Business Associations and Their Role in Strengthening Industrial Relations

Business Associations and Their Role in Strengthening Industrial Relations Conference organized by VCCI/BSPS/DANIDA Hanoi Horizon Hotel, 27 May 2008 Mr. Vu Tien Loc, Chairman of VCCI Leaders from Ministry of Labor, Invalids, and Social Affairs Vietnam General Confederation of Labor International Labor Organization DANIDA, Danish Embassy Thank you for inviting AmCham to participate in this workshop on Business Associations and Their Roles in Strengthening Industrial Relations. 1 With the large number of work stoppages in Vietnam these days, which are causing millions of dollars in losses to both workers and businesses, this is a very timely topic. I would like to review for you the American Experience in Labor and Management Relations. 2 And I will summarize the Birth of Labor Law in the United States Birth of the Federal Mediation and Conciliation Service What Mediators Do Economic Importance and Success of U.S. Labor Laws and Practice Relevance of the American Experience to the Current Situation in Vietnam Birth of Labor Law in the United States Conflict between unions and company management in 1933 across the United States was such that there were 1,856 separate work stoppages, affecting major sectors of the economy. The United States was in the grip of the Great Depression, and it was clear that action had to be taken. In 1935, an overwhelmingly pro-labor, Democratic Party-controlled U.S. Congress 3 passed the National Labor Relations Act. 4 This law is how the concept of free unions and what we call the freedom to associate became embedded in U.S. labor laws. Under the law, employees are allowed to engage in strikes and employers can lock out workers as part of a contract dispute. However, both sides must observe rules that govern their negotiations and the relationship between employee unions and company management. Either side can be sanctioned if it acts unfairly or violates the requirements of the law. The National Labor Relations Act has three basic sections: 1 Tri!n khai nhi"m v# $%i di"n Ng&'i s( d#ng lao )*ng trong các Hi"p h*i Doanh nhi"p 2 http://fmcs.gov/assets/files/articles/pjh-china_speechversion_41.doc. Based on a speech delivered by Former U.S. Federal Mediation & Conciliation Service Director Peter J. Hurtgen to the International Seminar on Labor Dispute Settlement, for a distinguished international audience of academics and Chinese government officials at in Beijing, China on November 19, 2004 3 http://en.wikipedia.org/wiki/party_divisions_of_united_states_congresses, 74 th Congress: 1935-1937 Senate: 69D 25R House: 435 = 333D 89R, 4 http://www.nlrb.gov/about_us/overview/national_labor_relations_act.aspx

(1) rules and regulations for holding elections to determine whether a majority of employees wish to be represented by a union; (2) a compilation of defined unfair labor practices by employers; and (3) a similar complement of defined unfair labor practices by unions. The law, which has been in effect for over 70 years, is interpreted by a 5- member National Labor Relations Board, 5 which hears and decides complaints brought by unions or management alleging that the other side has violated the law. This law continues to govern the unionized sector of the U.S economy. There are about 15 million union members in the U.S., of which about 10.5 million 6 belong to unions affiliated with the AFL-CIO (American Federation of Labor Congress of Industrial Organizations). Birth and Role of the Federal Mediation and Conciliation Service: In 1947, about 12 years after the passage of the National Labor Relations Act, the United States Congress determined that the process of collective bargaining could use a helping hand from a neutral source, which could impartially assist labor unions and company management. Congress created the Federal Mediation and Conciliation Service 7 to function as a neutral party, with a cadre of mediators who would be available to labor and management. The mediators work to help unions and employers resolve their contractual disputes through mediation, conciliation and voluntary arbitration, without resorting to economically disruptive strikes or lockouts. The primary goal is that the government agency will work with companies, and the unions that represent employees in those companies, to help them reach collective bargaining agreements, or contracts, that set forth the wages, hours and terms and conditions of employment for employees. It is important to note the difference between mediation and arbitration. Mediation, a form of alternative dispute resolution, is a process in which a neutral facilitates communication and negotiation between parties to assist them in reaching a voluntary agreement regarding their dispute. Arbitration involves a decision by a neutral, who hears a case, listens to witnesses, credits or discredits them, and renders a decision that the parties agree is binding. Although arbitration decisions can be appealed in the courts, courts almost never overturn an arbitration decision. Arbitration is considered a form of alternative dispute resolution as well because it is an alternative to the court-litigated process. As mediators, the FMCS helps companies and unions negotiate contracts that cover wages, hours and other terms and conditions of employment. In the United States, before a union and an employer begin the process of collective bargaining, the FMCS contacts the parties to offer mediation services. Often, the parties will accept the services, but sometimes they do not. In the United States, mediation is a purely voluntary process. Labor conflict is most obvious in the United States when strikes occur, and the FMCS primary mission is to avoid work stoppages through mediation. However, even 5 http://www.nlrb.gov/ 6 http://www.aflcio.org/aboutus/faq/ 7 http://www.fmcs.gov/internet/ 2

where there is no work stoppage, and where the parties reach agreement on the terms of a contract, it would be unrealistic to assume that the relationship between labor and management can be peaceful all the time. To the contrary, it is anticipated that both sides will perceive that they have different interests, which can create conflict. However, the Federal Mediation and Conciliation Service emphasizes conflict prevention equally with conflict resolution. The agency works with labor and management through relationship-development training programs that are designed to improve the one element that makes conflict manageable communication. Communication is at the core of all successful relationships, including the relationship between labor and management. Communication that includes listening without judgment, and response without reproach, leads to cooperative efforts. In the United States, federal mediators instruct labor and management partners in the art of positive communication, which is central to cooperative efforts. What Mediators Do: A mediator s job is to assist the parties in reaching contract settlements. How do they accomplish this task? The agency employs 200 mediators who are experts in conflict resolution. They are dispersed around the United States and spend a significant amount of time in their communities making themselves known to the labor and management representatives situated in their areas, and make every effort to gain trust from the parties so that they are viewed favorably by both sides even before a dispute begins. Relationship-building between mediators and labor or management representatives is time consuming, but it pays off significantly when the parties need a neutral to assist them. Once mediators have established a level of trust, they are often asked to provide assistance in improving the relationship between the representatives of management and labor through the relationship development training programs. These programs have one common thread, which is to improve communication between the parties such that their communication is respectful and can lead to meaningful cooperation. Through such meaningful cooperation, there are great benefits to the enterprise and its unions. Workers voices are heard, as their ideas and suggestions are encouraged by management. This means that businesses are able to take into account the feedback that is only possible when there are committed workers directly engaged in the production process; that is to say, when there are workers with an owner s mentality. When workers are respected and begin to feel that they have a stake in a company, morale improves, customer service improves, productivity improves, work attendance improves and, as a consequence, these companies are best equipped to meet the challenges of global competition. In addition, the type of support for collective bargaining that is provided by the FMCS is consistent with the commitment that the United States and many other nations made in the International Labor Organization s 1998 Declaration of Fundamental Principles of Rights at Work. 8 8 http://www.ilo.org/dyn/declaris/declarationweb.indexpage. 3

For that reason, the Federal Mediation and Conciliation Service programs may be of interest to Vietnam. As nations endeavor to meet their commitments pursuant to the declaration, the FMCS has provided technical assistance in more than 20 countries, including Vietnam. 9 By the way, in Singapore, there is a similar Tripartite Partnership between the Government Department of Manpower, the Singapore National Employers Federation, and the National Union of Trade Councils, that works to build this same sort of communication and partnership. As a result, enlightened unions and employers work together with the government in Singapore to achieve mutually beneficial results for workers and companies, with increased wages, profits, productivity, and competitiveness. 10 The Economic Importance and Success of Labor Law and Mediation The U. S. has found that collective bargaining and dispute resolution techniques are institutions that are practical and beneficial for economic growth. The U.S. economy is successful in part because we have these institutions to avert or minimize work stoppages or other economically disruptive labor strife. Why is collective bargaining and alternative dispute resolution important? Because, in the U.S., the system of collective bargaining, unfair labor practices and the role of FMCS, and the practice of labor relations is still based on an adversarial system. The system has been and continues to be adversarial because, when U.S. collective bargaining was created, it was believed that capital and labor, management and workers, would always be in conflict. So, a system of law and regulations, and government agencies, such as the National Labor Relations Board and the Federal Mediation and Conciliation Service, were created to take that conflict out of the streets and channel it into collective bargaining and acceptable forms of conflict, such as lawful strikes, lockouts or economic pressure. This has reduced harmful work stoppages in the U.S., which have diminished substantially, continuing a long-term trend. 11 In 2007, there were 21 work stoppages involving 1,000 or more workers, with a total of 189,000 workers involved, and 1,265,000 person/days idle. This is down substantially from 1977, when there were 298 work stoppages involving 1,000 or more workers, with 1,212,000 workers involved, and 21,258,000 person/days idle. 9 http://www.fmcs.gov/internet/itemdetail.asp?categoryid=103&itemid=15823. Office of International and Dispute Resolution Services: In August 2004, under the auspices of the ILO s Hanoi office, FMCS provided training for officials from the government, management and labor sectors in techniques of Interest-Based Problem Solving for collective negotiations as well as related labor relations skills such as consensus decision making, the formation and maintenance of labor-management worksite committees, joint problem solving, and non-defensive communication. The ILO s Vietnam Project was headed by an FMCS Commissioner on a 4-year leave of absence from the agency. In December 2004, FMCS Director Hurtgen traveled to Hanoi, Vietnam to address the First International Industrial Relations Conference in Vietnam. The purpose of the conference was to support modern labor relations in Vietnam and reinforce the good work that the ILO s local provincial trainers have been performing. The long-term goal of the ILO Vietnam Project is to build the capacity of managers to engage in sound and forward-looking labor relations and to improve union organizing and representational capacity on the union side. The Conference is modeled on the FMCS National Labor-Management conferences, with some Labor- Management panels from exceptional cooperative programs in Vietnam. There were also presentations by labor unions, the Vietnam Chamber of Commerce (employer representatives), and the Ministry of Labor to sum up lessons learned at the conference. 10 http://www.mom.gov.sg The Singapore workforce is consistently ranked the most competitive in the world by Business Environment Risk Intelligence (www.beri.com). And Singapore s industrial relations climate has been consistently rated as the best in the world by the World Competitiveness Yearbook (http://www.imd.ch/research/publications/wcy/index.cfm) over many years. 11 http://www.bls.gov/news.release/wkstp.t01.htm and http://www.bls.gov/news.release/wkstp.nr0.htm 4

Source: U.S. Department of Labor, Bureau of Labor Statistics http://www.bls.gov/news.release/wkstp.t01.htm These statistics are for major work stoppages, but total work stoppages show a similar declining trend from about 2,600/year in the 1970s to about 300/year since 2000. 12 Between 1999 and 2004, it is estimated that the FMCS mediation saved American workers and businesses more than $9.0 billion by reducing the number work stoppages, and shortening the length of those work stoppages that did occur. As shown below, the savings come from retained company profits, retained union bargaining unit member earnings; and retained workers earnings in related or ancillary industries. 13 12 http://fmcs.gov/assets/files/public%20affairs/2005%20documents/fmcs_impact_2006-2007.ppt 13 http://fmcs.gov/assets/files/public%20affairs/2005%20documents/fmcs_activities_-exec-_final.pdf 5

There are a number of factors behind the reduction in work stoppages, but the main reason is probably because both sides know that no one wins in a strike. Businesses suffer because they lose money when employees are not available to work. Employees suffer because they are not paid during the time that they are on strike. Familiarity with these concepts through the process of collective bargaining is likely a factor in the downward trend in work stoppages over the years. There is another factor that has reduced the number of labor disputes in the U.S.: the importance and success of United States labor laws. The National Labor Relations Act has not changed in many decades. Sections of the law may be interpreted somewhat differently today because of changed circumstances of the workplace, but the law remains intact, and both workers and management look to the law for guidance in determining their collective bargaining rights. And Congress intended for the Federal Mediation and Conciliation Service to use traditional dispute resolution techniques to gain the parties trust, hold their confidences, help them save face, and communicate with one another to reach agreements that benefit the employer, the employees, and the economy in general. The National Labor Relations Act remains the blueprint against which the parties determine their rights under the law, and the FMCS remains the glue that can hold the parties together when conflict threatens to tear them, and the economy, apart. This is not to say that the U.S. labor laws and practice are perfect. The reality is that either side, labor or management, may find it advantageous to violate the law on occasion. And there have been some serious work stoppages in the last few years. In 2007, the largest major work stoppage in total days idle was in the service sector between the Alliance of Motion Picture and Television Producers (on the management side) and the Writers Guild of America East and West (on the workers side), where 10,000 workers accounted for 409,500 lost workdays. The largest in terms of numbers of workers was in manufacturing, between General Motors (management) and the United Auto Workers, with 74,000 workers involved in the twoday work stoppage. 6

Other recent examples include the Southern California Grocery Strike, which cost management about $2 billion when 70,000 workers went on strike for 20 weeks from Oct 2003 to March 2004, 14 and the 10-day West Coast Ports closing in 2002 that cost the U.S. economy an estimated $1 billion a day. 15 By the way, the West Coast Ports contract expires July 1, 2008 and contract renewal negotiations have been under way since March 17. 16 Industrial relations in the United States remain relatively peaceful, work stoppages are substantially reduced, and unions and companies generally abide by the law because of the general respect for the Rule of Law in the United States both within and outside of labor relations. Relevance for Vietnam: How is this American experience in industrial relations relevant for the economic and social development of Vietnam today? There were widespread strikes with violence that occurred in many FDI factories in Vietnam s Southern Key Economic Zone in the spring of 2008, just as there were in the spring of 2006. A few years ago, there were 200 strikes in a year. In 2008, there were 200 strikes in the first two months of the year. According to one report, at least 541 labor strikes occurred in Vietnam in 2007, mostly at FDI factories 17 and involving an estimated 350,000 workers. 18 449 of those were in the Southern Key Economic Zone: Binh Duong (216), Dong Nai (123) and Ho Chi Minh City (110). According to FDI factories representatives, there has been little or no government reaction or assistance in mediating or resolving these strikes by helping develop better communication between workers and management of FDI factories. While workers have legitimate problems caused by inflation of 20% per year this spring, the central and local governments need to develop better tripartite cooperation and communication between government, workers and management to address and resolve differences in a constructive and peaceful way. 14 http://www.dsausa.org/dl/spring_2004.pdf To protest the Wal-Martization of their employment contracts. 15 http://www.industryweek.com/readarticle.aspx?articleid=15001 16 http://contract2008.org/bargaining-update and http://www.pmanet.org/?cmd=main.content&id_content=2142607560 The current waterfront contract covers 25,000 ILWU-represented longshore workers at 29 west coast ports in California, Oregon and Washington. The Pacific Maritime Association (PMA) represents cargo carriers, terminal operators and stevedores operating on the west coast. 17 Presentation by Mr. Diep Thanh Kiet, AGTEK, H+I TH,O TRANH CH-P LAO $+NG: $ÌNH CÔNG, 18/03/08. 18 http://www.atimes.com/atimes/southeast_asia/jd05ae02.html 7

According to FDI managers, in every strike that occurred, the workers did not follow the procedures outlined in Chapter XIV, Section 3 of the Labour Code of Vietnam for Collective Labor Disputes Settlement, 19 and in ND 133/2007, which are displayed graphically in the flow chart. 20 Strikes in Vietnam are being used as the first step in a labor dispute, Instead of being the final step as provided for by the law. Furthermore, according to FDI managers, the workers also did not follow the procedures for initiating or settling a legal strike as provided for by Chapter XIV, Section 4 of the Labor Code of Vietnam regarding Strikes and Settlement of Strikes. 21 A meeting in Ho Chi Minh City on March 27, 2008 was organized by the Vietnam Chamber of Commerce and Industry, with the participation of a Vice Minister of the Ministry of Labor, Invalids, and Social Affairs, and the Chairman of the Vietnam General Confederation of Labor, together with major U.S. and European buyers of apparel and footwear and Korean, Taiwanese, and other partner factory representatives. Some FDI representatives compared Illegal strikes to a social disease in Vietnam, spreading rapidly. They are mostly focused on FDI factories at the present time, but it is likely that they may spread to Vietnamese factories as well, if appropriate remedial action is not taken promptly. Major U.S. buyers and their partner factories from Korea, Taiwan, etc. have expressed growing concern and even frustration about the labor situation for more than two years, and recently have indicated that they may slow their investment and re-consider their commitment to Vietnam if the labor situation is not improved, constructive and peaceful collective dispute settlement procedures followed, and illegal strikes stopped. 22 Perhaps part of the frustration comes from the expectation of 19 S.: 74/2006/QH11, 29-11-2006, M#c III, TH/M QUY0N VÀ TRÌNH T1 GI,I QUY2T TRANH CH-P LAO $+NG T3P TH4, $i5u 168-171. 20 Presentation by Mr. Diep Thanh Kiet, AGTEK, H+I TH,O TRANH CH-P LAO $+NG: $ÌNH CÔNG, 18/03/08. 21 S.: 74/2006/QH11, 29-11-2006, M#c IV, $ÌNH CÔNG VÀ GI,I QUY2T $ÌNH CÔNG, $i5u 172-179. Tr&'ng h6p không )7ng 8 v9i quy:t );nh c<a H$ Tr=ng tài L$, thì có quy5n yêu c>u Tòan án Nhân dân gi?i quy:t ho@c )ình công (!i"u 172). Vi"c )ình công sa do Ban ChBp hành Công )òan cc sd quy:t );nh sau khi )&6c quá n(a tep thf lao )*ng tán thành. BCH C$ CS c( )%i di"n trao b?n yêu c>u cho ng&'i s( d#ng lao )*ng, )7ng th'i thông báo cho cc quan lao )*ng cbp tgnh. B?n yêu c>u và thông báo nêu rõ các vbn )5 bbt )7ng, n*i dung yêu c>u gi?i quy:t, k:t qu? bh phi:u tán thành )ình công và th'i )ifm bit )>u )ình công (trích!i"u 173). 22 Recent labor strikes and other issues have caused us to re-evaluate our assumptions about Vietnam s ability to manage the economy; and Our own supply chain has been disrupted by some significant production stoppages. Collectively, it is costing millions of dollars to us and our partner factories. There are no MOLISA regulation/guidance standard operating procedures to deal with these wildcat strikes, which has led to this radical situation. FDI factories have a hard time to find anybody to talk with, representing the workers, during the strikes. We need to clarify the role and responsibilities of authorities (DOLISA) and labor organizations (Federation of Labor), local and provincial police, in solving these illegal strikes.we want to develop business in Vietnam for mutual interest and benefit, but we need a 8

the FDI managers that the labor/management disputes and work stoppages will be managed in accordance with the Rule of Law. This situation is a serious threat to the national economy, causing harm to the investors, to the workers, to the labor and investment environment, and to Vietnam s harmonious economic and social development, since Foreign Invested Enterprises (FIEs) accounted for 38% of industrial output; 23 almost 60% of total exports; 24 almost 20% of the total labor force, 25 Avera average compensation in FIEs was double the level in Vietnamese private companies, and almost 50% higher than in State Owned Enterprises; and paid 37.2% of taxes. 26 Article 176 of Vietnam s Labour Code provides that When it is considered that a strike may cause serious threat to the national economy or public safety, the Prime Minister of the Government shall have the power to issue a decision to suspend or to stop the strike. We believe that the rash of illegal strikes directed against FDI enterprises, sometimes with violence, which do not follow the procedures established in Chapter XIV, Sections 3 and 4 of the Labour Code of Vietnam by their very nature cause a serious threat to the national economy, and we have respectfully requested that the Prime Minister of the Government issue a decision, based on Art 176 of the Labour Code, to suspend, or to stop, such strikes for a cooling off period when and if they occur in the future. In addition, we have respectfully requested that the Prime Minister direct the Chairman of the People s Committee where the strike is taking place to convene a meeting of the employer s representatives and the Executive Committee of the union to negotiate a mutually beneficial settlement of the collective labor dispute. This kind of positive action will help create a more favorable labor / management / government environment in Vietnam, and this will help retain and attract more Foreign Direct Investment, which has contributed and will continue to contribute to the economic and social development of Vietnam. Finally, AmCham and member companies are very interested in working as one party with VCCI as the Employers Organization, and cooperating at the national and local level with the Vietnam General Confederation of Labor, MOLISA, and other relevant government agencies 27, as well as international organizations such as the ILO and donor governments. stable labor environment, and we ask the Government to find solutions to these labor problems. If the labor environment should remain unstable, we will need to review our sourcing strategy and potentially reconsider our commitment. 23 UNCTAD, Investment Policy Review of Vietnam (draft), Nov 2007, p 19, http://www.amchamvietnam.com/1882 24 UNCTAD, Investment Policy Review of Vietnam (draft), Nov 2007, p 24 25 UNCTAD, Investment Policy Review of Vietnam (draft), Nov 2007, p 22 26 UNCTAD, Investment Policy Review of Vietnam (draft), Nov 2007, p 26 27 LU3T, S(a )Ji, bj sung m*t s. )i5u c<a B* luet Lao )*ng. 74/2006/QH11, 29/11/2006. $i5u 168 1. 9

We have proposed to work closely with VCCI / VCCI HCM to organize training in industrial relations and dispute resolution for factory-level managers and workers representatives, together with provincial- and district-level labor officials. We feel that VCCI and AmCham are considered as the Employers Organizations in representing and protecting the legitimate interests of our constituent members. We will cooperate closely with VCCI HCM in the years to come in capacity building, advocacy, and sharing experiences and best practices. As mentioned earlier, the U.S. Federal Conciliation and Mediation Service Office of International and Dispute Resolution Services has provided some consultative training in Vietnam 28 in the past. Perhaps we could involve them or a similar organization in special and intensive training programs in industrial relations and dispute resolution over the next several months. This would be a joint effort of Employers Organizations (VCCI and AmCham) working with the Government (MOLISA) and Workers Organization (VGCL) in the Industrial Relations field to develop a Tripartite Partnership between Government, Workers, and Employers, which has proved so successful in the United States (and in Singapore) in successfully resolving labor / management conflict and reducing costly and disruptive work stoppages. Developing this Tripartite Partnership could make a real contribution to the economic and social development of Vietnam. This is a difficult task, but AmCham worked closely with the Vietnam Textile and Apparel Association (VITAS), Ministry of Industry and Trade, U.S. buyers and FDI partner factories from 2002 to support the healthy development of apparel trade between Vietnam and the U.S., and we can all be proud of the fact that U.S. imports of apparel from Vietnam in 2007 were $4.4 billion, over 40% of total U.S. imports from Vietnam. Working together with VCCI, MOLISA, and VCGL, I am sure we can achieve the same success in the field of industrial relations. Thank you again for inviting AmCham to participate in this conference on Business Associations and Their Role in Strengthening Industrial Relations. I wish you all health, happiness, and prosperity. H*i )7ng hoà gi?i lao )*ng cc sd ho@c hoà gi?i viên lao )*ng; 2. Ch< t;ch UK ban nhân dân huy"n, quen, th; xã, thành ph. thu*c tgnh (sau )ây g=i chung là Ch< t;ch UK ban nhân dân cbp huy"n) 28 http://www.fmcs.gov/internet/itemdetail.asp?categoryid=103&itemid=15823. In August 2004, under the auspices of the ILO s Hanoi office, FMCS provided training for officials from the government, management and labor sectors in techniques of Interest-Based Problem Solving for collective negotiations as well as related labor relations skills such as consensus decision making, the formation and maintenance of labor-management worksite committees, joint problem solving, and non-defensive communication. In December 2004, FMCS Director Hurtgen traveled to Hanoi, Vietnam to address the First International Industrial Relations Conference in Vietnam. The purpose of the conference was to support modern labor relations in Vietnam and reinforce the good work that the ILO s local provincial trainers have been performing. The long-term goal of the ILO Vietnam Project is to build the capacity of managers to engage in sound and forward-looking labor relations and to improve union organizing and representational capacity on the union side. The Conference is modeled on the FMCS National Labor- Management conferences, with some Labor-Management panels from exceptional cooperative programs in Vietnam. There were also presentations by labor unions, the Vietnam Chamber of Commerce (employer representatives), and the Ministry of Labor to sum up lessons learned at the conference. 10