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Unions threaten whole world of pain

Multinationals face increasing pressure as international trade unionism takes hold. Trade union activity has historically been focused at local site or country-level but the emergence of organised and internationalised Global Union Federations over the last decade means multinationals now face more co-ordinated and concerted pressure from trade unions across national borders.

While their roots trace back over many decades, Global Union Federations (GUFs) have only existed in their current form since 2002. There are currently nine GUFs, following the merger of three unions in June to create a super federation for the industrial and manufacturing sector. GUFs bring together individual trade unions from around the world and are funded by subscriptions from member unions. Their objective is to increase international co-operation, joint action and global solidarity among trade unions in different countries that share common employers and secure enforceable bargaining, consultation and co-determination rights at the transnational level. Long-term, their goal is to raise employment standards in all countries to the level of the best and beyond. Nicholas Squire, partner in Freshfields” employment practice says, “Companies still tend to view industrial relations as a localised issue. However, the rise of increasingly organised and powerful Global Union Federations means multinationals now face a greater strain on their employee relations across national borders. Their ability to deal with trade unions needs to be global. If your company has different working conditions across countries, you are a target”.

“Unions are broadening their focus beyond domestic concerns to a company’s international workforce and global operations. Large multinational employers and private equity firms with global portfolio interests are increasingly being targeted by organised global trade union activity with pressure exerted on shareholders, suppliers and other stakeholders to sanction employers who do not meet the necessary standards.”

“And pressure can be applied very quickly. Using social media such as twitter, global unions can raise awareness of a labour relations issue around the world, and give the impression of a large and well-resourced campaign that may in reality only be very small scale. By elevating local issues to the global level, multinationals face the risk of severe reputational damage in markets far removed from the source of the issue. An increasing number of companies have been caught out as a result”.

European trend or international movement?
There are a number of tools used by global trade unions to pursue their strategies at the international level. International (or Global) Framework agreements (IFAs) are essentially voluntary agreements, without a legal underpinning, between a company and trade unions. Both sides make commitments to each other in areas of common interest. A key objective for the trade unions is to secure commitment from the employer not to obstruct unions organising campaigns and efforts to secure recognition and bargaining rights. The employer may also be asked to respect labour standards, including the International Labour Organisation’s core conventions on freedom of association and the right to collective bargaining.

Ninety five* multinational companies have signed agreements of this type with GUFs. The growth of IFAs reached its peak in 2008, with 17 signed in just one year. This rate has dropped to four in 2011 however the number of agreements signed in emerging economies has risen in recent years. Nick says, “Unions are also seeking to strengthen their agreements by adding concrete dispute resolution and implementation mechanisms to hasten progress towards a more mature form of international industrial relations. The decline in growth rate may be a sign of employer reluctance to agree to the terms of the new generation of IFAs however we expect to see the growth rate accelerate once again as economic uncertainty subsides. But it is important for employers to think carefully about the implications of IFAs, which could for example result in an increase in costs in emerging markets.” While IFAs were initially a European trend, with multinationals mainly headquartered in Germany (21 percent,) France (16 percent), Sweden (nine percent) and The Netherlands (seven percent), they are gaining traction beyond Europe. Three Brazilian companies signed agreements in the last four years and two Indonesian companies signed agreements in 2010.

Multinationals headquartered outside Western Europe have now signed more than one fifth (22 percent) of the total number of agreements. Nick adds, “The rise of agreements in emerging economies suggests that the movement is more than a passing European phenomenon. For almost three decades, the world’s biggest corporations have outsourced an increasing share of their manufacturing operations to emerging economies, where they can benefit from lower labour costs and less regulation. “However, China, for example, has witnessed an unprecedented wave of strikes at foreign-owned automotive factories in response to working conditions and wages in recent years. As unions become more international in approach, we expect multinationals will look more carefully at their operations and supply chains to avoid attracting criticism for failing to ensure reasonable working hours, pay, and health and safety conditions for workers”.

There is a growing number of examples of an increasingly international approach to industrial relations, with multinational companies capitulating to trade union demands often after long-running campaigns. Soft laws are proving to be an impressive leverage tool for the trade unions. In 2010, the UK National Contact Point ruled that a Malaysian subsidiary of British American Tobacco had failed to comply with OECD guidelines for operating overseas. The Malaysian Trades Union Congress brought the complaint against the UK-registered multinational for failing to consult an in-house trade union before a major workforce restructuring. As a result, the subsidiary has agreed to formalise its communications guidelines and committed to hold face-to-face meetings with employees or trade unions.

Nick adds, “Notwithstanding the success of actions for non-compliance with OECD guidelines, one of the issues that continues to affect trade unions is the absence of transnational law on collective bargaining and industrial action. Where multinational companies do face co-ordinated pressure, workers and local trade unions are bound by local law restricting the way in which industrial action can be carried out. Employers also need to address co-ordinated industrial action at a local level by using remedies available to them under local law.” Nick concludes, “However even if industrial action is not an option, one of the biggest threats facing multinationals is reputational damage. Employers need to understand the threats and level of risk and have a strategy in place to deal with them. Identify which Global Union Federation is operating inside your company; ensure local managers know what to look out for and how to react and scrutinise the supply chain for any union alliances.”

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