Definitive Report - REPORT_NO277, March 1991

1. 115. The complaints are contained in communications from the General Confederation of Peruvian Workers (CGTP) (September 1990), the Federation of Peruvian Light and Power Workers (FTLFP) (3 September 1990), the Trade Union of Employees of Electrolima (SEE) (3 September 1990), the Confederation of Peruvian Workers (CTP) (21 September 1990) and the National Co-ordinating Committee of Grass-roots Trade Union Organisations (CNOSB) (15 October 1990). The International Confederation of Free Trade Unions (ICFTU) and the World Confederation of Labour (WCL), in communications dated 26 September 1990 and 9 November 1990 respectively, gave their support to the complaints made by the CTP and the CNOSB. The Government replied by a communication dated 10 October 1990.
2. 116. Peru has ratified both 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 complainants' allegations

1. 117. The complainants allege that the Government which took office in July 1990 issued without any co-ordination or consultation with the trade union organisations several decrees which from 1 August introduced important restrictions in wage increases, suspended the application of collective agreements and imposed limitations on the free exercise of the right to collective bargaining. They thus infringed the provisions of Convention No. 98 with very drastic consequences on the conditions of work and life of the workers.
2. 118. Specifically, the complainants object to the following pieces of legislation: Supreme Decrees Nos. 057-90-TR; 056-90-TR; 107-90-PCM; 105-90-PCM and 058-90-TR, the text of which appears in the Annex to this case. The complainants allege that the Supreme Decrees provide: (1) that state undertakings and state bodies shall grant as from 1 August 1990 an increase in remunerations equal to 100 per cent of the ordinary remuneration and collateral payments received on 31 July 1990 and that the increase may not exceed I/. 75,000,000 per month (Supreme Decree No. 107-90-PCM) and that such undertakings and bodies may not grant other wage increases until 31 December 1990, even if they have been fixed by collective agreement (Supreme Decree No. 057-90-TR); (2) that between 1 August and 31 December 1990 state undertakings and state bodies which conclude collective agreements must observe the limits established by a supreme decree (Supreme Decree No. 107-90-PCM); (3) the suspension, until 31 December 1990, both in the private and public sectors, of the granting of advance payments, loans or credit which can be deducted from length of service compensation entitlements or compensation funds, as provided for by legislation or collective agreement, with the exception of those specifically allocated for housing purposes (Supreme Decrees Nos. 056-90-TR and 107-90-PCM); (4) that from 1 August 1990, if the administrative authority must settle the conclusion of collective agreements in the private sector (failing agreement between the parties), the said authority shall take into account the criteria established in the economic and labour report issued by the Directorate General of Labour Economy and Productivity on the basis of documentation presented by the undertaking and the studies carried out (Supreme Decree No. 058-90-TR).

B. The Government's reply

1. 119. The Government which took office on 28 July 1990 states in its communication dated 10 October 1990 that it introduced an Economic Stabilisation Programme in order to eradicate the causes of inflation which had been seriously affecting the various sectors of national activity, particularly those with the lowest incomes. In accordance with this stabilisation programme, several emergency Supreme Decrees were issued.
2. 120. Supreme Decree No. 057-90-TR dated 17 August 1990 stipulates that undertakings covered by Act No. 24948 (respecting state workers and workers employed in state bodies subject to the labour regulations applicable in the private sector) may not until 31 December 1990 grant wage increases, irrespective of their denomination, system, form or periodicity or which have been fixed by unilateral decision of the employer or in pursuance of collective agreements. It stipulates that the State shall be responsible for regulating increases deemed necessary during the stated period. This Supreme Decree covers only workers in state undertakings and state bodies subject to the labour regulations of the private sector. That is to say it does not apply to workers in private undertakings whose collective agreements shall remain in force, without any restriction; furthermore, as regards collective agreements which come into force from 1 August 1990, Supreme Decree No. 058-90-TR dated 17 August 1990 establishes freedom of collective bargaining so that employers and workers may freely negotiate increases in remuneration, wage protection clauses and working conditions. Supreme Decree No. 057-90-TR was issued with a view to establishing specific limits to indiscriminate wage increases in state undertakings and state bodies, most of which produce basic or essential goods and services.
3. 121. As a supplementary measure to Supreme Decree No. 057-90-TR, Supreme Decree No. 107-90-PCM dated 24 August 1990 was promulgated. It fixes the amount of the increase for the month of August 1990 at 100 per cent of the ordinary remuneration and collateral payments received by workers on 31 July 1990, up to I/. 75,000,000 a month. This increase is to be included in the calculation of all the rights and benefits of workers, including compensation payments for length of service.
4. 122. Furthermore, it was recently established in Supreme Decree No. 121-90-PCM dated 28 September 1990 that as regards collective agreements which come into force during the period up to 31 December 1990, the directors, representatives or managers of undertakings or bodies may negotiate wage increments, conditions of work and collateral payments without exceeding the limits established by the National Development Corporation (CONADE) and CONAFI for non-financial or financial state undertakings, respectively. In the same way, for those collective agreements in force and concluded subject to the provisions of Supreme Decrees Nos. 025-88-TR and 005-90-TR, the additional wage increments shall be applied in accordance with their own terms, provided that they do not exceed the limits established by CONADE and CONAFI, as the case may be.
5. 123. The third transitional provision of Supreme Decree 056-90-TR dated 17 August 1990 and which refers to workers in private undertakings suspends up to 31 December 1990 the granting of advance payments, loans or credit which could be deducted from length of service compensation entitlements or compensation funds as provided by legislation or collective agreement, with the exception of those specifically granted for housing purposes, in accordance with the legal regulations in force in this respect. Subsequently, section 7 of Supreme Decree No. 107-90-PCM extended this restriction to workers in state undertakings and state bodies. Supreme Decree No. 056-90-TR was issued in recognition of the fact that workers subject to the labour regulations of the private sector, in accordance with their collective agreements, can apply for loans or advance payments to be deducted from the compensation fund or reserve, which by law is held by the employer until the worker leaves his employment permanently. These loans or advance payments may, in normal economic circumstances, be reasonable and allowable, but in an inflationary period are not justified because when withdrawals are made from the compensation fund payment is made without interest. It should be pointed out that the sums withdrawn in this way do not have a cancellation effect, i.e. if there is a new increase in remuneration workers can then apply for a further sum, which means that they obtain resources from the assets of the undertaking. This new provision is designed to protect not only the assets of undertakings but also public interest in the case, for example, of banking institutions.
6. 124. The above-mentioned emergency Supreme Decrees were issued under article 211(20) of the Political Constitution which empowers the President of the Republic to adopt extraordinary measures in economic and financial matters when so required by the national interest and with the obligation of reporting to Congress. Under comparative legislation and doctrine the extraordinary measures issued by the Executive in the event of need are designated emergency decrees. In the case law of the country, the Supreme Court has in a number of resolutions established the validity of Supreme Decrees issued by the Executive in pursuance of article 211(20) of the Political Constitution. However, in order to be valid such decrees must embody the constitutive characteristics of such texts which are as follows: (1) the measures should have only temporary force given the extraordinary reasons which make it necessary to issue them; (2) the extraordinary measures should refer directly and necessarily to an economic and financial matter; (3) such measures can be issued only if they are reported to Congress. For the Supreme Court of Peru, such Supreme Decrees have the force of law and furthermore they may for this reason not only amend on a temporary basis legislation, but also contracts established between parties. This is what has happened when for reasons of social and public interest limits were established by the emergency Supreme Decrees referred to in the present case on increases negotiated in collective agreements and when restrictive measures were applied to the granting of compensatory advance payments up to 31 December 1990.
7. 125. The emergency Supreme Decrees in question should be subject to the criteria established in similar cases by the Committee on Freedom of Association, namely that "... If, as part of the stabilisation policy, a government considers that wage rates cannot be settled freely through collective bargaining, such a restriction should be imposed as an exceptional measure and only to the extent that is necessary, without exceeding a reasonable period, and it should be accompanied by adequate safeguards to protect workers' living standards." Thus the Government claims that the emergency Supreme Decrees are exceptional measures applicable only to workers in state undertakings and state bodies who receive very high remuneration; they are applicable for a specific period ending on 31 December 1990 and they are accompanied by specific guarantees and the granting of increases up to a specific limit.

C. The Committee's conclusions

1. 126. The Committee notes that in this case the complainant organisations have objected to the contents of a series of emergency Supreme Decrees issued by the Government concerning remuneration within the framework of an Economic Stabilisation Programme. Specifically, the complainant organisations allege that these Decrees were issued without consulting the trade union organisations and that they violate the provisions of Convention No. 98 regarding collective bargaining, with very serious consequences for workers who in August 1990 were faced with an inflation rate of 397 per cent. In its reply the Government has stated that the Decrees in question comply with the National Constitution and that their purpose is to eradicate the causes of inflation, that they are temporary and that they conform to the principles established by the Committee on Freedom of Association regarding restrictions imposed on collective bargaining.
2. 127. The Committee notes that the Supreme Decrees in question provide: (1) that state undertakings and state bodies shall grant as from 1 August 1990 an increase in remunerations equal to 100 per cent of the ordinary remuneration and collateral payments received on 31 July 1990 and that the increase may not exceed I/. 75,000,000 per month (Supreme Decree No. 107-90-PCM) and that such undertakings and bodies may not grant other wage increases until 31 December 1990, even if they have been fixed by collective agreement (Supreme Decree No. 057-90-TR); (2) that between 1 August and 31 December 1990 state undertakings and state bodies which conclude collective agreements must observe the limits established by a supreme decree (Supreme Decree No. 107-90-PCM); (3) the suspension, until 31 December 1990, both in the private and public sectors, of the granting of advance payments, loans or credit which can be deducted from length of service compensation entitlements or compensation funds, as provided for by legislation or collective agreement, with the exception of those specifically allocated for housing purposes (Supreme Decrees Nos. 056-90-TR and 107-90-PCM); (4) that from 1 August 1990, if the administrative authority must settle the conclusion of collective agreements in the private sector (failing agreement between the parties), the said authority shall take into account the criteria established in the economic and labour report issued by the Directorate General of Labour Economy and Productivity on the basis of documentation presented by the undertaking and the studies carried out (Supreme Decree No. 058-90-TR).
3. 128. The Committee emphasises that collective agreements which are in force should be applied fully (unless otherwise agreed by the parties). As for future negotiations, it considers that the only government interference acceptable must comply with the following principle which it has often stated in past cases: "If, as part of its stabilisation policy, a government considers that wage rates cannot be settled freely through collective bargaining, such a restriction should be imposed as an exceptional measure and only to the extent that is necessary, without exceeding a reasonable period, and it should be accompanied by adequate safeguards to protect workers' living standards." (See Digest of decisions and principles of the Freedom of Association Committee, 3rd edition, 1985, para. 641.) In any case, any limitation on collective bargaining on the part of the authorities should be preceded by consultations with the workers' and employers' organisations in an effort to obtain their agreement.
4. 129. Taking into account the foregoing conclusions, the Committee must regret that contrary to the principle of collective bargaining enshrined in Convention No. 98, some provisions of the Decrees adopted by the Government (in force between 1 August and 31 December 1990) within the framework of its Economic Stabilisation Programme have resulted in the non-observance of collective agreements in force, mostly in the public sector, and particularly as regards wages, advance payments and loans. It also regrets that limitations on future bargaining have been imposed by decree without consultation with the workers' and employers' organisations in an effort to obtain their agreement.

ANNEX

1. Text of the Supreme Decrees objected to by the complainants
2. Supreme Decree No. 057-90-TR
3. Section 1. Undertakings covered by Act No. 24948 dated 2 December 1988 (an Act
4. respecting state workers as well as workers employed in state bodies subject
5. to the labour regulations of the private sector) may not grant wage increases
6. until 31 December 1990 irrespective of their amount, system, form or
7. periodicity which may have been adopted or whether they have been fixed by a
8. unilateral decision of the employer or by collective agreement. The State
9. shall have the power to regulate any increases which may be necessary during
10. this period.
11. Section 2. The National Development Corporation (CONADE) shall be required to
12. supervise compliance with the standards to which the preceding section refers,
13. within the sphere of its competence.
14. Supreme Decree No. 107-90-PCM
15. Section 1. From 1 August 1990 undertakings and bodies to which Supreme Decree
16. No. 057-90-TR refers shall grant their workers whether or not they are covered
17. by collective agreements a wage increase which shall be equal to 100 per cent
18. of the ordinary remuneration and collateral payments which they received on 31
19. July 1990. The increase shall not exceed I/. 75,000,000 a month. The ordinary
20. reference wage excludes the July bonus.
21. Section 2. The increase to which the previous section refers shall be an
22. integral part of any increase, increment or anticipated payment made from 1
23. August 1990.
24. ...
25. Section 5. In any new collective negotiations initiated during the period of
26. application established by Supreme Decree No. 057-90-TR, undertakings or
27. bodies covered by the above-mentioned Decree shall give strict observance to
28. the limits established in the Supreme Decree as regards bargaining, under the
29. responsibility of their managers, representatives and directors. CONADE or
30. CONAFI, as the case may be, shall issue the corresponding regulations in
31. accordance with the law.
32. ...
33. Section 7. It should be noted that the third transitional provision of Supreme
34. Decree No. 056-90-TR dated 17 August 1990 is of a general scope and that it
35. applies equally to the state undertakings and bodies to which Supreme Decree
36. No. 057-90-TR refers.
37. Supreme Decree No. 056-90-TR
38. Section 1. From 1 August 1990 workers subject to the labour regulations of the
39. private sector whose remuneration is regulated by collective agreement and
40. holding a valid contract of employment on 31 July 1990 and who continue to
41. provide their services on the date of the publication of the present Supreme
42. Decree shall be entitled to receive an "advance wage increment" which shall be
43. established by the employer and which in no case shall be less than 100 per
44. cent of the remuneration received by the worker on 31 July 1990.
45. Section 2. The advance payment to which this Supreme Decree refers is an
46. integral part of the general increase and of any additional wage increments to
47. which the worker may be entitled from 1 August 1990 under a collective
48. agreement, administrative resolution or arbitration award.
49. Section 3. The increases or advance payments which may have been granted on a
50. general basis from 1 July 1990 by the employer in a unilateral decision or
51. under a collective agreement shall be part of the sum of the advance payment
52. stipulated by this Supreme Decree.
53. Transitional provisions
54. One. Up until 31 December 1990 employers may grant their workers voluntary
55. advance wage payments to be deducted from future additional increments or the
56. next general increase and in which case it shall be sufficient to communicate
57. such payment to the administrative labour authorities for authorisation.
58. Two. The provisions of this Supreme Decree shall not cover undertakings
59. subject to Act No. 24948 dated 2 December 1988 respecting state workers or
60. workers employed in state bodies subject to the labour regulations of the
61. private sector. The State shall issue the regulations which it considers
62. necessary in the cases to which this provision refers.
63. Three. Until 30 December 1990 the granting of advance payments, loans or
64. credits to be deducted from length of service payments or a compensation fund
65. as provided by legislation or collective agreement, shall be suspended with
66. the exception of those payments specifically made for housing purposes in
67. accordance with the legal regulations in force in this respect.
68. Supreme Decree No. 105-90-PCM
69. Section 2(n). The provisions approved and/or implemented by undertakings which
70. would have resulted in a modification of the organic and/or wage structures in
71. force on 1 July of the current year shall become null and void. This provision
72. does not apply to promotions, wage increases and/or re-classifications made in
73. accordance with the legal provisions in force.
74. Supreme Decree No. 058-90-TR
75. Section 1. In the collective agreements which come into force on 1 August
76. 1990, workers and their employers may freely negotiate wage increases, wage
77. compensation clauses and working conditions.
78. Section 2. When the administrative labour authorities are called upon to
79. settle cases where the parties have failed to reach an agreement, account
80. shall be taken of the criteria established in the economic and labour report
81. issued by the Directorate General of Labour Economy and Productivity.
82. This report, which is issued on the basis of documentation which undertakings
83. are obliged to present and studies carried out shall form part of the file and
84. be communicated to the parties.
85. Final transitional provisions
86. ...
87. Three. The provisions of Supreme Decrees Nos. 025-88-TR and 005-90-TR and
88. other complementary provisions shall apply only to collective agreements and
89. administrative resolutions in force.