reinforcing labor relations through responsive regulations

REINFORCING LABOR RELATIONS THROUGH RESPONSIVE REGULATIONS: AN ASSESSMENT OF THE REGULATORY REFORM AREAS IN BOOK FIVE OF THE

LABOR CODE, AS AMENDED

Patrick P. Patriwirawan Jr., Dip.IR, MIR Institute for Labor Studies

Department of Labor and Employment Manila, Philippines

July 2015 Fourth Regulating for Decent Work Conference

ILO, Geneva, Switzerland

PATRIWIRAWAN, 2015 2

Executive Summary

This policy paper1 intends to answer the longstanding public policy issue in

labor and employment concerning the urgent need to reform the Labor Code of the Philippines, as amended, particularly Book Five which covers labor relations. Since its enactment in 1974, profound changes in the socio-economic and political landscapes have taken place. These changes have influenced the transformation of a new world of work now perceived to be incongruent with the original framework of the Code. This paper examines the responsiveness of the Code by analyzing the extent to which policy objectives have been carried out through the issuance of regulatory interventions as measured by the identified policy indicators. By definition, labor relations merits priority towards an omnibus reform as it defines and delimits the manner, methods and means of interactions, including representations, between and among stakeholders in the labor market.

This paper adopts Dunlop’s systems theory in industrial relations by substituting

input-process-output-feedback coefficients to labor relations policy elements. Featuring the predominant industrial relations systems during the incipient phase of the Labor Code, a corporatist perspective is utilized as it regards the role of the state as an institutional structure in policy formulation. The framework further incorporates the role of regulation as it adopts Stigler’s theory of economic regulation. This paper offers a framework of analysis for regulatory areas, examining enunciated policy objectives, regulatory issuances, and indicators in labor relations.

Regulatory reform areas identified include labor organization, collective

bargaining, dispute settlement, as well as strikes and lockouts. Data show that there is relatively a steady decrease in the key indicators considered in this paper. These include union density rate, collective bargaining coverage rate, and rate of occurrence of strikes and lockouts. Workers’ association density rate, on the other hand, continues to rise with the number of employed workers. Moreover, perspectives from a roundtable discussion including findings from previous policy researches were taken together as inputs to the policy alternatives. The identification of policy alternatives is focused at the firm (micro), industry (meso), national (macro) and international (meta) levels.

The recommendations put forward generally advocate for: (1) alignment of

provisions of the 1974 Labor Code with the fundamental guarantees of the 1987 Philippine Constitution; (2) harmonization with international conventions and other

1 The author gratefully acknowledges the significant contributions gathered from the roundtable discussion entitled “Key Insights for Responsive Regulations: A Review of Books V and VI of the Labor Code of the Philippines” hosted by the Institute for Labor Studies in partnership with the UP School of Labor and Industrial Relations (SOLAIR), conducted on 11 September 2013 at the Don Isabelo Delos

Reyes Auditorium, UP SOLAIR, to draw perspectives as input to this research. The discussion was

participated in by luminaries in the field of labor relations and labor code reform: former labor secretary Ruben Torres; former labor undersecretaries Rene Ofreneo, Leogardo Vicente Jr., and Benedicto

Ernesto Bitonio Jr.; Dean Froilan Bacungan; and Prof. Cesario A. Azucena Jr.


labor-related instruments; (3) expansion of the coverage of employment and employment relations to include the promotion of gender equity and equality in the definition of employment relations; (4) recognition of the emerging forms of work arrangements and work representations; (5) integration of voluntary modes of practices and partnerships between workers and employers; and (6) configuration of more streamlined dispute settlement systems.


I. ISSUE DEFINITION

In a span of four decades, the Labor Code has been a very influential instrument affecting the relations between labor and capital. It has defined and regulated the relationship between workers and employers in particular through the provisions concerning Labor Relations in Book Five of the Code. It is understood that the Labor Code was crafted at a time when martial law was declared and an authoritarian form of government was installed. The change in the form of government has brought about change in the existing economic paradigm:

The martial law government shifted the economic policy from import substitution to a foreign investment-led strategy which was oriented toward expansion of manufacturing exports . . . To attract foreign investors and assure them of a stable industrial relations environment, the government promulgated Presidential Decree No. 442, otherwise known as the Labor Code of the Philippines. (Bitonio, 2012, p. 12)

Macaraya (2005) explained however that the framers of the Code disregarded

the labor market conditions existing during that period where majority of the workers were in the informal sector. He further noted that several provisions of the Code were drawn from foreign labor laws being implemented in labor markets where majority of workers already belonged to the formal sector of the economy. This adoption of foreign labor laws, he said, led to the implementation of a Labor Code focused on protecting the smaller segment of the workforce. Macaraya (2013) thus argued that the need to amend the Philippine Labor Code to attune its provisions with the current condition of the labor market in light of a growing borderless economy is no longer an issue but is a matter of survival as a nation.

The responsiveness of the Labor Code has been seen critical in its purpose of

serving social justice2 in the advent of globalized economic paradigm shifts (Confesor, 2010; Macaraya, 2013). Other studies have cited the issue of responsiveness of the Code to reform and to align with the current labor market governance3 framework (Bitonio, 2008; 2012; Imperial, 2004; Sale, 2011; Sale & Bool, 2012; Sicat, 2004; 2012; Usui, 2012). Likewise, several reports from multilateral institutions and stakeholders have expressed similar views (Joint Foreign Chambers of Commerce, 2013; World Bank, 2013). They have all called for reform of the Code not only to

2 Macaraya noted that the Philippine Labor Code is both an instrument of “social justice” and of

achieving economic development through “demand sidism.” For further discussion on economic shifts from demand to supply sidism, refer to Macaraya (2013). 3 Labor market governance is defined by Bitonio (2008) as the totality of institutions—including policies, norms, laws, regulations, structures, mechanisms and processes—that influence the supply and

demand for labor. Sale (2011) identifies labor market governance indicators to include the: extent, size or levels of workers’ associations, trade unions, collective bargaining agreement coverage, labor

management councils, compliance rates upon labor inspections including those under the Labor

Standards Enforcement Framework, establishments or employers, labor standards and Employees’ Compensation Commission cases handled, and public expenditures in proportion to gross domestic

product and gross national product.


address the economic restrictions of the labor market but also to expand coverage and protection of workers and employers in both the formal and the informal economy.

There have been several attempts to reform the Labor Code with the aim of

coming up with appropriate legislative measures that would carry out a new labor market governance framework in the country. The reform is expected to balance the needs to create an enabling environment for investments and to ensure social protection and welfare of workers in an era of highly competitive and globalized markets. However, attempts to pursue an omnibus amendment4 of the Code have been found futile. In recent times, reforms are being done piecemeal by amending certain provisions addressing specific labor relations issues.

This paper yet again attempts to address the pressing issue distinctively

through an examination of labor relations regulations in their role of carrying out the intended policy objectives as demonstrated in the identified policy outcomes. In general, it intends to look into the responsiveness of the Labor Code to the changes in the labor market in general and in employment relations in particular. Specifically, this paper offers the following: (a) a framework for analyzing the interrelations between labor relations policy objectives, policy interventions, and policy outcomes; (b) an understanding of the policy context and alternatives available; and (c) recommendations that advocate the immediate reform of the Code.

In the broadest sense, “labor relations,” as explained by Azucena (2010), refers

to “the interactions between employer and employees or their representatives and the mechanisms by which the standards and other terms and conditions of employment are negotiated, adjusted and enforced” (p. 10). On the other hand, “labor standards” are “the minimum terms and conditions of employment to which employees are legally entitled and with which employers must comply” (Azucena, 2010, p. 10). By the definition, it is critical to consider first the manner and boundaries of the interactions between employers and employees before trying to consider the very substance of their interactions. It must be noted however that labor standards and labor relations are equally important in the operational level as one cannot exist without the other.

Labor relations in the Philippines is critically affected by several factors5 internal

or external to the labor market system: (a) advent of globalization; (b) changes in

4 It was noted during the roundtable discussion that several Labor Code reviews have been done in the

past. As described by ILS Executive Director Cynthia Cruz, “labor regulation by its very nature is “Sisyphian”—something that requires endless sometimes tremendous effort as it represents an

important visible and an often controversial aspect of public policy.” In this context, all previous reviews

of the Labor Code are acknowledged as these form part of the knowledge base from which present effort takes off. 5 These were identified in the roundtable discussion as participants exchanged views on what the

current challenges are in the area of labor relations. Certain realities have also already been identified in the Philippine Labor and Employment Plan 2011-2016 as current issues and challenges facing the

labor market.


employment relations and work arrangements; (c) emergence of new forms of workers representation; (d) continuing rise of the informal economy; (e) incongruence between the 1987 Constitution and Presidential Decree No. 442 (Labor Code); (f) ratification of international conventions; and (g) issuance and implementation of labor regulations by various agencies and bureaus of the Department of Labor and Employment (DOLE). This paper focuses purely on three policy coefficients6 in understanding regulatory reform areas in labor relations: policy objectives, regulatory interventions, and policy outcomes. Nevertheless the consideration does not disregard the impact and contribution of the other factors in the labor market but only limits the scope and coverage for purposes of discussion.

A roundtable discussion7 conducted in September 2013 was used to gather

perspectives from the relevant stakeholders in the labor market. Policy stakeholders include representatives from workers’ organizations, employers’ organizations, the academe, government and nongovernment institutions, and foreign and multilateral institutions. Relevant studies on reforming the Labor Code were reviewed, highlighting conditions of the labor market and the significance of the reform. Policy papers were also considered in the identification of policy alternatives for regulatory reforms in labor relations. Indicators identified by the International Labour Organization (ILO) and the Bureau of Labor and Employment Statistics (BLES) were adopted as measures of policy outcomes. Data from BLES covering the period from year 2000 to 2013 were collated.

The subsequent part of this paper presents the framework used in analyzing

the policy issue and explains why the identified policy issue relates to key concerns in labor administration. The third part consists of policy contexts identifying relevant regulatory reform areas in labor relations and recognizing current states and conditions. Policy alternatives are forwarded in the fourth part, identifying possible actions that the government may take to resolve the initially identified policy issue. The final section summarizes the recommendations for appropriate policy action of decision-makers in the field of labor and employment.

6 “Policy coefficients” may refer to elements necessary in the understanding of a certain public policy.

Three policy coefficients are identified in this paper. “Policy objective” serves as the basis for creating policy. “Regulatory intervention” comes in the form of legislation or an administrative regulation. “Policy

outcome” refers to an observed consequence of a policy action (Dunn, 1981). 7 The roundtable discussion drew the varying perspectives of the stakeholders on regulatory reforms

particularly in labor relations and security of tenure. The objectives of the discussion included: (1) to

understand the regulatory reform philosophy in labor relations and security of tenure; (2) to recognize the paramount issues in labor relations and the importance of regulatory reforms in all levels (micro,

meso, macro and meta) of policy analysis; (3) to gain knowledge of diverging and converging

perspectives and insights from the stakeholders and the academe in the effort to address changes in employment relations policies; and (4) to establish the way forward and ensue steps for coherent policy

recommendations on regulatory reforms for labor relations and security of tenure.


II. FRAMEWORK OF ANALYSIS In assessing the responsiveness of labor relations regulations, theoretical

paradigms have been utilized to understand the process, context and rationale for the reform. Three theoretical models or perspectives are adopted by this policy analysis: Dunlop’s systems theory of industrial relations, corporatism, and the theory of economic regulation.

Dunlop’s systems theory aims to provide not only a general theory of industrial

relations but also a tool of analysis in understanding and interpreting the widest possible range of industrial relations conditions and situations (Farnham & Pimlott, 1995). This tool of analysis examines input-process-output-feedback coefficients or factors that play significant and varying roles in influencing the labor market system. Essentially, Dunlop regards the labor market system as comprising certain actors, certain contexts, an ideology which binds the industrial relations system together, and a body of rules created to govern the actors at the work place in particular and the labor market in general (Kochan, Katz, & McKersie, 1986). By and large, viewing any sector or system through the scheme of the systems model is an attempt to simplify something that is relatively complex (Dunn, 1981). Considering the complex regulatory systems in labor relations, an adaptation of the input-process-output-feedback model would best illustrate the responsiveness of the Labor Code particularly in terms of how policy objectives are realized through formulation of policy interventions and formation of policy outcomes. (See Figure 1 for illustration)

Figure 1. Framework of Analysis

(Adapted from Dunlop’s Industrial Relations System model)

LR Policy Objectives

1987 Philippine Constitution

LR Legislations/

Regulations

Labor and Other Legislations

Administrative Regulations

FEEDBACK

International Conventions

PD 442 (Book V)

PD 442 (Art. 3 & Art.211)

LR Policy Formulation

LR Policy Implementation

Institutions

Stakeholders

Labor Market Realities

INPUT PROCESS OUTPUT


The theoretical foundation highlighted in understanding the context of the formulation of labor relations regulations is based on corporatism’s perspective of industrial relations. This theory defined by Philippe Schmitter and Gerhard Lehmbruch regards the state, in its relationship with the other institutions that constitute society, as being autonomous and independent. Corporatism is a system of interest representation and an institutional pattern of policy formulation (Baccaro, 2003). The state directly intervenes in the operation of the political or economic system under the banner of public interest. This intervention is done through bargaining and negotiating with the various organizations or interest groups that are constituent sections of society. The perspective recognizes that the state cannot pursue its objectives in isolation from the actions and desires of other institutions. This industrial relations perspective is adopted to highlight the political context of the formulation of the 1974 Labor Code.

Finally, the theory of economic regulation by George Stigler (1971) provides an

understanding of the importance of regulations in the labor market particularly in labor relations. “Regulation is instituted primarily for the protection and benefit of the public at large or some large subclass of the public,” in this case, the labor force (Stigler, 1971, p. 3). Thus, the state’s formulation of regulations is important in promoting public interest.

An integrated policy analysis as explained by Dunn (1981) provides for a more

comprehensive form of analysis incorporating production and transformation of information both before and after policy actions have been taken (Dunn, 1981, p. 54). This approach demands a “continuous, iterative, and unlimited” examination of the policy elements (Dunn, 1981, p. 54). Adopting this approach gives a holistic view of the assessment, from how policies were formulated to how they are being implemented and what policy outcomes have been produced.

Figure 1 illustrates the systems model using labor relations policy coefficients

to analyze the responsiveness of the Labor Code particularly the provisions in Book Five. As mentioned earlier, the paper focuses on only three specific policy coefficients. First, policy objectives, which are expressed in three significant references: (1) the 1987 Philippine Constitution, specifically articles III–Bill of Rights and XIII, Section 3–Labor; (2) Presidential Decree 442, otherwise known as the Labor Code, as amended, specifically articles 3 and 211–Declaration of Policy; and (3) international conventions which the country has ratified and adopted. Second, policy interventions as expressed through legislations and regulations include: (1) Book Five of the Labor Code, as amended, (2) labor and other social legislations, and (3) administrative regulations including implementing rules and regulations and department orders. Third, policy outcomes, as products of the implementation of such interventions, include labor relations indicators as identified by BLES in its annual Yearbook of Labor Statistics and Current Labor Statistics. Policy outcomes are either reflective or not of the initially enunciated policy objectives.


III. REGULATORY AREAS IN LABOR RELATIONS The regulatory areas identified in Book Five of the Labor Code, as amended, include: labor organization, collective bargaining, dispute settlement, and strikes and lockouts. To provide an understanding of the current state of the regulatory areas in labor relations, the identified areas are reviewed through an examination of the policy objectives, policy interventions, and policy outcomes. A brief policy analysis after reviewing the three labor relations coefficients is completed to assess the responsiveness of the identified policy interventions, which aim to realize the intended policy objectives as demonstrated by the produced policy outcomes. Responsiveness of the Labor Code is shown when policy outcomes reflect the initially intended policy objective for any regulatory interventions made. Labor Organization Policy objectives. The 1987 Philippine Constitution provides that the State “shall guarantee the rights of all workers to self-organization” (Article XIII, Section 3). The Constitution further provides in Article III, Section 8 that “the right of the people, including those employed in the public and private sectors, to form unions, associations, or societies for purposes not contrary to law shall not be abridged.” The 1974 Labor Code likewise enshrines this right under Article 211-A (b), stating “It is the policy of the State to promote free trade unionism as an instrument for the enhancement of democracy and the promotion of social justice and development.” In addition to these guarantees of rights, the State also ratified in 1953 ILO Convention No. 87 concerning Freedom of Association and Protection of the Right to Organise. It provides that “workers and employers, without distinction whatsoever, shall have the right to establish and . . . to join organisations of their own choosing without previous authorisation” (Part I, Article 3, par. 1). Policy interventions. From a legislative perspective, the Labor Code, as amended, provides from articles 234 to 246 the laws regarding labor organization, from registration and cancellation to rights and conditions of membership, rights of legitimate labor organizations, and coverage. Moreover, the enactment of Republic Act (RA) 9481 in 2007 strengthens the workers’ constitutional right to self-organization. This includes, as Sale and Sale (2013) noted:

the relaxation of requirements on charter registration of union locals or chapters, the eligibility of the unions of rank and file and supervisors in an establishment to join the same national union or federation, the contraction of grounds for union registration cancellation, and the applicability of the “employer bystander rule” during representation disputes. (p. 4)

The administrative regulation that further advances the implementation of

these laws is Department Order (DO) No. 40-03, which provides for the definitions of both labor organizations and workers’ associations. Sale and Sale (2013) mentioned


that under DO 40-03, the following have been introduced: trade union combinations, multi-employer bargaining, CBA deregistration, and interpleader/intervention. Policy outcomes. Kuruvilla (2006) identified as a usable measure of social dialogue, particularly for the representation of workers, union density, defined as “the number of union members expressed either as a percentage of the non-agricultural workforce or as a percentage of wage and salary workers” (pp. 183-184). Similarly, with the emergence of workers’ associations, density rates have been recognized and measured as the percentage of workers association membership against total employed workers. Studies have found a steady decrease in union density over time (Bitonio, 2008; 2012; Fashoyin, 2003; Macaraya, 2001; 2013; Sale, 2011; Sale & Bool, 2012; Sale & Sale, 2013; Sibal, 2004). There have also been findings that workers association density rate continues to increase (Bitonio, 2008; 2012; Macaraya, 2005; 2013; Sale, 2011; Sale & Bool, 2012). Figures 2 and 3 below as collated from the Yearbook of Labor Statistics (BLES, 2012) and Current Labor Statistics (BLES, 2013a; 2013b; 2013c) show the varying trends between union density rate and workers association density rate over time (13 years). Policy analysis. While it is clear that the policy of the State is to promote free trade unionism and to faithfully implement such policy through legislation and administrative regulations as previously discussed, the desired policy outcome of an increased union density rate over time has not been evidently realized. Nevertheless, a new mode of worker representation in the form of a workers association has emerged as it particularly caters to workers in the informal economy. Taking into consideration the framework of analysis, regulations or other interventions on trade unionism have to a significant extent failed to address the decreasing rate of union density.

Figure 2. Total Wage and Salary Workers, Union Membership, and Union Density Rate

Source: BLES, 2009; 2012; 2013a; 2013b; 2013c.

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Figure 3. Total Employed Workers, Workers Association Membership, and Workers Association Density Rate

Source: BLES, 2009; 2012; 2013a; 2013b; 2013c.

Collective Bargaining and Negotiations Policy objectives. The right of all workers to collective bargaining and negotiations is guaranteed by the 1987 Philippine Constitution in Article XIII, Section 3. Similarly expressed in the 1974 Labor Code, as amended, is the policy of the State “to promote and emphasize the primacy of free collective bargaining and negotiations” (Article 211-A[a]). This expressed right also has its ILO convention equivalent (C098) ratified in 1953. As provided under Article 4 of C098:

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.

Policy interventions. The legislative aspect of the policy intervention for collective bargaining is found primarily in articles 250 to 259 of the Labor Code, as amended. These parts of the Code cover procedures in collective bargaining, duties of the parties involved, terms included in a collective bargaining agreement (CBA), and special concerns in the conduct of collective bargaining or negotiation. In the administrative regulatory aspect, these laws are implemented through DO 40-03. Rules XV to XVIII of DO 40-03 provide for the purpose a registry of CBAs and the process of registration. Policy outcomes. In the attempt to develop a measure of the concept of social dialogue where stakeholders exchange views, make decisions and enter into agreements,

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Kuruvilla (2006) identified collective bargaining coverage as a tangible measure as it provides a quantifiable indicator of the number of workers who are actually covered by CBAs. In the Philippine Labor Index, BLES defines collective bargaining coverage rate in private establishments as the percentage of workers covered by CBAs in private establishments out of the total wage and salary workers in private establishments. Parallel to the observed outcome in union density rates over time, collective bargaining coverage rates also continue to decrease over time (Bitonio, 2008; 2012; Macaraya, 2005; 2013; Sale, 2011; Sale & Bool, 2012; Sale & Sale, 2013). Generally, it may be deduced that the continuous decrease in union density would likewise result in a continuous decrease in collective bargaining coverage rate over the same period of time. Figure 4 presents the trend in collective bargaining coverage rate with the number of total wage and salary workers and magnitude of union membership.

Figure 4. Total Wage and Salary Workers, Total Union Membership, Workers Covered By Existing CBAs, and Coverage Rate

Source: BLES, 2009; 2012; 2013a; 2013b; 2013c. Policy analysis. Similarly, as union density rate continues to decrease over time, collective bargaining coverage rate also decreases, since the collective bargaining coverage rate is a function of the union density rate. The state policy to promote collective bargaining is expressed in the various regulatory interventions in Book V of the Labor Code and in the supplementing DOLE order. These interventions have not been able to reflect the desired policy outcome without prejudice to other factors that may have influenced the current state of collective bargaining in the Philippines.

Dispute Settlement Mechanisms Policy objectives. The State through the 1987 Philippine Constitution is mandated to promote “the preferential use of voluntary modes in settling disputes, including


conciliation, and shall enforce their mutual compliance therewith to foster industrial peace” (Article XIII, Section 3, par. 3). The Constitution also provides for individual rights of workers as embodied in the Bill of Rights. Article III, Section 11 provides that “free access to the courts and quasi-judicial bodies, and adequate legal assistance shall not be denied to any person by reason of poverty.” Section 16 of the same article further provides that “all persons shall have the right to a speedy disposition of their cases before all judicial, quasi-judicial or administrative bodies.” The 1974 Labor Code, as amended, also enshrines the promotion and emphasis on the use of “voluntary arbitration, mediation and conciliation, as modes of settling labor or industrial disputes” (Article 211-A[a]). It further advances the policy of the State “to provide adequate administrative machinery for the expeditious settlement of labor or industrial disputes” (Article 211-A[e]). At the international level, however, the ILO does not have any conventions that pertain to dispute settlements or grievance machineries, indicating that it does not prescribe any preferred regulatory intervention in dispute or conflict settlements of its member states. Policy interventions. At the legislative intervention level, dispute settlement mechanisms are governed by the laws provided in articles 260 to 262 of the Labor Code, as amended. They include grievance machinery and voluntary arbitration with provisions on jurisdiction, procedures and costs. The Alternative Dispute Resolution (ADR) Act of 2004 (RA 9285) institutionalizes the use of alternative dispute resolution for the speedy resolution of all disputes, while RA 10396 enacted in 2013 institutionalizes conciliation-mediation as a voluntary mode of dispute settlement for all labor cases. At the administrative intervention level, two department orders implement this policy objective. On the one hand, Rule XIX of DO 40-03 provides for implementing rules on the establishment of grievance machinery and procedures in handling grievances including details on voluntary arbitration. Rule XXII, particularly Sections 1 to 4, specifies the implementing rules for conciliation of labor-management disputes. On the other hand, DO 107-10 provides for the guidelines on the Single Entry Approach prescribing 30-day mandatory conciliation-mediation services for all labor and employment cases. Executive Order (EO) No. 97, s. 2012, revoking EO 523, s. 2006, was likewise issued relative to the enactment of the ADR Act of 2004, which similarly “promotes the use of alternative modes of dispute resolution such as, but not limited to, arbitration, mediation, conciliation, and early neutral evaluation as part of their practice in resolving disputes” (Section 3). Policy outcomes. In its October 2013 issue of the Current Labor Statistics, BLES defines “voluntary arbitration” as the “mode of settling labor-management disputes by which the parties select a competent, trained and impartial person who shall decide on the merits of the cases and whose decision is final, executory, and unappealable” (p. 86). While it is the policy of the State to promote voluntary modes of settlement as discussed, a study by Bitonio in 2008 showed that the number of voluntary arbitration cases is decreasing. This is supported by Sale (2010) as he noted that, while compulsory arbitration cases remain high, voluntary approaches are hardly utilized. (See Annex for statistics on type of cases)


“Disposition rate” is likewise defined by BLES as the percentage of the number of cases disposed over number of cases handled. Bitonio (2012) pointed out that “the entire labor dispute settlement system has been variously described as adversarial, legalistic and complex, with multiple entry points and multiple layers of appeal” (p. 24). Studies have also noted the decreasing disposition and settlement rate of labor cases (Bitonio, 2012; Herrera, 2010; Soriano, 2010). Figure 5 (next page) shows the disposition rate by type of labor cases over time. Policy analysis. While it is the policy of the State to promote voluntary modes of dispute settlement and to guarantee speedy disposition of cases, the policy outcomes as shown by disposition rates and by types of labor cases over a period of time show otherwise. Disposition rate of voluntary arbitration cases and the use of voluntary arbitration as compared to compulsory arbitration have been low for the past ten years. The regulatory interventions formulated have been found futile in realizing the policy objectives intended for dispute settlements.

Figure 5. Disposition Rate by Type of Labor Case

Source: BLES, 2009; 2012; 2013a; 2013b; 2013c.

Strikes and Lockouts

Policy objectives. The 1987 Philippine Constitution provides in Article XIII, Section 3 that the State shall “guarantee the rights of all workers to . . . peaceful concerted

activities, including the right to strike in accordance with law.” This is in harmony with the individual right of workers as enshrined in the Bill of Rights—the freedom of association clause. It states that “no law shall be passed abridging the freedom of speech, of expression, or of the press, or the right of the people peaceably to assemble and petition the government for redress of grievances” (Article III, Section 4). The Declaration of Policy in the Labor Code, however, does not explicitly guarantee the exercise of strike and/or lockout. There is only a provision under Article 263 that

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recognizes and respects such right. At the international level, similarly, the right to strike has not been set out in any of the ILO conventions or recommendations. According to Gernigon, Odero, and Guido (1998), the ILO recognizes the right to strike in two of its resolutions in the International Labour Conference namely: (1) the resolution concerning the abolition of anti-trade union legislation adopted in 1957 and (2) the resolution concerning trade union rights and their relation to civil liberties adopted in 1970. And although not explicitly mentioned, the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87) establishes the right of workers’ and employers’ organizations to “organize their administration and activities and to formulate their programmes” (Article 3), and the aims of such organizations as ‘furthering and defending the interests of workers or of employers’ (Article 10)” (Gernigon, Odero, & Guido, 1998, p. 8). Policy interventions. In the aspect of legislative intervention, the right to strike/lockout is governed by the laws provided under articles 263 to 266 of the Labor Code. These provisions stipulate details on the conduct of strikes, picketing and lockouts, including assumption of jurisdiction over disputes in an industry indispensable to the national interest, prohibited activities, effort to settle a strike or a lockout through improved or reduced offer balloting of the parties respectively, and requirements for arrest and detention. In terms of administrative intervention, Rule XXII of DO 40-03 lays down the implementing rules prescribing the grounds for strike or lockout and the requirements in the exercise of such right. The issuance of DO 40-G-03, s. 2010, provides for the implementing rules on the assumption by the Secretary of Labor and Employment, the requirement for minimum operational service, finality of decisions, prohibitions on law enforcement agencies or public officials/employees, armed persons, private security guards and similar personnel in the private security agency, and criminal prosecution. A very recent issuance of DOLE, DO 40-H-13 specifies the industries indispensable to the national interest, which include the hospital sector, electric power industry, water supply services, air traffic control, and such other industries as maybe recommended by the National Tripartite Industrial Peace Council. Policy outcomes. In the Philippine Labor Index, BLES defines “notice of strike” as “the notification filed by a duly registered labor union with the respective National Conciliation and Mediation Board (NCMB) regional branches about its intention to go on strike because of alleged commission by the employer of unfair labor practice acts or because of deadlock in collective bargaining negotiations” (p. 557). In addition, it defines “notice of lockout” as “the notification filed by an employer with the appropriate NCMB regional branches about its intention to temporarily cease its operation because of alleged unfair labor practice acts committed by a duly registered labor union or because of a deadlock in collective bargaining negotiations” (p. 558). Sale and Bool (2012) stated that the workers involved in strike/lockout notices and actual strike/lockout cases have decreased. Figure 6 (next page) shows the total strike and lockout notices, actual strikes and lockout cases, and rates of occurrence over time.


Policy analysis. It is clear that the right to peaceful concerted activities, including the right to strike in accordance with law, is guaranteed by the 1987 Constitution specifically under Article XIII, Section 3, and is recognized and respected by the 1974 Labor Code under Article 263(b), as amended. The decrease in the number of strike and lockout notices, including actual strikes and lockouts and the rates of occurrence, however does not necessarily mean that it is not reflective of the policy objective intended for this regulatory area. Essentially, the provisions state that this right must be guaranteed and that it must be freely exercisable in accordance with law.

Figure 6. Total Strike and Lockout Notices, Actual Strikes and Lockouts, and Rate of Occurrence

Source: BLES, 2009; 2012; 2013a; 2013b; 2013c.

The data presented among the regulatory areas in labor relations validate the responsiveness of the identified policy interventions formulated or issued in the implementation of the said policy objectives. Within the framework of analysis, these outcomes, whether they are reflective or not of the policy objectives, offer an avenue for possible policy action or non-action for the government to be able to fully realize the intent of the labor relations policies. This feedback mechanism as shown in Figure 1 addresses the gaps in the policy objectives (input), the policy formulation (process), and the policy interventions (output) by identifying policy options. However it must be noted that this paper primarily focuses on policy coefficients taking consideration of the legislations passed and the regulations issued for the sole purpose of fully implementing the said policy objectives. For this reason, it is imperative that policy options for each regulatory area in labor relations be identified and directed towards reforming regulations and legislations responsive to the enunciated policy objectives.

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7.00

8.00

9.00

0

100

200

300

400

500

600

700

800

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Rat

e o

f O

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ce (

%)

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Stri

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Lock

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Strike/Lockout Notices

Actual Strikes/Lockouts

Rate of Occurence


IV. POLICY OPTIONS IN LABOR RELATIONS The identification of policy options is based on the inputs in the roundtable discussion and the current states of the regulatory areas identified. To make the Code responsive to the changes in the labor market, options are presented here, clustered into different policy levels. The policy levels include: firm/enterprise (micro level), industry/sector (meso level), national (macro level), and global (meta level). The options listed mean not only appropriate policy actions for the government to decide on, but also areas in which other stakeholders in the labor market may take initiative, especially in the effort to improve responsiveness of the Labor Code. Organizing options into the various policy levels also suggests expanding the scope of representation and enhancing the forms of interactions in labor relations to cover areas that may not have been previously covered by the Labor Code or any of the administrative issuances by DOLE.

Policy issues in the micro level are focused on practices in the micro or small

enterprises including practices not within the scope of the Labor Code or those in the informal sector. The meso level sees its concerns or problems about labor relations policy in the differences in terms of processes and interests of the many industries that operate in the country today. Labor relations policy interventions to some extent may not be viable in certain industries (e.g., agricultural, mining) and yet valuable to others (e.g., industrial, telecommunications and manufacturing). Policy issues in the macro level are those that take into account a great number of people, systems and institutions that influence the labor relations situation of the country or of the labor administration or governance system. Policy issues at the meta level go beyond the boundaries of national concerns. In a much bigger perspective, it deals with international issues that influence a number of labor market systems such as in the case of the 2015 economic integration of members of the Association of Southeast Asian Nations (ASEAN).

The following options are aligned towards the realization of key policy

objectives in each of the regulatory areas in labor relations.


On Labor Organizations Considering the consistently declining rate of union density, the following options have been identified to promote the right to self-organization and to make the process of organizing more accessible including to those in the informal economy.

Table 1. Policy Options on Labor Organizations

Policy Level Policy Options

Firm/Enterprise Make 20% requirement for independent unions in Article 234 directory, not mandatory, or completely remove minimum membership requirement in Article 234

Recognize continuous union membership when an employee transfers to another company

Industry/Sector Enable/institutionalize multi-employer organizing such as craft unionism8 or industry unionism9

National Reduce required number of affiliates for federations

Empower trade union centers to issue charters

Global Encourage affiliations of national unions or federations with international trade unions such as the International Trade Union Confederation10

Explore the nature of representation of such affiliations For national unions or federations to look at possibilities

for bilateral union agreements towards multinational union collaborations

8 Craft unionism refers to a trade union combining workers who are engaged in a particular craft or skill

but who may work for various employers and at various locations (Craft unionism, 2013). 9 Industrial unionism refers to a trade union that combines all workers, both skilled and unskilled, who

are employed in a particular industry. At the heart of industrial unionism is the slogan “one shop, one

union” (Industrial unionism, 2013). 10 The International Trade Union Confederation (ITUC) is the largest trade union federation. Its primary

mission is the promotion and defence of workers’ rights and interests, through international cooperation

between trade unions, global campaigning and advocacy within the major global institutions. The ITUC represents 176 million workers in 161 countries and territories and has 325 national affiliates

(International Trade Union Confederation, 2013).


On Collective Bargaining and Negotiations With the steady decrease in union membership, the collective bargaining coverage rate likewise continues to decrease. Exploring other options for bargaining will increase the coverage rate which to a considerable extent need not be dependent on the number of union membership.

Table 2. Policy Options on Collective Bargaining and Negotiations


Firm/Enterprise Explore workers associations’ negotiation with local government authorities for security of tenure in the place or routes where they conduct their business/work11

Industry/Sector Enable/institutionalize multi-employer bargaining12 or sectoral/industry-wide bargaining13

National Explore prospects for national bargaining between federations and employer’s association or the government

Global Strengthen partnerships and coordination among national trade unions of ASEAN member countries for possibility of collective bargaining with the employer sector within the ASEAN region

11 Bitonio, 2012. 12 Generally the term “multiemployer bargaining” refers “to all situations in which two or more

independent employers bargain or negotiate jointly, through an agent, committee or association, with

one or more labor organizations representing employees of the several employers, with respect to

wages, hours and other terms and conditions of employment” (Rains, 1954, cited in Anonymous, 1967). 13 Sectoral/industry-wide bargaining is a term denoting collective bargaining conducted between a

sectoral union and a corresponding organization on the employer side. Bargaining at the sectoral level

normally takes the form of negotiation on grievances, bargaining with a view to reaching agreement in order to conclude a sectoral agreement and negotiation on managerial decisions (European Foundation

for the Improvement of Living and Working Conditions, 2009).


On Dispute Settlement Mechanisms To address the decreasing rate of disposition in labor cases, including

recognition of other forms of conflict management and prevention, policy options (Table 3) have been identified to facilitate and strongly advocate the use of voluntary modes of dispute settlement mechanisms.

Table 3. Policy Options on Dispute Settlement Mechanisms


Firm/Enterprise Institutionalize labor management councils and/or works councils14 as a preventive mechanism for grievance handling and driver towards productivity gain-sharing

Promote workplace bipartite cooperation15

Industry/Sector Explore prospects for industry-based grievance machineries

National Harmonize policies in promoting voluntary arbitration and compulsory arbitration

Streamline the National Labor Relations Commission’s Rules of Procedure to improve case management and quality management systems

Global Explore the possibility of handling grievances for workers engaged in virtual economies

14 “Works council” may be defined as “permanent elected bodies of workforce representatives (or

occasionally joint committees with employers representatives), set-up on the basis of law or collective agreements with the overall task of promoting cooperation within the enterprise for the benefit of the

enterprise itself and employees by creating and maintaining good and stable employment conditions, increasing welfare and security of employees and their understanding of enterprise operations, finance

and competitiveness” (Carley, Baradel, & Welz, 2005, p. 9). 15 For further explanations on workplace bipartite cooperation refer to Suwarno and Abyoto (2012).


On Strikes and Lockouts Considering the policy outcome on strikes and lockouts, the identified options (Table 4) address components that enable stakeholders, both employers and workers organizations, to exercise freely their right to peaceful concerted activities, including the right to strike in accordance with law.

Table 4. Policy Options on Strikes and Lockouts


Firm/Enterprise Clarify the elements considered in declaring a strike valid or invalid, especially in consideration of the new element of “damage to employer” as applied in the decisions of the Supreme Court in the cases of Biflex vs. Filflex (2006) and NUWHRAIN vs. Court of Appeals (2008)

Industry/Sector Align coverage of prohibited groups on the right to strike as identified by the ILO with Section 18 of DO 40-G-03 to exclude private security guards and similar personnel in the private security agencies

National Align “essential services”16 criterion with the “national interest” requirement in the exercise of Assumption of Jurisdiction

Global Explore possibility of a globalized strike/lockout among internationally affiliated federation members or multinational companies for the government to identify appropriate preventive intervention in light of a globalized labor economy

16 “In 1983, the Committee of Experts defined such services as those ‘the interruption of which would

endanger the life, personal safety or health of the whole or part of the population.’” The Committee

has considered to be essential services in the strict sense, where the right to strike may be subject to major restrictions or even prohibitions, to be: the hospital sector; electricity services; water supply

services; the telephone services; air traffic control” (Gernigon, Odero, & Guido, 1998).


V. SUMMARY OF POLICY RECOMMENDATIONS In analyzing the responsiveness of the Labor Code, it is important to examine the policy coefficients that influence policy outcomes. These coefficients are the policy objectives (input), the policy formulation (process), and the policy interventions (output), including policy outcomes themselves (feedback). Policy options are presented to address the gaps identified in the course of examining the policy areas in labor relations. These options address the lack of responsiveness of the Labor Code to the changes in the labor market.

The policy options identified are clustered into key recommendations on a general perspective with the goal of improving the responsiveness of the Labor Code particularly on labor relations. The key recommendations are: (1) alignment of the provision of the 1974 Labor Code, as amended, with the fundamental guarantees of the 1987 Philippine Constitution; (2) harmonization with international conventions and other labor-related instruments; (3) expansion of the coverage of employment and employment relations, to include the promotion of gender equity and equality in the definition of employment relations; (4) recognition of the emerging forms of work arrangements and work representations with consideration for gender-specific requisites; (5) integration of voluntary modes of practices and partnerships between workers and employers; and (6) configuration of more streamlined dispute settlement systems.

Echoing the recommendations identified in this paper, the Philippine Labor and Employment Plan 2011–2016, by way of review and assessment, unequivocally commits to the following: (1) respond to labor market realities through policy reforms and by aligning labor and social legislation with the 1987 Constitution and international treaties and ILO conventions in a sound and realistic manner; (2) provide an enabling environment for the observance of the constitutionally protected rights of all workers particularly their right to freedom of association and collective bargaining and the right to participate in the policy making process and in other venues for dialogue and cooperation based on the spirit of mutual benefits; (3) improve labor adjudication in the country by ensuring transparency, efficiency and integrity in the labor dispute settlement system and transforming the traditionally conflicting and litigious labor relations system towards one that incorporates the tenets of social dialogue, such as free exchange of information, consultation, negotiation and collective bargaining; (4) provide an environment for more inclusive tripartism and social dialogue to make representation of interests of sectors more broad-based and highly participatory, through a policy track that affords consultation and broad-based participation to include not only the social partners in the Tripartite Industrial Peace Council; and (5) promote venues for social dialogue particularly at the plant/firm, industry and local government levels. To conclude, this paper has put forward: (a) a framework for analyzing the interrelations between labor relations policy objectives, policy interventions and policy outcomes; (b) an understanding of the policy context and available alternatives; and


(c) policy recommendations that would advocate the immediate reform of the Code. This paper echoes the urgent call to reform Book Five of the Labor Code, as amended, to make it responsive to the many changes that have transpired in the labor market extensively and particularly affecting labor relations.

The fast pace of change in the global economy is changing the work environment, thereby necessitating a need to review labor relations systems.

--Nieves R. Confesor, DOLE Secretary, 1992-1995 (2010, cited in Ofreneo, 2010)


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ANNEX

Number of Cases Handled by Type of Case

0

10000

20000

30000

40000

50000

60000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Nu

mb

er o

f C

ase

s H

an

dle

d

Preventive Mediation Cases Voluntary Arbitration Cases

Original Compulsory Arbitration Cases SEnA Request For Assistance

Source: BLES, 2009; 2012; 2013a; 2013b; 2013c.

Documents

reinforcing labor relations through responsive regulations