This page presents an introduction to and analysis of the dilemma. It does so through the integration of real-world scenarios and case studies, examination of emerging economy contexts and exploration of the specific business risks posed by the dilemma. It also suggests a range of actions that responsible companies can take in order to manage and mitigate those risks.
"How does a company respect the right to freedom of association in its operations and supply chain when its operations, business partners or suppliers are based in countries where such rights are heavily restricted in law and/or practice?"
According to the International Labour Organization (ILO), freedom of association is the "key element in ensuring respect for other fundamental rights at work".1 Not only is freedom of association a fundamental human rights in itself, as laid down in both the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights, but failure to respect this right could result in the infringement of a number of other fundamental rights, including discrimination, the use of child or forced labour, and unsafe health and safety practices.
The challenge for a business is how it can best respect its workers' right to freely associate (including the right to join a trade union and to undertake union activities) when it operates in or sources from countries in which this right is heavily restricted by government. Even if workers (either within the company or its suppliers) formally enjoy the right to freely associate, they can still face a range of practical barriers, including discrimination, informal restrictions, intimidation and even violence.
In such circumstances, how - and to what degree - can a responsible company continue operating or sourcing from such countries, whilst at the same time respecting this right?
NB: Freedom of association is a separate right from collective bargaining as it can take place even when there are no trade unions present. However, there is a relationship between the two as trade unions and other worker groups will often participate in collective bargaining.
In May 1998, the union, COLSIBA2 and its European and American counterparts launched a media and consumer campaign accusing Chiquita of quashing union activity, political corruption, owning secret companies and poisoning workers by crop dusting.3 These trade unions alleged that the company was engaging in anti-union activities undermining workers' rights in many Latin American countries including Ecuador, Colombia and Guatemala. It was claimed that local unions were weakened due to multi-national companies (MNC) relocating production to non-union, low pay supplier plantations.
At the time, suppliers were attempting to replace trade unions with 'solidarismo' organisations. Solidarismo organisations are partly financed by the employer and provide workers with credit opportunities and social activities. However, they prevent a worker's right to join a trade union of his or her own choosing, including the right to join an independent trade union. Also solidarisimos do not defend workers rights, such as the right to a living wage and health and safety. How does a company that sources from a country where suppliers actively undermine workers' rights in relation to freedom of association ensure that this practice ends?
In February 2007, NGO Students & Scholars against Corporate Misbehaviour (SACOM) launched a campaign highlighting labour abuses in electronic factories within Special Economic Zones in China's Guangdong Province, where trade unions are forbidden.
According to a 2008 SACOM follow up report, High Tech - No Rights?, these electronic factories supplied parts to multinational companies including HP, Apple and Dell. According to SACOM, as trade unions cannot be formed workers cannot defend their fundamental labour rights. SACOM's campaign alleged a number of related labour abuses, including low wages, not being paid for overtime, long working hours, lack of health and safety measures and the lack of a worker's right to legal information. How does a MNC, especially in the lower tiers of its supply chain ensure that the right to freedom of association is not being restricted in its supplier factories?
On 18 May 2009, the Clean Clothes Campaign (CCC) claimed on its website4 that IKEA, Walmart and Carrefour failed to take action against a bed linen supplier factory in Turkey accused by textile union TEKSiF of 'union busting'. It was alleged that when TEKSiF started to organise workers at the factory in March 2008, union leaders were called into employers' offices one-by-one and were given a choice between renouncing union membership or dismissal. How does a large MNC sourcing from a country where the law protects union members from retribution ensure that supplier companies are complying with the laws of the country?
Often, strategic and operational goals require companies to work in countries where freedom of association is constrained, either by law or practice. As a result, businesses will often face challenges when trying to uphold policies that allow for freedom of association.
Companies are likely to come across this dilemma when operating in, or sourcing from countries where:
Laws restrict or prohibit the right to freedom of association: This includes laws forbidding workers to form their own organisations free from interference by the employer or government.
Some governments (including, for example those in China, Myanmar, North Korea and Iran) only allow one trade union, which is often under the government's control (either directly or indirectly). Even if unions or other worker groups purport to be independent from the government, its influence can nonetheless be strong.
There are poor legal frameworks and legal enforcement is weak: Many of the worst abuses in relation to the right to join trade unions or workers associations is characterised by limited enforcement of labour laws.
Likewise, in many countries the ability of courts, labour inspectorates and other enforcement bodies to protect this right is undermined by a lack of capacity and resources - as well as corruption. In such contexts, local companies are often able to discriminate against workers linked to unions (and other workers' groups), or subject them to more extreme abuses. In some cases, these can include kidnapping and even murder.
Governments interfere with the formal registration of unions: In some countries governments may obstruct the bureaucratic process necessary for the legal recognition of trade unions. In others, governments may refuse to legally recognise these unions for inadequate reasons.
Companies refuse to recognise a trade union: Suppliers may refuse to recognise trade unions or worker organisations and therefore refuse to listen to complaints or to partake in collective bargaining.
Managers or suppliers engage in practices that discourage workers from organising: This includes, for example, not allowing union leaders access to workers for recruiting purposes, as well as the punishment of union organisers or members through intimidation, arbitrary dismissal or forced relocation.
The International Trade Union Confederation (ITUC) claims that in 2008, 7,500 workers in 68 countries were sacked due to their involvement in trade union activity.5 The ITUC says, for example, that Turkey was the worst offender, with 2,000 workers having been dismissed due to union activity.6 In addition, some 7,500 cases of dismissal of workers involved in trade union activity were recorded in a total of 68 countries, including 20 countries in Africa alone.7 Turkey, Indonesia and Pakistan were amongst the countries with the highest number of workers dismissed due to union-related activities.
In 2006, the Global Union Federation estimated that almost 160 million people were members of trade unions globally, with a presence in around 160 countries. In the ITUC's 2009 Annual Survey8 of infringements of trade union rights, it claims that "hundreds of millions"9 of workers around the world are denied the fundamental rights to freedom of association (and collective bargaining). This, it says, results in long working hours, hazardous or unhealthy working conditions and low incomes that are insufficient for supporting a family.
A number of countries continue to ban independent trade unions including, for example, Myanmar, China, Laos, North Korea and Viet Nam. According to the ITUC, in many countries, those attempting to unionise are often arrested, fired, harassed or discriminated against.10
The ITUC notes that in 2008 at least nine countries (Myanmar, Burundi, China, Cuba, Iran, South Korea, Tunisia, Turkey and Zimbabwe) governments were responsible for imprisoning trade unionists on account of their legitimate activities.11
In some locations, workers' representatives face serious violence at the hands of groups who are either politically motivated and/or who have been directly tasked by employers to discourage union activity. This includes paramilitary groups operating in areas of weak government control - for example in remote rural areas with a limited government presence.
The ITUC reports that in 2008, at least 76 trade unionists were killed worldwide as a result of their actions for worker's rights, with the majority (66) in South America.12 This is a particular issue in Columbia, where 49 trade unionists were killed in 2008 as a result of their union activities.13
In some regions, employers may finance organisations that provide non-work related benefits to workers, such as social programmes and possibly access to credit. These organisations ('solidarista') are often led by company managers. They do not amount to independent trade unions and can in some cases act as impediments to the development of independent trade unions.
Special Economic Zones (SEZs) aim to attract foreign investment through a number of incentives, including tax breaks and exemptions from labour and environmental laws. As a result, in some countries trade unions are forbidden or restricted within these zones.
Because of this, SEZs are often the site of abuses. The ITUC reports that there are 34 countries worldwide that have inadequate or non-existent protection of workers in SEZs, including, for example, Albania, the Bahamas, Belize, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Jamaica, Jordan, Mexico, Nicaragua, Poland and Oman.14
In 2003, the ILO reported that there were about 3,000 SEZs in 116 countries, in which approximately 43 million workers were employed.15 Many countries (including, for example, China, Bangladesh, Pakistan and Malaysia) either outlaw unions within their SEZs, or make it very cumbersome for workers to form trade unions or workers' organisations.16 Common industries located within SEZs include electronics and textiles.
Companies and their suppliers can be under intense pressure to reduce the costs of production. Since many production costs are fixed, the pressure to reduce variable costs (such as wages) is often increased. When workers form trade unions, companies (or their suppliers) may become concerned that any union activities could incur costs for the company, such as higher wage settlements and reduced working hours.
The global financial and economic crisis has increased pressure on labour markets, reducing available jobs and negatively impacting on working conditions such as wages. In addition, accelerated globalisation has arguably prompted a 'race to the bottom' for companies seeking cheaper labour costs and lighter labour regulation. Similarly, countries compete with one another to attract investment from such companies, often through the liberalisation of labour regulation. This may mean that an increasing number of workers are denied fundamental human rights.
Examples of scenarios companies might face when operating in emerging economies include:
Bangladesh: The law upholds the rights of workers to organise without interference, but this right is not always protected. According to the US Department of State's 2009 Human Rights Report, the total labour force was approximately 50 million, and union membership was 1.9 million in 2008.17 In its 2009 survey, the International Trade Union Confederation (ITUC) says that in practice, many private sector employers discourage union activity and fire employees suspected of organising or sympathising with unions.18
Although trade unions have been permitted in Special Economic Zones (SEZs) since November 2006, the formation is "complicated and cumbersome". Furthermore, the government has not established labour tribunals in SEZs to protect workers' rights.
Brazil: The Constitution19 and Labour Code20 allow workers to form trade unions. The law stipulates certain restrictions such as "unicidade", which limits freedom of association by prohibiting multiple, competing unions of the same professional category in a given geographical area.21 The Single Central Organisation of Workers estimates that 20 to 25% of workers are unionised.22 Most informal sector workers (approximately 38% of the labour force)23 cannot join unions as they are not protected by the law.
Many trade union rights abuses take place in rural areas where employers are hostile towards trade unions and the enforcement of government regulations is weak. Rural labour organisers are often subject to intimidation and killings, while perpetrators enjoy relative immunity.24
China: Contrary to international standards, workers are not free to form or join trade unions of their choice. Only the government-affiliated All-China Federation of Trade Unions (ACFTU) is legally recognised. As of September 2008 the ACFTU claimed 212 million members in 1.7 million affiliated unions. Furthermore, a total of 3.7 million enterprises established trade union organisations.25 The ACFTU discourages any sign of dissent, including strikes, whilst collective bargaining falls far short of international standards.
A report entitled Going it Alone, The Worker's Movement in China,26 by NGO China Labour Bulletin analysing 100 collective labour protests in 2007 and 2008 reveals that strikes are becoming more common and successful. Workers' demands were also becoming more sophisticated and instead of strikes being held over basic labour conditions such as the non-payment of wages, they are now reported to be over disputes in relation to collective bargaining agreements, higher wages and better working conditions.
Egypt: According to the US Department of State,27 freedom of association is restricted. All unions are required to join 23 officially recognised industrial federations, which are all affiliates of the government-linked Egyptian Trade Union Federation (ETUF). The ETUF is the sole legally recognised labour federation and has 23 existing trade unions. Legislation permits a limited form of strike action, but only if two-thirds of the ETUF's board agrees. Unions in the private sector are uncommon.
According to the ITUC's 2009 annual survey,28 workers are able to form a local union or workers' committee if at least 50 employees express a desire to organise. The union must provide a 10 day notice period and indicate the planned duration of the strike. The ITUC argues that these restrictions mean the right to strike is "virtually non-existent."29
Indonesia: Public and private sector workers are allowed to form and join unions of their choice without previous authorisation or excessive requirements. An estimated 4% of the total workforce (including the informal sector) is unionised. Fourteen percent of workers in the formal sector belong to trade unions.
A court can dissolve a trade union if its basic principles are perceived to conflict with the "national ideology". According to the law, to negotiate a collective agreement a union must have membership equal to or more than 50% of the total workforce in the establishment or receive more than 50% support by the enterprise's workers on the union's demands.
Mexico: Federal law entitles workers to form and join unions of their choice and to organise and bargain collectively. The US State Department30 reports that administrative procedures for registration are complex and burdensome, however, and government labour boards frequently reject independent unions' registration applications on technicalities. Furthermore, the ITUC reports that, as well as exploiting the difficulties associated with obtaining legal union status, the government also encourages the appointment of certain union leaders over others.
The ITUC also reports that deficiencies in Federal employment law have been exploited in order to create false collective agreements called "protection contracts", which force workers to join unions nominated by company management. These contracts consist of a company paying a monthly sum to the union in exchange for a guarantee of 'industrial peace'.31
Philippines: The ITUC reports that employers in the private sector often file administrative and criminal charges against union leaders and activists, and engage in other delaying tactics to frustrate the formation of unions. During 2008 four trade union officials were assassinated and there were reports of the military intimidating and harassing union members.32 Widespread use of contract labour is also used by businesses to frustrate trade union activity, as these workers cannot join a union.
Both employers and the government take advantage of relevant legal restrictions in order to obstruct the right to strike. The requirement to give advance notice to the Department of Labour and Employment gives employers ample opportunity to divide workers and organise reprisals against them. If the workers still go ahead with the strike call, employers can request that the National Commission on Labour Relations issue an injunction against the strike.
Viet Nam: There is only one trade union, the Viet Nam General Confederation of Labour, which is an umbrella organisation controlled by the Communist Party of Viet Nam. It approves and manages a range of subsidiary labour unions that are organised by location and industry. According to the ITUC strikes are severely restricted by law.
In 2008 however, wild cat strikes increased to 762, up by 41% from 2007.33 At times these strikes end with clashes, violence or workers being forced to submit their resignation. On 9 May 2008, for example, workers at a Chinese-owned plastics factory in Bac Giang Province were beaten when a struggle arose in the factory after the manager refused a pay rise. In the ensuing clash with police many workers were injured and 60 were arrested.34
When the right to freedom of association is enshrined in national law, a company may face legal risks if it obstructs worker activity in this regard. This is in a great degree dependant, however, on whether and to what degree such law is enforced in practice and whether workers are prepared to defend their rights in court. Although many such cases have taken place in the United States and other similar jurisdictions, for example, they nonetheless demonstrate some of the situations in which litigation can take place in a range of countries - including emerging economies.
Since 2006, for example, Starbucks has faced six anti-union cases all initiated by the barista affiliated Industrial Workers of the World (IWW), which has resulted in considerable legal costs and adverse publicity. Three of these cases were filed in three different states in the US: New York, Michigan and Minneapolis, all with the National Labor Relations Board (NLRB). The NLRB is an independent federal agency created to investigate and make findings in relation to complaints made by workers that are protected by the National Labor Relations Act.
Some of the cases filed by the IWW with the NLRB include those in:
Additional risks companies may face if the right to freedom of association is undermined within its operations or supply chain include:
Loss in productivity: A lack of legitimate channels through which workers can communicate grievances and concerns to employers can result in a breakdown in communications and poor industrial disputes. Arguably, this in itself can result in disputes and strikes that could affect company productivity.
In addition, it may result in high levels of employee turnover. Together, these can do much to undermine company productivity.
High employee turnover: Workers that are not being adequately compensated, are working long hours and are being refused time off may look for work elsewhere. Employees who experience difficulty between balancing out home and work balance are three times more likely to consider quitting their jobs.
Damage to reputation: NGOs and trade union-driven media campaigns alleging that companies are violating workers rights to associate freely can do significant damage their reputation. This can also result in brand contamination, a loss of sales, poor recruitment and other commercial challenges.
On 16 March 2010, for example, a conglomerate of trade unions (representing 45 million workers)36 wrote a letter to the Council on Ethics of the Government Pension Fund of Norway, asking it to divest its holdings in Grupo Mexico due to alleged labour and environmental abuses. The unions accused the large mining conglomerate of systematically attacking labour unions, as well as workers' rights to freely associate and collectively bargain. It was also alleged that the National Union of Mine and Metal Workers of the Mexican Republic (SNTMMSRM) in particular, were targeted by the company. The unions cited examples include seizing the SNTMMSRM's assets, attempting to replace the union with one selected by the company and the launch of a protracted campaign of repression against the union's leadership.
Sustained campaigning also can result in disinvestment. According to one study, best labour practices (which are often the outcome of strong worker representation) provide returns to shareholders that are three times greater than those of companies with weak practices.37
Similarly, on 30 June 2009 the Clean Clothes Campaign (CCC) alleged that companies such as Polo, Ralph Lauren and Tommy Hilfiger had been ignoring labour right infringements occurring in supplier factory, PT Mulia Knitting Factory located in Indonesia. CCC alleges that the factory has denied its employees that right to set up its own workers' union38 and that these high quality brands are ignoring the rights of these employees.
For a company to ensure the elimination of restrictions on freedom of association within its own operations, it should first comply with national laws on freedom of association. Where there are no national laws in place, companies that aim to create policies that responsibly respect the right to freedom of association can be guided by international instruments.
Instruments include the ILO Convention No. 87, Freedom of Association and Protection of the Right to Organise (1948) and ILO Convention No.98, Right to Organise and Collective Bargaining (1949) which set down a number of basic principles. Principles include giving employees the right to establish and join trade unions "of their own choosing without previous authorisation"39 and being given "adequate protection against acts of anti-union discrimination in respect of their employment".40
It is important to note, however that employers are not required to take an active role in supporting worker's efforts to associate or organise. However, they must ensure that workers can exercise this right in a climate free of violence, pressure, fear and threats.
Companies can implement responsible work practices that give workers the fundamental right to enjoy their right to join a trade union or workers' organisation.
Companies can seek specific guidance on this and other issues relating to international labour standards from the ILO Helpdesk. This aims to help company managers and workers understand the ILO approach to socially responsible labour practices and to assist in the development of good industrial relations.
Other actions that responsible business might take include:41
Adopting a human rights policy that commits to not restricting a worker's right to join a trade union/organisation and to associate freely. This policy should commit to complying with the national law. However if it is below international standards then a company can make a commitment to aspire to international standards, as long as it does not conflict with the law:
Specific policies, some of which have been used by companies with many tiers in their supply chain, such as Coca Cola, HP and Levis Strauss could include, for example:
If appropriate, the policy can be extended to suppliers through their codes of conduct or contracts by embedding a requirement that the supplier must comply with the company's policies on freedom of association. This may become applicable when a company sources a majority of its products (or components) from multitude tiers of the supply chain. To ensure that suppliers are complying with the code they could, through supplier audits, check that these policies are being complied with.
Companies can provide training to its auditors so that they are aware of the current national laws and regulations on labour rights, including laws on freedom of association in particular countries and regions
Furthermore, a company can train auditors on the warning signs that they must be look out for in relation to breaches to an employee's right to associate freely.
Warning signs can include (but are not limited to):
The company can train suppliers on workers' rights in relation to freedom of association. This training can ensure that suppliers comply with any code of conduct that has been agreed with by the company. A company could do this where freedom of association is restricted by governments, such as China and Brazil as long as training complies with the laws of the country.
Training can provide information on:
Companies are increasingly signing framework agreements with relevant trade unions, which undertake to protect fundamental workers' rights. This provides for greater transparency and can assist the company in recruiting better quality staff. Agreements between companies and trade unions can be at a local, sectoral or international level. If companies deem it appropriate, they can join other parties to the framework agreement, such as major suppliers and joint venture partners.
International framework agreements often commit the company to observing international standards for the recognition of the right to join a trade union as well as other fundamental workers rights.
Where the right to associate freely is restricted, either by law or practice, a company can (if appropriate) establish grievance mechanisms for both their employees, and, if feasible, for suppliers' employees.
These mechanisms should ensure that workers are not reluctant to report any grievances, so if appropriate a third party independent facilitator could be useful. The facilitator should also have the power to properly investigate any complaint, including being allowed to inspect suppliers' premises as well as implementing remedies in response to the complaint.
Mechanisms should be:
The principle of freedom of association is set out in Article 20 of the Universal Declaration of Human Rights: "Everyone has the right to peaceful assembly and association" and "no-one may be compelled to belong to an association". It is also enshrined in a number of human rights instruments including Article 22 of the International Covenant on Civil and Political Rights (ICCPR)42 and Article 8 International Covenant on Economic, Social and Cultural Rights (ICESCR).43
According to the The Labour Principles of the United Nations Global Compact, Guide for Business, "Freedom of association implies a respect for the right of all employers and all workers to freely and voluntarily establish and join groups for the promotion and defence of their occupational interests. Workers and employers have the right to set up, join and run their own organisations without interference from the State or any another entity. Employers should not interfere in workers' decision to associate or discriminate against either those workers who choose to associate or those who act as their representatives."44
Article 2 of the ILO Convention No. 87, Freedom of Association and Protection of the Right to Organise (1948) gives both workers and employers the right to establish (in accordance with rules) or join organisations of their own choosing without previous authorisations. Article 3(2) further says that public authorities should refrain from any interference. It has been ratified by 150 countries. Countries that have not ratified the convention include China, Iran, Iraq, Brazil and India.
ILO Convention No.98, Right to Organise and Collective Bargaining (1949) has been ratified by 160 countries. Article 1 says that "workers shall enjoy adequate protection against acts of anti-union discrimination in respect of their employment." Further, Article 4 states: "Measures appropriate to national conditions shall be taken, where necessary, to encourage and promote the full development and utilisation of machinery for voluntary negotiation between employers or employers' organisations and workers' organisations, with a view to the regulation of terms and conditions of employment by means of collective agreements". China, Iran, Brazil and India are some of the countries that have not ratified this convention.
Collective bargaining is a separate right, which can create separate issues for companies. It can be defined as "a voluntary process through which employers and workers discuss and negotiate their relations, in particular terms and conditions of work. Participants include employers themselves or their organisations, and trade unions or, in their absence, representatives freely designated by the workers."45 Therefore, although trade unions often participate in collective bargaining this is not a requirement and workers not part of organisations can also participate.
According to the ILO, collective bargaining serves a dual purpose: "It provides a means of determining wages and conditions of work applying to a group of workers". "It also enables employers and workers to define agreement the rules governing their relationship."46
The ILO recommends that "workers' representatives should be given appropriate facilities (taking account of the needs, size and capabilities of the enterprise involved) that will enable them to do their work effectively and allow them to perform their role without interference. Workers' representatives should be provided with information required for meaningful negotiations."47 It also notes that it is important that collective bargaining agreements include provisions for settling disputes.48
In contexts where the right to freedom of association is restricted, a range of human rights abuses are impacted, including:
Right to equality before the law, equal protection of the law, and rights of non-discrimination (ICCPR, Article 26): Trade union activists can experience discrimination in the form of arbitrary dismissal, demotion, or lack of access to promotions.
Right to work (ICESCR, Article 6): The right to work includes a prohibition of arbitrary dismissal. However, trade union members in many countries are arbitrarily dismissed by employers as a result of trade union membership or collective bargaining activities.
Right to freedom of assembly (ICCPR, Article 21): The right for workers and trade union members to demonstrate in groups peacefully. Demonstrations by trade unions can result in interference by police or company security in many countries. This can, in some circumstances, end in violence. Often trade union members are dismissed for demonstrating.
Right to enjoy just and favourable conditions of work (ICESCR, Article 7): The right to enjoy just and favourable conditions at work including a wage that enables families to enjoy the right to a decent standard of living, reasonable working hours. In many countries where trade unions are not independent or present, workers' conditions are not just and favourable.
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