ECONOMICS OF EMPLOYEE RELATIONS - DLA Piperfiles.dlapiper.com/...Piper_Economics_of_Employee_Relations_Final.pdf4 Economics of employee relations The study reveals that respondents’

ECONOMICS OF EMPLOYEE RELATIONS

November 2010

Trade Union Report v9 AW FINAL:Layout 1 28/10/10 16:38 Page 1


www.dlapiper.com 1

FOREWORDIn a volatile economic climate and with the continuing globalisation of business,employers face multiple risks and challengesin labour relations. This year has seenseveral high-profile disputes, from the long-running conflicts at Royal Mail andBritish Airways to threats of strike action at Network Rail, BAA and BT. Furtherindustrial action is expected towards the end of 2010 and into 2011, particularly inthe public sector where the Government’seconomic austerity measures will begin to have a significant impact.

DLA Piper in partnership with YouGovStonehas conducted market research with seniorbusiness leaders and human resourcesprofessionals to gauge the current mood in employee relations and to identify theimpact industrial unrest is having on UKbusinesses. Over 500 responded from boththe public and private sectors, acrossindustry sectors and UK regions.

In this report, we highlight the key trendsemerging from the responses to the studyand provide comparisons between theapproaches to employee relations and tradeunions in eight countries.

The study reveals that, although manyemployers have constructive relationshipswith trade unions, in the context of fullrecognition or on an informal basis, there isreal concern over the perceived increasingmilitancy of and failure by certain unions to‘move with the times’. Respondents pointedout the inability of unions to appreciate thepressures felt by organisations, particularly ina challenging economy. This was illustratedin particular by some of the open-endedresponses to the study.

Despite increasingly high-profile strikeaction in the transport and communicationssectors, including the long-running BritishAirways dispute and walkouts by Royal Mailand London Underground staff, the majorityof respondents reported having suffered nosignificant disruption from industrial actionin the last 12 months. A small majority ofrespondents (51%) agree, or agree strongly,that the Government should intervene toprevent strikes in the transport andcommunications industries, but almost a third (31%) disagree or disagree stronglywith this proposition. However, privatesector businesses are concerned about thepotential impact of planned public sectorwalkouts. A substantial minority (17%) ofprivate sector respondents are expectingpublic sector unrest to have a significantdetrimental effect on their business.

The last 20 years has seen a significant levelof litigation surrounding strikes and otherindustrial action. The reforms of labourrelations law by the ConservativeGovernment in the 1980s introducedcomplex balloting requirements for lawfulstrike action and made trade unions liablefor damages if the requirements were notfollowed. The Labour Government madeonly minor changes at the margins of the lawand it seems that there is now little politicalappetite from the three main political partiesfor wholesale change. The new CoalitionGovernment has not made any commitmentsto amend industrial action legislation, butdid say that it would “look at it” if necessary.Recently the CBI (Confederation of BritishIndustry) launched a report calling for apackage of measures to modernise

employment relations legislation, includinga recommendation that the test for alegitimate strike should require 40% ofballoted members to support it as well as amajority of those voting. Our study revealsthat there would be significant support forthis proposal, with 76% of respondents infavour of changing the law to introduce aminimum threshold for ballots for industrialaction. Such a change would, in practice,significantly limit trade unions’ ability totake lawful strike action.

As the threat of a double-dip recessionremains, it is worrying that industrial unrestis on the increase, creating a fear that thiscould hinder economic recovery. The studyfindings provide a strong encouragementfrom business for the Government to tightenthe laws around strike action. However,careful consideration will be required astrade unions already consider existing lawsas punitive and disproportionate. A furthertightening would be bound to bring a greaterchallenge at a European level based onworkers’ human rights.

David Bradley Group Head - Employment,Pensions and Benefits - [email protected]

“Politically motivated strikes following probably the worsteconomic crisis in history could wreck the UK recovery and seriously [damage] my company, which currently has the largest single block of its employees in the UK. Certainly,concerted industrial action on the scale proposed by theTUC will encourage me to downsize the UK team andstrengthen overseas offices” Respondent in the transport and logistics sector


2 Economics of employee relations

EXECUTIVE SUMMARYINDUSTRIAL DISPUTES

• The overwhelming majority ofrespondents (88%) anticipate increasedindustrial action in coming months.

• 66% of respondents believe thatindustrial disputes are in danger ofstifling Britain’s economic recovery.

• Many of the respondents have confidencein ACAS, with 69% believing that it willhave a critical role to play in futureindustrial disputes.

• In recent months, there have been high-profile strikes in the air and rail sectors.Verbatim responses to our study revealthat these disputes have had a detrimentalimpact on business. However, 69% ofrespondents said that their organisationhad suffered no disruption as a result ofindustrial action by workers of anotherorganisation in the last 12 months andjust 51% of respondents agree, or agreestrongly, that the Government shouldintervene to prevent strikes in thetransport and communications industries.

• The majority of private sector employersbelieve that the predicted widespreadindustrial action in the public sector wouldhave a minor (66%) or significant (17%)detrimental effect on their business.

• 25% of respondents have been involvedin an industrial dispute in the last fiveyears. Pay and benefits was the primarycause for nearly half (47%) of thosedisputes. Where a dispute arose, 78% of these disputes resulted in a threat ofindustrial action. However, just 13%resulted in industrial action taking place.

• A large majority (71%) of respondentswho have been involved in an industrialdispute in the last five years experiencedcosts of less than £10,000.

• 69% of public sector respondents expectmore public sector industrial unrest in thenext 12 months, but only 28% of privatesector respondents expect more unrest inthe private sector.

• Business leaders were evenly split onwhether it is a mistake to make anychanges to industrial relations laws until economic recovery gains more pace, with 41% wanting to wait while39% were supportive of change now. In relation to specific proposals forreform, only 26% of respondents supportchanges proposed in a private members’bill which would extend thecircumstances in which trade unions areimmune from legal action in relation to industrial action. However, 76% ofrespondents are in favour of changing thelaw to introduce a minimum threshold forballots for industrial action. Such a changewould, in practice, significantly limit tradeunions’ ability to take lawful strike action.

EMPLOYEE RELATIONS

• 71% of respondents inform employeesdirectly regarding major issues.Respondents are more likely to consultwith a trade union than another standingor specifically elected body.

• 44% of respondents with 100 or moreemployees always engage in a consultativeprocess with employees over employment-related issues.

• Where employers do regularly engage in a consultative process, 82% respondedthat the consultation has a material impacton the organisation’s decision-makingprocess. Respondents are actively engagingwith their employees, with traditionalmethods of communication such as staffbriefings, newsletters, staff forums andintranets proving popular. Businesses donot yet appear to be using social media ortext messaging on a wide scale to engagewith their employees, with just 8% and7% respectively using these methods.

• Employee relations ranked first inimportance by the highest percentage of respondents (39%) in terms of theamount of management time spentdealing with collective employee issues.Equality and diversity is not a highpriority for respondents, with just 4%ranking this as the most important issue.

• 63% of respondents have consulted with their employees about potentialredundancies in the last five years.

UNION ENGAGEMENT

• 47% of private sector respondents thinkthat union recognition or increasedrecognition would have a detrimentaleffect on the future of employee relationswithin their organisation.

• 90% of public sector respondentsrecognise a trade union for collectivebargaining purposes, compared with 39% of private sector respondents.


www.dlapiper.com 3

0

10

20

30

40

50

60

70

80

0

10

20

30

40

50

0

10

20

30

40

50

60

SURVEY REPORT

Do you agree or disagree with the following statements?

The study reveals that the vast majority ofrespondents to this question are anticipatingan increase in industrial action over thecoming months. The responses from the private sector mirror those from thepublic sector, with 86% and 88% respectivelyagreeing, or agreeing strongly, that there will be a lot more industrial action over thecoming few months.

As the threat of a double-dip recessionlingers, it is worrying that 66% ofrespondents agree, or agree strongly, thatindustrial relations are in danger of stiflingBritain’s economic recovery. However, thereis a marked difference in the responses fromthe private and public sectors, with 70% and54% respectively agreeing or agreeingstrongly with this statement.

ACAS has played a conciliatory role inmany of the recent industrial disputes byfacilitating discussion between concernedparties and suggesting proposals for the wayforward. Most recently, ACAS has offered toconciliate between London Undergroundand the RMT and TSSA trade unions. Priorto this, ACAS provided its conciliationservices in the very high-profile disputebetween British Airways and Unite.

The study shows that a significant majority of respondents (69%) agree thatACAS will have a critical role to play over coming months, with just 8% ofrespondents disagreeing.

Q.1

19%

15%

4%

14%

8%

2%3%0% 0%

1% 2%

68%47%

54%

7%

16% 21%20%

Agree strongly

Agree

Neither agree nor disagree

Disagree

Disagree strongly

Don’t know

Chart 1 Chart 2 Chart 3

I believe there will be a lot moreindustrial action in Britain overthe coming few months

Industrial relations are in danger of stifling Britain’seconomic recovery

The Government’s conciliationservice ACAS will have a criticalrole to play over coming months



The study reveals that respondents’ views on the need to reform industrial relationslaws are finely balanced. Some 41% ofrespondents agree that it is a mistake to makeany changes to industrial relations laws untileconomic recovery gains more pace. Thiscompares with 39% of respondents whodisagree with this statement.

The findings illustrate that only a smallmajority of respondents (51%) agree that theGovernment should intervene to preventstrikes in the transport and communicationsindustries. In contrast, 31% disagree. Thereis, however, a marked difference in theresponses of the private and public sectors,with 58% and 37% respectively agreeingthat the Government should intervene.

However, open ended responses to our studyreveal that recent strikes in the transport andcommunications industries have had anoticeable impact on some businesses:

“Tube strikes have had an effect onattendance and important meetings andpitches have been postponed”

“Sales were down significantly on the days of the London tube strike.Unplanned absence was higher on those days which affected customerservice and availability”

“Tube strike resulted in people beingunable to come to work or arrivinglate/leaving early, therefore output was reduced”

Q.1

0

5

10

15

20

25

30

35

0

5

10

15

20

25

30

35

2%

7%

24%

16%

35%

16%

3%

10%

29%

17%

33%

8%

Chart 4 Chart 5

Chart 5

Agr

ee s

tron

gly

Agr

ee

Nei

ther

Dis

agre

e

Dis

agre

e st

rong

ly

Don

’t kn

ow

PUBLIC v PRIVATE SECTOR

8%

20%

38%

29%

14%

18%

20%

8% 3% 2% 7%

35%

It is a mistake to make anychanges to industrial relations lawsuntil economic recovery gainsmore pace

The Government should interveneto prevent strikes in the transportand communications industries


www.dlapiper.com 5

The majority of respondents (69%) have suffered no disruption as a result ofindustrial action taken by workers of anotherorganisation in the last 12 months. Asignificant proportion (28%) have sufferedminor disruption but only 4% have sufferedsignificant disruption. There was nosignificant distinction between the publicand private sectors or between largeremployers and small and medium sizedenterprises (SMEs). As highlighted above,the majority of the disruption sufferedrelated to transport and in particular tube andrail strikes, meaning that staff could not getto work. However, a minority of respondentsalso highlighted delays to mail and supplychain disruption as a result of third partyindustrial action.

In the past 12 months, has your organisation suffered disruption as a result of industrialaction taken by workers of another organisation? If possible please provide a briefdescription of the disruption your organisation suffered.

Q.2

“One of our businesses has BA as its major customer andthe strikes, real and threatened, were both obviouslydisruptive to services”

“Minor disruption to postal services”

“Suppliers on work to rule over pay limiting their production and quantity of supply as a result of refusing to work overtime”

Yes, significant

disruption: 4% No: 69%

Yes, minordisruption:

28%


0

10

20

30

40

50


The TUC recently voted in favour of a motion calling for widespread industrial action bypublic sector workers. Would such action have a detrimental effect on your business?

This question was directed at private sectoremployers only. At the annual TUC Congressin Manchester in September 2010, Congressresolved that all TUC affiliates would worktogether to build a broad solidarity alliance of unions and communities to organise anational demonstration, lobby of Parliamentand national days of protest against theGovernment’s austerity measures.

The majority of respondents (66%) predicted that widespread industrial actionby public sector workers would have adetrimental effect on their business, and aconsiderable proportion (17%) thought thatthe impact would be significant. Overall,large employers were more concerned by the threat of impending public sector action.Some 24% of respondents employing 250 or more employees thought that the impact of public sector action would be significant,compared with only 9% of SME respondents.

“As a private organisation that supplies services to the publicsector, I feel that the dangers we may experience are not so much related to my own staff or organisation, but thatprovision of services may stall, and personal relationshipsbetween my staff and their clients may sour in the face ofsignificant and co-ordinated industrial action. At a time whenprivate and public sector relations are showing signs of strainover the perceived inequality of pensions and certain workingconditions, I think any attempt to shirk collective responsibilityfor austerity measures risks causing a permanent rift betweenthe sectors that will harm both the recovery and the countryas a whole, possibly for a generation, much as the stigma of the70s strikes damaged both sides for some time” Respondent in the media and information services sector

Q.3

Yes, minordetrimental effect - 49%

Yes, significantdetrimentaleffect - 17%

No likelyeffect - 34%


www.dlapiper.com 7

Have you consulted with your employees (either directly or indirectly) on any of thefollowing topics in the last five years?

In the prevailing economic climate, it is no surprise that a high percentage ofrespondents had consulted about potentialredundancies (63%) or terms and conditions(61%) in the last five years. Large employerswere more likely than SMEs to haveconsulted over redundancies. Some 73% oflarge employers but only 47% of SMEs hadconsulted over redundancies in the last five years.

Q.4

Transfer ofundertakings - 33%

Potentialredundancies - 63%

Terms andconditions - 61%

Other - 6%

None of these - 22%



How does your organisation consult with and inform its employees on major issues?

Some 71% of respondents said that theyconsulted with and informed employees onmajor issues by informing them directly.Where respondents consulted with orinformed a collective body, however, theywere most likely to consult with a tradeunion (42%). This figure was much higherfor public sector respondents than for private sector respondents; 79% of public sectorrespondents consulted with or informed atrade union on major issues, compared withjust 26% of private sector respondents.Large employers were also more likely to consult with or inform a trade union on major issues; 59% of large employersconsulted with trade unions as opposed to14% of SMEs. Perhaps unsurprisingly,SMEs were more likely than large employersto inform employees directly on major issues(81% and 65% respectively).

Q.5

0%

10%

20%

30%

40%

50%

60%

70%

80%

Trade unions - 42%

Standing consultative body - 16%

Specifically elected consultative body - 18%

Inform directly - 71%

Other - 4%

None of above - 7%

Trad

e un

ions

Stan

ding

co

nsul

tativ

e bo

dy

Spec

ifica

lly e

lect

ed

cons

ulta

tive

body

Info

rm d

irec

tly

Oth

er

Non

e of

the

abo

ve


79%

26%

25%

10%

15%

18% 65%

5% 1% 10% 4%

73%


www.dlapiper.com 9

Does your company ever engage in a consultative process with its employees onemployment related issues or more generally?

Only respondents with 100 or more employeeswere asked to respond to this question. The majority of respondents engaged in aconsultative process with employees eitheralways (44%) or sometimes (42%). Morepublic sector respondents (63%) than privatesector respondents (34%) said that they‘always’ engaged in a consultative processwith employees.

Q.6

0%

10%

20%

30%

40%

50% Always - 44%

Sometimes - 42%

Rarely - 10%

Never - 4%

Alw

ays

Som

etim

es

Rar

ely

Nev

er


63%

34%

31%

47%

6% 0% 7%

13%


Always - 18%

Never - 2%

Rarely - 17%

Sometimes - 64%


How often would you say that the consultation process has a material impact on yourorganisation’s decisions on policy issues?

Of the respondents who said that they‘always’ or ‘sometimes’ engaged in aconsultative process with employees, thevast majority (82%) responded that theconsultation process has a material impacton decisions always or sometimes. Some64% said that the consultation processsometimes had a material impact on theorganisation’s decisions on policy issues and 18% said that the consultation processalways had a material impact. Overall,responses from the public sector were verysimilar to responses from the private sector.

Q.7

Alw

ays

Som

etim

es

Rar

ely

Nev

er


28%

14% 60%

64%

12% 0% 2% 21%


www.dlapiper.com 11

Does your organisation use any of the following methods to engage with employees?

Staff briefings are used by the overwhelmingmajority of respondents (91%) to engagewith employees. However, other methodsare also popular, with email being used by77%, intranets by 75%, employee satisfactionsurveys by 74%, a staff newsletter by 73%and information and consultation/staffforums by 62%.

Other methods of employee engagementidentified by respondents to the studyinclude focus groups, “tool box talks”, storm voicemail, monthly meetings, seniormanagement roadshows and listeningsessions, engagement workshops, company-wide conference calls, “captains table” lunchmeetings with directors, newsletters, socialevents, away days and seminars.

Q.8

0%

20%

40%

60%

80%

100%

Employee satisfaction surveys - 74%

Information and/or consultation forumor staff forum - 62%

Social media (Facebook, Twitter, etc) - 8%

Staff briefings - 91%

Staff newsletter - 73%

Intranet - 75%

Drop-in sessions - 33%

Text messaging - 7%

Email - 77%

Other - 6%



Please indicate the importance of the following issues to the management of yourorganisation in terms of management time expended on dealing with these issues, rankingfrom 1 to 5 with 1 the most important and 5 the least.

The study’s results suggest that employershave different priorities. Interestingly, nosingle issue attracted an overwhelminglyhigh percentage of first place rankings.Unsurprisingly in times of economicuncertainty, where maintaining a goodrelationship with the workforce is essential,employee relations was ranked first by thehighest percentage of respondents (39%),followed by employee commitment at 23%.However, there was some divergencebetween public and private sectorrespondents on these issues. Some 46% ofpublic sector respondents rated employeerelations first, compared with 34% of privatesector respondents. For employeecommitment, just 14% of public sectorrespondents ranked this issue first, comparedwith 28% of private sector respondents.

Q.9

CHART BREAKDOWN

1 Employee relations Ranked first - 39%Ranked second - 29%

2 Employee commitment Ranked first - 23%Ranked second - 18%

3 Reward, compensation andbenefits (including pension) Ranked first - 19%Ranked second - 25%

4 Absence management Ranked first - 15%Ranked second - 19%

5 Diversity/equal opportunitiesRanked first - 4%Ranked second - 8%

Given the recent implementation of theEquality Act 2010, it is surprising to see thatjust 4% of respondents ranked equality anddiversity as the most important issue to theirorganisation in terms of management timespent on dealing with it, with 42% ranking it in fifth place. This may suggest thatemployers’ time is being subsumed withmore immediate industrial relations issues.However, the Equality Act 2010 is a far-reaching piece of legislation which mayprove to be a latent danger and catch out theunprepared in the medium to long term.

0%

5%

1 2 3 4 5

10%

15%

20%

25%

30%

35%

40%

0%

5%

1 2 3 4 5

10%

15%

20%

25%

30%

35%

40%

Ranked first

Ranked second


www.dlapiper.com 13

0%

10%

20%

30%

40%

50%

What effect do you feel recognition (or increased levels of recognition) of a trade unionwould have on the future employment relations structure within your organisation?

The 2009/2010 Annual Report for the CentralArbitration Committee (CAC) shows that, inthe year ending 31 March 2010, the CACreceived 42 applications for union recognition.This was the same number as for the previousyear. The manufacturing, transport andcommunications sectors provided 54% of the caseload.

The study sought to discover respondents’views on the impact of trade union recognition,or increased recognition, on future employeerelations. Some 47% of private sectorrespondents consider that recognition woulddamage the future employee relationsstructure. However, only 16% of public sectorrespondents concurred with this. A lowpercentage of respondents (12%) consider thatrecognition (or increased levels of recognition)of a trade union would benefit the futureemployee relations structure within theirorganisation. However, this figure was higherin the public sector (24%). Some 41% of totalrespondents believe that recognition wouldhave no effect.

Respondents’ comments about the effect ofunion recognition, or increased recognition,shed light on these findings:

Q.10

“Many of the trade unions recognised in ourindustry are not ‘moving with the times’ in termsof their thinking and do not seem to grasp theneed to work more collaboratively to survive.Also, many of them do not take on board thefinancials of the business and the implicationsthis has in terms of the company constraintswhen it comes to negotiations”

“It would slow the decision making processand potential conflict between the employerand the employee”

“Unnecessary third party intervention thatwould hamper relations between organisationand employees”

“Trade unions have their own agendas whichare often not relevant to the employees’concerns/employer; often about increasingpower of a trade union and not about specificissues in the workplace”

“It is difficult to assess the impact ofrecognising a trade union as it depends ontheir agenda and the relationship createdbetween the organisation and the union. Canbe a positive if partnership is centric in theprinciples of the relationship”

“There is of course benefit [to trade unionrecognition] if both parties have the sameagenda which is to make the businessproductive and profitable with an aim for long-term employment opportunities. Unfortunatelysome individuals within the trade union arepolitically motivated and seek to build in layersof distrust and conflict, often as a mechanism to increase trade union membership”

A lack of perceived benefit for furtherrecognition in the public sector is likely to be influenced by the high level of unionrecognition already existing in the publicsector (see below). This is reflected in someof the open-ended responses to the study:

“We are a public sector organisation withtrade unions at the centre of our consultationand information strategy. I’m not sure wecould increase the levels of recognition otherthan to recognise other unions and I don’tknow how they would operate alongside thealready well established unions we deal with”

“The organisation is already signed up tocollective bargaining so recognising otherunions would not have a significant effect”

“Already have recognised unions and goodworking relationships”

Benefit 12%

No effect 41%

Damage36%

Don’t know12%

Bene

fit

No

effe

ct

Dam

age

Don

’t kn

ow


24%

8% 48%

36%

16% 13%

10%

47%


1 Recognise a union for collectivebargaining purposes - 57%

2 Do not recognise a union but happy to talk to the union on relevant issues - 12%

3 Do not engage with unions - 13%

4 Actively seeking to keep unions out of the workplace - 3%

5 Do not have a strategy - 16%


Does your organisation have a defined strategy for its dealings with trade unions (whether you currently recognise a trade union or not)?

Some 90% of respondents in the publicsector recognise a trade union for collectivebargaining purposes, compared with only39% in the private sector.

Respondents had many reasons for engagingwith trade unions, including:

“If the workforce seek representationthen it is right and proper to use thebody for information/consultation/negotiation purposes”

“Unions are representations of theworkforce, and as it is the workforce that drives the company, unions play animportant role”

“This provides a clear and openframework for discussing such issues”

Q.11

Some 24% of private sector respondents donot engage with unions or are activelyseeking to keep unions out of the workplace.A further 24% do not have a defined strategy at all. The reasons for this include:

“Paying direct attention to employeeneeds and concerns, conducting regularperformance appraisals andcommunicating well/frequently with themon company strategy, direction or specificissues removes the need for employeesto resort to trade union representation”

“We believe in one to one witheveryone in our organisation and unionsadd no benefit. We have very goodemployee relationships/communicationswithout unions. Everyone has access tomanagement and there are many timeswhen this is used to deal with issues”

“We believe they would have negativelyimpacted on our business, including theinterests of our employees. Our businesssuccess is, in part, due to the flexibilityand responsiveness of our business andour workforce. We believe a trade unionwould damage this”

01 2 3 4 5

10

20

30

40

50

60

Rec

ogni

se a

uni

on fo

rco

llect

ive

barg

aini

ng p

urpo

ses

Do

not

reco

gnis

e a

unio

n bu

t ha

ppy

to t

alk

to t

he u

nion

on

rele

vant

issu

es

Do

not

enga

ge w

ith u

nion

s

Act

ivel

y se

ekin

g to

kee

p un

ions

out

of t

he w

orkp

lace

Do

not

have

a s

trat

egy


90%

6% 15%

2% 19%

1%24%

1% 5%

39%


www.dlapiper.com 15

In your opinion, has union membership increased, declined or stayed static in yourorganisation in the past two years?

Some 54% of respondents believe that tradeunion membership has stayed static, while16% believe it has increased. However, there was a marked public/private sectorsplit on this issue. Some 29% of publicsector respondents believe that trade unionmembership in their organisation hasincreased in the past two years, comparedwith just 10% of private sector respondents.Some 20% of public sector respondentsbelieve that membership has declined,compared with 36% of private sectorrespondents.

Interestingly, the findings show that therespondents’ perception of the trend in tradeunion membership in their own organisation

Q.12

does not match the position as revealed bythe Office for National Statistics (ONS)statistics. Trade union membership anddensity is much stronger in the public sector.Private sector union density was just 15.1%in 2009, while public sector density was56.6%. However, both fell by the same rate,around half a percent, in 2009 comparedwith 2008. In the UK as a whole, the declinein trade union membership and density hasbeen an established trend for many years.Trade union membership peaked in 1979 at 13 million. In 2009, membership levels fellby 2.4% to 6.7 million compared with 2008,though union density (the proportion ofpeople in employment who are trade unionmembers) remained constant at 27.4%.

Increased - 16%

Declined - 30%

Stayed static - 54%

Incr

ease

d

Dec

lined

Stay

ed s

tatic


29%

10%

20%

51%

55%

36%



INDUSTRIAL DISPUTES

Just 26% of respondent organisations have been involved in an industrial disputein the last five years, with 24% of these being involved in five or less. Perhapsunsurprisingly, just 12% of the respondentswho have experienced industrial disputeswere in the private sector.

Q.13Has your organisation been involved in an industrial dispute in the last five years?

Yes, 1 dispute - 11%

Yes, 2-5 disputes - 13%

Yes, more than 5 disputes - 2%

No - 75%


www.dlapiper.com 17

The study highlights that pay and benefitsare the most common causes of industrialdisputes, with 47% of respondentsidentifying this issue as the primary cause.Other terms and conditions and employment/termination of workers are evenly matchedas the primary cause at 11%.

Q.14Thinking of the most recent dispute, what was the primary cause?

Pay/benefits - 47%

Negotiation or consultation - 5%

Pension - 13%

Other terms andconditions - 11%

Employment/non-employment/termination/suspension of workers - 11%

Allocation of work - 1%

Disciplinary matters - 6%

Non/membership of a trade union - 1%

Facilities for trade unionofficials - 0%

Other - 6%

The findings are in line with nationalstatistics for the UK as a whole. Accordingto official labour market statistics, the maincauses of industrial action in 2009 werewage disputes (mainly wage rates andearnings levels) and redundancy issues.Some 60% of the working days lost in 2009were due to disputes primarily overredundancies.



A high percentage of respondents (78%) have been subjected to a threat of industrial actionarising out of a dispute.

Q.15

Yes - 78%

Again, thinking of the most recent dispute, did it result in a threat of industrial action?

No - 22%


www.dlapiper.com 19

Q.16

Despite 78% of respondents being threatened with industrial action when dealing with theirmost recent dispute, just 12% took legal action to delay or prevent industrial action taking place.

Did the company take legal action to delay or prevent the industrial action?

No - 88%Yes - 12%



A total of 105 respondents, with at least 100 employees, who have had a dispute in the lastfive years and taken legal action, answered this question.

In just 13% of cases industrial action still proceeded when respondents took legal action. Inthe vast majority of cases (87%), the industrial action did not proceed, either because legalaction was successful, or more commonly (68%) for another reason.

Q.17Did the industrial action proceed?

0%

10%

20%

30%

40%

50%

60%

70%

80%

Yes - 13% No, because legal actionwas successful - 19%

No, for anotherreason - 68%


www.dlapiper.com 21

0%

10%

20%

30%

40%

50%

60%

70%

80%

A total of 105 respondents, with at least 100 employees, who have had a dispute in the lastfive years and taken legal action, answered this question.

The majority of respondents (71%) who have had a dispute in the last five years experiencedless than £10,000 of costs to the organisation in terms of direct financial cost, lostproduction, management time and effect on future business.

Q.18What was the approximate cost of the dispute to the organisation (in terms of directfinancial cost, lost production, management time and effect on future business)?

Less than£10,000 - 71%

£10,000 - 49,000 - 8% £50,000 -

99,000 - 6%£100,000 -

249,000 - 5%£250,000 -

499,000 - 3% £500,000 -999,000 - 2%

£1m - 4m -4% £5m+ - 3%



Overall, a small majority of respondents(52%) expect industrial unrest to remain thesame in their sector. In light of impendingpublic sector cuts and the TUC’s call forwidespread action by public sector workers,it is unsurprising that 69% of public sectorrespondents expect more industrial unrest inthe public sector in the next 12 months.

ONS figures show that 455,000 workingdays were lost to industrial action in 2009,

Q.19Do you expect more or less industrial unrest in your sector in the next 12 months?

compared with the 27 million lost during the1984 miners’ strikes and the 29 million lostduring the 1979 Winter of Discontent. ONSstatistics for 2010 show lower levels ofindustrial action than in 2009, except inMarch 2010 when the impact of the BritishAirways cabin crew strike led to 277,000working days being lost to industrial action.

More - 41%

Less - 8%

Same - 52%

Mor

e

Less

Sam

e


69%

28%

4%28%

26%

10%


www.dlapiper.com 23

A total of 486 respondents with at least fiveemployees answered this question.

It is interesting that although 41% ofrespondents expect more industrial unrest intheir sector in the next 12 months, only 29%of respondents expect more unrest in theirorganisation. Large employers were morelikely than SMEs to expect more industrialunrest in their organisation (40% of largeemployers responded ‘more’ compared withonly 9% of SMEs).

Q.20Do you expect more or less industrial unrest in your organisation in the next 12 months?

More - 29%

Less - 10%

Same - 62%

Mor

e

Less

Sam

e


58%

16%

3% 39%

72%

12%



This Private Members’ Bill aims to extend the circumstances inwhich trade unions are immunefrom legal action in relation toindustrial action. As a general rule,industrial action is unlawful unlessit has the support of a properlyconducted ballot, but there is anexception in certain specifiedsituations if the balloting processsuffered from a “small accidental”failure which is “unlikely to affectthe result”. The Bill would extendthe circumstances in which the “small accidental failure”exception would apply. Would yousupport this change to the law?

Q.21The Lawful Industrial Action (Minor Errors) Bill 2010 - 11

Only 26% of respondents support theproposed change to the law. Support washigher in the public sector than in the private sector, with 33% of public sector but only 24% of private sector respondentssupporting the proposed change.

Section 232B of the Trade Union andLabour Relations (Consolidation) Act 1992(TULRCA) provides that failures by theunion in ascertaining which members areentitled to vote and ensuring that thosemembers receive a ballot paper can bedisregarded if they are “accidental and on ascale which is unlikely to affect the result ofthe ballot”. This ‘accidental failures’exception also applies to ensuring that themembers’ votes are fairly and accuratelycounted. However, TULRCA makes noexpress provision for accidental failures tobe disregarded so far as the union’s variousnotice obligations (to the employer and to itsmembers) are concerned. This would beaddressed by the proposed Private Members’Bill.

No - 48%

Yes - 26%

Don’t know - 26%


www.dlapiper.com 25

The majority (76%) of respondents wouldsupport the proposed change in the law.

Recently the CBI launched a report“Keeping the wheels turning: modernisingthe legal framework of industrial relations”calling for a package of measures tomodernise employment relations legislation.The proposals comprised the following 11recommendations:

• rationalise the law on employers usingtemporary workers to cover for strikingemployees to allow employers to hireagency workers;

• extend the notice period for industrialaction from 7 to 14 days;

• ballot mandates should be limited to theoriginal dispute;

• make a ballot of employees in thebargaining unit compulsory when a unionis seeking statutory recognition;

• the test for a legitimate strike should require40% of balloted members to support it aswell as a majority of those voting;

• only paid-up union members should beeligible to vote;

Q.22The Government is widely reported to be proposing a change to industrial action law tobring in a minimum threshold in strike ballots; ie that no strike should be legal unless 40%of those eligible to vote in a strike ballot support it. At present the strike is legal if a simplemajority of those actually voting support the strike. Would you support the proposedchange in the law?

• unions should be required to conduct anannual audit of their membership and usereasonable endeavours to keep records up to date;

• employers should be able to include awritten statement in the informationwhich goes out with strike ballot papers;

• ballot papers should include a noticestating that pay and non-contractualbenefits can be withdrawn by theemployer if the worker goes on strike;

• unions should be required to repudiateunlawful strike action within a definedtime period and the Certification Officershould be given more power to enforcethe law;

• unions should face realistic sanctions forfailing to comply with the law onindustrial action.

Many of these recommendations are new,but there have been suggestions for sometime that if the Government did considerreforming the law on industrial action, themost likely reform would be to thethresholds for support for lawful strikeaction. The proposed “40% of those eligibleto vote, and a majority of those voting” testwould mirror the threshold in a ballot forstatutory trade union recognition.

Several employers who responded to thestudy were in favour of the thresholds beingraised even higher than proposed by the CBI:

0%

10%

20%

30%

40%

50%

60%

70%

80%

Yes No Don’t know



“Support the need for a minimumthreshold to vote but this should be at least 50% of those eligible to vote inmy opinion”

“40% is too low, more than 60% shouldhave to take part in a vote to takeindustrial action in order to make it lawful”

Recent case law suggests that there arenumerous instances where a union would beable to demonstrate a clear majority infavour of strike action on the basis of thecurrent law but would be unable to achievethe proposed 40% threshold. It would beparticularly difficult for unions to gain therequisite support for strike action where theworkforce is geographically diverse orworks in non-traditional workplaces.

The RMT recently balloted its members overaction which did not go ahead due to a legalchallenge to the accuracy of the union’smembership data. However, even if the datahad been accurate, a simple majority ofthose voting would not have achieved thethreshold of 40% of those eligible to vote.The ballot result of 1,705 ‘yes’ votes from avoting constituency of 4,556 members givesan overall percentage of eligible votersvoting in favour of only 37%.

In a recent vote (August 2010) by Unitemembers to take strike action against BAA,of the 6,185 staff eligible to vote, only 3,054valid papers were returned. Although 2,263voted in favour of strike action, again thisgives an overall percentage of eligible votersvoting in favour of action of only 37%.

The proposed change in the law would nothave affected the outcome in the recentUnite and British Airways dispute. In thatcase, the actual number of union memberseligible to vote was in dispute (and was thesubject of legal challenge), but in any eventwith a turnout of around 80% of eligiblevoters and 9,514 of the total 10,286 votescast in favour of industrial action, Unitewould in that case have passed the 40%threshold.

Yes

No

Don

’tkn

ow


76%

75%

17%

8% 10%

14%


www.dlapiper.com 27

THE INTERNATIONALPERSPECTIVE

The cross-border dimension of employeerelations is increasingly important formultinational businesses, not least due to theincreasing globalisation of the trade unionmovement. Like businesses, unions want toextend their reach, to attract new membersand grow. The internationalisation of theunion movement gives unions the potentialto apply more pressure to susceptible partsof an international business. Similarlyunions recognise that in order to tackle thelabour issues that arise from globalisationthey have to operate at a transnational level.There is currently no genuinely global unionbut in recent years the trend in the tradeunion movement has been towards increasedinternational co-operation. National tradeunions work together on an internationalscale by industry sector forming influentialworkers’ federations such as theInternational Transport Workers’ Federationand the International Metalworkers’Federation. The recent British Airwaysdispute is an example of how domesticunions can use their alliances with unionsoverseas to increase the pressure on amultinational business. During the cabincrew strike there were reports of sympatheticaction by unions in the US and Australia.Increasingly global union federations arealso entering into multinational frameworkagreements with multinational companiesinvolving a commitment on behalf of thecompany concerned to engage the relevantinternational trade union federation anddiscuss issues of fundamental importance to both parties.

Against this background, it is crucial formultinational companies to understand thedifferent legal requirements, cultures andexpectations which apply in respect ofemployee relations in all the countries in

which they operate. In this report we look atsome of the key issues shaping the employeerelations landscape in the followingcountries:

• Australia

• Belgium

• China

• France

• Germany

• Italy

• Spain

• UK

• US

Our report reveals that there are importantdifferences across jurisdictions in the rolewhich trade unions play in employeerelations, the influence which trade unionscan bring to bear and the rights or freedomsof employees to take industrial action.

With few exceptions, official figures show an overall decline in trade uniondensity over the last decade. One notableexception is Belgium, where densityincreased from 49.3% to 54.1% between2000 and 2006. Density levels alone do notshow the full picture. For example, in Franceunion density levels are relatively low butunions participate to a greater degree inWorks Councils.

At the national level the right to freedom totake strike action is guaranteed by theconstitution in most countries in theEuropean Union, with the exception ofAustria, Belgium, Luxembourg, Malta, theNetherlands, Ireland and the UK. InGermany and Finland the right derives fromthe freedom of association.


28 Economic of Employee Relations

AUSTRALIAThe role of trade unions inemployee relations

For well over 100 years, the industrialrelations systems throughout Australiaoperating at the state and federal levels havecompelled employers to recognise tradeunions in the workplace. Today, it is freedomof association that gives trade unions a rolein the workplace. The role of trade unionsremains important because freedom ofassociation is an enduring theme ofworkplace relations law.

Under federal law, employees have thefreedom to choose whether they are amember of a union and whether to be or notto be represented by a union, particularly inthe collective bargaining regime thatoperates under the Fair Work Act 2009 (Cth)(FW Act). As a consequence, any unionvalidly appointed to represent an employeeor employees is someone an employer inthose circumstances must recognise and dealwith according to law. This did not changeunder the reforms introduced by the FW Act,although many will argue that unions’ role incollective agreement negotiations has beenenhanced by their ‘default’ position as abargaining representative for their membersunder the new collective agreement makingrules that have applied since 1 July 2009.

An employer simply cannot refuse to dealwith a trade union if the employee wishes tobe represented by that body. The employerwould breach provisions in the FW Act wereit to do so. If an employer treats anemployee less favourably because of his orher union membership, then that employerwill breach the law and possibly facepecuniary penalties.

Trade union membership

Information obtained from the AustralianBureau of Statistics reveals that trade unionmembership in Australia hit its peak in 1962,with just over 61% of workers having unionmembership. This level declined rapidlyfrom 1962 until in 1970 just over half of allAustralian workers were union members.Though there was a resurgence in unionmembership throughout the 1970s, beyondthat time trade union membership slowly

declined, until in 1990 only 40.5% ofworkers were union members. Since then,membership levels have continued to fall, to32.7% in 1995, 24.7% in 2000, 22.4% in2005 and 18.9% in 2008. In 2009, there wasa slight increase in membership to 19.7%.

Industrial action and the employeerelations climate

The FW Act retains the distinction between ‘protected’ industrial action (lawfulaction) and ‘unprotected’ industrial action(unlawful action).

Industrial action continues to be permittedfor the purpose of supporting or advancingclaims in relation to an enterprise agreementthat are about (or reasonably believed to beabout) ‘permitted matters’. Protected actioncan only take place once the nominal expirydate of an enterprise agreement has passed.Permitted matters are essentially matterspertaining to the relationship between anemployer and employee and matterspertaining to the relationship between anemployer and the union.

Protected industrial action is lawfulindustrial action which is immune to legalremedies that would otherwise apply unlessit falls outside the exemption. Industrialaction will only be protected when strictconditions are observed which include aballot in support, notice requirements andtime limits. Protected industrial action mustalso be categorised as an:

• ‘employee claim action’ (industrial actionorganised to support or advancepermitted claims made in relation to anagreement);

• ‘employee response action’ (industrialaction engaged in by employees who willbe covered by the proposed agreement inresponse to industrial action taken by anemployer who will be covered by theagreement); or

• ‘employer response action’ (industrialaction engaged in by an employer whowill be covered by the proposedagreement in response to industrial actiontaken by an employee who will becovered by the agreement).

ESSENTIAL FACTS AND FIGURES

Number of trade unions: There are currently 46 federallyregistered trade unions.

Trade unionmembership/density: As of August 2009 (the lateststatistics available), 19.7% of theworkforce are union members.This equates to approximately 1.8 million workers.

Days lost to industrial action: In the June quarter 2010, there were 56 disputes involving 13,900workers, resulting in the loss of24,000 working days. This compareswith the March quarter 2010, whenthere were 54 disputes involving13,200 workers and the resultantloss of 28,800 working days.

Nick Ruskin Partner [email protected]


www.dlapiper.com 29

BELGIUMThe role of trade unions inemployee relations

Trade unions mainly have influence throughthe establishment of union delegations withina company. An employer must establish aunion delegation at the request of one or morerepresentative trade unions, subject to anumber of conditions. The union delegationmembers are workers of the company whoare either appointed by the union or electedby the other unionised workers.

Trade unions have a significant role to playin employee relations. Their rights include:

• conducting collective negotiations andconcluding collective bargainingagreements;

• representing union members before anemployment tribunal.

Trade unions also indirectly have the followingrights through staff representative bodies:

• There are extensive staff information andconsultation rights within the WorksCouncil and the committee for preventionand protection in the workplace. Whilethe staff representatives in these bodiesare elected every four years by theworkers themselves in the framework ofthe so-called social election process, inprinciple only the trade unions have theright to submit lists of candidates in theframework of this social election process(although there are exceptions to this rulefor the representation of management ofstaff in the Works Council).

• The trade union delegation has the rightto be heard if a conflict on a collectivebargaining agreement or an individualemployment agreement arises.

Trade unions operate alongside WorksCouncils which function as a meeting anddiscussion forum for both management andthe workers’ representatives. A WorksCouncil has to be established in everycompany usually employing a minimum of100 workers. A committee for preventionand protection in the workplace must inprinciple be set up if there are at least 50workers. The conditions for allowing tradeunions to claim the establishment of a

union delegation vary, but generally stand at around 25 workers. The number ofrepresentatives on a Works Council, acommittee for prevention and protection in the workplace or a union delegation isrelated to the size of the company.

There is also a system of ‘replacement’, so that if a union delegation has beenestablished within the company, but there is no Works Council or committee forprevention and protection at work, then theunion delegation takes over certain functionsof the other two bodies.


There are three main unions in Belgium: the socialist trade union (ABVV in Dutch,FGTB in French), the Christian union (ACVin Dutch, CSC in French) and the liberaltrade union (ACLVB in Dutch and CGSLBin French). According to a 2006 EuropeanTrade Union Confederation Report, tradeunion membership stands at approximately54% of the workforce.


In Belgium, employees have completefreedom to strike. The right of employees tostrike is guaranteed in the European SocialCharter and by case law. In the majority ofcase law, no distinction is made between astrike organised by a registered union andone by a non-registered union or byindividual staff representatives.

A strike suspends the employment contract,hence there is no right to remuneration.Traditionally, the trade unions pay theirmembers a certain amount for each day they participate in a strike organised by the trade union.

An employer may seek an injunction toprevent a strike going ahead but, in mostcases, an injunction will only be granted ifthere is sufficient evidence that, either thereare workers who are not participating in thestrike and are being refused access to thepremises, or the employer’s premises arebeing damaged. In the majority of caseswhere such an interlocutory injunction isgranted, it does not prohibit the strike as

such (ie the concerted refusal of work), but rather incidents linked to the strike (forinstance, blocking access to the premises ofthe employer for the workers who are notparticipating in the strike).

The current industrial climate is difficult tosummarise. In the current economic crisis,unions have been adopting a more pragmaticapproach; the claims formulated by unionsare often mitigated by an understanding ofthe limited room for negotiation as a resultof the financial and economic situation of a considerable number of employers.Notwithstanding this, there have been a few fiercely contested and confrontationalindustrial disputes at some of the largestemployers in the country, which have beencovered extensively by the media.


Number of trade unions: There are three main unions inBelgium: the socialist trade union(ABVV in Dutch, FGTB in French),the Christian union (ACV in Dutch,CSC in French) and the liberaltrade union (ACLVB in Dutch andCGSLB in French).

Trade unionmembership/density: Estimated in 2006 at 54%

Days lost to industrial action: 88,941 working days lost due tostrikes during 2006.

Eddy Lievens Partner [email protected]



CHINAThe role of trade unions inemployee relations

All unions in China belong to or arecontrolled by the All China Federation of Trade Unions (ACFTU). Unionrepresentatives have the right to negotiateand sign collective agreements that addresscompensation and benefits, social insurance,working time and health and safety issues.


Approximately 170 million employees inChina are members of a trade union.

The last two decades witnessed thedissolution of many state-owned enterprises,whose employees formed the core of China’sunions. To compensate for the decrease insize and strength, the ACFTU announced anaggressive campaign to unionise all foreignenterprises. Just over a year ago, 83% ofMNC headquarters in China had beenunionised. Union members are heavilyprotected under Chinese law.


Any provision in a collective agreement can be disputed. By law, the union mustparticipate in the resolution of any labourdispute. The union also has the right to asklocal government to initiate court proceedingsagainst any employer or individual whoviolates the Labour Union Law.

Unions in China are not authorised toorganise, initiate or support strikes. Should a strike or work to rule situation arise, theunion is responsible for negotiating withemployers on behalf of employees. Theunion is required to assist the company in resolving the matter and resumingproduction and work as quickly as possible.Strikes are not expressly prohibited, but theyare also not authorised. Since there is nolegal right to strike, there is no outlinedprocedure for organising or conductingstrikes. Strikes are most common in themanufacturing sector, specifically in factoriesthat produce low tech, labour intensivegoods. Disputes frequently revolve aroundback payment of wages and sub-standardworking conditions.

The law in China is silent on strike liability.The only obligation mentioned in relation tostrikes is the union’s role in mediation andreturn to work. There are no forms of protestlegally recognised under PRC law. In additionto strikes, typical reactionary measures includetaking management hostage or the destructionor theft of company property. Although theglobal economic crisis has affected demandand factory output, labour relations in Chinahave remained remarkably stable.


Number of trade unions: 1,324,000

Trade unionmembership/density: 169,942,111

Days lost to industrial action: Not publicly available

Pattie Walsh Partner [email protected]


www.dlapiper.com 31

FRANCEThe role of trade unions inemployee relations

Many of the rules applying to unions inFrance were changed in August 2008 whennew legislation was passed.

A union must create a Union Section within acompany in order to acquire any rights. Thepurpose of the Union Section is to representthe moral and material interests of its membersin accordance with the aims of the union.

A union can establish a Union Section in anycompany having at least 50 employees. AUnion Section gives a union a number ofrights, including communication rights,negotiation of collective bargainingagreements and determining candidates forthe election of employee representatives.

The Union Section must be provided with allnecessary means to achieve its objectives,including collecting contributions, postingunion communications on noticeboardsmade available by the employer, distributingleaflets and publications, exclusive access toa meeting room in companies of more than200 employees and freedom to organise acertain number of meetings.

Once a Union Section is in place, UnionDelegates may be appointed. Their missionis to represent the interests of their unionbefore the employer and, in principle, theyhave a monopoly to negotiate and enter intocollective bargaining agreements with theemployer on most subjects.

Under the French Labour Code, companiesemploying 50 or more employees are alsoobliged to organise the election of membersto a Works Council. The purpose of theWorks Council is to exercise the employees’right to information regarding the economicstatus of their company and decisions thatmay affect their employment.


Historically, five trade unions have beenofficially recognised as ‘representative’unions as of right (CGT, FO, CFDT, CFTC, CFE-CGC). However, recent legalprovisions have changed the rules onrepresentativeness. Under the new rules, anyunion, including an emerging one, has to

prove its representativeness, on the basis oflegally set criteria, at whatever level it wantsto act (industry or company level).

In France, net union membership and uniondensity are relatively low (less than 10% inthe private sector) but a larger number ofworkers participate in elections to WorksCouncils and employees are protected bynationwide, industry-wide collectivebargaining agreements.


The right to strike is recognised by theFrench Constitution of 1958.

Under the French Labour Code, a strike does not terminate an employment contractunless there has been wilful misconduct bythe employee. The dismissal of a strikingemployee is considered void and theemployee can demand to be reinstated in the company. Further, it is not possible foran employer to take into account the fact that an employee has gone on strike whendetermining salary increases, bonuses, etc.

However, in order for a strike to be valid, the striking employees must cease workingentirely. Continuing to work, but at a slowerpace or in a poor manner, is not, under case law, considered a valid strike and couldpotentially be used against the employees as professional misconduct leading to adisciplinary sanction. However, case law hasestablished that it is not necessary for theentire workforce, or even a majority of it, togo on strike in order for the strike to be valid.

Employees can decide to go on strike at any time and, unless they are in the publicsector, are not required to give prior noticeof the strike.

There has recently been widespreadindustrial unrest in France, largely aimed atputting pressure on the Government over acontroversial pension reform plan. A generalstrike took place on 23 September 2010causing widespread disruption to transport.Strikes in France are particularly common inthe public transport sector and strike actionis generally more extensive in France than inother European countries.


Number of trade unions: There are 5 nationally recognisedunions but many others exist.Exact figures are not available.

Trade unionmembership/density: 9%

Days lost to industrial action: Official statistics are not availableas no prior notice is required forstrike action. In 2005, the days lostto industrial action were estimatedby the European Trade UnionCongress (ETUC) to be 1,754,710.

Bijan Eghbal Partner [email protected]



GERMANYThe role of trade unions inemployee relations

German law provides for employeerepresentation at different levels. The mostimportant employee representative body is theWorks Council (Betriebsrat), a body electedby employees for a term of four years. TheWorks Council has to be consulted on a widerange of subject matters but is not usuallycompetent to negotiate salaries and other keyterms of employment. This competence restswith the unions. Also, only unions have thecompetence to call for a strike. Key membersof the Works Council, particularly in largercompanies, are, however, often unionmembers and have a say within the union.


Trade unions are either industrial orprofessional organisations. Industrialorganisations are associations of employeesworking in the same industrial sector. The IGMetall union, for example, representsemployees working in the metal, electronics,textiles and clothing, wood and syntheticssectors, as well as employees in theinformation and communication technologysector. Professional unions, on the other hand,are unions for members of the sameprofession, such as Marburger Bund, theunion for medical doctors.

There are three umbrella trade unions inGermany. The biggest is DeutscherGewerkschaftsbund (DGB). Eight trade unionsbelong to the DGB and the DGB has a totalmembership of 6.26 million. The secondbiggest umbrella trade union is DeutscherBeamtenbund (DBB). Some 39 trade unionsbelong to the DBB with a total membership of1.28 million (2007). The smallest umbrellatrade union is Christlicher Gewerkschaftsbund(CGB). Some 16 trade unions belong to theCGB, with a total membership of 0.28 million.In addition there are four small trade unionswhich do not belong to one of the threeumbrella trade unions, the Marburger Bund,which has 110,00 members, the VereinigungCockpit, with 8,200 members, theUnabhängige Flugbegleiter Organisation(UFO) with 10,000 members and the Verbandangestellter Akademiker und leitender

Angestellter der chemischen Industrie (VAA),which has 27,000 members.


Strikes are only admissible after all otheroptions for solution of the problem areexhausted, which in turn means that allnegotiations must have failed (the so-called‘ultima ratio’ principle). According to caselaw of the Federal Labour Court, warningstrikes are restricted by the ultima ratioprinciple and are therefore unlawful, ifnegotiations have not failed at the time ofthe warning strike. However, the warningstrike itself implies that negotiations havefailed and the failure does not have to beannounced specifically to the employers.

A lawful strike has to be organised by a tradeunion and can only be carried out by, andagainst, parties who are able to be parties tothe collective bargaining agreement. It mustbe aimed at a change that can be achieved bycollective bargaining agreements. A strikeballot must be held, in which a certainmajority of members of the trade union mustsupport the execution of the strike.

The strike itself is governed by the principleof proportionality. This implies that thestrike is only admissible after all otheroptions for solution of the problem areexhausted, which in turn means that allnegotiations must have failed.

If the trade union is bound by a no-strikeclause in a collective bargaining agreement,all labour conflicts concerning issuesgoverned by that agreement will be invaliduntil the agreement terminates. For theduration of a collective bargaining agreementthere is a ‘relative peace’ obligation, meaningall measures of labour conflict must berefrained from, as long as the crucial issue isregulated in the agreement.

Demonstration and protest strikes are unlawfulif the purpose is to criticise or influence theemployer, ie the aim is not to achieve aconclusion of a collective bargainingagreement. Political strikes are illegal.

In 2007, the Federal Labour Court ruled that‘supporting strikes’ may be considered legal.Strikes whereby one trade union supportsanother in the latter’s labour conflict are


Number of trade unions: 67: 3 umbrella unions comprising63 unions in total, plus 4independent unions

Trade union membership: Approx 7,973,000

Days lost to industrial action: Between 2000 and 2008 5 averageannual days were lost to strikeaction (per 1,000 employees). In2006, however, the annual days lostto strike action (per 1,000employees) reached 12.4.

Volker von Alvensleben Partner [email protected]

lawful if a certain economic closeness existsbetween the businesses organised by thedifferent trade unions. Nevertheless, thesupporting strike itself needs to be lawful.

In Germany, collective labour disputes aremost common in the metalworking industryand in the retail industry. However, due to the global economic crisis, employees andtrade unions are more likely to understanddetrimental management decisions, such ascutbacks. Therefore, the current industrialrelations climate in Germany is rather relaxed,although, in particular, pilots and train drivershave been involved in strikes lately.


www.dlapiper.com 33

ITALYThe role of trade unions inemployee relations

Trade unions usually act at a national levelinterfacing with government and publicauthorities and employers’ associations todeal with matters of general interest in thework and employment sector. They negotiatewith employers’ associations and execute theNational Collective Bargaining Agreementswhich are different according to the differentindustry sectors and contain the generalterms and conditions applicable to theemployment relationship.

In collective matters trade unions representall employees employed in an employer’sestablishment, regardless of their unionmembership. In individual cases, tradeunions represent the rights and interests of their members or employees who seek assistance.

Works Councils also function to representthe interests of employees and can beestablished in companies employing at least15 employees. Members of a Works Councilare elected by the employees.


Even though there are no official statistics on trade union membership, it is estimatedthat Italian trade unions have more than 12 million members. However, a highproportion of them are retired (almost half -47% - across the three largest confederations).Taking this into account, union density can be put at a rate of 30-33%.

There are three main union confederations in Italy – CGIL, CISL and UIL – whosedivisions were initially based on politicaldifferences, although these have become lessclear over time.

The largest is the CGIL, which has 5,734,900members, although only 2,719,700 of them areemployed. The second biggest is CISL with4,507,500 members, of whom 2,306,800 areemployed. And the third largest is UIL, whichhas 2,116,300 members of whom 1,181,000are employed (all figures are for 2008).

In the past these union confederations hadfairly clear political affiliations. CGIL wasclose to the Communist Party; CISL wascreated by Catholic trade unionists who were also active in the Christian Democratic

Party, while UIL was closest to the SocialistParty. However, changes in the politicalstructure (none of these parties still exist in their previous form) and changes withinthe confederations mean that this politicalcategorisation is no longer appropriate. It isclear, however, that in general CGIL took amore combative approach to the right-winggovernment than the other two.

There are other groupings of trade unionsoutside these dominant confederations. The most important is the UGL, formerlycalled CISNAL. It is close to the right-wingparty. The UGL states that it has two million members.

Overall, trade union representation in Italyhas become increasingly fragmented in thelast 20 to 30 years, particularly in the publicsector and transport. Figures compiled bythe state agency ARAN, for example, showthat in 2008, although union density in thepublic sector was around 50%, with 80% ofunion members in the three majorconfederations, CGIL, CISL and UIL, morethan 700 other unions were also present. Ofthese, more than half (52%) had amembership below 0.1% of total unionmembership, including around 30% whosemembership was below 10% and 11.5%,which had only a single member.


The freedom to strike is provided by Section40 of the Constitution and its exercisecannot constitute a breach of contract. As ageneral principle, striking is a lawful actionprovided it does not prejudice the company’sorganised assets or the company’s continuedactivity. However, a reduction in the volumeof production is considered a normalconsequence of a strike.

There are no specific procedures forconducting a legal strike. However, normallyemployees do give prior notice of the striketo the employer.

Specific rules apply for strikes involvingpublic essential services, such as publichealthcare, public transportation,administration of justice, telecommunications,public education, etc.

Strikes in Italy are most common in theindustrial sector and in public and privatetransportation.

In the past two years there have been manystrikes in the aviation sector, given thesituation of the financial crisis of the formerflag company Alitalia and the subsequent takeover of the private company CAI, withimplementation of thousands of dismissalsand negotiation of a new collective agreement.

In 2010, FIAT, which is the most importantItalian car manufacturer (metal industry sector),also experienced a large number of strikes.


Number of trade unions: There are 3 main unionconfederations in Italy – CGIL,CISL and UIL, plus UGL andhundreds of minor unions.

Trade unionmembership/density: 30-33%

Days lost to industrial action: According to ISTAT (Italian Instituteof Statistics), total time lost toindustrial action is equal to 5,059,000hours in 2008 and 2,600,000 hoursin 2009 (48.6% less).

Fabrizio Morelli Partner [email protected]



SPAINThe role of trade unions inindustrial relations

Employees may be represented by tradeunions (which may create national inter-union organisations as well as national,regional or local trade unions) or employeerepresentatives at a company’s level.Employees are entitled to participate in the company through Personnel Delegates or Works Councils. In collective mattersunions represent all employees employed in an employer’s establishment, regardless of their union membership. In individualissues they only represent the rights andinterests of the individual members askingfor their assistance.


All employees have the right to join tradeunions for the promotion and defence oftheir social and economic rights.

The most important and representative tradeunions (Sindicatos) in Spain are theComisiones Obreras (CCOO) and the UnionGeneral de Trabajadores (UGT), which havethe largest membership among the majorSpanish industries.

Furthermore, those employees who areaffiliated to a union may create unionsections (secciones sindicales) within theircompany or workplace. In companies orworkplace with more than 250 employees,union sections may be represented by aUnion Delegate (Delegado Sindical)who enjoys the same legal protection as Employees’ Delegates or Works Councils’ members.


The most frequent collective labour disputesin Spain are those concerning interpretationor application of rules regardingremuneration and working hours. The rightof employees to strike is guaranteed in theSpanish Constitution. It is an employee’sright, although it must be exercisedcollectively. A strike consists of collectivelyrefraining from work by employees for thepurpose of resolving a collective labourdispute. Retaliation against a strike is illegaland any dismissal will be declared null andvoid. Work to rule strikes, political strikes,solidarity strikes, shifting strikes, strategicstrikes and strikes aimed at amending labourconditions agreed in a CBA that remains inforce are illegal. However, only thecompetent labour court (and not theemployer) is capable of declaring the strikeillegal, and such declaration will take placein most of the cases once the strike hasended. Likewise, a strike that does notfollow the legal requirements (eg notice)will be declared illegal.

Currently Spain is experiencing acomplicated industrial relations climatemotivated by a 20% unemployment rate andgovernment, trade unions and employersorganisations failing to reach an agreementregarding a labour law reform; things couldworsen if the Government decides to giveflexibility to the labour market by amendingtermination provisions/severance paymentrules as advised by most of the national andinternational think tanks. The last 12 monthshas seen strike action in the followingsectors: automobile sector, trains, publictelevision and air traffic controllers.

On 29 September 2010, a general strike bySpanish workers against the labour lawreform and spending cuts caused widespreadtravel chaos. This was the first general strikein Spain in eight years.


Number of trade unions: There are at least 500 trade unionswith workers’ representatives inSpain.The most important tradeunions at national level are CCOOand UGT they qualify as the mostrepresentative trade unions.

Trade unionmembership/density:In 2009, around 17% of the totalworkforce was unionised.

Days lost to industrial action:Between 25,000 (low point) and225,000 (high point) per month in2009-2010.

Pilar Menor Partner [email protected]


www.dlapiper.com 35

UKThe role of trade unions inemployee relations

The areas of activity and influence of tradeunions depend on whether the union isrecognised by the employer, ie whether the union has a negotiating voice with theemployer on behalf of its members for thepurposes of collective bargaining. As aconsequence of recognition, the union willenjoy more extensive rights such as the rightto disclosure of information for the purposesof collective bargaining, the right to beinformed and consulted in relation tocollective redundancies, business transfersand occupational pension schemes, andrights for officials, members and learningrepresentatives to take time off.

Regardless of whether the trade union isrecognised by the employer for collectivebargaining purposes, trade unionrepresentatives can accompany employees at discipline and grievance meetings ifrequested by the employee.

Works Councils or interpretation andconsultation forums have not proved popularin the UK and, consequently, unions are the main representative body for employees’interests. However, their influence hasdeclined substantially since the 1970s astraditional industries such as manufacturinghave declined. Just under half of UKworkers are in a workplace where a union is present but this is largely due to the public sector.


There are around 180 trade unions in theUK, of which 58 are affiliated to the TradesUnion Congress (TUC). Most of the rightsgiven to trade unions under UK labour laware reserved for independent trade unions.Trade unions may opt to become listedorganisations with the Certification Officer,which enables the union to apply for acertificate of independence, which is the firststep towards gaining recognition. Some 163are listed with the Certification Officer and114 have a certificate of independence.

Trade union density levels in the UK havebeen falling steadily since their high point in1979. In 2009, 27.4% of employees wereunion members, 6.7 million in total. From1996 to 2006 density levels fell from 31.4%to 28.3%.

Union density is highest in professionaloccupations (44.9% in 2009) and lowest insales occupations (just 13.1% in 2009).


By ‘days lost’, strike action in the UK inrecent years reached a peak in July 2008,October 2009 and March 2010. In thecalendar year 2009 there were 455,200working days lost due to 98 stoppages (ascompared with 758,900 days lost due to 144stoppages in 2008). A total of 81% ofworking days lost were in the public sector,although the stoppages were evenly splitbetween the public and private sectors.Some 60% of working days lost in 2009were due to redundancy disputes.

Although overall the number of strikes hasfallen since the 1990s, the last few yearshave seen a rising number of high-profileindustrial disputes involving serviceindustries and in particular the transportsector which have had a significant effect on other businesses. The British Airwaysstrike is the most obvious example; a strike by Royal Mail workers causedwidespread disruption in 2009, and in 2010 a national strike by Network Rail staff was narrowly avoided.

There is no right to strike in UK law. A workerwho strikes will be in breach of contract and atrade union will also therefore commit the tortof inducing breach of contract if it organises astrike. Trade unions are granted limitedimmunity from liability for organising strikeaction in certain circumstances, provided thatthe industrial action is taken “in contemplationor furtherance of a trade dispute” and issupported by a properly conducted ballot. Theballot and notification procedures are complexand, increasingly, employers are resorting tolegal action to restrain industrial actionfocusing on technical breaches by the union ofthe complex procedures. Even the larger andmore sophisticated unions have been caughtout by the complexity of the process and thelevel of detailed information required.


Number of trade unions: Approx 180 in total, 163 listed, of which 114 have a certificate of independence.

Trade unionmembership/density: 27.4% in 2009

Days lost to industrial action: 455,200 in 2009

David Bradley Group Head - Employment,Pensions and Benefits - [email protected]


36 Economic of Employee Relations

US The role of trade unions inemployee relations

Under US law, a union becomes the exclusivebargaining representative of employees at aparticular employer either when a majority ofthe employees in the bargaining unit vote infavour of the union, or where the employervoluntarily recognises the union as thebargaining representative of the employees. Aunion only represents a select group ofemployees. The group may either be agreed toby the employer and the union, or may bedetermined by the National Labour RelationsBoard, the federal agency charged withadministering the federal labour law, theNational Labor Relations Act (which applies toalmost all private employers excluding certainvery small employers and the employers in theairline and railroad industries, which aregoverned by the Railway Labor Act).


According to the US Bureau of LaborStatistics, union membership fell by 771,000 to15.3 million in 2009, reflecting the sharpincrease in unemployment due to therecession. In 2009, 7.9 million public sectoremployees belonged to a union, compared with7.4 million union workers in the private sector.The union membership rate for public sectorworkers (37.4%) was substantially higher thanthe rate for private industry workers (7.2%).

With 3.2 million members, the NationalEducation Association remained the largest USunion in 2009. Four other unions also reportedmore than a million members on financialdisclosure reports filed with the US Departmentof Labor. They included the Service EmployeesInternational Union (SEIU) (1.8 million),American Federation of State, County andMunicipal Employees (1.5 million),International Brotherhood of Teamsters (1.4million), and the United Food and CommercialWorkers International Union, (1.3 million).

The majority of national and internationalunions in the US are affiliated with theAmerican Federation of Labor - Congress ofIndustrial Organizations, known as the AFL-CIO. The AFL-CIO serves as labour’s lobbyingrepresentative before the US Congress and statelegislatures, supplementing the lobbying

activities of individual unions. According to anAFL-CIO report, unions affiliated with theAFL- CIO had a combined averagemembership of 8.4 million members over atwo-year period ending 30 June 2009. Changeto Win is a coalition of five former AFL-CIOunions representing about 4.9 million workers.Two unions have dropped out of theorganisation since Change to Win’s formation –UNITE HERE, which rejoined the AFL-CIO,and the United Brotherhood of Carpenters andJoiners of America, which quit Change to Winand has not reaffiliated.

In 2009, New York, with 25.2% union density,ranked number one among all states in thepercentage of employed workers who belong toa union. Hawaii’s 23.5% union density wasclosely followed by Alaska at 22.3%. NorthCarolina ranked last for the tenth time in thepast 12 years with a union density of 3.1%,followed by Arkansas at 4.2%. South Carolinaranked third to last with 4.5% of its wage andsalary workers belonging to a union.


Public policy and sentiment has been movingslightly more in favour of unions – however,the vast majority of the economy is notorganised. In 2009, there were five majorstrikes and lockouts involving 1,000 or moreworkers. The prior low for major workstoppages was 14 in 2003. The five majorwork stoppages in 2009 idled 13,000 workersfor 124,000 lost workdays, both record lows,and a large decrease compared with 2008with 15 stoppages idling 72,000 workers for 1.95 million lost workdays.

Since 2007, the number of major workstoppages and the number of employeesinvolved in major work stoppages havefallen sharply. From 2000-2009, there wereapproximately 20 major work stoppages onaverage per year, compared with 35 per yearfrom 1990-1999 and 83 from 1980-1989.

The largest work stoppage in 2009 in termsof number of days and total workdays idlewas between Bell Helicopter Textron and theUnited Auto Workers Local 218, lasting 27workdays with 2,500 workers accounting for67,500 lost workdays. The largest work

stoppage beginning in 2009 in terms ofnumber of workers was between theSoutheastern Pennsylvania TransportationAuthority and the Transport Workers UnionLocal 234 with 5,500 workers involved inthe work stoppage.


Trade union membership: Unions affiliated with the AFL- CIO had a combined averagemembership of 8.4 millionmembers over a two-year periodending 30 June 2009.

Trade uniondensity/membership: The proportion of wage and salaryworkers who belonged to unionsfell slightly to 12.3% in 2009 from12.4% in 2008.

Days lost to industrial action: In 2009, there were 5 major strikesand lockouts involving 1,000 ormore workers. The 5 major workstoppages in 2009 idled 13,000workers for 124,000 lost workdays.

Phillip Wang Associate [email protected]


www.dlapiper.com 37


DLA Piper UK LLP1 and DLA Piper SCOTLAND LLP2 are part of DLA Piper, an international legal practice, the members ofwhich are separate and distinct legal entities.

For further information please refer to www.dlapiper.com/structure A list of offices can be found at www.dlapiper.com

Regulated by (1) the Solicitors Regulation Authority, (2) the Law Society of Scotland UK switchboard +44 (0)8700 111 111

Copyright © 2010 DLA Piper. All rights reserved. | OCT10 | DLA.PIP.157.10

www.dlapiper.com

DLA Piper’s Employment, Pensions and Benefits group is a market leading global practice with a strong reputation

for delivering solutions-based advice and supporting clients in the day-to-day management of their people legal issues

and risks. It includes over 250 specialist lawyers working globally on a strategic and operational level on both

contentious and non-contentious matters across the private and public sectors. The group advises on all areas of

employment, trade union and employee relations, discrimination and diversity management, pensions, employee

benefits and reward legal issues.

ABOUT DLA

METHODOLOGYThe study was completed by 507 senior business decision makers who were drawn from a database including clients and contacts held byDLA Piper. Fieldwork was undertaken online between 9 September and 8 October 2010.

FOR FURTHER DETAILS ABOUT THIS STUDY, PLEASE CONTACT DLA PIPER’S PRESS OFFICE:

Helen Obi Nicholas BreakspeareT (0)20 7796 6989 T (0)20 7796 [email protected] [email protected]

FOR GENERAL ENQUIRIES REGARDING EMPLOYMENT, PENSIONS OR BENEFITS PLEASE CONTACT:

Ranjit DhillonT (0)120 262 [email protected]


ECONOMICS OF EMPLOYEE RELATIONS - DLA Piperfiles.dlapiper.com/...Piper_Economics_of_Employee_Relations_Final.pdf4 Economics of employee relations The study reveals that respondents’

Documents