Labour Dispute Resolution Systems

in the Asia–Pacific RegionA nine-country comparison

Benedicto Ernesto R. Bitonio Jr.

International Labour Office, Bangkok2008

Contents

1. Introduction 1

2. Labour Dispute Resolution Systems 3Substantive laws 3

International standards as guideposts 4What constitutes labour disputes 9

Country definitions 10 International perspective: Points of comparison 12

3. Labour Dispute Resolution Mechanisms and Procedures 17Modes of labour dispute resolution: A hypothetical model 17Application of the model: Country experiences 18 The model applied to the technical conceptualization of 19

labour disputesThe model and institutional structures 20

4. Governance Issues 26Calculating the costs of labour disputes 26Effects of substantive laws on mechanism design 27Improving access, efficiency and effectiveness 29Voice and participation 31Rule of law 32Accountability 33

5. Convergence and Divergence 35Historical movements 35Coping with change 37

6. Moving Forward 40Some practices to build on 40Reform paths and lessons learned 40 Annex 43Guide questionnaire for evaluating LDR systems

Table: Status of ILO Conventions in the nine countries of the study 7FiguresFigure 1: Strikes and lockouts in selected countries 16

(excluding Viet Nam), 1995–2006

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Figure 2: Hypothetical model: Modes of dispute resolution 18

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1. Introduction

A country’s labour dispute resolution (LDR) system encompasses the policies, laws, processes, procedures, mechanisms and agents involved in the prevention and settlement of conflicts and disputes arising from employment or non-employment. The LDR system is an important part of a country’s larger industrial relations system. It is also part of how the industrial relations system interacts with the political, economic and other systems. These systems complement each other to form a network of governance institutions that help attain social and economic development goals under the rule of law. LDR systems have both justice and development dimensions.

National industrial relations experiences are unique, as national industrial relations systems are not homogenous. They constitute an amalgam of the internal and external influences of national political and legal frameworks and the operations of transnational corporations, international workers’ solidarity movements and international standards governing conditions and rights at work as embodied in the Conventions of the International Labour Organization (ILO) and other instruments. The same holds true for LDR systems.

Comparisons, to be meaningful, must pay equal attention to convergence and diversity. How do countries resolve their labour disputes? What modes of dispute settlement are employed and how is the process of settlement or resolution organized? What are the specific LDR mechanisms in place? In what ways are LDR systems similar and in what ways do they differ? What might account for the similarities and differences? What lessons and insights can be drawn from a comparative analysis of LDR systems?

This paper covers nine selected Asia–Pacific countries: Australia, China, India, Japan, Republic of Korea (Korea), Malaysia, Philippines, Thailand and Viet Nam. The selection is a representative sample of country groupings, based on the phases of development in the Global Competitiveness Index (GCI) 2007–2008. The three main phases are i) the factor-driven phase, ii) the efficiency-driven phase and iii) the innovation-driven phase. (Some countries are situated in between these three main phases.) At least one country in this analysis represents each phase.1 Apart from the GCI groupings, the countries were also selected for size, industrial relations history and their general political and

1 On the basis of the GCI criteria, the countries included in the study are grouped as follows: for the factor-driven phase – China, India, Philippines and Viet Nam; for the efficiency-driven phase – Malaysia; between factor- and efficiency-driven phases – Thailand; for the innovation-driven phase – Australia and Japan; and between efficiency- and innovation-driven phases, Korea.

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economic history.2 For convenience, this paper makes a distinction between developed industrial relations systems (early developers) and developing industrial relations systems (later developers). Early developers are those with industrial relations institutions and structures already in place before the 1990s, when the Cold War ended and the pace of globalization accelerated. Later developers are those that started building their market-oriented industrial relations systems after the 1990s.

Building on existing surveys of national labour laws, the objective of the study is to comparatively assess and evaluate various LDR systems. This analysis looks at how labour disputes are understood, the modes of LDR and the strengths and limitations of different LDR systems. It also identifies general lessons from national experiences and links between LDR systems and the larger political, economic, legal and institutional environment.

The questionnaire used for the study is appended to the paper, for use as a tool for deeper in-country evaluation of LDR systems. By way of limitation, levels of sophistication of available data and systems of performance measurement are not the same. Thus, the paper relies more on qualitative rather than quantitative analysis.

2 Among the factor-driven countries, the Philippines is a medium-sized country with a market economy and a relatively developed industrial relations (industrial relations) system. Viet Nam is a medium-sized country, with a transition economy and a relatively new industrial relations system. India is a big country (with a federal government), a history of democratic socialism moving towards a market-oriented economy, and a relatively developed industrial relations system. China is a big country with a transition economy and a relatively new industrial relations system. The sample of an efficiency-driven country is Malaysia, which is a medium-sized country (with a federal government), a history of a state-guided economy and a relatively developed industrial relations system that has seen little substantive changes in recent years. Between the factor- and efficiency-driven phases is Thailand, which is a medium-sized country with a market economy and a relatively new industrial relations system. Within the innovation-driven phase is Australia, which is a big country but with a labour force smaller than the medium-sized countries, an open economy and recent experience as well as ongoing experiments in labour market reforms, particularly flexibility and LDR mechanisms. Another country in the innovation-driven phase is Japan, which has an open economy but a history of state guidance, a relatively developed industrial relations system and an LDR mechanism currently undergoing reforms in the context of larger reforms in the justice system. Between the efficiency- and innovation-driven phases is the Republic of Korea, which is a medium-sized country with an open economy that has a history of state guidance and a relatively developed industrial relations system operating in a labour market that has experienced wide-ranging and continuing reforms.

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2. Labour Dispute Resolution Systems

An LDR system has three basic components: i) substantive laws, ii) conceptualization of what constitutes labour disputes and iii) the structures, mechanisms and procedures in place to resolve these disputes. This chapter considers the first two elements and Chapter 3 focuses on the third element.

Substantive laws

International standards as guideposts

Substantive labour law determines the boundaries of the LDR system. It defines legal rights, imposes legal obligations and sets up structures for administration, enforcement and adjudication. It also organizes the process of bargaining, sets standards of bargaining behaviour and prescribes legal remedies and consequences in the event of failure of bargaining or undesirable bargaining behaviour. In this regard, the influence of labour law can be analysed from two dimensions – the scope of the substantive law itself and access to the mechanism intended to implement the substantive law.

This section discusses how the nine countries of the study compare in terms of the scope of their labour laws. At its founding in 1919, the ILO began defining the scope of labour law in its first International Labour Conference (ILC), when the agenda included: i) application of the principle of the eight-hour work day or 48-hour work week; ii) preventing or providing against unemployment; iii) women's employment, including maternity protection and benefits, night work and protection against unhealthy work processes; and iv) employment of children, including the minimum age of employment, night work and protection against unhealthy work processes.

While recognizing the diverse conditions of labour among countries, the first ILC participants also agreed on methods and principles for regulating labour conditions that all industrial communities should endeavour to apply, insofar as their special circumstances would permit. These included i) the principle that labour should not be regarded merely as a commodity or article of commerce; ii) right of association for all lawful purposes by the employed as well as by the employers; iii) payment to the employed of a wage adequate to maintain a reasonable standard of life (as understood in their time and country); iv) adoption of

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a weekly rest of at least 24 hours; v) abolition of child labour and the imposition of such limitations on the labour of young persons to allow the continuation of their education and assure their proper physical development; vi) the principle that men and women should receive equal remuneration for work of equal value; vii) a standard set by law in each country regarding the conditions and the equitable economic treatment of all workers lawfully resident therein; viii) setting up an inspectorate to ensure the enforcement of the laws and regulations for the protection of the employed.

Both the preamble to the ILO Constitution and the Declaration of Philadelphia (1944, which expanded on the original preamble3) express the fundamental assumption that “conditions of labour exist involving such injustice, hardship and privation to large numbers of people as to produce unrest so great that the peace and harmony of the world are imperilled.” Improvement of these conditions therefore was an urgent concern of nations and the international community. Matters of priority included regulation of the hours of work, regulation of labour supply, prevention of unemployment, provision of an adequate living wage, protection of workers against sickness, disease and injury arising out of employment, protection of children and women, provision for old age and injury, protection of the interests of workers when employed in countries other than their own, recognition of the principle of equal remuneration for work of equal value, recognition of the principle of freedom of association, the organization of vocational and technical education and other measures.

The Declaration of Philadelphia spoke of world programmes to achieve full employment and to raise standards of living; the employment of workers in the occupations in which they can have the highest satisfaction, realize their full potential as workers and make their greatest contribution to the common well-being; the provision of facilities for training and transfer of labour, including migration for employment and settlement; policies in regard to wages and earnings, hours and other conditions of work calculated to ensure a just share of the fruits of progress to all and a minimum living wage to all employed

3 The 1944 ILC reaffirmed the fundamental principles on which the ILO was based, in particular, that (a) labour is not a commodity; (b) freedom of expression and of association are essential to sustained progress; (c) poverty anywhere constitutes a danger to prosperity everywhere; (d) the war against want requires to be carried on with unrelenting vigour within each nation, and by continuous and concerted international effort in which the representatives of workers and employers, enjoying equal status with those of governments, join with them in free discussion and democratic decision with a view to the promotion of the common welfare. It also reaffirmed the concept in the ILO Constitution that lasting peace can be established only if it is based on social justice and that (a) all human beings, irrespective of race, creed or sex, have the right to pursue both their material well-being and their spiritual development in conditions of freedom and dignity, of economic security and equal opportunity; (b) the attainment of the conditions in which this shall be possible must constitute the central aim of national and international policy; (c) all national and international policies and measures, in particular those of an economic and financial character, should be judged in this light and accepted only in so far as they may be held to promote and not to hinder the achievement of this fundamental objective; (d) it is a responsibility of the ILO to examine and consider all international economic and financial policies and measures in the light of this fundamental objective; (e) in discharging the tasks entrusted to it the ILO, having considered all relevant economic and financial factors, may include in its decisions and recommendations any provisions which it considers appropriate.

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and in need of such protection; the effective recognition of the right of collective bargaining, the cooperation of management and labour in the continuous improvement of productive efficiency and the collaboration of workers and employers in the preparation and application of social and economic measures; the extension of social security measures to provide a basic income to all in need of such protection and comprehensive medical care; adequate protection for the life and health of workers in all occupations; provision for child welfare and maternity protection; the provision of adequate nutrition, housing and facilities for recreation and culture; and the assurance of equality of educational and vocational opportunity.

The Declaration of Philadelphia was followed by the United Nations Declaration of Human Rights in 1948. Article 23 specifies four rights recognized as inherent to every human being: i) the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment; ii) without any discrimination, the right to equal pay for equal work; iii) the right to just and favourable remuneration ensuring for oneself and one’s family an existence worthy of human dignity and supplemented, if necessary, by other means of social protection; and iv) the right to form and to join trade unions for the protection of one’s interests. Article 24 covers working conditions in which everyone has the right to rest and leisure, including reasonable limitation of working hours and periodic holidays with pay. Also echoing ILO principles and the UN Human Rights Declaration is the UN Covenant on Economic, Social and Cultural Rights (CESR); its Part III includes the right to work,4 the right to just and favourable conditions of work,5 the right of everyone to form trade unions of their own choice, including the right to strike,6 the right to social security,7 and maternity and child labour protection.8

4Under Article 6, which includes the right of everyone to the opportunity to gain a living by work that is freely chosen or accepted, and will take appropriate steps to safeguard this right. 5 Article 7, which includes the right of everyone to the enjoyment of just and favourable conditions of work which ensure, in particular: a) Remuneration that provides all workers, as a minimum: i) fair wages and equal remuneration for work of equal value without distinction of any kind, in particular women being guaranteed conditions of work not inferior to those enjoyed by men, with equal pay for equal work; ii) a decent living for themselves and their families in accordance with the provisions of the present Covenant; b) Safe and healthy working conditions; c) Equal opportunity for everyone to be promoted in their employment to an appropriate higher level, subject to no considerations other than those of seniority and competence; d ) Rest, leisure and reasonable limitation of working hours and periodic holidays with pay, as well as remuneration for public holidays.6Article 8, which affirms a) The right of everyone to form trade unions and join the trade union of their choice, subject only to the rules of the organization concerned, for the promotion and protection of economic and social interests. No restrictions may be placed on the exercise of this right other than those prescribed by law and which are necessary in a democratic society in the interests of national security or public order or for the protection of the rights and freedoms of others; b) The right of trade unions to establish national federations or confederations and the right of the latter to form or join international trade union organizations; c) The right of trade unions to function freely subject to no limitations other than those prescribed by law and which are necessary in a democratic society in the interests of national security or public order or for the protection of the rights and freedoms of others; d) The right to strike, provided that it is exercised in conformity with the laws of the particular country. 7Article 9

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As stated in its Constitution, the ILO’s strategic role is to act as the social conscience in the world of work. In more specific terms, the ILO performs this role through its standards-setting functions by adopting Conventions and Recommendations. Although it is acknowledged that member States have varying capacities in fully realizing them, the Conventions and Recommendations are deemed to represent the universal aspiration of all countries. Together with the UN Declaration of Human Rights and the CESR, ILO instruments have created notions of legal rights that collectively form the framework of an international labour code. Some of the legal rights are considered basic human rights, while others fall into the category of social and economic rights. ILO member States can use the international framework as a guide in formulating their national labour laws and codes.

The nine countries discussed in this paper are all members of the ILO and generally adhere to the international doctrine of incorporation, which specifies that the principles of international law become part of each nation’s laws. The doctrine of incorporation does not automatically make ILO instruments a “hard” law in the sense that failure to comply would give rise to a legal sanction. As it is, a State has to ratify an ILO Convention before it can be subjected to the supervisory authority of the member States. Further, it has to enact corresponding national legislation in order to make the Convention effective within its national jurisdiction.

When the ILO instruments specified legal rights in the form of human, social and economic rights, there emerged another special classification called Fundamental Principles and Rights at Work, also known as core labour standards. There are eight such core standards, two each on organizational rights (ILO Convention No. 87 on freedom of association and protection of the right to organize and Convention No. 98 on the right to organize and collective bargaining), forced labour (Convention No. 29 on prison labour and Convention No. 105 on forced labour), non-discrimination (Convention No. 100 on equal remuneration and Convention No. 111 on discrimination in employment and occupation), and child labour (Convention No. 138 on the minimum age for admission to employment and Convention No. 182 on elimination of the worst forms of child labour). The following table shows the ratification status of

8Article 10, which recognizes that: a) The widest possible protection and assistance should be accorded to the family, which is the natural and fundamental group unit of society, particularly for its establishment and while it is responsible for the care and education of dependent children. Marriage must be entered into with the free consent of the intending spouses. b) Special protection should be accorded to mothers during a reasonable period before and after childbirth. During such period, working mothers should be accorded paid leave or leave with adequate social security benefits. c) Special measures of protection and assistance should be taken on behalf of all children and young persons, without any discrimination for reasons of parentage or other conditions. Children and young persons should be protected from economic and social exploitation. Their employment in work harmful to their morals or health or dangerous to life or likely to hamper their normal development should be punishable by law. States should also set age limits, below which the paid employment of child labour should be prohibited and punishable by law.

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these Conventions, including the year they were ratified, among the nine countries.

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Status of ILO Conventions in the nine countries of the study

C 87 C 98 C 29 C 105 C 100 C 111 C 138 C 182Australia Yes

(1973)Yes (1973)

Yes(1960)

Yes (1960)

Yes (1974)

Yes (1973)

No No

China No No No No Yes (1990)

Yes (2006)

Yes (1999)

Yes (2002)

India No No Yes (1954)

Yes (2000)

Yes (1958)

Yes (1960)

No No

Japan Yes (1965)

Yes (1953)

Yes (1932)

No Yes (1967)

No Yes (2000)

Yes (2001)

Republic of Korea

No No No No Yes (1997)

Yes (1998)

Yes (1999)

Yes (2001)

Malaysia No Yes (1961)

Yes (1957)

Den.9

(1990)Yes (1997)

No Yes (1997)

Yes (2000)

Philippines

Yes (1953)

Yes (1953)

Yes (2005)

Yes (1960)

Yes (1953)

Yes (1960)

Yes (1998)

Yes (2000)

Thailand No No Yes (1969)

Yes (1969)

Yes (1999)

No Yes (2004)

Yes (2001)

Viet Nam No No Yes (2007)

No Yes (1997)

Yes (1997)

Yes (2003)

Yes (2000)

In all, there have been 48 ratifications, including Malaysia’s ratification of Convention No. 105 – which it later denounced. Twenty-six ratifications came in or after 1990. All nine countries have ratified Convention No. 100. But only the Philippines has ratified all the eight Core Conventions. Further, only Australia, Japan and the Philippines have ratified the Conventions on freedom of association and collective bargaining, while Malaysia has ratified only the Convention on collective bargaining. There has been no ratification of Conventions No. 87 or No. 98 after Australia ratified both in 1973. This point is noteworthy because industrial relations systems have conventionally cast labour disputes mostly as demands for the effective exercise of the freedom of association and collective bargaining. It is also notable that the wave of ratifications in China, Korea, Thailand and Viet Nam happened after watershed events affected the global order – the collapse of communism, the acceleration of globalization through trade and the Asian financial crisis that began in 1997 – all of which led to profound and wide-ranging political and economic restructuring in those four countries.

Constitutions, national labour laws and LDR systemsRatification of ILO Conventions and adherence to other related international instruments is a State’s expression of commitment to effectively put international standards in practice. But absence of ratification does not negate this commitment. National constitutions commonly speak of labour protection in alignment with the fundamental principles and rights at work embodied in the core conventions.

9 Malaysia ratified the Convention in 1958 and denounced it in 1990.

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Specifically, equality of opportunity and non-discrimination, freedom of association and prohibition against forced labour are incorporated in the Constitution of every country included in the study. Indeed, labour protection is expressed or affirmed in a variety of ways, for example:

In India, the federal Constitution mentions the fundamental rights of equality, which includes non-discrimination in employment and a special provision on public employment (Articles 15 and 16), prohibition against exploitation particularly against human trafficking, forced labour and the employment of children in industries (Articles 33 and 34). Under the Constitution’s Directive Principles (Part IV), a general provision on the promotion of social order and welfare is included, as are specific provisions on the right to work, education and assistance (Article 41), provision of just and humane conditions of work (Article 42), a living wage (Article 43) and workers’ participation in the management of industries (Article 43-a).

In Korea, the Constitution mandates the legislature to make laws governing working conditions so as to guarantee human dignity (Article 32). As a norm, work is a human right and obligation (Article 32). The workers' right to freedom of association, collective bargaining and collective action are also recognized (Article 33). There is also special protection for working children and working women, including prevention of unjustified discrimination against women (Article 32).

In Malaysia’s Constitution, the principle of non-discrimination is generally recognized, subject only to exceptions authorized in the Constitution (Article 8). For example, any provision or practice restricting office or employment connected with the affairs of any religion or an institution managed by a group professing any religion to persons professing that religion, is not considered discrimination (Article 8, 5.b). On the other hand, Article 10.1.c recognizes the right of all citizens to form associations, but the Parliament may impose such restrictions as it deems necessary or expedient in the interest of the security of the federation or any part thereof, public order or morality (Article 8. 2.c and 3).

In the Philippines, labour is considered a primary social and economic force whose welfare shall be promoted and protected (Article II, Sec. 18). The right of workers to productive gain-sharing is recognized in the same vein as the right of employers to profits, expansion and growth (Article XIX, Sec. 3).

These types of constitutional provisions indicate paramount challenges for the State in relation to workers. These include: i) the creation of opportunity and promotion of welfare for every citizen, especially workers; ii) the need for continuing economic and social redistribution towards more equality and equity; iii) a recognition of the ethic of the greater good; and iv) an encompassing role for the State, especially in

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coordinating desired outcomes for workers. It is in this context, along with the advantages and limitations inherent in each country, that national labour laws are designed.

Until the early 1990s, it was convenient to classify countries as having “thick” or “thin” labour laws. In the first classification were the early developers, which had either labour codes or a comprehensive set of labour laws that covered most – if not all – of what is envisioned in the ILO Constitution and in the Declaration of Philadelphia.

There also were countries that had a balance of laws for protecting individual rights and organizational rights (Australia and Japan) and countries that were highly protective of individual workers’ rights but restricted organizational rights (such as Korea before democratization and the Philippines during its authoritarian period). In the 1990s and onward, all of this changed. Countries that used to have “thin” labour laws, particularly China and Viet Nam,10 started adopting their own labour codes and laws. On the other hand, the early developers experienced pressures to make their own laws thinner, such as more flexible and market oriented. The objective was to make labour markets more competitive.

By the turn of the millennium, countries (particularly the nine included in this study) attained more or less parity in terms of the subject matters covered by their labour laws. Thus, all nine countries have laws on trade unionism and collective bargaining, employment services, vocational training, working conditions (including working hours and wages, non-discrimination, inspection, social insurance, safety and health), protection for women (including maternity protection) and prohibitions against child labour.

Where they vary is in the motivation behind the enactments as well as in their implementation. A critical consideration between the existence of a law and its effective implementation is the existence of a venue where rights may be asserted and enforced. Herein lies the value of an efficient and properly functioning LDR system.

What constitutes labour disputes

Generally, a conflict is a situation in which the rights or interests of one or more persons or groups are in opposition or perceived to be in opposition to the rights or interests of some other persons or groups. Disputes, including labour disputes, are overt manifestations of conflict. Labour disputes are generally unresolved demands for compliance or enforcement of legal rights or for the redistribution of economic resources through bargaining. For the countries under this study, the term “labour dispute” is generally interchangeable with “industrial dispute” and “trade dispute”.

10 Compared to China and Viet Nam, Thailand has a relatively thin set of labour laws.

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This section first examines the country-specific definitions and nuances of labour disputes and then the similarities and differences in conceptualizing them.

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Country definitions

In Australia, the definition of an industrial dispute can be inferred from the definition of “industrial action”, which means any of the following, according to the Workplace Relations Act (1996): a) the performance of work by an employee in a manner different from that in which it is customarily performed or the adoption of a practice in relation to work by an employee, the result of which is a restriction or limitation on, or a delay in, the performance of the work;  b) a ban, limitation or restriction on the performance of work by an employee or on the acceptance of or offering for work by an employee; c) a failure or refusal by employees to attend for work or a failure or refusal to perform any work at all by employees who attend for work; and d) the lockout of employees from their employment by the employer. This does not include action by employees that is authorized or agreed to by the employer or vice versa. Industrial action can still apply even if an employee’s questionable conduct relates to only part of the required duties or to a course of conduct consisting of a series of industrial actions.

A type of dispute that has a specific definition in Australia is a “demarcation dispute”, which includes: a) a dispute arising between two or more organizations or within an organization as to the rights, status or functions of members in relation to the employment of those members; or b) a dispute arising between employers and employees or between members of different organizations as to the demarcation of functions of employees or classes of employees; or c) a dispute about the representation of the industrial interests of employees by an organization of employees.

In China, according to the Regulations on the Settlement of Labour Disputes in Enterprises (1993), labour disputes pertain to all those arising out of dismissal, discharge or a lay-off of workers and employees and the resignation of workers and employees; those concerning implementation of relevant state policies on wages, insurance, welfare, training and labour protection; those regarding the execution of a labour contract; and those that other laws and regulations stipulate should be handled with reference to the regulations on labour disputes. The regulations also require that the enterprise and the workers and employees involved are the parties to a labour dispute.

In India, according to the Industrial Disputes Act (1947), industrial dispute means any disagreement or difference between employers and employers, between employers and workers, or between workers and workers, which is connected with the employment or non-employment or the terms of employment or with the conditions of labour, of any person. Where any employer discharges, dismisses, retrenches or otherwise terminates the services of an individual worker, any dispute or difference between that worker and the employer connected with or arising out of such discharge, dismissal, retrenchment or termination is

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treated as an industrial dispute, notwithstanding that no other worker or any union of workers is a party to the dispute.

In Japan, according to the Labour Relations Adjustment Law (1946 and amended in 1988), a labour dispute means a disagreement over claims regarding labour relations, arising between the parties concerned with labour relations, resulting in either acts of dispute or the threat of them. An act of dispute means a strike, a slowdown, a lockout or any other act that hampers the normal course of work of an enterprise by the parties concerned, with the object of attaining their respective claims. The purpose of the law is to promote, in conjunction with the Trade Union Law, the fair adjustment of labour relations and to prevent or settle labour disputes and thus contribute to industrial peace and economic development. Parties concerned are responsible for special efforts to mutually promote proper and fair labour relations, to fix by "collective agreement matters concerning the establishment and operation of regularized organs in order to promote the constant adjustment of labour relations, and, in the event labour disputes have occurred, to settle them independently in good faith”.

Reference to “labour relations” in the context of the law projects a narrow notion of labour disputes to matters between employers and unions. But more recent developments in the laws have focused on individual disputes, defined as those between individual workers and employers, including disputes between individual job applicants and employers with respect to matters concerning the recruitment and employment of workers and working conditions and other matters concerning labour relationships (Act on Promoting the Resolution of Individual Labour Disputes, 2001).

In Korea, according to the Trade Union and Labour Relations Adjustment Act (1997), an industrial dispute is any controversy or difference arising from disagreement between the trade union and employer or employers' association, referred to as "parties to labour relations", concerning the determination of terms and conditions of employment, such as wages, working hours, welfare, dismissal or other treatment. In this case, "disagreement" is referred to as situations in which no agreement is likely to be reached by the parties even though they continue to attempt to make an agreement.

On the other hand, "industrial action" means actions or counter-actions that obstruct the normal operation of a business, such as strikes, sabotage, lockouts or other activities through which the parties to labour relations intend to achieve their claims. The purpose of the law is to maintain and improve the working conditions and to improve the economic and social status of workers by securing their right of association, collective bargaining and collective action as allowed by the Constitution and to contribute to industrial peace and to the development of the national economy by preventing and resolving industrial disputes through the fair adjustment of labour relations.

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In Malaysia, according to the Industrial Relations Act (1967), a trade dispute means any dispute between an employer and workers that is connected with the employment or non-employment or the terms of employment or the conditions of work of any such worker. A worker is then defined as any person, including an apprentice, under a contract of employment to work for hire or reward. For purposes of any proceedings in relation to a trade dispute, a worker refers to any person who has been dismissed, discharged or retrenched in connection with or as a consequence of that dispute or whose dismissal or discharge led to that dispute.

In the Philippines, according to the Labour Code, a labour dispute is any controversy or matter concerning terms and conditions of employment or the association or representation of persons in negotiating, fixing and maintaining, changing or arranging the terms and conditions of employment, regardless of whether the disputing parties stand in the proximate relation of employer and employee.

In Viet Nam, according to the Vietnamese Labour Code (1994 but amended in 2002 and taking effect in 2003), a labour dispute is about rights and benefits relating to employment, wages, incomes and other labour conditions; the performance of the labour contract and the collective agreement; and the issues that arise during a training or apprenticeship period. It includes an individual labour dispute between an employee and an employer and a collective labour dispute between a labour collective and an employer.

International perspective: Points of comparison

Technically, a labour dispute is a disagreement over a particular issue or group of issues in which there is conflict between workers and employers, or it can be a grievance expressed by workers and employers; with both there can be workers or employers supporting other workers and employers in their demands or grievances (Resolution of the 15th International Conference of Labour Statisticians, 1993; see also Labour Statistics Convention, 1985 (No. 160) and Labour Statistics Recommendation, 1985 (No. 170)). Under this definition, strike11 or lockout12 are the two actions directly resulting from a labour dispute. In addition, “other action due to labour disputes” refers to action taken by one or more group of workers or by one or more employers with the intent to enforce or resist demands or express grievances. It also refers to the support of workers or employers in their demands or grievances in which there is no cessation of work.

11 A strike is a temporary work stoppage by one or more groups of workers with the intent to enforce or resist demands or express grievances or the support of other workers in their demands or grievances. 12 A lockout is a total or partial temporary closure of one or more places of employment or the hindering of the normal work activities of employees with the intent to enforce or resist demands or express grievances or to support other employees in their demands for grievances.

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This technical conceptualization of a labour dispute has three components: i) the parties to the dispute; ii) the subject matter of the dispute; and iii) the effects of the dispute.

Parties to a labour disputeThe labour law in all nine countries share the conceptualization of a labour dispute as one that involves a worker or a group of workers against an employer or a group of employers. The disputing parties must stand in the actual or proximate relationship of an employer and employee. Thus, a labour dispute occurs when the employer-employee relationship still actually exists, such as when a worker complains of poor working conditions. It can also occur proximate to an actual employer-employee relationship, such as when a worker, having been dismissed from employment and therefore no longer actually working, initiates a claim to question the validity of his/her dismissal.

All countries in the study recognize a proximate employment relationship after the actual fact of employment. But some countries also recognize a proximate relationship before employment; for example, an issue arising from recruitment is classified as an individual labour dispute in Japan. And in Viet Nam, an issue that arises during the training or apprenticeship period is considered a labour dispute.

Parties to a labour dispute may be individual or collective. Interestingly, the early developers built their industrial relations and LDR systems around collective disputes. In the first Labour Statistics Conference, the definition of labour disputes focused on their collective nature in a unionized context. In its barest sense, “collective” necessarily involves a group of workers, whether members of a union or not, in dispute with an employer or with a group of employers. Action by a worker or employer in resisting or enforcing demands or expressing grievances is not per se classified as a labour dispute; it is merely classified as other action arising from a labour dispute, as narrowly defined. This group-level orientation of parties to labour disputes seems to have been given more prominence in the international discourse than individual labour disputes. This also probably explains why the only meta data consistently compiled for international comparison are strikes and lockouts and their cumulative effects in terms of lost workdays.

In practice, the term “collective” in reference to labour disputes has its own distinct nuances. A relatively narrow meaning is indicated in Korea and Japan (where the phrase “parties involved in labour relations” appears in the law) and in the Philippines as well, where the term is descriptive of group-level matters concerning the exercise of the freedom of association and the right to self-organization or collective bargaining, including strikes, lockouts and matters of representation or recognition.

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What this also implies is that for a group of workers to be a party to a labour dispute, it must have a recognized legal standing as a legitimate union. In the Philippines, for example, complaints against an employer from a group of workers who do not belong to a registered union, such as unpaid wages, even if filed simultaneously by them, is not classified as a collective dispute but as an individual dispute involving several claimants. In Thailand, this would be treated as a collective dispute regardless of union membership. In Thailand, China and Viet Nam, “collective” is used in a loose sense, inferred from the notion of collective agreements, which are agreements covering a group of workers but are not always the result of collective bargaining undertaken with the participation of a union, as contemplated in ILO Conventions No. 87 and No. 98.

In terms of structuring the relationship of the parties, a labour dispute is essentially configured vertically. Thus, a labour dispute involves the employer and workers where the employer stands in a relationship of control and subordination over the worker or employee or a group of workers or employees. This structuring is a necessary derivative of the class and power relations under industrialism. Employers, represented by managers, constitute a class whose interests are distinct from, and often in opposition to, those of workers and their unions. All nine countries of the study share this vertical dimension. But the structuring of labour disputes in China, Malaysia, Thailand and Viet Nam appear to be built exclusively on it.

There is, however, a horizontal dimension to a labour dispute as well. Disputes may arise among workers, either individually or in groups. Intra-union matters, inter-union matters such as representation, recognition or demarcation disputes, matters among union members and grievances among individual workers would also be classified as labour disputes. This dimension has not been given international prominence in terms of statistical data, although some national laws actually refer to it. India’s labour law includes matters “between workmen and workmen”; the Philippine law includes matters of representation and recognition; Australia includes demarcation disputes in its conceptualization of labour disputes.

The policy prominence given to representation, recognition or demarcation issues may also be a function of the union and collective bargaining structure. It is a core issue, for instance, in the Philippines, which follows a pluralist union-exclusive bargaining representation model. It is also an issue in India, which follows a pluralist union-non-exclusive bargaining representation model. It is increasingly an issue in Korea where demand for the recognition of multiple unions is central to ongoing public policy debates. But the horizontal dimension is not apparent in China where unionism is vertically integrated, following what its labour laws term as “democratic centralism”. It is also not apparent in Viet Nam, where representation of labour collectives appears not to include the idea of democratic contestation.

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Subject matter of a labour disputeLabour disputes are unresolved demands for compliance or enforcement of existing legal rights or demands for redistribution of economic resources through bargaining. The academic literature typically refers to the first type as “rights disputes” and to the second type as “interest disputes”.

The subject matter of labour disputes in Malaysia is of the first type: A labour dispute relates to the terms of the applicable law or contract or the conditions of work of the worker. It does not mention trade union or collective bargaining issues. The Philippines’ definition is explicitly broader: Any controversy arising from terms and conditions of employment is a rights dispute, whether it involves individuals or groups. Controversies arising from negotiating, fixing and maintaining, changing or arranging terms and conditions of employment would be an interest dispute. In turn, interest disputes have a group-level or collective orientation.

The subject matter of rights disputes is naturally determined by the scope and extent of rights recognized by substantive laws and contracts. Application and implementation of company policy and existing collective contracts can give rise to rights disputes, as does non-compliance with standards. On interest disputes, some national labour laws are open-ended and do not specify the subject matter of collective bargaining (such as in the Philippines).

Theoretically, agreements are subject only to general limitations, such as reasonableness, compliance with existing laws and regulations, and consistency with public policy. Others specify what must be negotiated (such as China). Still others specify allowable awards in case a labour dispute occurs, leaving all other matters to collective bargaining at the enterprise level (such as Australia). Those with coordinated bargaining systems, like Japan and Korea, complement the area of bargaining, defined by statute with guidelines from organizations of unions and employers. In Australia, which has a centralized bargaining system, the subject matter of an award may be extended under certain circumstances to groups of workers not originally covered by the award.

The distinction between rights and interest disputes is material in two important respects: First, in rights disputes like those arising from law or from minimum labour standards, the primary LDR mechanism is the inspectorate system. Because the issue in dispute is compliance with state regulations, the State has as much stake in the case as the individual worker. In this context, the State is theoretically also a party to the dispute. Second, the process involved in the resolution of rights disputes is either enforcement or adjudication. This is done through a process analogous or similar to the exercise of judicial power, such as in rights arbitration. In “interest disputes”, the primary LDR approaches

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are negotiation, conciliation, mediation and interest arbitration. The process involved is analogous to law-making because it leads to the creation of legal rights through new terms or conditions of employment.

But the distinction between rights and interests disputes is not always straightforward. For statistical purposes, the subject matter of disputes may also be classified into disputes arising from collective bargaining and those not arising from collective bargaining.13 The first category would include problems concerning wages, bonuses and other compensation (such as increases, methods of calculation and conditions of payment); problems concerning working conditions (such as reduction or changes in hours of work, the organization of work, and health and safety in the workplace); employment problems (such as personnel policies, movement of staff, job evaluations, reclassification of staff, closure of establishment, redundancies and lay-offs); and trade union issues.

The same issues also can be addressed in a non-collective bargaining context. But in this case, the subject matter of labour disputes also includes other problems relating to the workplace (such as discrimination, harassment, duress and unfair labour practices), sympathy or solidarity (such as strong support for a group of workers on the part of other workers although they have no direct interest in the particular labour dispute); and protest, such as the expression of grievance with respect to a government policy or decision affecting conditions of work.

Effects of a labour disputeThe primary effects of a labour dispute are cessation of work (as in strikes or lockouts) or disruption without cessation of work. There are also secondary effects, such as when a labour dispute action prevents workers from working or disrupts their work or affects other groups of self-employed workers who are prevented from working or whose work is disrupted (Resolution of the 15th International Conference of Statisticians).

Only eight countries had meta data available on this issue and it only covered the number of strikes and lockouts. Over a 15-year period, the statistics show the following:

Figure 1: Strikes and lockouts in selected countries (excluding Viet Nam), 1995–2006

13 Paragraph 24, Resolution of the 15th Conference of Labour Statisticians

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19

0

200

400

600

800

1,000

1,200

1,400

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

No. of strikes/lockouts

Australia China India Japan Korea Malaysia Philippines Thailand

3. Design of Labour Dispute Resolution Mechanisms

This chapter presents comparisons of how the LDR mechanisms in the nine countries are designed or structured. A hypothetical model of LDR is presented as a framework for analysis. From this proceeds a discussion of the various modes of LDR, the role of the parties and of neutral third parties, and the conditions under which state or third-party intervention may be invoked.

Modes of dispute resolution: A hypothetical model

The modes of LDR that are practised in all nine countries are dialogue and negotiation (with grievance handling in some countries), conciliation and mediation, arbitration and court adjudication.

In resolving or settling labour disputes, the sequential principles advocated by the ILO are:

Prevention is better than resolution. If preventive measures fail, the parties themselves should resolve

the problem. If parties cannot resolve the problem, neutral third-party

intervention may be invoked, but it should involve the parties as much as possible.

The first principle envisions a situation in which there is no dispute. The second places on the parties the primary responsibility of resolving disputes as and when they arise, primarily through negotiation and consensus. The third principle envisions the entry of a neutral, impartial and independent third party who can help facilitate a resolution through conciliation or mediation, leading to a consensus. If this is not successful, the same third party or another third party, using legal rules, should resolve the dispute with binding effect. If the dispute is not resolved in spite of these sequential principles, the use of power either by the parties (such as a strike or lockout) or by state authorities is then the mode of resolution. In other words, cooperative or consensual approaches are to be preferred and should first be exhausted before employing legal or non-cooperative approaches. Figure 2 presents a hypothetical model of LDR that combines the common modes and the sequential principles of LDR.

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Figure 2: Hypothetical model: Modes of dispute resolution

Application of the model: Country experiences

The objective of the hypothetical model is to put closure on a labour dispute at the earliest stage or lowest level possible through cooperative means. This is the policy preference in all nine countries of the study, at least as expressed or implied from their labour laws. As a corollary to this, the primary or joint responsibility for settling disputes rests on the parties. This preference is true whether the industrial relations system of the country developed early or at a relatively later stage.

Among the early developers, Japan articulates its policy by striving to promote the fair adjustment of labour relations and prevent or settle labour disputes and thereby contribute to the maintenance of industrial peace and economic development. Parties concerned with labour relations can make special efforts mutually to promote proper and fair labour relations, to fix by collective agreement matters concerning the establishment and operation of regularized organs in order to promote the constant adjustment of labour relations and, in the event labour disputes have occurred, to settle them independently in good faith (Labour Relations Adjustment Law).

The Philippine Constitution states a preference for voluntary and consensual modes of settling labour disputes, including conciliation, mediation and voluntary arbitration. The Labour Code says that the State is to promote and emphasize the primacy of free collective bargaining and negotiations, including voluntary arbitration,

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Dialogue/negotiation

Conciliation/mediation

Settlement

Arbitration

Settlement

Courts

Resolution

Finalresolution

DISPUTE

mediation and conciliation, as modes of settling labour or industrial disputes.

Among the later developers, China specifies in its Labour Code that the settlement of labour disputes must observe the following principles: 1) emphasis is given to mediation and prompt handling; 2) labour disputes shall be dealt with in accordance with the law on a fact-finding basis; and 3) the parties involved are equal before applicable laws.

In Viet Nam’s Labour Code, labour disputes are settled on the following principles: 1) direct negotiation and arrangement between two disputing parties at the place where the dispute arises; 2) reconciliation and arbitration on the basis of respect for the rights and interests of both parties, respect for the common interests of society and observance of the law; 3) openness, objectivity, timeliness, expeditiousness and conformity with the law; and 4) participation of the representatives of the trade union and the labour user in the process of settling the dispute.

The model applied to the technical conceptualization of labour disputes

Beyond this shared policy preference for early negotiated settlement, it is interesting to see the extent to which the sequence in the hypothetical model is actually followed. National experiences vary on how the model is made operational. Recalling the technical conceptualization of a labour dispute presented previously, distinctions can again be drawn, based on the parties to the dispute, the subject matter of the dispute and the effects of the dispute.

With respect to parties, the model is applicable across countries on group-level or collective disputes. In relation to strikes and lockouts, a common approach is to recognize the necessity for negotiation, conciliation and mediation in statutes and regulations. Resort to these modes is a precondition to arbitration. For individual disputes, dialogue, negotiation, conciliation or mediation does not always happen. An individual claimant may have a statutory right to invoke mediation prior to arbitration (such as Malaysia); or a claimant may go straight to arbitration, with conciliation or mediation internalized into the arbitration procedure (such as the Philippines); or a separate procedure for individual disputes may be prescribed (for example, Japan). The model also generally does not apply to horizontal disputes.

With respect to subject matter, the model is applicable across countries on issues arising from collective agreements. This is regardless of whether or not a country follows the standards on freedom of association and protection and promotion of the right to organize and to bargain collectively under Conventions No. 87 and No. 98. However, its application to enforcement of labour standards or rights disputes is not automatic. In the nine countries in the study, inspection rather than

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dispute resolution is the main mode of ensuring compliance. Thus, the model can be used only to complement enforcement procedures.

With respect to the effects of labour disputes, the nine countries explicitly or implicitly assume the importance of industrial peace in their overall development. Therefore, a fundamental objective of an LDR system is to promote industrial peace or, stated differently, minimize the disruptive effects of labour disputes on public welfare. That is why early developers like India, Japan, Malaysia and the Philippines, and later developers like China and Viet Nam, recognize a special classification of labour disputes. This special class is variously referred to as disputes in public welfare undertakings, disputes in emergency cases or disputes involving the national or public interest. Determining which type of dispute belongs to this class can be made by statute or by an authority identified by statute (such as the minister of labour).

This classification is analogous to “essential services”, as defined by the ILO. Under this special classification, early state intervention is an exception to the policy preference for settlement by the parties. State intervention also results in restrictions on industrial actions, such as the right to strike or lock out.14 Likewise, mandatory and expedited procedures for conciliation and mediation may be imposed, including submission of the dispute to compulsory arbitration.15

The model and institutional structures

LDR mechanisms are institutionalized through law. All the countries included in the study provide for an administrative mechanism for LDR. This means creating a specific state institution with the mandate and resources to promote industrial peace and resolve disputes. As a state institution, an LDR mechanism may be an integral part of the national authority in charge of labour (for example, Malaysia’s Department of Industrial Relations, which performs mediation functions), an autonomous agency attached or aligned to the ministry in charge of labour (for example, the Philippine National Labour Relations Commission, which performs arbitration functions) or an independent agency (for example, the Australian Industrial Relations Council).

Conciliation and mediation structures In each of the nine countries there is essentially a single LDR system. But each system has several LDR mechanisms that are organized as separate organizational units and with various degrees of de-concentration or decentralization. With respect to conciliation and mediation, Japan and Viet Nam present contrasting examples:

14 The compatibility of national labour laws restricting the right to strike or lock out in national or public interest or emergency cases has been a long-standing issue in the ILO’s Committee on Freedom of Association and Committee of Experts. The views expressed in this paper are not intended to suggest a formula for resolving these issues. 15 Australia and the Korea have ongoing policy debates on changing the role and mandate of arbitration.

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In Viet Nam, according to its Labour Code, it is mandatory for enterprises with ten or more workers to establish a labour conciliation council composed of an equal number of representatives of workers and of the employer. This council is decentralized down to the enterprise level. The council is competent to settle individual and collective labour disputes. Its authority may be invoked when one of the parties to a dispute refuses to negotiate or both parties have negotiated but have failed to reach agreement and one or both of them lodge a request for labour dispute settlement. If there is no labour conciliation council in the enterprise, only then will a neutral third party intervene to settle the dispute. This neutral third party is the labour conciliator of the local labour office and is a public servant. Like a mediator, the council or the conciliator can make proposals to the parties. Once these are accepted, the parties are bound to implement the agreement. If conciliation fails, each party has the right to request the People’s Court at the district level to settle the dispute. There are also two kinds of disputes that may be directly submitted to the People’s Court without going through the procedure of conciliation: i) disputes concerning dismissal or the unilateral termination of a labour contract and ii) disputes concerning workers’ material liability to compensation for damages.

The labour conciliation council in Viet Nam is different from the labour arbitration council. The latter is a provincial mechanism composed of full-time and part-time members who are representatives of the labour office, trade unions and employers as well as a number of authoritative lawyers, administrators and social workers. It is mandated to settle collective labour disputes, whether or not they involve rights or interests or labour disputes that were not settled by the labour conciliation council and one or both of the parties have requested the labour arbitration council to settle the dispute. The arbitration council can make proposals that, when accepted by the parties, constitute a binding agreement. If there is no agreement, the council must issue an award that, in the absence of timely objection, becomes automatically enforceable upon notification of the parties. If there is an objection, the workers or the employer have the right to request the People’s Court to settle the dispute. This court is empowered to make the final adjudication on collective labour disputes.

In Japan, according to its Labour Relations Adjustment Law, the conciliators are not drawn from the enterprise, but nor are they public servants. The Labour Relations Commission maintains a list of conciliators who are private persons with knowledge and experience and who are capable of rendering assistance for the settlement of labour disputes. Upon request of one or both of the parties to the dispute or upon his/her own initiative, the chairman of the Labour Relations Commission nominates one or more conciliators. The conciliators act as intermediaries between the parties, ascertain their

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respective points of view and assist in arriving at a settlement. In the event a conciliator has no prospect of achieving a settlement, he/she withdraws and reports the salient facts of the case to the Labour Relations Commission. While not a full-time public servant, a conciliator may receive compensation for expenses necessary for the performance of his/her duties, as fixed by Cabinet Order.

Although coordinated by the same agency (the Labour Relations Commission), conciliation and mediation are distinct modes of LDR in Japan. Mediation of a labour dispute by the Labour Relations Commission is carried out by a tripartite mediation committee consisting of an equal number of members representing the employers, the workers and the public interest. Mediation specifically applies to collective disputes arising from the Trade Union Law.

Mediation is applied in any of the following cases, according to the Labour Relations Adjustment Law:

when a request for mediation has been made to the Labour Relations Commission by both parties to the dispute;

when either one or both the parties has requested the Labour Relations Commission for mediation in accordance with the provisions of a collective agreement;

when, in a dispute concerning a public welfare undertaking, a request for mediation has been made by either party to the Labour Relations Commission;

when, in a dispute concerning a public welfare undertaking, the Labour Relations Commission on its own initiative has decided ex officio that it is necessary to carry out mediation;

when, in a dispute concerning a public welfare undertaking or in a dispute of a large scope or involving work of a special nature and therefore seriously affecting the public welfare, a request for mediation has been made by the Minister of Labour (or, as regards mariners covered by the Mariners Law, by the Minister of Transport) or by the prefect governor to the Labour Relations Commission.

A new development in Japan is the Law Promoting the Resolution of Individual Labour Disputes, which took effect in 2001. The law institutionalizes a consultation unit as the entry point for individual labour disputes. Through this unit, the consultant provides information to both the worker and employer on the means of resolving the dispute. If the dispute cannot be resolved through consultation, it is then handed to the head of the regional labour office for advice and instruction. A person knowledgeable in labour problems can also provide his/her offices to resolve the dispute. Disputes that are brought before consultation units involve mostly termination issues or those relating to the modification of

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employment contracts, retirement, sexual harassment or other work conditions. In May 2004 a Labour Tribunal Law was also enacted, creating labour tribunals within the judicial system to resolve individual disputes that cannot be resolved through consultation, advice and outside offices.16

Arbitration structuresArbitration is a mode of dispute settlement in which an impartial third person, who is either a government functionary or a private person chosen by the parties, resolves a labour dispute. Arbitration mechanisms exist in all nine countries in the study. And they share at least four characteristics: i) The arbitration mechanism is provided by the State and is institutionalized through legislation. ii) Submission of a case to arbitration suspends the right of either party to take industrial action. iii) In the course of the arbitration proceeding, the arbitrator may attempt to conciliate or mediate the dispute. iv) The award or resolution of the arbitrator is generally final and binding on the parties. Nevertheless, national arbitration mechanisms vary greatly in scope, authority and design. The arbitration mechanisms of Australia and the Philippines illustrate this point:

The Australian Constitution restricts the federal Government’s role in industrial relations to “conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of one state”. Accordingly, Australia’s LDR system is divided into federal and state levels. As established by the Workplace Relations Act (WRA) of 1996, the federal system features two independent bodies: the Australian Industrial Relations Commission (AIRC) and the Office of Employment Advocate (OEA). The AIRC’s core functions encompass setting wages in federal awards, registering new awards and enterprise agreements, settling industrial disputes and registering trade unions. The OEA investigates breaches of the WRA’s freedom of association provisions and files individual employment agreements, called Australian Workplace Agreements (AWAs). The following section discusses federal arbitration performed through the AIRC.

The AIRC arbitrates labour disputes at the federal level only; disputes within states are resolved at the state level under applicable state laws. Jurisdiction of the AIRC is limited to collective disputes. Jurisdiction over individual disputes is vested in the courts, except for individual termination disputes, which are also under the jurisdiction of the AIRC. As well, the AIRC’s jurisdiction applies only to interest disputes. By constitutional limitation, it cannot exercise judicial power and thus cannot resolve rights disputes (Fenwick, 2002). The AIRC’s primary authority is to issue awards or certify collective agreements. Awards are orders that are the arbitrated outcome of a

16 Japan Institute for Labour Policy and Training, “Resolving individual labour and management disputes,” Labour situation in Japan and detailed analysis 2005/2006, p. 28.

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dispute between an employer and one or more unions. Because the Australian bargaining structure is centralized, awards generally cover certain classes of workers within a given industry.

The WRA limits the AIRC’s authority to what is termed “allowable award matters” as follows: ordinary time hours of work and the time within which they are performed, rest breaks, notice periods and variations to working hours; incentive-based payments and bonuses; annual leave loadings; ceremonial leave; leave for the purpose of seeking other employment after giving notice of termination by an employer to an employee; observance, with pay, of days declared by or under a law of a state or territory as public holidays; days to be substituted for, or a procedure for substituting, days referred to; monetary allowances for expenses incurred in the course of employment, responsibilities or skills that are not taken into account in rates of pay for employees or  disabilities associated with the performance of particular tasks or work in particular conditions or locations; loadings for working overtime or for shift work; penalty rates; redundancy pay; stand-down provisions; dispute-settling procedures; type of employment, such as full-time, casual, regular part-time and shift work; conditions for outworkers but only to the extent necessary to ensure that their overall conditions of employment are fair and reasonable in comparison with the conditions of employment specified in a relevant award or awards for employees who perform the same kind of work at an employer’s business or commercial premises.

The WRA reformed the Australian industrial relations system through what has become known as the concept of award simplification, or “stripping”. The WRA provided that awards would consist of only 20 "allowable matters", which may be considered in enterprise agreements. Before the WRA, awards by the AIRC had evolved over time to include, in some cases, 100 matters. To date, about 85 per cent of awards have been stripped. Conditions removed by "award stripping" are now negotiated separately through the enterprise bargaining process in the form of certified agreements or AWAs.

By the terms of the WRA, an award also includes dispute-settlement procedures. Thus, each award includes a term for a dispute-resolution process as the model set out in the WRA. A term providing for any other dispute-settling process or procedure is not about an allowable award matter. The dispute-settling process included in an award may only be used to resolve disputes about matters arising under the award and between persons bound by the award.

In the Philippines, arbitration is performed through three distinct mechanisms: the National Labour Relations Commission (NLRC), the Office of the Secretary of Labour and voluntary arbitrators who are private citizens accredited by the National Conciliation and Mediation Board (NCMB). The NLRC and the NCMB are agencies attached to the

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Department of Labour and Employment. The decisions, orders and awards of these three mechanisms are final and binding; they can only be brought before the courts on questions of fact and law.

The primary arbitration mechanism is the NLRC. Its jurisdiction is expansive in that it includes individual and collective disputes as well as rights and interests disputes. It has exclusive and original jurisdiction over unfair labour practices; termination disputes; cases involving wages, rates of pay, hours of work and other terms and conditions of employment if accompanied by a claim for reinstatement; claims for actual, moral, exemplary and other forms of damages arising from employee-employer relations; cases arising from the commission of prohibited acts by labour organizations and employers, including the legality of strikes and lockouts; and all other claims arising from employer-employee relationships. Because its jurisdiction is exclusive and that agreement of the parties is not a precondition for invoking it, the NLRC is a compulsory arbitration mechanism for all intents and purposes.

The Secretary of Labour exercises extraordinary compulsory arbitration powers “[w]hen, in his opinion, a labour dispute exists that is causing or is likely to cause a strike or lockout in an industry indispensable to the national interest” (Article 263[g], Labour Code). The same power may be exercised by the NLRC over the same type of dispute if the Secretary of Labour, instead of assuming jurisdiction, certifies the dispute to the NLRC for compulsory arbitration. In addition, representation, recognition and intra- or inter-union issues are also treated as arbitration cases that are resolved by the Med-Arbiter, a public servant in the Department of Labour and Employment who is deployed in the regional offices but under the technical supervision of the Secretary of Labour. The orders of the Med-Arbiter can be appealed to the Secretary of Labour (Labour Code).

Compared with compulsory arbitration, voluntary arbitration is distinctive because the arbitrator is a private person who is accredited to perform a public task. The general jurisdiction of voluntary arbitrators pertains to cases arising from the interpretation or implementation of collective bargaining agreements and those arising from the interpretation of company personnel policies and any other labour dispute that the parties may agree to submit before the voluntary arbitrator (Article 262, Labour Code). In practice, voluntary arbitration in the Philippines is applicable more to collective disputes arising from interpretation of collective bargaining agreements. In such cases, use of the grievance mechanism at the enterprise level and thereafter conciliation and mediation through the NCMB are preconditions to the jurisdiction of the voluntary arbitrator. With respect to Article 262 cases, agreement of the parties to submit the case to voluntary arbitration is a jurisdictional precondition.

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Australia and the Philippines are early developers of labour dispute mechanisms. Their current arbitration models are actually second-generation models that were introduced as part of larger reforms in their industrial relations systems. Australia’s federal mechanism is based on the WRA of 1996 and the Philippines’ is based on a labour relations law enacted in 1989. The path followed by these countries, however, could not be more divergent. With the stripping of allowable award matters under the WRA, Australia obviously envisioned a dispersed arbitration and LDR mechanism with more reliance on enterprise bargaining and individual workplace agreements than on government methods.

Australia has retained the role of the courts with respect to individual disputes, conforming to its Constitution. On the other hand, while the primary arbitration agency in the Philippines – the NLRC – remains an administrative tribunal, it has been vested with powers that are normally associated with regular courts. This includes the power to award actual, moral and exemplary damages, the power to issue injunctions and the power to execute its own decisions. In sum, the Philippines has increased the role of the bureaucracy in LDR.

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4. Governance Issues

LDR mechanisms are institutions of governance. In addition to how they are designed, an important question is how their design internalizes governance indicators. This chapter discusses why governance matters and shows how governance principles such as access, voice and participation, accountability, rule of law, and efficiency and responsiveness are embedded in national LDR systems.

Calculating the costs of labour disputes

Disputes must be resolved in the most efficient, least expensive and most effective way possible. High costs of disputes restrict the access of parties, especially workers, to LDR mechanisms. In effect, this deprives them of the protection provided by the substantive laws. For instance, in China, submitting a case to arbitration requires the claimant to pay a fee of more than US$50, about half the average monthly pay of a Chinese worker (Wu, 2006). In the Philippines, voluntary arbitration is promoted as a preferential mode of dispute settlement. However, the parties have to pay a fee to the voluntary arbitrator. Thus, the tendency is for them to go instead to a compulsory arbitrator, who is a public servant and whose services are free. But whether or not there is a fee in entering an LDR mechanism, a dispute always has costs. A common public policy concern, therefore, is the rising costs of labour disputes, whoever bears it.

A practical way to estimate the costs of disputes is to combine the following:

costs to government, in the form of maintaining public institutions, including paying the salaries of public servants;

costs to parties, including lost-time pay, litigation costs, filing and lawyers’ fees and incidental expenses;

costs of lost opportunities, including loss of productive work days, time spent pursuing the case at the expense of more productive work and re-alignment of resources to respond to the costs of pursuing the case;

costs to society and the public welfare, including costs from the secondary effects of industrial actions and perceptions on the lowering of competitiveness.

Across the nine countries, reforms of LDR mechanisms have been motivated to a large extent by the common realization that labour

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disputes are not only getting more expensive but can also be a drag on a country’s competitiveness. China and Japan, for all their contrasting experiences, have repeatedly made this objective public.

The ILO has actively promoted the more consensual and cooperative modes of dispute resolution, such as dialogue, negotiation, conciliation and mediation, in lieu of more legalistic modes. All nine countries in this study have embraced this as a matter of advocacy. But institutional reforms to implement this advocacy have been slow to take root.

Effects of substantive laws on mechanism design

Starting from the 1990s, the content and substance of national constitutions and labour laws have converged along fundamental or core international labour standards. Across the nine countries, labour codes and laws created the infrastructure for rights-based industrial relations systems, founded on the principle of labour protection. Given this convergence, how are national experiences different? What makes some countries more prone to labour disputes while others appear to have very few problems? Why, for instance, are there so few disputes going to arbitration in Malaysia and Thailand but so many going to the same mechanism in the Philippines?

The design of LDR mechanisms and how the substantive law feeds into its internal workings is an important factor in the occurrence and resolution of labour disputes. In various ways, substantive laws structure the behaviour of the parties to an employment relationship in order for them to act in a desired manner. The structuring of substantive law may encourage the parties to assume greater responsibility in preventing or resolving disputes or, on the other hand, encourage them to choose third-party intervention.

The following provides a discussion of three facets of this argument:

1) The substantive laws in all nine countries allow, in varying degrees, a priori participation of parties in defining the scope and content of the employment relationship through individual or collective employment contracts. Quality participation in the preparation of the employment contract, clear and unambiguous contract language and intrinsic fairness of contract provisions can prevent or at least minimize the occurrence of disputes. With respect to collective agreements, the fact that these are entered into through union representatives assures workers of equitable and fair treatment and minimizes future disagreements. In Australia, workplace agreements are negotiated by individual workers and are subject to the approval of a competent authority to ensure fairness. In Viet Nam, and to a certain extent in Thailand, every employer is required to adopt an individual or collective contract that conforms to existing standards. As long as the provisions of the contract are complied with in good faith, the

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likelihood of differences ripening into labour disputes and entering formal LDR mechanisms can be reduced.

2) Some countries require compliance with certain conditions before parties can take actions that have the potential of causing disputes. In collective cases, statutory requirements for a strike or lockout, including the observance of cooling-off periods, can encourage the settlement of disputes through the preferred modes of negotiation, conciliation and mediation. This is true for countries that have “learned” to use the process, such as Japan and the Philippines. For newer industrial relations systems like China and Viet Nam, there is a learning curve. Many workers and unions still do not know the legal requirements for strike action and the consequences of not observing them. Most strikes in these two countries are undertaken without regard to the legal requirements. In Viet Nam and India, there is a requirement to notify the administrative authority prior to termination of employment. Additionally in India, there is a requirement to consult with workers prior to specific types of termination. Notice to the administrative authority or consultation prior to termination are generally seen as rigidities. Nevertheless, their potential to prevent disputes, if properly complied with, or to escalate disputes in cases of non-compliance, cannot be overemphasized.

3) Substantive laws embody policy choices. At some point, a government may have decided to invest a large role for the State and the bureaucracy in resolving labour disputes. This seems to be the case in the Philippines where individual termination disputes can be immediately submitted to compulsory arbitration. Under the substantive laws, the employer has the burden to prove that the termination was legal. The law also provides that an illegally dismissed worker shall be reinstated in his/her job immediately upon order of the arbiter, with full, unlimited back wages and, in some cases, compensation for damages. Ease of entry into the arbitration mechanism for the worker and compulsion to participate in it for the employer create a strong incentive for the dismissed worker to file a termination case rather than settle matters at the enterprise level. Given the consequences of a finding of illegal dismissal as prescribed by the law, delays in the disposal of cases can actually benefit the worker because it increases the pay-off if he/she wins and doesn’t cause any harm if he/she loses. Accordingly, claimants prefer to file cases to resolve termination disputes, resulting in huge case inflows and backlogs in the arbitration mechanism.

Related to this analysis is a seminal study on the effects of labour regulations, among others, on labour disputes (Ahsan and Pages, 2007). The study points to the price effect, the expropriation effect and the rigidity effect of labour regulations. The expropriation effect is related to problems that occur when labour laws make it easier for workers to appropriate part of the returns of employers’ investments.

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The question lies in how the substantive law and the LDR mechanism combine to allocate rewards and consequences. Is the law designed to force redistribution of resources from the employer to the worker in the event there is no agreement? If forced redistribution through a third-party LDR mechanism is an option, workers will go to the mechanism regardless of the State’s expressed policy preferences. Some employers will also not oppose such a mechanism if it accommodates rent-seeking. This is one of the main policy dilemmas in countries that still follow compulsory arbitration. To temper this outcome, substantive laws and LDR mechanisms should be designed to make it easy for both parties to negotiate or bargain, without forcing redistribution or putting either at a disadvantage. The theory is that if transaction costs of negotiating or bargaining are low, the parties will agree on the fairest and most efficient solution to the dispute, independent of how the law allocates rewards and consequences.

Improving access, efficiency and effectiveness

A centralized LDR system is one that is open, single, non-exclusionary and publicly provided and where all labour disputes can be brought for resolution. The hypothetical model presented previously does not argue for a centralized LDR system. Bureaucracies, especially monolithic ones, cannot be expected to be the most efficient structure in solving labour problems. On the contrary, the experience across the study’s nine countries shows distinct classifications of disputes that are processed through separate specialized channels. Multiple access, based on different modes of dispute resolution and invoked in accordance with the sequential principles of dispute settlement, has been the norm.

The common objective across the nine countries has been to nudge parties towards more shared responsibility in resolving their own disputes, using cooperative and consensual modes of dispute resolution at the earliest stages when cooperation is still possible. Further, applying first the consensual modes of dispute settlement is obviously less costly. It may lead to a quicker resolution of the dispute and can act as a filter in limiting the number of cases entering more formal and legalistic modes of resolution, such as arbitration and court adjudication. In this regard, higher consciousness on consensual modes of dispute settlement, captured in such rubrics as alternative dispute resolution, mutual-gains approach, win-win approach and the like, is now apparent across the nine countries.

There also is continuing efforts within the nine countries to decentralize the LDR function. A fair amount of administrative de-concentration or decentralization is taking place, with responsibility being spread out to regional and provincial levels that have jurisdiction over the locus of the dispute. Different forms of delegation are also being recognized in statutes. The procedure in Australia’s AIRC that empowers just one of its

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members to act on certain matters without the participation of other members is one form. Authority given to private practitioners in Japan to assist in the resolution of individual disputes is another. The setting up of conciliation and mediation committees at the enterprise level in China, with representatives of workers and employers as members, is yet another.

While LDR mechanisms are being decentralized and localized, access to most mechanisms has generally remained free. Fees may act as filtering devices to discourage parties from invoking third-party intervention immediately. Yet, a pay-per-entry approach in an LDR mechanism is a problematic one because it can aggravate the inherent economic disadvantage of the worker vis-à-vis the employer.

In situations where fees are paid, various approaches are employed: In China, the party that applies for arbitration pays the arbitration fees according to the relevant rules set by the State. Arbitration fees include an acceptance fee and a fee for dealing with the case. The rates and procedures for charging arbitration fees are determined by the department in charge of labour administration, under the State Council, jointly with the departments in charge of finance administration and commodity prices administration. In the Philippines, the State charges nominal administrative fees for compulsory arbitration disputes upon the filing of a case. Further, an employer who appeals against a judgement of the arbiter is required to post a cash or surety bond of an amount equivalent to the award. In voluntary arbitration, the parties must pay for the services of the voluntary arbitrator they have chosen, although the State also provides a subsidy. In Japan, it is the State that prescribes the rates and pays for the fees of private persons or consultants engaged to assist in the resolution of labour disputes.

Procedural conditions required to enter an LDR mechanism also affect access. As previously mentioned, some arbitration mechanisms require payment of fees. Where courts function as LDR mechanisms, filing and docket fees are normally prescribed. In most countries, legitimate status is required before a union can have legal standing in a labour dispute.

In the Philippines, parties to a collective bargaining agreement are required to go through the enterprise-level grievance procedure before they can invoke third-party intervention. In Malaysia, a worker has free entry or access to mediation and conciliation services provided by the Director of Industrial Disputes, under the Ministry of Human Resources. If the dispute is not resolved, the director may refer the matter to the minister. If the dispute is not resolved at the level of the minister, the latter may refer it to the labour courts.

A concern is that procedural conditions may actually work as outright or subtle barriers to access particular LDR mechanisms. In Malaysia, the law clearly specifies the procedure before a worker can go to the labour courts. But it does not specify the standards under which the Minister of

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Human Resources may refer the dispute to the courts. The law simply leaves the minister with the discretion and does not provide for any remedy, whether the discretion is exercised or not. Malaysia also restricts workers’ choices in securing legal or union representation to assist them in pursuing their claims. Further, it has what may be described as a “level of income test” in entering LDR mechanisms. Under the Industrial Disputes Act, the definition of a worker is limited to those whose monthly income does not exceed 1,500 ringgit, which is lower than the national median wage. The effect is to exclude those earning more than 1,500 ringgit from the coverage of the labour laws pertaining to workers, thereby disqualifying them from using the LDR mechanism.

In the Philippines and India, the Labour Secretary and Minister in Charge of Labour, respectively, may assume jurisdiction over a dispute that in his/her discretion involves national interest. The effect of intervention is to remove the dispute from the regular LDR mechanisms.

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Voice and participation

At the enterprise level, all nine countries have adopted policy preference for having the parties settle their own disputes. Dialogue and negotiation as the preferred first-line mode of settlement is endorsed, expressly or by implication, by all of them. Voice and participation through dialogue and negotiation is a central facet of collective bargaining across all industrial relations systems. But what about the individual level?

In the Australian Workplace Agreements (AWAs), the worker, individually or with the assistance of a union, directly participates in negotiating his/her own employment contract. The AWA covers terms and conditions of employment and may also incorporate a dispute settlement procedure in case a dispute arises. To ensure that the worker is not disadvantaged, an AWA must be approved by the Office of the Employment Advocate upon showing that the contract passes the “no disadvantage” or “fairness” test. In this respect, the AWA may embody the most direct and institutionalized form of voice and participation for individual workers among all industrial relations and LDR systems included in this study.

Another aspect of voice and participation is choice. Can parties choose the persons to whom their dispute is submitted for settlement or resolution? In conciliation and mediation at the enterprise level, such as in the cases of China and Viet Nam, the parties are represented by their designated representatives, but the procedure for designation is not clear. The possibility exists for the choice to be made by the dominant party; thus, it can be made by the employer in the exercise of his/her mandated duty to set up a conciliation council in enterprises with ten or more employees.

In the Philippines, where conciliators and mediators are external third parties and public servants, parties do not have the statutory right to choose their conciliators or mediators. Generally, assignment to particular cases is done randomly, although in practice, nomination based on mutual choice is not prohibited. In Japan, the nomination of a conciliator or mediator is made by the chairman of the local or central labour relations commission. Nominations for conciliators must be done from an accredited list of conciliators. Mediation is done through committees, for which nominations must come from the members of the appropriate labour relations commission. Because the labour relations commission is tripartite (with representation from workers, employers and the public), there is the requirement that workers’, employers’ and the public interests must be equally represented in the committees. Nomination implies a right of the parties to veto (but no information on this matter was available during the research period).

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What emerges is that in Japan, disputing parties may not have a direct participation in choosing who the conciliator or mediator will be. Nevertheless, and more particularly in mediation, there is proxy participation through interest representation because the nominations always come from members of a tripartite body.

In arbitration, the right of the parties to choose the arbitrator is not generally expressed in statutes. In disputes arising from collective bargaining agreements, however, the agreements themselves usually contain a dispute settlement procedure in which a potential neutral third-party, or at least the procedure for choosing the third-party if a dispute arises, is included. In the Philippines, parties to a compulsory arbitration case do not have a right to choose. However, voluntary arbitration assumes that the arbitrator is chosen directly by the parties. The parties also have a choice in defining the issues to be submitted as constituting the labour dispute.

Rule of law

Whether the mode of dispute settlement is dialogue, negotiation, conciliation, mediation or arbitration, LDR functionaries are expected to settle or resolve disputes with due regard to the laws. As a rule, minimum labour standards form the baseline in any settlement or resolution. This appears to be a shared perspective actualized in different ways in the laws and procedures of all nine countries in the study.

Having said this, labour dispute resolution is not only an exercise in law – it is also an exercise in equity. All nine countries assume that labour disputes constitute a special type of dispute whose resolution requires a specialized mechanism or procedure. National constitutions very clearly recognize this point. In Japan and Korea, labour disputes should not only be resolved fairly for the parties but also for the larger goal of promoting industrial peace and economic development. The Philippines regards labour contracts not as ordinary contracts but as contracts vested with public interest.

In China and Viet Nam, labour disputes are to be prevented or resolved, with the higher interest of the State always in mind. In Australia, the AIRC is mandated to perform its functions with due regard, among others, to the desirability of high levels of productivity, low inflation, creation of jobs and high levels of employment (WRA, as amended). Whether it is to uphold the ethic of the greater good, the public interest or the State’s interest or to promote productivity and full employment, it is clear that the resolution of labour disputes bears a social function and responsibility. Thus, the overall welfare effect becomes a necessary criterion in evaluating LDR systems.

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A characteristic of LDR mechanisms that aids in promoting respect for the rule of law is independence. In conciliation and mediation, independence means the authority to control or direct the proceedings free from political or extraneous influences. In arbitration, it is the power to resolve the issues under the best lights, in accordance with law and equity. The independence of functionaries is also strengthened if they possess specialized or expert qualifications, are men or women of unquestionable probity and integrity, and their appointment and tenure is made under and protected by administrative or civil service laws. Independence refers to the functionaries of the LDR mechanism but also includes the mechanism itself. Attachment of the LDR mechanism to a higher authority, such as the ministry of labour, does not necessarily negate its independence so long as the higher authority does not have veto power or does not exercise control and direct supervision over the mechanism. The exercise of oversight functions by the legislature or judicial power by the courts over the LDR mechanism, provided the rules of engagement are clear, would also affirm the independence of the mechanism.

Accountability

Across the nine countries, several measures are employed to ensure that LDR functionaries are accountable. The most common are the following:

LDR functionaries are public servants or at least they are acting as public servants when they are performing their functions. This makes them subject to civil service rules or, in the case of labour courts, to the rules of the judiciary.

LDR functionaries must possess a minimum set of qualifications. In the Philippines’ NLRC, labour arbiters and commissioners must be lawyers with 10–15 years of membership in the bar. In Australia, appointees to the AIRC must have the same qualifications as judges. In China, Japan, Korea and Viet Nam, they must be persons with demonstrated knowledge or expertise in labour relations.

LDR functionaries are appointed by a high-level official. In the Philippines, NLRC labour arbiters and commissioners are appointed by the country’s president; the Malaysian King appoints judges in industrial courts; in Australia, the AIRC president, vice president, deputy vice president and commissioners are appointed by the country’s governor-general. Members of the central labour relations commission in Japan and Korea are appointed by the prime minister, based on a list prepared by the labour minister. In Japan, the appointment of the public sector members of the central labour relations commission must be done with the consent of the Diet. Conciliators and mediators who are full-time public servants are appointed by a high-level labour ministry official, usually by the minister or secretary of labour.

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LDR functionaries are ranked highly in the bureaucratic hierarchy. In the Philippines, the chairman of the NLRC has the same rank as the presiding justice of the court of appeals, while labour arbiters have the same rank as regional trial court judges.

LDR functionaries who represent workers and employers in LDR mechanisms with a tripartite composition must be nominated by their respective sectors as a condition for their appointment. This is true in Japan, Korea and the Philippines. Accountability is enforced through the implied power of the nominating sector to recall.

LDR functionaries have well-defined tenure. Commissioners of the AIRC in Australia and commissioners and labour arbiters of the NLRC in the Philippines hold office until they retire, subject to good behaviour. A different approach is employed in Japan and Korea where workers and employer members of the regional and central labour relations commission have a term of two years, subject to renewal.

LDR functionaries must follow prescribed procedures. They are bound, among others, to resolve labour disputes within given periods of time.

LDR functionaries are subject to oversight. Administratively, they are subject to oversight by the minister or secretary of labour. With respect to arbitrators and judges of labour courts, their decisions may be reviewed by higher courts, including a country’s Supreme Court.

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5. Convergence and Divergence

Historical movements

Three historical “threads” run through the evolution and development of LDR systems. Industrial unrest and social tensions over workers’ exploitation and poor working conditions in industrial countries brought about the first one. This led to the recognition of the need to protect workers by ensuring just and humane conditions of work. Following the ILO Constitution, the Declaration of Philadelphia and the norms set by ILO Conventions and Recommendations, various labour standards were developed to provide guiding principles on what constitutes humane conditions of work. Standards relating to minimum age of employment, minimum wages, days and hours of work, holidays, leave, overtime, workplace safety and health, and social protection were adopted, both at the international and national levels.

To ensure compliance and enforcement, national authorities set up labour inspectorates. Standards gave individual workers both protection and power by prescribing legally enforceable rights. Where these rights were not observed and non-compliance or denial ripened into disputes, the disputes were referred for adjudication to the labour courts, which were usually part of the judicial system. To the extent that inspectorates and labour courts gave workers the venue to assert these rights, they formed separate but complementary LDR mechanisms.

The second thread is the rise of unionism and collective bargaining from the early part of the twentieth century to the 1970s. The power of unions is the power of collective action, embodied in the right to organize, to bargain collectively, to strike and undertake other forms of industrial action. It is ranged against the inherent economic advantages of employers and their power to lock out labour.

With freedom of association, the right to organize and the right to collective bargaining regarded as fundamental human rights, the economic weapon of strike that workers as a collective group possessed became far more threatening to the general welfare than any individual grievance. This threat potential increased the gravity and scope of conflicts and disputes. It became necessary that the relations between unionized workers and employers – in technical terms, labour relations – be governed by a set of laws, regulations and institutions that protected workers, employers and the public at large. Thus, specialized LDR mechanisms, particularly for conciliation, mediation and arbitration, were set up to prevent and resolve union-management disputes.

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The third thread is globalization, which brought about political and economic liberalization. It brought about the collapse of communist regimes and their transition to democratic political institutions and market economies. Its effect on the industrial relations systems of these regimes can be viewed from two angles: i) Internally, it strengthened the citizens’ demands for basic labour rights and institutions that had been recognized and used by democratic and market economies, particularly freedom of association and the right to collective bargaining. ii) Externally, the foreign trading and investment partners of countries in transition also raised similar demands for adoption of labour standards in order to level the playing field and avoid what has been described as a competitive “race to the bottom”.

In the market economies, the effects of globalization on industrial relations are quite different. One is that the participation of the labour forces of China and Viet Nam, together with the labour forces of the old Soviet bloc, in the production of goods and services created an infinitely elastic global labour pool. Workers from market economies compete with workers from transition economies. Consequently, profit margins have whittled down, eroding the ability of the unions to bargain for better benefits and even secure the employment of their members. This has led to the decline of unionism in the market economies, a decline that continues to the present.

The first and second threads are at the core of industrialism and industrial relations. They initially shaped the LDR systems of the early developers – in particular Australia, India, Japan, Korea, Malaysia and the Philippines. For these countries, the LDR system is generally a mix of three mechanisms – i) the inspectorate, ii) arbitration usually preceded by conciliation and iii) mediation (conceptually for collective disputes) and the courts that are either specialized or part of the regular judicial system (usually exercising direct jurisdiction over individual disputes and review powers over arbitration awards or decisions).

In these two threads of development, the boundaries between LDR mechanisms were labour relations-centric, which means that collective disputes involving unionized workers was given more policy prominence. Specifically, more emphasis was given to the resolution of issues through collective bargaining, strikes and lockouts. Specialized institutions dealing with these issues, particularly union registries and arbitration, became the fulcrum of industrial relations policy.

The third thread has been dominant in shaping the LDR systems of China and Viet Nam. While labour standards were put in place, the capacity of the labour inspectorate systems of both countries was limited. Although arbitration and court adjudication existed in China even before the transition, it is notable that as transition economies, China and Viet Nam started building - and continue to build - their LDR systems by placing emphasis on enterprise-based conciliation and

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mediation. This is in contrast to the early developers, whose preference was for third-party intervention outside the enterprise.

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Coping with change

At the start of the millennium, these three threads converged. Technology and globalization have resulted in a rearrangement of employment relationships and work processes. The early developers went on to review their systems, with some eventually introducing changes. The later developers started building their own institutions in accordance with their own values and also with due consideration to the legacy of industrialist institutions and values. The history of industrial relations is an alternating cycle of equilibrium and disequilibrium. The institutions and practices born in the first and second historical threads, such as trade unions, collective bargaining, strikes and lockouts, arbitration and minimum standards setting, comprised the disequilibrium phase at the turn of the twentieth century. When these institutions started functioning, the equilibrium was restored. The principal actors in industrial relations did not eschew conflicts, but the institutions within the system were adequate to prevent or resolve conflicts with minimum damage to the economy and society.

With the convergence of the three historical threads and the entry of globalization, a new cycle of disequilibrium has been set in motion. How have industrial relations and LDR systems responded?

The nature of changes taking place among the nine countries recalls an early distinction raised by Dunlop (1958) between conflicts played out within systems and conflicts over the shape of such systems. Labour disputes, as technically conceptualized, are conflicts played out within national industrial relations systems. LDR mechanisms in a country simply capture the society’s preferences on how the disputes should be resolved. But industrial conflicts brought about by globalization and the need for higher competitiveness challenge the shape of the system itself. Only systemic changes can resolve such conflicts in a holistic manner.

The changes that have taken place in the Philippines belong to the first type. Labour reforms that started in 1986 were inspired by the restoration of democracy. Reforms in LDR mechanisms focused on enhancing conciliation and mediation and expanding the scope of arbitration. Changes in the legal provisions concerning the rights to self-organization and collective bargaining brought the laws more faithfully in line with the principles of ILO Conventions No. 87 and No. 98, which in themselves are creations of industrialism. A recent change is a law increasing the number of divisions (or committees) in the NLRC to address the tremendous backlog of cases in the arbitration system. On the whole, most scholars agree that the reforms started in 1986 helped bring down the incidence of strikes and lockouts in the Philippines. Nevertheless, these reforms were simply incremental, adding to mechanisms that were already in place. The role of the State in LDR, through the bureaucracy and the

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courts, expanded and solidified even further, an effect that is completely the opposite of the policy preference towards shared responsibility of the parties in settling their conflicts.

The recent changes in Japan also belong to the first type. The reforms were part of Japan’s 1995 Economic Plan and were brought about by the recognized lack of expeditious special procedures within the court system dealing with individual disputes. The direction of reforms was to extend LDR mechanisms to individual disputes through the labour tribunals and strengthen conciliation, mediation and citizen’s participation in LDR processes through administrative decentralization and delegation. The reasons for the reforms were both practical and economic – among others, the decrease in collective disputes but persistence of delays and increasing complexity of cases, and diversification and individualization of workers in the labour market. Being a part of the larger effort towards judicial reforms, these reforms also signified a shift from administrative paternalism to the rule of law and self-responsibility, as well as from pre-entry regulation to rule-based governance of the market.17 On the whole, the LDR reforms were wide-ranging but they neither changed the substantive laws nor did they expand substantive rights. Being relatively recent, the effects of these reforms cannot be determined precisely at present.

Among the second type of reforms are those in China and Viet Nam. The main catalyst for the reforms was the collapse of communism and the consequent economic liberalization of those two countries. What continues to be done in China and Viet Nam is a first-generation experiment – the first attempt at developing an industrial relations system and LDR mechanisms under a market economy. As noted earlier, the core of the LDR system is conciliation and mediation. Elements of participation and decentralization are apparent in the development of tripartite enterprise-based conciliation and area-based mediation. In spite of this, a paternalistic – if not pervasive – role of the State in LDR is undeniable. Centralized unionism that is vertically integrated to form part of the political apparatus is still the norm in both countries. Representation of workers in LDR mechanisms at the enterprise and local levels is a positive approach that can work best if the representatives are independently chosen by the workers.

Also belonging to the second type are Australia and Korea. Globalization pressures, the need to upgrade competitiveness, and political will appear to be the key drivers of reforms in Australia. In 1996, Australia broke away from a long tradition by supplanting its major labour laws with the Workplace Relations Act. The legislation strengthened individual workers’ rights to enter into employment contracts on their own, or with the assistance of agents, shifted

17 Kazuo Sugeno, “Judicial reform and the reform of the labour dispute resolution system,” in Japan Labour Review, Vol. 3, No. 1, Winter 2006, pp. 4-12.

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protection from collective to individual contracts and dispersed LDR functions among several agencies (such as the AIRC, the wage commission, the workplace authority director and the employment advocate office). From an administrative governance standpoint, the approach is not only de-concentration of LDR functions but also devolution of governance to the workplace through more individual contracting and enterprise-level bargaining.

In Korea, the changes started with democratization in the late 1980s. The democratic space sparked off big strikes. This was followed by an exogenous shock – the financial crisis that started in 1997. The crisis forced economic restructuring and a revision of laws to make the labour market more flexible. Before the revisions, the Korean Government had restrictive labour standards and highly protective job security laws – laws that curtailed freedom of association and collective bargaining; compulsory arbitration was the lynchpin of the LDR system. After the reforms, the Government recognized temporary work (Law on Dispatched Workers), thus making the labour market more flexible, lifted restrictions on freedom of association, abolished compulsory arbitration and set up tripartite bodies to build consensus on needed policy reforms and to directly participate or assist in the settlement of labour disputes.

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6. Moving Forward

Some practices to build on

Based on the experiences of the nine countries in the study, it can be generally said that ways of preventing conflicts and disputes are as important as ways of resolving them. Economic and political choices influence the contours of LDR mechanisms. How different States balance market principles and workers’ protection, both substantively and procedurally, is reflected in the design of their LDR systems. Fundamental labour rights, such as freedom of association, collective bargaining, workers’ participation and the role of the State in LDR, are prominent issues. But context-dependent factors ultimately determine the choices or combination of choices that States take with respect to the structure, operation and capacity of the LDR mechanism. Further, whether these choices are deterministic or causative to LDR outcomes has not been established.

In the nine countries, state provision is still the main policy instrument in designing LDR mechanisms. Within this policy instrument, there are notable efforts to promote the following:

shared responsibility of the parties in LDR; easy and inexpensive access, achieved through decentralization

and localization of LDR mechanisms and services; more conciliation and mediation as the first line of third-party

intervention prior to arbitration. Nevertheless, arbitration and court adjudication remain important functions both in rights and interest disputes;

continuing professionalizing and skills building of LDR functionaries; integration of tripartism into the LDR mechanism in some countries;

private sector or citizens’ participation in LDR is also being encouraged in others; less bureaucracy and less legalism are advocated in most;

participation of workers’ and employers’ organizations in the formulation of social and economic policies, thereby reducing the potential for disputes.

Reform paths and lessons learned

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The forces of globalization continue to put pressures on LDR systems, challenging their effectiveness with new situations of disequilibrium and conflicts. The combined experiences of the nine countries tend to show that changes in LDR systems are second-round effects of economic and political changes. They also tend to validate three assumptions: i) Political and economic developments are external “shocks” to industrial relations systems. ii) These shocks generate new insecurities and demands from national constituents, leading to conflicts that LDR systems are expected to resolve. iii) The current shape of LDR systems at the time of shocks as well as their previous institutional experiences, combined with larger economic and political factors, determine their responsiveness, adaptive capacity and ability to contribute to the attainment of development and social justice goals.

For the nine countries, the policy choices have ranged from preservation to enhancement and replacement of existing systems. In making choices, the experiences of the nine countries yield key lessons:

i) For the early developers, the countries that are higher in the Global Competitiveness Index (GCI) scale have shown greater political will and capacity to innovate. Thus, Australia and Japan, which are in the third phase of development under the GCI, and Korea, which is between the second and the third phases, are the leaders in reform efforts. In Australia and Korea the reform process approximates “creative destruction”, extending to LDR structures and to substantive labour laws. These countries have more integrated labour markets (bigger formal sectors), higher growth and investment rates, are more active in international trade, have higher income levels and bigger industrial bases.

ii) The early developers that are in the factor-driven stage and where the pace, scope and intensity of LDR reforms are more gradual, have lower growth rates, relatively higher unemployment rates and are in the lower income brackets. They also have segmented labour markets, with their labour forces characterized by a large informal sector. This is the situation in the Philippines and India. In these two countries, institutional inertia also plays a major role. The main players in the industrial relations system are constrained from engaging political leaders in building a consensus for fear of scaling back labour protection as well as substantive rights already recognized in the statute books.

iii) The early developers with relatively high growth and investment

rates, those who have moderate income levels and whose dominant trade union is affiliated with the ruling political party or otherwise have a relatively weak trade union movement, are more conservative in terms of reforms. This may partly explain why little LDR reform is taking place in Malaysia and Thailand.

iv) In the transition economies of China and Viet Nam, LDR reforms did not actually start with a blank slate. While the fast growth of

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foreign investment inflows may have paved the way for migration of international concepts and ideas, some of which were eventually translated into substantive laws, the two countries did not start building their post-communist LDR mechanisms along the initial path used by the early developers. They chose to start with enterprise-level conciliation and local-level mediation. The link between this choice with the culture and the previous political system is an idea that could be explored further.

v) Increases in strikes and lockouts are always part of the justification for LDR reforms, but decline in their incidence has not stopped countries from pursuing further reforms. In this connection, continuing reforms are characterized by a re-mixing of preferences in terms of modes of LDR. Reforms generally point in the direction of negotiation, conciliation and mediation as preferred modes. Further, there is a growing recognition that individual disputes need to be given equal attention, especially in countries with more sophisticated work environments. The parties to a labour dispute are still primarily the worker and the employer in a vertical relationship; little is said of new developments relating to the horizontal dimensions of LDR mechanisms.

In conclusion, the most instructive way to evaluate LDR mechanisms might be to see them as ongoing experiments in conflict prevention, management and resolution. Countries can learn from each other, and the migration of some practices may at times be desirable. Yet, they may have different starting points, advantages and constraints. The fundamental objective of LDR mechanisms is to help countries adjust and adapt to fluid environmental circumstances in a manner that is fair and equitable for all. Convergence of influences and basic universal principles is indeed a general theme. But with unique national experiences rooted in a country’s culture, politics and values, there will be diversity more than ever.

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AnnexGuide questionnaire for evaluating LDR systems

The following lists the various questions, grouped under thematic headings, used to analyse the LDR systems in each of the study’s nine countries.

Political and economic systems1) Based on its constitution, what is the country’s form of government? Does the

country follow a unitarian or federal model? What is the extent of centralization or decentralization of political and governance institutions?

2) Does the political system incorporate elements of corporatism, tripartism or other forms of democratic participation? If so, in what way?

3) What type of economy does the country have? Are there enterprises that are state-owned?

General labour market indicators

1) Describe the country’s labour force, labour force participation, employment, unemployment and underemployment rates over the past five years.

2) Describe the country’s labour market over the past five years with respect to a) respective shares of the formal and informal sectors among those employed; b) respective shares of public and private sector employment; and c) sector distribution of employment (such as industry, services and agriculture).

3) Describe the country’s state of unionism and collective bargaining over the past five years in terms of a) unity or plurality, as the case may be, of the union movement and of employers’ organizations; b) union structure (national, federation, industry or enterprise-based); c) total union membership; d) number and coverage of collective agreements; e) levels of bargaining; d) union/collective bargaining agreement density by sector, if data is available; e) incidence and extent, if available, of industrial action and collective disputes.

4) Describe the extent of political involvement of unions in terms of a) representation in policy-making bodies, including the legislature; b) existence of a political arm or labour party; and c) veto power and powers of co-determination for unions in relation to government policies and programmes.

Rule of law tradition1) What is the country’s legal system (civil law or common law)?2) Does the country have a judiciary independent from the executive and

political branches of government? What power, if any, does the judiciary have on executive and political actions?

3) Which of the core ILO conventions has the country adopted? To what extent have these been embodied in the national legislation?

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Substantive laws1) What are the major labour laws in the country? Does the country have a

labour code, or do labour laws exist but are not codified?2) Do the labour laws cover both the public and private sector, or are there

separate laws for each sector?3) Do the labour laws classify types or classes of employment (such as regular,

indefinite, fixed period) and if so, what are these? How do these classifications affect substantive rights?

4) Do the labour laws provide for protection in terms of a) general labour standards and working conditions, including payment of wages; b) measures against workplace discrimination; c) protection of the right to organize and to bargain, including protection against unfair labour practices; and d) protection against unjust dismissal, including grounds for dismissal, right to reinstatement and back wages, or right to damages?

5) Do the laws provide for procedures that enable the parties to work out terms and conditions of employment through negotiation, whether individual or collective?

6) Do the laws require registration or notice to an administrative authority before a union can claim legal existence?

7) Do the laws require that a union must have majority status before it can engage in collective bargaining? If so, is there a procedure for determining majority status? If not, how does bargaining take place?

8) Do the laws prescribe conditions, including notice to administrative authority, before a strike or lockout can be staged? Do the laws require a decision to stage a strike or lockout to be arrived at through a democratic process?

9) Do the laws require employers to secure clearance from or give notice to administrative authority before they can terminate the services of an employee? Do the laws require payment of severance pay in the event of employment termination?

Structure of LDR mechanisms1) How is a labour dispute defined in the country? What are the most common

types of labour disputes? Do the laws provide for a classification of disputes (such as individual or collective, rights or interest)?

2) What is/are the LDR mechanism/s in the country? Is it a specialized administrative agency, part of a ministry (for instance, the ministry of labour) or part of the regular courts, or is it an independent agency? How is the LDR mechanism funded? To which higher authority is the LDR mechanism accountable? Is there a supervisory or advisory body that oversees or monitors the mechanism?

3) What is the jurisdiction or scope of authority of the LDR mechanism? What labour disputes can be brought before it? Is it accessible to both public and private sector workers, or is there a separate mechanism for each sector?

4) What are the conditions, if any, before the LDR mechanism can be invoked? Is access dependent upon the classification of a dispute? Is access subject to the payment of fees? If so, are these nominal fees or pro-rated to the claim?

5) Is there a labour inspectorate in the country? What is the relationship between the inspectorate and the LDR mechanism?

6) Are grievance procedure, conciliation and mediation part of the LDR mechanism?

7) Is arbitration included in the LDR mechanism? If arbitration exists, what labour disputes may be submitted to arbitration? What, if any, are the preconditions for arbitration? Are parties given the choice to select the arbitrator?

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8) Do the labour laws include a definition of disputes involving “essential services” or any comparable concept? If so, would such dispute fall under the LDR mechanism, or is there a special device, instrument or procedure in dealing with it?

9) Which party has the burden of proving their cause in a labour dispute?10)What rules of procedure are followed in the use of the LDR mechanism (such

as summary procedures, specialized procedures or procedures similar to litigation)? Do workers’ and employers’ representatives participate in formulating these rules? Are these publicly disseminated? Are proceedings in the LDR mechanism open to the public?

11)Who can participate in the resolution of labour disputes? Do the labour laws prescribe minimum qualifications, training or accreditation standards before a person may be qualified to perform LDR functions? Who appoints such persons? How are they compensated?

12)Describe the LDR mechanism in terms of its composition, meaning whether the persons who perform LDR functions are a) public servants; b) public servants who are nominated by labour and employer organizations; c) private persons who represent labour and employers’ organizations; d) recognized “wise professionals” or experts; e) ordinary citizens. Does the LDR mechanism work through individuals or through committees?

13)Do the labour laws express a policy that tripartism and shared responsibility are requirements in the setting up and operation of an LDR mechanism?

Powers of the LDR mechanism and remedies available1) Describe the powers and prerogatives of the LDR mechanism in terms of a)

determining the issues in dispute (for example, does the LDR mechanism have discretion to determine the issues in dispute or is it limited to the issues submitted by the parties?); b) prescribing ancillary remedies (such as injunctions ordering return to status quo or prohibiting certain acts); c) using modes of discovery and rules of evidence; d) allowing the parties to adopt their own procedures in lieu of standard procedures; and e) allowing or facilitating efforts of the parties to explore negotiated solutions.

2) Describe the substantive terms of settlement that are possible under the LDR mechanism (restitution, compensation or damages). In the event of illegal termination, does the worker have a right to a) compensation by way of damages (what kind of damages); b) severance or separation pay; c) back wages, limited or full; d) reinstatement, either immediate or upon finality of judgement; or e) any combination of the above?

3) If the dispute is settled through the LDR mechanism (whether by grievance procedure, conciliation, mediation or arbitration), is the settlement binding or non-binding? Do parties have a choice on whether settlement shall be binding or non-binding? If non-binding, what is the next step? If binding, how can the settlement be enforced?

4) In the event a party (worker or employer) is dissatisfied with the decision of the arbitrator or the court, as the case may be, does the person or group have a right to appeal? Up to what level is this right available (appeals court or supreme court)?

Performance of LDR mechanisms1) Do the laws prescribe periods within which the LDR mechanism should resolve

disputes? If so, what is the consequence if the periods are not observed?2) Is there a system to enable public monitoring of the performance of the LDR

mechanism (such as posting of status and ageing of cases)?

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3) Describe the performance of the LDR mechanism in terms of a) volume of cases; b) speed of disposition; c) acceptability or enforceability of settlements, orders or awards.

4) What are the main strengths of the LDR mechanism? 5) What are the main problems encountered by the LDR mechanism? What

efforts have been exerted by the country to respond or correct these problems?

6) How has the LDR mechanism responded to the renewed advocacy for alternative dispute resolution? Can the LDR mechanism be considered a special alternative dispute mechanism for labour disputes?

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