Financial Times

Striking down productivity

Tea pluckers on strike

Low productivity continues to hold back the economy despite signs that growth is picking up. Employee unrest and strikes are a significant reason for low productivity.
These have constantly stifled the growth of the industrial sector and sent negative signals to international investors.

Ravi Peiris, deputy director general of the Employers' Federation of Ceylon, said that the right to strike was a legitimate trade union action. "It is a weapon that must be used as a last resort when all bargaining avenues have failed," he said. However, this right has been abused, with workers using it as a means of threatening the management, taking them hostage and making them accede to their demands.

Harry Sandrasekera, senior vice president of the Ceylon Workers' Congress, said that strike actions were usually a result of a crisis in confidence with the management of the company, where the management failed to come up with effective solutions to solve longstanding issues such as the lack of proper working facilities. Another reason for a strike was 'on the spot' disciplinary action, where managers used their authority and discretion to take action against workers.

Peiris said that today, most strikes were organised to assert unreasonable demands such as the reinstatement of an employee dismissed on charges of misconduct. "How do you then expect a disciplined workforce?"

Peiris said that they had raised concerns among policy makers that the laws pertaining to strikes were inadequate. "Strike per se is permitted but I feel there must be a degree of restriction," he said. For instance, there must be sufficient notice given to the employer, informing him about a threat of a strike, or there must be a collective agreement between the workers and employers as to how disputes must be resolved.

Minister of Employment and Labour Mahinda Samarasinghe told the Sunday Times FT that the labour advisory council had approved a decision to make it mandatory that trade unions give employers two weeks' notice prior to a strike, unless in exceptional circumstances in which an immediate strike is warranted.

The minister said that although such a provision was generally included in a collective agreement between the employers and trade unions, most companies had not entered into such agreements, and therefore had been subject to severe financial losses.

The minister said that this mandatory requirement is to be included in an amendment to the Industrial Disputes Act, which would also be in harmony with the ILO conventions on freedom of association and collective bargaining. "All our international competitors have this provision in their law, and I think it is timely and of paramount importance."

A leading lawyer, who declined to be identified, denied that employees were given a wide discretion by law as to the grounds on which they could strike. "The grounds have to be within 'reasonable means', and those words cannot be interpreted broadly to mean everything," he said. For example, if a company dismisses an employee over misconduct, then a strike action demanding that the worker be reinstated would be unreasonable.

Peiris observed that it was the minority that decided whether to strike, and the majority was forced to follow suit, despite their unwillingness. He said that since the right to strike was a democratic right, a trade union should also use democratic means like a secret ballot to find out whether in fact its members did want to strike.
However, both Sandrasekera and Minister Samarasinghe shared a different view. "No trade union which worked for the welfare of its members would call for a strike against the wishes of its membership," Sandrasekera pointed out.

He said that wage increases had never been realised in the plantation sector without trade union action. The plantation sector has been one of the worst affected by constant strike action. Usually the threat of a strike was more powerful than an actual strike.

Minster Samarasinghe said that there was a huge practical problem involved in a referendum: "Especially considering the large workforce in the plantation sector, which would be as good as having Aristotle's democracy."

Speaking on the actual effectiveness of an employee strike in achieving its demands, Peiris said that there was no guarantee of success. "Sometimes the employees return to work without any of their demands being met," he said.
The effectiveness of a strike usually depended on how long the employer could sustain the impact of a strike on his business.

'Go slow' actions, where employees report for work but abstain from working, was another dangerous employee action rapidly spreading, which was illegal and amounted to employee misconduct, Peiris warned. Such actions reduce productivity.

Rohan Fernando, chairman of the Planters' Association, said that any form of strike caused disruption in productivity and had a negative effect on international tea buyers. "What was of grave concern was the use of violence and the damage to property during strikes," he said.

This had now been curbed to a great extent due to a more cordial relationship with the trade unions, but incidents of violence during strikes were still not uncommon.
In 2001, during the strike in support of a wage hike, workers prevented tea from being transported to Colombo, resulting in severe delays in shipping the product to international tea buyers.

Peiris said that the breakdown in law and order during a strike, where the management is assaulted or taken hostage, was unacceptable. "Just because the workers are on strike they have no immunity from misconduct, and their employment can be duly terminated," he said, when asked why some employees are dismissed following a strike action.

Another lawyer said that if one were to look at the history of collective agreements and collective bargaining, they were drawn up by the companies and the main trade unions, enabling both parties to come to a consensus on most issues. "Today there are far too many trade unions. It seems difficult for all trade unions to collectively agree on a particular issue," he said.

He explained that companies that maintained good industrial relations with employees had a dispute settlement process in place, where the management first met with the branch union, followed by the parent trade union. If negotiations failed, then the Industrial Disputes Act provided for other methods of dispute resolution such as conciliation and arbitration.

Disputes are also referred to the Minister of Labour, who can direct the matter to an arbitrator. However, legal remedies have proven to be time consuming and have been frustrating for the employee demanding a speedy solution. "When an emergency operation needs to be done, it needs to be done immediately," Sandrasekera said.

"Likewise, when workers have issues that need to be attended to urgently, then methods such as conciliation and arbitration are overlooked because of their time consuming nature, and we are compelled to go on strike." Minister Samarasinghe said that the ministry provided a role of facilitation by encouraging parties to settle their disputes through conciliation and arbitration.

"We have already set up two conciliation centres in the free trade zones of Katunayake and Biyagama and we have also commenced training officials in conciliation procedures with the help of the International Labour Organisation (ILO) and CIDA, a Canadian agency," the minister said. Workers' education programmes had been launched to enlighten workers on the laws of the country and international labour conventions and standards.

Peiris also called for a change in the present legal framework. The global environment is moving towards competition and productivity and the entire labour structure must be directed to meet such global challenges, he said. "The trade union ordinance that defines a strike has not been amended since 1935. There is a clear need for law reform that will create greater understanding between the parties and focus on resolving disputes," he said.

At present there were 40-50 labour laws but none of them competently deal with improving the relationship between the employer and his employees, he said. Minister Samarasinghe agreed: "If Sri Lanka is to remain competitive in the global market, then the laws must change accordingly." Some legal analysts maintained that the labour laws in the country were sound and radical reform not necessary.

However, they stressed that there needed to be a change in the mindset of the parties in arriving at a solution rather than prolonging the dispute through the available legal mechanisms. These, such as the Labour Tribunal and even alternative dispute resolution mechanisms such as conciliation and arbitration, tended to be time consuming and needed to be made more efficient.

Sandrasekera said that the issue of productivity depended on how both sides could work together. "Employers must be well versed with modern human resource management skills to be sensitive to the needs of the workers, and workers in turn must be knowledgeable of their rights and duties," he said.

Peiris said that as a result of employee strikes, foreign investor confidence has deteriorated with investors feeling dejected at the indiscipline of workers. Employers and the trade unions should create a level of trust between each other so that each party could work for the benefit of the other party, he added.

Minister Samarasinghe said that trade unions must realise the responsibility and job security of its members, being mindful of the fact that employers have certain time schedules and quality standards, which must be met. The minister also reiterated that the employers being in a privileged position should not make their employees submissive about their right to a proper working environment. Both parties needed to be more responsible and ensure industrial peace and stability through collective agreements.

Plantations suffer from hangover
Every single plantation company has been smarting from the effects of a wage hike due to a collective agreement drafted in 2001. Another issue that has followed the wage hike has been the low attendance record of workers.

Rohan Fernando, Chairman of the Planters' Association, said that having increased the wages of estate workers, the industry was facing the issue of low productivity as a result of poor attendance of workers. This is quite a worrying sign for the industry, he said.

Dan Seevaratnam, a veteran planter and now part of the MJF group, said that poverty and poor health have contributed to the drop in attendance of the estate workers and blamed such a situation on the influence of alcohol in the region.

If a workman earned Rs. 100 a day and he worked a total of 20 days, he would receive a monthly income of Rs. 2,000. If his salary was increased to Rs. 150, he would have to work only 14 days now to make Rs. 2,000. Today, estate workers live for the day and don't make any savings unlike in the past where they used to save money to buy gold or sewing machines, which they could have given as a dowry.
One reason why estate workers are in abject poverty is due to alcoholism, which has become a huge problem. A Colombo University survey has revealed that nearly 40 percent of estate women consume alcohol. A survey done by CARE international revealed that 40-60 percent of earned wages in the plantation sector was spent on alcohol.

"How are they going to improve their quality of life when they have no savings?" asked Seevaratnam. "Trade unions keep pressurising companies to give the workers a wage hike, in order to sustain their membership. Companies are then forced to take loans on high interest rates to pay the workers, who in turn waste the money the next day in the tavern."

Seevaratnam said that every plantation company had attributed their poor financial performance to the wage hike imposed on the industry. "We (MJF) incurred a loss of Rs. 50 million and the wage hike itself had a negative impact of Rs. 56 million. Otherwise we could have showed a profit of six million rupees."

There is also a misconception in the estates that alcohol is the ideal tonic to soothe aches and pains after a hard day's work. The quality of the alcohol is very low, it contains more chemicals than alcohol causing severe health problems, including headaches. "When half the men and women are drunk, how do you expect productivity to increase? The quality of work is obviously very poor."

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