Letters to Lagarde

Everything you ever wanted to know about the controversial Labour Act — this summer’s most hotly contested piece of legislation in Bosnia-Herzegovina.

On Friday, July 31st, the Parliament of the Federation, one of the two administrative subdivisions of Bosnia and Herzegovina, adopted the new Labour Act, settling one of the fiercest debates about economic related issues in the country. But before delving headfirst into what happened, certain details must be explained first for those without much familiarity with labour reform.

The Federation of Bosnia and Herzegovina currently has a registered unemployment rate of about 47 percent, though it should be noted that social benefits paired with health care protection, which are calculated in the registration process, contribute to such a high figure. Keeping the huge grey area of employment in mind, along with various registration issues, accurate estimates place real unemployment at around 25 percent of the population (or from 20 percent to 27.5 percent, according to various estimates).

With its legacy of socialism and a strong workers’ rights system firmly in place, the country faced its transition to a market economy both during and in the immediate aftermath of the Bosnian War for Independence in the 1990s. The Dayton Peace Accords divided the country and entrusted labour legislation to the entities – as administrative subdivisions of the country.

The Federation adopted its first Labour Act in 1999, which defined procedures for the conclusion of employment contracts, working hours, wages, the rights and obligations arising from employment, collective agreements, and the peaceful settlement of collective labour disputes. More significantly, the labour act system established the terms of relations between employers, employees and the government. From this the General Collective Agreement was made, signed by the Employers’ Association, Unions and the Government, defining with more precision certain rules, rights and obligations, especially pertaining to collective bargaining, minimum wage issues, rights related to strikes and other means of workers’ organizing. As the third level of regulation, we find collective agreements between unions and employers, often covering specific branches (railways workers, workers employed in chemical industry, etc.).

In practice, a wide range of workers—especially those employed in the private sector—avoid engaging in union actions despite the fact that extensive labour rights violations do take place. Collective bargaining and specific benefits enshrined in the labour act are only possible for those employed by large companies, those that are partly state-owned, and institutions funded directly through the state budget (education, the health care system, etc.). This means that any heated debate about labour reform is limited to those who are actually receiving benefits through these three channels. This makes the phrase “workers get out on the street” insignificant for the unemployed and most of the private sector.

However, where workers’ unions demonstrated the capacity to organize, the state faced numerous charges of violations of collective agreements. According to Prime Minister Fadil Novalić, labour lawsuits have thus far cost the Federation almost 500 million euros. And it is at this point that the story of the Labour Act in the Federation becomes the recipient of international attention.

During the last session of the Federal government in 2012, an official draft of the new Labour Act was adopted. Very soon, both chambers of the Federal parliament adopted the draft text.

On September 11th, 2012, the International Monetary Fund (IMF) received a Letter of Intent from Bosnia and Herzegovina, seeking IMF support for an economic program. It stated: “We will reach an agreement with representatives of the trade unions on the settlement of government employees’ lawsuits arising from the 2009 and 2010 cuts in wages and allowances by end-August 2012. This agreement will, inter alia, include amendments to the collective agreement to prevent lawsuits in the future.”

Despite its relationship to government employees, where a special Civil Service Act in the Federation of Bosnia and Herzegovina is applied, this was the sign that collective bargaining would come on the agenda with the IMF.

One year later, after the formal public debate on the Labour Act had ended, an official Proposal on the Labour Act was made, though trade unions responded and asked for additional negotiations with the Government.

“We have started extensive consultations with stakeholders, with a view to building a broad consensus and to improving the design of the new Labour Laws, including by strengthening the process for collective bargaining and increasing penalties for Labour Act violations. We aim to have the new Labour Laws adopted by the respective parliaments by end-December 2013,” read the new promise made in a letter to Ms. Christine Lagarde, managing director of the IMF, dated October 9, 2013.

The love letters did not stop there. “We will seek—in cooperation with the social partners—to achieve new laws which will require all collective bargaining agreements to be time-bound,” so said the statement signed and sealed by then-Prime Minister Nermin Nikšić of the Social Democrats  (SDP) on January 8, 2014.

“The entity governments will improve the drafts of new Labour Laws in the coming months, with assistance from the staff of the World Bank and the IMF, that can then form the basis for renewed discussions with the social partners. The drafts at a minimum will: (i) require all collective bargaining agreements to be time-bound, and with sector-specific collective agreements applied only to those enterprises and workers that want to be part of the agreement,” read another statement, again from SDP, in June 2014. One can easily see the progression.

Elections took place in October 2014, which witnessed the total defeat of SDP, with part of their vote transferred to the newly formed Democratic Front (DF), a nominally centre-left party led by Željko Komšić, formerly of SDP. DF formed the government with the centre-right Party for Democratic Action (SDA) and Croat Democratic Union (HDZ BiH).

The international community went on the offensive, with the European Union changing its focus from encouraging basic human rights-oriented constitutional reforms to economic and social reforms. Pressure grew with the so-called Reform Agenda (essentially a document comprised of wishful thinking made to convince the EU that the new government was reform-oriented), and the Labour Act was brought to the agenda. The aforementioned proposal went through significant changes in the meantime, but the government decided to play the entire thing off to make it look the same, presumably so no new public debate would be needed.

Despite the fact that SDP was the party that signed the initial promise with the IMF to begin with, they recently adopted the role of the ‘true left’ (‘when in opposition go left’ policy) and began campaigning against the Labour Act. The strongest opposition party in the Federal Parliament, Union for Better Future (SBB), also made comments critical of the law, though refrained from making direct attacks on its content, focusing instead on the procedures that accompanied the proposed legislation and the circumstances under which the law was being discussed. Meanwhile, DF, despite its decision to leave the Government and coalition with SDA and HDZ BiH (for reasons unrelated to the Labour Act), due to procedural blockades, still has three ministers (out of four) in office.

One of them is Milan Mandilović, Minister of labour and social protection. Despite his title, he remained quite silent on the issue. The leaders of the three mentioned parties — Komšić, Nikšić and Fahrudin Radončić of SBB — met and stated that they would not support the Labour Act. But the move seemed to have more to do with politics than content or substance. In reality, very few representatives of political parties addressed issues of relevance to the proposal itself.

Trade unions made 26 comments on the proposed law. Their remarks addressed issues of individual rights, deadlines, and the time framework related to collective bargaining.

Practically speaking, the new proposal stated that collective agreements could be signed for a limited time period (up to three years), and in case a new accordance was not signed in the interim, that the existing agreement would be applied for an additional 90 days after the initial period had passed. In contrast, many prior proposals had included some variation of the sentence “this collective agreement is concluded for an indefinite period”, or with other terms exceeding proposed deadlines and limits. The new proposal stated that any existing collective agreements needed to be harmonized with the new Labour Act within 90 days of its adoption. However, an option was given allowing for an expansion of up to 90 days. On the basis of problematic individual rights, trade unions pressed for the possibility of 60 hours working time (broken down as a 40-hour work week with 10 hours of overtime, plus up to 10 possible additional hours).

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Then D-day came, and since the ruling coalition, now without the ‘hands’ from their former partners in DF, and unsure about whether or not they could acquire the necessary majority in the House of Representatives, unconventionally decided to first present the law before the House of Peoples. On the morning of August 30th, Prime Minister Novalić received amendments from Naša Stranka (an opposition party with two delegates in the House of Peoples). The proposal was redrafted, and the deadline for the harmonization of existing collective agreements was increased by an additional 90 days to 120 days. In addition, the aforementioned 10 hours of possible additional overtime was removed from the proposal, with a few other related amendments meant to avoid the misuse of contract termination, and the subsequent resetting of contractual start dates with employers.

The session started at 11 in the morning. Delegates from the opposition complained about procedural errors, and representatives from DF, SBB, SDP and NS left the session. Meanwhile, non-violent protests organized by trade unions were taking place in front of the Parliament. With 28 votes for the law, the proposal passed the House of Peoples. The Chairman of the House of Representatives, Edin Mušić, called for an immediate session for Friday — the next day.

In the morning, Novalić was trying to get the majority of the necessary 50 votes in the House of Representatives. SDA and HDZ BiH hurried to get the votes of small populist parties like SBiH, BPS and A-SDA, with whom SDA managed to sign an agreement on cooperation and support. Still, one more vote was needed, bearing in mind that one SDA representative was not able to make it to the session. HDZ 1990, despite having supported the law before the House of Peoples, changed their decision the very next day. An enormous amount of pressure was put on Dennis Gratz, the representative from NS, the party whose part of the proposed changes Novalić had accepted earlier that day. After that, Gratz demanded that another amendment related to guarantees for the securing of employment for workers with reduced ability to work be made. Novalić promised to include this in the General Collective Agreement. During the marathon parliamentary session, other opposition parties also proposed constructive amendments but theirs were turned down, due to requirements of same-text adoption in both houses. The law was ultimately adopted with 50 votes in favor.

It’s summertime for the elected representatives and Prime Minister Fadil Novalić, who can breathe easy for the time being. In September, new issues and proposals will arise for the parliamentary majority to ponder or pass, and each decision will be subject to similar challenges. However, all those letters to the IMF were a bit longer than a single phrase on the Labour Act. But one thing is certain: few are eager to take the helm or responsibility at the moment.


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Nedim Jahić

Nedim Jahić (26, Sarajevo) has been engaged in various civic initiatives in Bosnia and Herzegovina, mostly related to human rights, political freedoms and war crimes. His articles have been published in Al Jazeera Balkans, NIN, BH Dani, Oslobođenje, Novo vrijeme, Today’s Zaman, Peščanik, Kosovo 2.0, RadioSarajevo.ba, Klix.ba, and various other media, publications and reports throughout the region. Jahić has also been engaged in political campaigns and various successful advocacy initiatives in Bosnia through which he's gained experience in political research and education.