Sunday, October 4, 2015

Trade unionists, employers, HR professionals, risk officers and anti-corruption activists should unite to end the protection contract system in Mexico

On September 22, 2015, eight multi-national clothing and sportswear companies - including Adidas, American Eagle, New Balance, Nike, Patagonia, Puma, PVH and The Walt Disney Company - sent a letter to Mexican President Enrique Peña Nieto calling on him to outlaw the practice of labor protection contracts in Mexican labor relations because the practice violates international labor norms.

As a practice that intersects the fields of labor rights, human resources management, corporate social responsibility and corporate compliance (including anti-bribery compliance), eradicating the protection contract system will require a multi-pronged, multi-sectoral approach.  Trade unions, worker rights activists and CSR advocates must appeal not only to international labor norms but also to anti-bribery laws and norms.  They must ally themselves with company risk officers, HR professionals and anti-corruption activists to rid Mexico of the invidious practice of protection contracts.

The problem of labor protection contracts in Mexico

Labor protection contracts are part of a decades old practice in Mexico whereby companies enter into "collective bargaining agreements" with individuals claiming to represent trade unions prior to the commencement of operations.  These so-called collective bargaining agreements are registered with state labor boards before employees are hired and without their inscription or agreement.  As outlined in the letter from the Brands to the President of Mexico and discussed in the press release issued by global union INDUSTRIALL, the International Labor Organization (ILO - a UN organization) found in 2012 that labor protection contracts violate international norms on Freedom of Association.  Frequently when workers unite to organize their own union in Mexico, they find that there is already a collective bargaining agreement in place which serves as an obstacle to organizing a truly representative trade union.  In March 2015, the Fair Labor Association published an issue brief on labor protection contracts to educate its constituency.

The link between labor protection contracts and risk of illegal bribery of government officials

Not only do labor protection contracts vitiate employment relationships and distort the collective bargaining process, however.  Surely labor protection contracts do not come for free.  Companies doing business in Mexico must ask themselves to whom are payments for labor protection contracts made, and where does the money end up?  Labor boards in Mexico - where all collective and individual labor disputes are mediated and adjudicated - are tripartite, meaning that they consist of a government representative, an employer representative and a trade union representative.  More frequently than not, the trade union representative sitting on the local labor board is a leader in the "official" trade union with which the company entered into a protection contract.  There is a high possibility that some or all the funds paid in consideration for the protection contract will end up in the pockets of the trade union representative acting in his or her official capacity as a government official on the labor board - creating risk of violating anti-bribery laws for the multi-national company doing business in Mexico.

Bribery of foreign government officials is prohibited by the U.S. Foreign Corrupt Practices Act (FCPA), the Canadian Corruption of Public Officials Act (CFPOA) and anti-bribery laws passed by every OECD member state (including Mexico) in compliance with the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.  To better understand the international anti-bribery framework, see this 2010 web resource produced by the Association of Corporate Counsel as well as this guide to the CFPOA produced on the Business Anti-Corruption Portal.  It should be highlighted that the Canadian government now has wider powers to take legal action against Canadian companies for violations of the CFPOA, as discussed in this April 22, 2014 article in the National Law Review.

Multi-national companies that subcontract work to manufacturers in Mexico may assert that their risk of violating foreign bribery laws is mitigated by the fact that they may not themselves enter into labor protection contracts or make payments to trade union officials sitting on labor boards.  Yet, as discussed in this October 2013 article in Bloomberg Law by FCPA experts on mitigating third party risk in anti-corruption compliance, companies can be held liable for bribes paid by third party agents and contractors.  Companies that invest directly in Mexico and participate directly in payments as a quid pro quo for a protection contract may find themselves in direct violation of anti-bribery laws and truthfulness in books and records requirements.

With the possibility of tens of millions of dollars in legal fees and fines, as well as the risk to reputation and company brand, is taking the risk that a subcontractor may be directly or indirectly paying bribes to government officials sitting on labor boards really worth it?

A path to a solution - partnering with the Mexican anti-corruption movement

Eradicating a protection contract system which has been embedded in HR practice and labor law administration in Mexico for decades will not be an easy task.  Worker rights activists and CSR advocates should not consider themselves alone in the struggle, however.

As discussed by Mauricio Merino Huerta in his June 2015 paper published by the Wilson Center Mexico:  The Fight Against Corruption, the anti-corruption movement in Mexico has been gaining strength in the wake of scandals and tragedies in the last few years.  Merino highlights the work of the Accountability Network, an alliance of a variety of academics and organizations dedicated to the eradication of public corruption in Mexico.  This network has had a number of successes - in particular the passage of national legislation by the Mexican Congress creating a National Anticorruption System that was signed into law on May 27, 2015 (Merino, p. 16).

Joining or partnering with the Accountability Network to raise the profile of the protection contract system in Mexico is just the first step to passing laws and implementing policies to eradicate protection contracts in Mexico.  Worker rights and CSR advocates should also pursue partnerships at the regional and international level.

The next stop should be the OECD itself, where INDUSTRIALL and other international trade unions and worker rights advocates can partner with the OECD's Trade Union Advisory Committee (TUAC) and conscientious employers like the Brands that signed the letter to the President of Mexico can partner with the Business and Industry Advisory Committee (BIAC)  to table text explicitly prohibiting the practice of protection contracts with consequences for companies, manufacturers and employers alike.'

Don't be a rube!  Training of human resources professionals, financial auditors and CSR auditors is needed

It is critical - in fact an absolute necessity - that human resources practitioners both within and outside Mexico be sensitized to the risks protection contracts pose not only from an HR perspective but from a corporate compliance / anti-corruption perspective.  In Mexico, it may simply be that it has been "done this way" for so long that the practice is accepted without conscious thought.  For companies that subcontract or invest in Mexico, it may be simply a matter of HR managers being ignorant of human resources practice in Mexico and relying too heavily on their in-country counterparts.  Human resources management professionals cannot accept at face value assertions that making payments to an "official trade union" before ground has broken on the factory and employees have been hired "is just the way we do things in Mexico."

Two organizations that might be good partners for implementation of this type of training and sensitization program would be the North American Human Resource Management Association (NAHRMA) and the Society for Human Resources Management (SHRM) which offers periodic Global Human Resources Management certification courses and recently established international membership fora outside the United States.  Organizations of financial and CSR auditors can also be partners in the fight to eradicate the protection contract from Mexico's labor relations system by developing methodologies for matching payments to trade unions with dues deducted from workers' pay - or not as the case may be.  The presence of payments to trade unions without matching deductions from workers' pay could be an indicator of the existence of a protection contract - or if union dues are deducted without workers' assent or knowledge.

The protection contract system in Mexico violates international labor norms, decreases the credibility of Mexican legal institutions empowered to enforce labor law, creates financial and compliance risk for international companies doing business in Mexico and diverts resources from the pockets of workers.  It is a relic of a bygone era that has no place in a transparent, modern Mexico.  It is time for everyone at the table to unite and bring an end to it.

Friday, October 2, 2015

Great new policy brief from MPI on health and welfare of left-behind children of Asian labor migrants

Yesterday Kolitha Wickramage, Chesmal Siriwardhana and Sharika Peiris released a great policy brief on the health and welfare of children left behind by moms and dads who migrate from countries like the Philippines, Indonesia, Thailand, Sri Lanka and Vietnam to work in Gulf nations like Saudi Arabia.

Released by the Migration Policy Institute on October 1, 2015, Promoting the Health of Left-Behind Children of Asian Labour Migrants: Evidence for Policy and Action (Migration Policy Institute 2015) includes a solid human rights law framework that balances the rights of children with the right of parents to migrate, cites fascinating (and seemingly rare) studies of nutritional and mental well-being of left-behind children (with surprising outcomes based on cultural and policy maker attitudes) and highlights effective policies in some migrant sending nations.  One of the issues the paper sheds light on is the stress on migrants' parents and husbands who are left behind to hold the family together when moms migrate for work - as well as the pressures placed on the entire family when moms return home after suffering an injury or abuse while working abroad.

All in all, a great read with a lot of things to think about in just a few pages.  Clearly more studies about the health and welfare outcomes for children and family members left behind are needed, as well as creative policies at the local, national and regional level.  Definitely check out this paper!

Tuesday, May 26, 2015

Voice and Transparency in Aaronson's May 2015 paper "New Ideas to Empower US and European Workers in TTIP"

Earlier this year I had the opportunity to participate in an exciting survey administered by Susan Aaronson of the George Washington University Elliott School on how best to incorporate worker rights in the Transatlantic Trade and Investment Partnership (TTIP), a free trade agreement being negotiated between the United States and the European Union.  One of Dr. Aaronson's primary projects is Make Trade Policy More Trusted, Transparent and Accountable at the GWU Institute for International Economic Policy.  Participating in the survey gave me and the other 22 respondents a chance to get some of our ideas and recommendations into trade and labor policy discussions while TTIP negotiations are ongoing.  Some of the ideas I had that made it into the final paper were (1) inclusion of provisions to address human trafficking; and (2) emphasis on utilization of creative international cooperation mechanisms like the Joint Public Advisory Committee which has been an innovative and effective mechanism for public involvement in the North American Commission of Environmental Cooperation.

Susan Aaronson's resulting paper Working by Design New Ideas to Empower US and European Workers in TTIP was released at a joint ILO-GWU conference held in Washington, DC on May 14, 2015.  In addition to the findings and recommendations resulting from the survey, the paper captures some of the misgivings many have about the possible negative impacts the TTIP could have on workers' rights, particularly on strong labor and social welfare protections in most European Union member states.  The paper also captures key differences in the US and EU approaches to labor rights in free trade agreements (See p. 7).

One of the most compelling recommendations from the survey is that labor, human and social welfare rights should be considered and incorporated throughout the text of the US-EU free trade agreement (instead of in just a single chapter) as a way to advance labor rights and increase employment (See pp. 12, 21).  Aaronson points to a proposed "regulatory coherence" chapter that could have a negative impact on worker rights as its aim is to "ensure that domestic regulations, such as environmental regulations, health and safety standards or workplace regulations do not distort trade" (p. 13).  She cites a 2015 ETUI policy brief written by Aida Ponce titled TTIP:  fast track to deregulation and lower health and safety protection for EU workers as an example of how a US-EU free trade agreement regulatory coherence chapter might lower workplace standards in the EU.  Two other proposed chapters that could have a negative impact on worker rights are the proposed services and investment chapters.

The paper also includes some other survey recommendations of note such as:
  • Improvements to the labor dispute process under TTIP (p. 22); 
  • Periodic (every 5 years) reporting on the TTIP's impact on the realization of ILO core labor rights (p. 23);
  • Specific exclusion of minimum or living wage laws, collective bargaining agreements, public procurement standards and public health and welfare regulations from the Investor-State Dispute provisions (p. 21);
  • Establishment of an independent Secretariat to resolve disputes, issue reports, conduct research and engage in innovative projects to promote worker rights (p. 23); and
  • Improved transparency in the TTIP negotiation process to allow the public to better understand how the agreement will expand employment and protect labor rights (p. 24).
The Working by Design paper takes a hopeful stance on ways the TTIP might be used to improve the lives in hundreds of millions of workers in the U.S. and Europe.  Nevertheless, I am left wondering if strong worker and social protections in almost every EU member state might be interpreted as trade distortions under a less than artfully crafted US-EU free trade agreement, leading to erosion rather than improvement of standards.

Finally, while I enjoyed the ILO-GWU conference (and picked up some useful tidbits of updated information) where the Working by Design paper was released, I wonder if the traditional conference format of 15-minute speeches and audience questions is the best way to come up with genuinely creative ideas.  In over 15 years of speaking at and attending international and comparative labor and employment conferences, only once have I attended an event that had an alternative format which captured and improved upon the ideas of the participants - the First Hispanic Forum on a Safe and Healthy Environment held in Orlando in 2003.  At the First Hispanic Forum on a Safe and Healthy Environment, participants were divided into 3 groups where we worked with facilitators to discuss and develop our ideas into a final set of recommendations which were then merged together in a single document on the final day of the Forum.  Maybe the next step in the Working for All work stream should be the First Global Forum on New Ideas and Innovative Strategies to Enhance Economic and Social Benefits in Trade Agreements - where the audience teaches the speakers rather than the other way around.

Can free trade work for all? Canada throws down gauntlet as U.S. attempts to avoid labor obligations imposed on its trade partners

One of the purposes of the May 14, 2015 conference Working for All? New Ideas and Innovative Strategies to Enhance Economic and Social Benefits in Trade Agreements co-hosted by the GWU Elliott School and the International Labor Organization was to shake up Washington policy discussions about incorporation of labor, human rights and social welfare concepts in free trade agreements.

For me, remarks made by Pierre Bouchard (Director of Bilateral and Regional Labour Affairs, Canada) were the highlight of the conference.  Bouchard used the event to highlight a tricky negotiation point with the United States Trade Representative regarding labor provisions in the Trans-Pacific Partnership currently under negotiation.  While the U.S. has made strides in strengthening labor provisions in free trade agreements negotiated after NAFTA, in fact the U.S. has inserted a footnote in each of the post-NAFTA free trade agreements to make sure these broader FTA labor provisions do not apply to the 50 U.S. states, the District of Columbia and U.S. territories like Puerto Rico.  This actually decreases the level of obligation the U.S. agreed to in the NAFTA labor side agreement (NAALC) which contains no such limitation.*  Canada, unlike recent U.S. trading partners like Peru, Singapore, Bahrain and the Central American nations, seems to have both the leverage and the willingness to press this point with USTR.  For U.S. labor rights advocates who have utilized the NAALC as a tool to press for improved labor law enforcement at the federal and state level, it is critical that the Government of Canada prevail on this point.  Hopefully other trading partners in the TPP support Canada in this endeavor if for no other reason than the U.S. should not impose international labor obligations on its trading partners that it is not willing to commit to itself.

Other remarks to highlight during the conference include:

  • The Trans-Pacific Partnership eliminates labor law exemptions for Export Processing Zones in member states (Carol Pier, Deputy Undersecretary, International Labor Affairs, U.S. Department of Labor).
  • Globalization and trade have traditionally been engines of inequality and their gains have not been broadly shared (Lance Compa, Senior Lecturer, Cornell University).  Compa also shared his experiences with the Fruit of the Loom labor rights framework in Honduras.
  • Switzerland and China have negotiated a free trade agreement with labor provisions (Silvia Formentini, Trade and Sustainable Development, European Commission).
  • Chile has negotiated free trade agreements with labor provisions with, in succession, Canada, the U.S., the EU, Japan and now China.  As a comparatively smaller country and economy, Chile must adopt different tactics with each of these trade partners (Pablo Lazo Grandi, Permanent Mission of Chile to UN in Geneva).
  • Canada ratified the ILO Forced Labor Convention (No. 29) as a result of negotiating a free trade agreement with the EU (Pierre Bouchard).
  • Freedom of Association has been seen as a barrier to the Right of Establishment and Investment in the EU (Tonia Novitz, University of Bristol.  For more information, see this 2010 European Parliament briefing note The Impact of the ECJ Judgments on Viking, Laval, Ruffert and Luxembourg on the Practice of Collective Bargaining and the Effectiveness of Social Action or Novitz's 2008 piece A Human Rights Analysis of the Viking and Laval Judgments). 
  • The EU Employer Federation is in favor of ILO standards in the Transatlanltic Trade and Investment Partnership/TTIP (Thomas Zielke, Representative of German Interest and Trade).

 * In fact, a number of NAALC complaints filed with Canada and Mexico allege ineffective labor law enforcement by  U.S. state authorities as well as federal authorities - particularly the Washington Apple, De Coster Egg Packing, New York Workers' Compensation cases (not to mention the North Carolina Public Workers case which is still pending with Canadian authorities).

Monday, May 11, 2015

All hype or maybe some light? May 14 ILO Conference on New Ideas on incorporating labor and human development issues in Free Trade Agreements

The draft agenda is out for the May 14 Conference Working for All? New Ideas and Innovative Strategies to Enhance Economic and Social Benefits in Trade Agreements, co-hosted by the International Labor Organization and George Washington University in Washington, DC.  Speakers include a number of thought leaders and policy makers in the subject area.  Will it all be hype and more of the same ideas everyone has had for the last two decades?  Or will there be genuine dialogue leading to transformative ideas for future policy development and action?  Don't forget to register - and if you can't attend, tune in here for analysis and response.

Saturday, April 4, 2015

Save the Date! May 14, 2015 All Day ILO Conference in Washington, DC on labor issues in trade agreements

Working for All? New Ideas and Innovative Strategies to Enhance Economic and Social Benefits in Trade Agreements

9:00 am to 5:00 pm 


Participation is free, but prior registration is required.  Please register here

Sunday, March 1, 2015

New Book! NAFTA and the NAALC Twenty Years of North American Trade-Labour Linkage (2015)

The 20th anniversary edition of the NAFTA and NAALC monograph in the International Encyclopaedia of Laws, Labour Law and Industrial Relations by Lance Compa and Tequila Brooks provides an up-to-date retrospective on all of the citizen petitions filed under the NAFTA labour side agreement since 1994. The monograph includes early petitions filed about trade union rights at the Honeywell and Echlin plants in Mexico, the McDonald's case in Canada and the Washington Apple and DeCoster Egg cases in the United States as well as more recent petitions filed about migrant worker rights under the H-2A and H-2B visa programs in the US. In addition to being the most complete compilation of NAALC cases in existence today, NAFTA and the NAALC Twenty Years of North American Trade-Labour Linkage outlines the internal mechanics leading to the filing of a 2000 NAALC petition with the Government of Mexico about unequal treatment of migrant workers in the US, and describes changes in the treatment of petitions by US, Mexican and Canadian authorities over the last 20 years. It also contains a chapter that compares the NAALC to the OECD Guidelines for Multi-National Enterprises and highlights recent North American cases filed under the OECD Guidelines including the relatively lesser known 2004 Yucatan Markey Tex-Coco Tex petition which was dual filed under both mechanisms. Finally, the 20th edition introduces a new chapter that compares labour provisions in US and Canadian free trade agreements negotiated since 2000 and discusses recent labour petitions filed under the US-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) and US free trade agreements with Bahrain and Peru.
February 2015, 200pp, softcover
ISBN: 9789041160102

To purchase a copy, find it at