Chile: Statutes, Case Law Strengthen Unions

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By Tom Azzopardi

April 18—Employers in Chile could be facing a dramatic increase in the number of strikes following the approval of a law strengthening the hands of the country's unions and a series of court rulings expanding the right to strike.

The government bill, which received its final approval from senators on April 6 after 15 months of often bitter debate in Congress, promises to massively increase union powers by giving them the exclusive right to negotiate with employers and to decide who can receive benefits gained through collective negotiations and banning all kinds of replacement labor, including existing employees.

The new law would make it almost obligatory for workers to join a union in order to share in benefits gained through collective negotiations, Luis Lizama of Lizama y Cia told Bloomberg BNA April 11.

“Today workers who stay out of a union enjoy some economic benefits—now we are going to the opposite extreme,” he said.

The result will be a significant increase in union membership over the coming years, predicted Francisco Arce of Carey y Cia April 12 at a seminar organized by the Chilean-U.K. Chamber of Commerce.

Currently, approximately 12 percent of the Chilean workforce is unionized, but this figure could rise rapidly as employers are obliged to extend benefits to all those who join the union.

Labor Costs Set to Rise

Labor costs for companies operating in Chile are likely to rise as workers join unions to qualify for additional benefits, according to Juan Andrés Perry of EY Chile.

The legislation also removes numerous restrictions on the kinds of workers who can participate in a collective negotiation. Currently, construction workers, seasonal farm employees and port workers cannot hold collective negotiations. Under the new law, only senior management could not negotiate collectively.

Changes also mean that management could be forced to negotiate with intercompany unions led by officials employed at rival firms, said Perry.

In addition, the new legislation broadens the definition of anti-union practices, removing the need for a union to prove intention in the company's behavior, while the fine labor courts can impose in such cases is doubled.

Ban on Replacement Labor

As well as dramatically increasing the number and size of unions, the law greatly enhances their ability to exert pressure on employers during the negotiation process by banning all replacement labor during a strike.

The ban applies not only to external personnel but also limits how nonstriking employees may be deployed to cover for striking colleagues. Under the new legislation, employers could adjust nonstriking employees' shifts but could not move them to a different workplace, said Arce.

Unions will be obliged to agree with employers on emergency staff to provide essential services during the strike, but this only refers to the minimum staff required to prevent damage to the environment and third parties rather than minimal levels of production or service.

The one bone thrown to employers is that special working hours that once required the approval of labor authorities may now be agreed through the negotiation process.

Challenged as Unconstitutional

According to Lizama, the law represents a huge gain for Chile's labor unions in terms of their muscle with little in return for employers.

“There's no doubt that we are going to have more strikes and longer strikes because it will be much harder for employers to hold out,” the lawyer said.

Promulgation of the law, a key part of President Michelle Bachelet's legislative agenda, has been delayed, however, by legislators from the opposition Independent Democratic Union and National Renewal parties who challenged parts of the bill as unconstitutional before Chile's Constitutional Court.

The lawmakers' suit filed April 7 focuses on four key clauses:

  • the exclusivity of unions in collective negotiations,
  • the right of unions to decide who can qualify for negotiated benefits,
  • intercompany unions and
  • the ability of unions to access company information, including pay sheets, during negotiations.
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    The court has 10 days to issue a ruling, extendable by a further 10 days, suggesting a ruling by early May. If successful, the action would tear the heart out of the reform, noted Arce.

    Right to Strike

    Labor relations in Chile have been further complicated by a series of ground-breaking court rulings radically extending the rights of workers in strike situations.

    In a case involving a wildcat sit-down strike at a call center last November, the Santiago Court of Appeals held that the right to strike could not be limited to the collective negotiation process as the law had been previously interpreted. On March 6, the Supreme Court rejected as inadmissible an appeal by the center's operator Actionline Chile.

    In the intervening weeks, the ruling has already been cited by union officials leading strikes that would have been described as illegal in the past.

    The result is that unions will be able to strike when they like without the need for ballots or mediation and bring almost any company to a halt, Rodrigo Ugarte, a partner at Aninat Schwenke y Cia, told Bloomberg BNA April 11.

    “While the labor reform focuses on the negotiation process and unionization, the ruling goes much further than that and leaves it quite redundant,” said Ugarte, who led the representation of Actionline Chile in the case.

    To contact the reporter on this story: Tom Azzopardi in Santiago at correspondents@bna.com

    To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

    For More Information

    For more information on Chilean HR law and regulation, see the Chile primer.