigated
perceived an increase in the state intervention at company level after 1989, due
to the expanding of state jurisdiction in areas such as to manage the
privatisation process and to enforce financial discipline, which are closely
linked with job security.
Collective bargaining in Romania does not appear to be similar to any particular
country, although findings in other CEECs revealed several comparable changes
and continuities. In contrast to most CEECs, in Romania employers are obliged to
initiate collective bargaining process in all companies with more than 21
employees and there is an extension mechanism at each level. Also, the
perception of an increase of the state's influence on the terms of conditions of
employment after 1989 was not found in other CEECs. Differences in collective
bargaining among countries are likely to be determined to a certain extent by
the dissimilarities in the legislation, the national inherited legacies and the
progress with the economic reforms (Aro/Repo 1997; Clarke/Cremers/Janssen 2003).
However, differences among the companies investigated cannot be explained in
terms of legislation or inherited legacies. The case of company S1 shows that
the trade union and the top management played a crucial role in establishing a
collective bargaining mechanism that resulted in a positive outcome for both
parties. In a context where institutions are not well consolidated, the local
power holders have a degree of choice, as the differences between the four case
studies indicate. The findings suggest that collective bargaining varies across
countries and companies, being dependent on the co-evolution between the
specific context and the choices of power-holders.
This paper contributes to a deeper understanding of institutional change in the
context of a shift from a centrally planned to a market-based economy. It
appears that the historical legacies and the previous institutional setting have
had an important role during the transition process (Clarke/Cremers/Janssen
2003; Pollert 1999), not least because the new actors have been rather weak and
they have been experiencing reduced legitimacy. Nonetheless, considering the
limited empirical data and the fact that labour institutions are still in flux,
further research is needed to have a comprehensive and conclusive answer to the
debate of convergence versus divergence in collective bargaining practices in
Romania in comparison to other CEECs and to continental Western Europe.
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Endnotes
1
The author is very grateful to Jürgen Feick, Karl Koch and
Simone Leiber for their detailed and constructive comments on earlier versions
of this paper.
2
Each company has more than 1000 employees. Large companies
were chosen because they were more likely to have labour institutions (e.g.
trade unions and collective bargaining). Also, they reveal the transformation of
the typical type of company which existed before 1989. Additionally, large
companies still cover almost half of the labour force, although they account for
only 0.5% of the total number of active companies in Romania (UniCredit Romania
2005).
3
These are used as a benchmark, because a return to Western
European values and practices has been the aim (or at least the political
discourse) across Eastern Europe since 1989.
4
18 interviews were carried out in company S1, 16 in
companies S2 and P1, and 15 in P2.
5
The numbers of responses were: 123 in company S1, 119 in
S2, 89 in P1 and 117 in P2.
6
It refers to formal recognition of the divergent interests
of labour and capital (e.g. the right to strike).
7
They fulfil the representativeness criteria stipulated by
law.
8
This corporation was privatised in 2004. It was bought by
OMV Aktiengesellschaft (Austria).
9
The minimum difference in the basic salary between an
unskilled worker and a skilled worker is 1:1.2, while between a worker and an
employee with higher education is 1:1.5 (Contractul colectiv de munca - Ramura
chimie si petrochimie 2001-2005 2001:10).
10
Union officials stayed inside of the company headquarters
as required by the management.
11
For instance, in the company P2, wages are less than 100
Euro (2,100,000 ROL in 2001) per month for blue-collar workers, which according
to a respondent do not cover the cost of daily food and transport to the company.
Copyright © 2005 Aurora Trif No part of this publication may be
reproduced or transmitted without permission in writing from the author.
Jegliche Vervielfältigung und Verbreitung, auch auszugsweise, bedarf der
Zustimmung des Autors. MPI für Gesellschaftsforschung,
Paulstr. 3, 50676 Köln, Germany
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