The current state of Negotiating Groups under the new labor reform

The new labor reform bill tried to eliminate the ability of groups of employees gathering together only to negotiate, instead of going through a formal union. This would give the group of employees the ability to collectively bargain exclusively without the union. This act only occurs in companies where there are no formal unions in place. The Constitutional Court considered that this act was in fact, unconstitutional since it would infringe on the right of the employees to bargain collectively. Thus, this potential rule of banning non-unionized collective bargaining was eliminated from the labor reform bill.  This led to the realization that the Labor Code still has some gaps regarding the manner in which negotiating groups can negotiate as well as the lack of clarity for the effects of the agreement signed after a negotiation performed by such groups.

In 2017 the Directorate of Labor issued a number of opinions on the matter, establishing that:

1. There was no legal authority to establish the negotiating procedure for these types of group negotiations.
2. That agreements between negotiating groups and an employer do not formally constitute a “collective instrument”, resulting in the following issues:
   1. The employee part of an agreement reached through a negotiating group would be required to participate in a regulated collective bargaining started by a formal union.
   2. The benefits agreed upon by a negotiating group may not be extended to workers who were not part of that group.
   3. The agreement reached by a negotiating group cannot include a benefit-extension clause.
   4. The agreement reached by a negotiating group has no true merit and cannot be upheld in the Labor Courts.
   5. The Labor Inspector has no obligation to take into consideration or take note of the agreements between a negotiating group and an employer.

However, on July 27^th, 2018 the Director of Labor issued a new ordinance (Ord. No. 3938/33) that modifies the previously mentioned interpretations and establishes that the agreement reached between a negotiating group and an employer constitutes as a legal “collective instrument”, and that the Labor Inspector must take note and formally recognize such agreements.

The new ordinance does not resolve the process through which these types of groups should negotiate, nor does it explicitly state whether, the other issues previously highlighted by the Labor Directorate will be addressed or solved. Thus doubts still persist about whether an employee who receives benefits from a negotiating group agreement can then decide to negotiate through a formal union, or if the extension of benefits of the agreements concluded by the negotiating group and the pact of a benefit-extension clause, or whether that agreement has executive merit or not.

New pronouncements are to be expected from the Labor Ministry or the potential presentation of a new bill by the Labor Minister, in order to solve in the current situation of the negotiating groups.

For more information, please contact:

Jorge Arredondo   

Labor Group Director

jarredondo@az.local

Daniela Hirsch

Senior Associate

dhirsch@az.local