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Labour Dispute Resolution Systems
in the Asia–Pacific Region
A nine-country comparison
Benedicto Ernesto R. Bitonio Jr.
International Labour Office, Bangkok
2008
Contents
1. Introduction
1
2. Labour Dispute Resolution Systems
Substantive laws
International standards as guideposts
What constitutes labour disputes
Country definitions
International perspective: Points of comparison
3
3
4
9
10
12
3. Labour Dispute Resolution Mechanisms and Procedures
Modes of labour dispute resolution: A hypothetical model
Application of the model: Country experiences
The model applied to the technical conceptualization of
labour disputes
The model and institutional structures
17
17
18
19
4. Governance Issues
Calculating the costs of labour disputes
Effects of substantive laws on mechanism design
Improving access, efficiency and effectiveness
Voice and participation
Rule of law
Accountability
26
26
27
29
31
32
33
5. Convergence and Divergence
Historical movements
Coping with change
35
35
37
6. Moving Forward
Some practices to build on
Reform paths and lessons learned
40
40
40
Annex
Guide questionnaire for evaluating LDR systems
43
Table: Status of ILO Conventions in the nine countries of the study
Figures
Figure 1: Strikes and lockouts in selected countries
(excluding Viet Nam), 1995–2006
Figure 2: Hypothetical model: Modes of dispute resolution
7
iii
20
16
18
iv
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 economic history.2 For
1
On the basis of the GCI criteria, the countries included in the study are grouped as follows: for the factordriven 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.
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
1
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.
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.
2
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 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
3
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 wellbeing; 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 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
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.
4
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
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.
5
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 these Conventions, including the
year they were ratified, among the nine countries.
6
Status of ILO Conventions in the nine countries of the study
China
C 87
Yes
(1973)
No
C 98
Yes
(1973)
No
C 29
Yes
(1960)
No
C 105
Yes
(1960)
No
India
No
No
Japan
Yes
(1965)
No
Yes
(1953)
No
Yes
(1954)
Yes
(1932)
No
Yes
(2000)
No
No
Thailand
Yes
(1953)
No
Yes
(1961)
Yes
(1953)
No
Viet Nam
No
No
Yes
(1957)
Yes
(2005)
Yes
(1969)
Yes
(2007)
Den.9
(1990)
Yes
(1960)
Yes
(1969)
No
Australia
Republic
of Korea
Malaysia
Philippines
No
C 100
Yes
(1974)
Yes
(1990)
Yes
(1958)
Yes
(1967)
Yes
(1997)
Yes
(1997)
Yes
(1953)
Yes
(1999)
Yes
(1997)
C 111
Yes
(1973)
Yes
(2006)
Yes
(1960)
No
Yes
(1998)
No
Yes
(1960)
No
Yes
(1997)
C 138
No
C 182
No
Yes
(1999)
No
Yes
(2002)
No
Yes
(2000)
Yes
(1999)
Yes
(1997)
Yes
(1998)
Yes
(2004)
Yes
(2003)
Yes
(2001)
Yes
(2001)
Yes
(2000)
Yes
(2000)
Yes
(2001)
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 systems
Ratification 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. Specifically, equality of opportunity and non-discrimination, freedom
of association and prohibition against forced labour are incorporated in the
9
Malaysia ratified the Convention in 1958 and denounced it in 1990.
7
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 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.
8
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”.
This section first examines the country-specific definitions and nuances of labour
disputes and then the similarities and differences in conceptualizing them.
10
Compared to China and Viet Nam, Thailand has a relatively thin set of labour laws.
9
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 treated as
an industrial dispute, notwithstanding that no other worker or any union of
workers is a party to the dispute.
10
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.
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
11
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.
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 dispute
The 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
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.
12
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 selforganization or collective bargaining, including strikes, lockouts and matters of
representation or recognition.
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.
13
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.
Subject matter of a labour dispute
Labour 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.
14
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 are negotiation, conciliation,
mediation and interest arbitration. The process involved is analogous to lawmaking 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
13
Paragraph 24, Resolution of the 15th Conference of Labour Statisticians
15
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 dispute
The 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
1,400
No. of strikes/lockouts
1,200
1,000
800
600
400
200
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Year
Australia
China
India
Japan
16
Korea
Malaysia
Philippines
Thailand
2005
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.
17
Figure 2: Hypothetical model: Modes of dispute resolution
Courts
Final
resolution
Arbitration
Conciliation/
mediation
DISPUTE
Dialogue/
negotiation
Resolution
Settlement
Settlement
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, mediation and conciliation, as modes of settling labour or
industrial disputes.
18
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 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
19
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:
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
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.
20
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 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 fulltime 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.
21
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 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 structures
Arbitration 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
Japan Institute for Labour Policy and Training, “Resolving individual labour and management disputes,”
Labour situation in Japan and detailed analysis 2005/2006, p. 28.
16
22
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 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,
23
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 disputesettling 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 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
24
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.
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.
25
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 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.
26
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 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
27
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.
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 rentseeking. 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
28
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 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 payper-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.
29
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 thirdparty 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 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.
30
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).
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.
31
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.
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
32
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.
 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.
33
 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.
34
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.
The third thread is globalization, which brought about political and economic
liberalization. It brought about the collapse of communist regimes and their
35
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
mediation. This is in contrast to the early developers, whose preference was for
third-party intervention outside the enterprise.
36
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 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.
37
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 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 deconcentration of LDR functions but also devolution of governance to the
workplace through more individual contracting and enterprise-level bargaining.
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.
17
38
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
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
40
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 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 postcommunist LDR mechanisms along the initial path used by the early
developers. They chose to start with enterprise-level conciliation and locallevel mediation. The link between this choice with the culture and the
previous political system is an idea that could be explored further.
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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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Annex
Guide 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 systems
1) 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 stateowned?
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 enterprisebased); 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 tradition
1) 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 laws
1)
2)
3)
4)
5)
6)
7)
8)
9)
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?
Do the labour laws cover both the public and private sector, or are there separate laws
for each sector?
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?
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?
Do the laws provide for procedures that enable the parties to work out terms and
conditions of employment through negotiation, whether individual or collective?
Do the laws require registration or notice to an administrative authority before a union
can claim legal existence?
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?
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?
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 mechanisms
1) 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?
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?
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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 available
1) 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 nonbinding, 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 mechanisms
1) 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)?
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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