Changes in Philippine labour relations policy: Convergence or divergence of productivity, flexibility and welfare?

Abstract

In the first decade of the present century, a succession of changes to Philippine labour law and jurisprudence sought to contribute to productivity and social welfare by introducing greater industrial relations flexibility, based on collective bargaining and voluntary dispute settlement. The article examines whether these changes actually resulted in any shift from a rights-based system for resolving industrial disputation to a system based on workplace-level interest-based negotiation, and whether they were accompanied either by higher labour productivity or by improved social welfare. The analysis draws on a conceptual framework that identifies coherent national labour regulation systems as being based on a convergence of three institutional approaches – to the operation of labour markets, of labour relations and of social security. Broadly, such labour regulation systems can be classified as either civil law or common law based. The Philippine labour regulation system is shown to have a hybrid basis, whose origins are briefly traced by identifying the legacy of the colonial and post-colonial phases, the martial law era and the restoration of democracy in 1986. Whereas Australia, another hybrid system, appears to have achieved some coherence in changes to the regulation of industrial relations, labour markets and social welfare, in the Philippines, such changes have not converged. In the 1990s, efforts to mitigate the traditional legalistic and adversarial character of industrial relations through liberalisation of restrictions on the right to organise were cross-cut by the effects of the growing labour market flexibility that resulted from integration into the global economy. Legal changes between 1999 and 2011 have not fostered voluntary self-organisation of distributive bargaining at enterprise level. Union membership, collective bargaining coverage and numbers of workers involved in notified or actual industrial action have declined, while reliance on compulsory arbitration and monetary compensation claims has remained high. Labour productivity has not improved. Within the context of globalisation, the labour market is increasingly characterised by numerical flexibility and a prevalence of small enterprises. High unemployment levels and a large informal sector indicate divergence between the systems for regulating labour and welfare.

Introduction

This article outlines key trends and developments in Philippine labour laws, rules and jurisprudence, since the 1986 restoration of democracy, and more particularly since 1999. It asks how well these regulatory changes have served the interests of capital, labour and society. It examines the extent to which they have contributed to the establishment of a voluntary industrial relations system based on the collaborative settling of disputes between employers and employee organisations. Such a development would involve a reduction in rights-based applications for centralised state arbitration of disputes and a shift to more participative, interest-based bargaining processes at enterprise level. Indicators would include increases in union density and higher rates of collective bargaining agreement (CBA) coverage. Even if this meant increased numbers of workers involved in strike/lockout notices and actual industrial action, it would also signal a growth in social dialogue, and a greater willingness of both employers and employees and their representatives to engage in integrative or problem-solving bargaining (Walton and McKersie, 1965).

Bitonio (2012) comments on the need for such a change:

The entire [Philippine] labour dispute settlement system has been variously described as adversarial, legalistic and complex, with multiple entry points and multiple layers of appeal. The problem of multiple entry points arises because many agencies are involved in resolving specific types of disputes. This has often resulted in splitting causes of action, delays and inconsistent decisions. (p. 24)

It is therefore important to investigate whether efforts of the past 10 years to create greater bargaining flexibility, through a shift of regulatory focus to the promotion of enterprise level negotiation, have succeeded, and whether these efforts have been associated with improvements in labour productivity, and also with improvements in social welfare. Or has the quest for procedural flexibility in employment relations been cross-cut and undermined by structural changes in a globalising labour market, promoting numerical rather than functional flexibility? Have the forms of industrial relations and labour market flexibility diverged rather than converged, and with what sorts of social welfare changes have they been associated?

In order to investigate these questions, the article is organised into six sections. Following this introduction, the ‘Literature review’ section begins with a literature review outlining theories of convergence and divergence, both between national systems, and within nations, among systems for regulating industrial relations, the operation of labour markets and social welfare. The hybrid civil/common law nature of the Philippines system of labour regulation is emphasised, and the divergent impact of changes to its three elements is contrasted with the more convergent direction of change in labour regulation in Australia, another hybrid system. The ‘Key trends and developments in the Philippines’ section explains the Philippine hybrid system, through a periodised history of regulatory approaches to labour relations, as these evolved through both statute law and case law. It then outlines labour market changes, drawing out conceptualisations of transition and flexibility and illustrating convergence and divergence between the impacts of industrial relations practice, structural adjustment agendas and social welfare. The ‘Recent changes to Philippine labour law and rules and the context of labour market restructuring’ section provides an analytical commentary on recent significant changes to Philippine labour law and its interpretation through administrative decisions and jurisprudence, concluding with a conceptual model of the learning cycle through which a basis for future labour relations practice has been laid down through interpretation and choice of centralised and decentralised approaches to employment relations. The ‘Indicators – Changes to labour market operations, productivity and welfare’ section provides longitudinal evidence, for the period 1999–2011, of the direction of changes to labour market operations, together with indicators of productivity and economic and social welfare. The conclusion argues that the Philippine hybrid civil/common law model has hindered the adoption of distributive productivity bargaining at enterprise level. Efforts to lay a foundation for such a shift have not been able to contend with structural transitions in the labour market, with a large informal sector and insecure forms of flexibility in the ascendency.

Literature review

It is useful to examine the legal origins of an employment or labour relations system, in terms of whether the system is of common law or civil law origin, and the relationship, if any, of these origins with other phenomena in the country. Foster (2005), citing La Porta and others, refers to this approach as legal origins theory. According to Foster (2005),

Most versions of legal origins theory share at least two common assumptions. First, the theories assume that most countries’ legal systems fit into one of two major families, common law and civil law, which date back as far as the twelfth century. Common law developed first in England, and emphasizes judicial discretion and the following of judicial precedents. Civil law, in contrast, originated in Roman law with the Justinian Code, and was reinvigorated by the great state-builders Napoleon and Bismarck. The modern civil law is typically divided into three families, French, German, and Scandinavian. The second common assumption of legal origins theories is that most countries receive their legal systems involuntarily, as through conquest or imperialism. From this observation, legal origins theorists deduce that legal origin is determined exogenously.

Foster cites Botero et al. (2004) to argue that there is a strong correlation between legal origin categories and the categories that they call ‘labour regulations’ embracing employment, ‘collective relations’ and social security. Botero et al. (2004: 1357) argue that common law countries regulate labour more lightly than do civil law countries, with French civil law countries exercising the most interventionist form of labour regulation. These writers propose (Botero et al., 2004: 1339) that in the regulation of labour markets and social security, governments conform to the ‘styles of social control’ that prevail within countries of that legal family. They support this convergence thesis by an empirical analysis, covering a sample of 85 countries. The analysis confirms that all civil law families, particularly those in the French tradition, exercise a higher degree of control over employment and collective relations than do common law countries, while ‘all civil law groups except German civil law have more generous social safety nets than common law countries’ (Botero, 2004: 1365; cited in Foster, 2005:12–13).

The general question to be explored, however, is the extent to which national systems of legal control over employment relations and social welfare continue to maintain their coherence and integration, in the face of the trends to labour market liberalisation that have attended globalisation. Are there both ‘pull’ and ‘push’ factors at work? Is the divergence between civil and common law models holding, in the face of a common global model of market-based ‘deregulation’?

To illustrate these concepts, it is instructive for Anglophone readers to begin by comparing the Philippines with another post-colonial labour law system – that of neighbouring Australia. Although Australia is normally placed with the United Kingdom and the United States in the common law category of lightly regulated industrial relations systems based on collective bargaining, between 1904 and 1988, dispute settling was presided over by a succession of national labour relations Courts (to 1956) and Commissions (to 1998) with powers of both arbitration and conciliation, whose central determinations in effect established social rights (Mitchell et al., 2013). From 1988 to 1990s, the renamed Australian Industrial Relations Commission presided over a shift to enterprise-level agreement-making. Between 1996 and 2009, there was a further legislative shift towards decollectivisation, with a lifting of the obligation on employers to bargain and the Commission losing its powers of minimum wage setting and becoming (in essence) a voluntary dispute resolution body. The Fair Work Act (2009) oversaw a return to collective bargaining underpinned by a safety net of modern awards and a restoration of the power of the tribunal, renamed Fair Work Australia, over minimum wage setting (Balnave et al., 2010). This system of labour regulation, despite its common law origins, has been characterised by a convergence of protective industrial relations law and social safety net legislation. While union bargaining scope is restricted to industrial matters and largely excludes questions that might be candidates for co-determination in some civil law systems, nevertheless, awards and agreements are comprehensive in their working conditions prescriptions, their coverage extends well beyond union members, and they supplement what would otherwise be a fairly restricted means-tested welfare system. Despite a decline in union density between August 1992 and August 2011, from 43% to 18% for males and from 35% to 18% for females (Australian Bureau of Statistics (ABS), 2012), and the exposure of labour markets to global pressures, in October 2013, the national minimum wage was 52.7% of median weekly earnings, compared with 47.2% in the UK and 38.2% in the US, two common law countries with greater reliance on market regulation (Healy, 2014: 27). Certainly, numerical flexibility has grown: in November 2013, 15.6% of employed men and 23.0% of employed women were in casual jobs (ABS, 2013). For the majority inside the regulated system, however, it is possible to agree with Mitchell et al. (2013) that in Australia

… it is necessary to view employment legislation and welfare state provisions as operating as complementary mechanisms acting in combination to contain the socially disruptive character of free markets … (p. 17)

This hybrid system of labour regulation, with its partial convergence of industrial relations, welfare state and labour market regulation, provides a useful contrast from which to analyse the Philippine system – a hybrid civil/common law system in which the three aspects of labour market regulation are less convergent.

Key trends and developments in the Philippines

Our starting point is to establish where the Philippine employment or labour relations system came from, how it evolved and what is uniquely Philippine about it. Is there a congruence in changes to the regulations shaping the labour market, industrial conflict resolution and the social safety net? What distinguishes these regulatory ‘push’ and ‘pull’ factors, from those in neighbouring Australia?

Policies on settling labour disputes adopted by the Philippine government are said to have evolved over four periods (National Conciliation and Mediation Board, 1999):

1. 1. Commonwealth period (1936–1953)

2. 2. Industrial Peace Act period (1953–1972)

3. 3. Martial Law period (1972–1986)

4. 4. Post-Martial Law period (1986–present)

Through the Commonwealth Act 103, enacted in 1936 pursuant to the 1935 Constitution’s social justice policy, the Court of Industrial Relations (CIR) was created to handle compulsory arbitration of labour disputes. Thus, the system of compulsory arbitration was introduced in the Philippines. The CIR had jurisdiction to ‘consider, investigate, decide, and settle any question, matter, controversy or dispute arising between, and/or affecting, employers and employees or laborers’, and landlords, tenants or farm labourers, and regulate the relations between them (Commonwealth Act 103, Sec 1). The CIR had similarities to the National Labor Relations Board of the United States which had been created under the Wagner Act (1935) a year earlier. Prior to the 1935 Constitution, a laissez faire policy had been in existence in the country. For example, Spanish civil law was applied to labour and employment relations, and Act 4055 (1933) on voluntary mediation, conciliation and arbitration was promulgated. (Institute for Labor Studies, 2005: 13). ² Spanish civil law had been transplanted during the Spanish colonial period, particularly in 1889. Spanish civil law is based on Roman law (Coquia, 1979: 2).

Owing to the perceived failings of the compulsory arbitration method, however, such as the slow disposition of labour disputes (Institute for Labor Studies, 2005: 15), the Republic Act 875 or the Industrial Peace Act, also patterned after the US Wagner Act (1935), was passed in 1953:

The Act severely restricted the compulsory arbitration powers of the CIR. The latter was divested of the power to set wages, rates of pay, hours of employment, other terms or conditions of employment, or otherwise regulate the relation between employers and employees, as a compulsory arbitration body, except in labor disputes involving industries indispensable to the national interest. (National Conciliation and Mediation Board, 1999, note 1)

Via this law, the regime of freedom of association and collective bargaining began. The elimination of causes of industrial unrest through the encouragement and protection of the exercise by employees of their right to self-organisation for the purpose of collective bargaining, the promotion of sound stable industrial peace, the settlement of issues between employers and employees through collective bargaining and the prescription of rules to be followed in the negotiation and administration of collective bargaining agreements were among the declared policies of the law ( Republic Act No. 875. 1953: sec. 1).

In 1974, Presidential Decree 442, otherwise known as the Labor Code of the Philippines, became effective, 2 years following the declaration of martial law. The then President, Ferdinand Marcos, exercised law-making power. The Labor Code preserved both methods of dispute resolution – compulsory arbitration, but this time by the Secretary of Labor or the President and the National Labor Relations Commission (NLRC) in specified cases, and freedom of association and collective bargaining (Labor Code arts. 211, 213–225, 227, 234–263). This is evident from the Labor Code’s declaration of basic policy requiring the State to, among others, regulate the relations between workers and employers and assure the rights of workers to self-organisation and collective bargaining (Labor Code art. 3).

There have been significant amendments to the Labor Code, many of which took place after Corazon Aquino became President of the Philippines in 1986 and the present Constitution was ratified in 1987. Democratic institutions were thereby restored. Significantly, the policy expressing preference for voluntary modes in settling labour disputes, including conciliation, was established in the 1987 Constitution. Among the amendatory laws is Republic Act No. 6715 (1989) or the Herrera-Veloso Law. For instance, the Herrera-Veloso Law enlarged the scope and meaning of grievances to include questions regarding implementation or interpretation of company personnel policies (Labor Code art. 260). The Herrera-Veloso Law also expanded the jurisdiction of voluntary arbitrators who shall hear and decide grievances regarding implementation or interpretation of company personnel policies and, upon agreement or consent of the parties–disputants, may hear and decide all other labour disputes including unfair labour practices (ULP) and bargaining deadlocks (Labor Code art. 261, 262). Moreover, through Republic Act 6727 (1989) or the Wage Rationalization Act, the jurisdiction of voluntary arbitrators was expanded further to include unresolved wage distortion disputes (Labor Code art. 124). Another amendatory law is Republic Act No. 9481 which was enacted in 2007 to strengthen the right to self-organisation.

Meanwhile, the Single-Entry Approach (SEnA) was introduced in 2010 via an administrative issuance. Under the SEnA, there is a 30-day mandatory conciliation–mediation process for labour disputes. But management prerogative remains anchored to civil law property rights and the policy of laissez faire.

Therefore, the Philippine system is a hybrid. It has common law and civil law origins, and our task is to identify whether these divergent origins have resulted in a labour law system whose components interact in a convergent way or whether they have pulled in different directions, and how they have interacted with other pressures for labour market restructuring.

Recent changes to Philippine labour law and rules and the context of labour market restructuring

There has been a rapid succession of changes to Philippines labour law and jurisprudence since 1999. Analysis of these changes needs to take account of their context – the end of the stability that characterised the post-war era, and within which labour standards were formulated. Changes to Philippines labour regulation have been influenced by the global transition from a Fordist system of employment and social protection regulation, stabilised by mass production and male wage-earner welfare, to post-Fordist forms of regulation based on flexible markets; specialised production; the drawing of increasing numbers of women into the labour market; and insecurity of labour categories, industry conditions and social and political relations (Lurie, 2012; Wilson and Ebert, 2013; Vosko, 2010).

These global tendencies mean that workers in the Philippines, as elsewhere, now face many labour market transitions. Full-time, permanent male employment and the education–work–retirement life cycle have become atypical. Individuals face several types of labour market transitions – transitions between jobs (i.e. movement of workers from one job to the next, voluntary or involuntary), transitions between employment and unemployment (e.g. due to disability) and transitions between several work statuses (e.g. between employment and self-employment, or full-time and part-time or permanent and casual jobs). Employment security is governed in part by the flexibility of employment practices, job structures and labour markets. For employers, external numerical flexibility is based on freedom to hire and dismiss, while internal numerical flexibility may involve flexibility in work scheduling, including part-time work, overtime and flexible working hours. Functional flexibility is the ability to move among tasks, and wage flexibility is the capacity of employers to reduce or increase wages or to move to result-based pay (Kalleberg, 2009; Lurie, 2012: 8-9). However, as a general rule, any reduction in wages below minimum wage rates is prohibited under the Philippine Labor Code. When analysing changes in the framework of industrial relations regulation, it is therefore important to identify how they are linked to transitions in the structuring and operation of labour markets and the social safety net.

Between 1999 and 2011, there were 16 significant changes in, or the introduction of new, laws, rules or jurisprudence ³ affecting unions and collective bargaining agreement-making in the Philippines.

It was held in Serrano v. NLRC and Isetann Department Store (2000) that an employee, whose termination from employment is based on just or authorised cause but is not in accord with proper procedure, is entitled to full backwages as his dismissal, although valid, is ineffective. The authorised cause for dismissal in Serrano was redundancy owing to contracting out of the activities of the in-house security division headed by Serrano.

Previously, the Department of Labor and Employment (DoLE) had issued Department Order (DO) No. 10, Series of 1997 prohibiting labour-only contracting ⁴ but at the same time permitting seven forms of contracting or subcontracting. This DO was widely opposed by regular employees, who argued that it allowed firms to remove them and pass on their jobs to contractors and subcontractors. In response, the DoLE then promulgated DO No. 3, Series of 2001, revoking DO No. 10, continuing the prohibition against labour-only contracting, and giving government, workers and employers the opportunity to shape a new and more responsive set of rules through the Tripartite Industrial Peace Council. Thus, DO No. 18-02 was issued by the Secretary of Labor on 21 February 2002. It still banned labour-only contracting and prohibited six other forms of contracting and subcontracting. DO No. 18-02 required contractors and subcontractors (e.g. corporations, cooperatives, partnerships) to register, in order to facilitate labour market information monitoring: a contractor who fails to register is presumed to be engaged in labour-only contracting (Sale, 2002).

Trade union combinations (mergers or consolidations of labour organisations), multi-employer bargaining (one CBA covering two or more employers as well as bargaining units), CBA deregistration and interpleader/intervention ⁵ are rather novel processes that were recognised under DoLE DO No. 40-03, Series of 2003.

The Labor Standards Enforcement Framework (LSEF) ⁶ of the DoLE was introduced as a self-enforcement mechanism based on cooperation among employers and their employees. Self-assessment was to be undertaken by employers of establishments employing at least 200 workers and unionised establishments with certified collective bargaining agreements regardless of the number of workers employed. Self-assessment was to be jointly conducted by the representative of the employer and the representative of the workers/union or the representatives of the Labor Management Committee or Health and Safety Committee. Inspections were required in workplaces with 10–199 workers and effected restitutions/corrections if there were violations. Advisory services were to be provided in workplaces with less than 10 workers and those registered as Barangay Micro-Business Enterprises (BMBEs) (Sale and Bool, 2010: 82–83).

Meanwhile, the Serrano protections against labour-only contracts were modified in Agabon et al. (2004), a case taken against the National Labor Relations Commission. As a result, in termination disputes, nominal damages, usually equivalent to 1 month’s salary, are now awarded instead of full backwages where there is just or authorised cause for termination but the employer failed to follow due process.

In 2005, there were further amendments to DoLE DO No. 40-03. DO No. 40-C-03, Series of 2005 (DoLE, 2005a) defined those entitled to join labour unions and workers’ associations and specifically included foreign nationals with valid working permits, while DO 40-E-03, Series of 2005 (DoLE, 2005b) clarified the appeal procedure in certification election protest by adding five new sections aimed at achieving speedy disposition of representation disputes.

As already noted, Republic Act No. 9481 – an act aimed at strengthening the workers’ constitutional right to self-organisation and amending the Labor Code for this purpose – became law in 2007. Among its features are the relaxation of requirements on charter registration (by national unions or labour federations) of union locals or chapters, the eligibility of unions of rank and file employees and supervisors in an establishment to join the same national union or federation, a contraction of the grounds for union registration cancellation and the applicability of the ‘employer bystander rule’ during representation disputes. The last-named of these provisions establishes that when employees in a workplace petition for a union certification election, the employer is a mere bystander and cannot oppose the petition.

Also in 2007, the Supreme Court promulgated a significant decision relating to protection from unfair dismissal. In King of Kings Transport, Inc., et al. v. Mamac, the Court held that in terminating the services of employees, the first written notice to be served on the employees should contain the specific causes or grounds for termination against them, and directed that the employees be given the opportunity to submit their written explanation within a reasonable period of at least 5 calendar days. After serving the first notice, the employers should schedule and conduct a hearing or conference, which could be used by the parties as an opportunity to come to an amicable settlement. After determining that termination of employment is justified, the employers shall serve the employees a written notice of termination (Sale and Bool, 2010: 81–82). The requirement for and purpose of the 5 calendar days was enunciated for the first time by the Supreme Court in King of Kings.

In 2008, DoLE (2008) DO No. 40-03 was further amended in consonance with the changes to the Labor Code introduced by Republic Act No. 9481. However, these administrative amendments are quite incomplete as rules designed to give effect to the law. For instance, pursuant to Republic Act No. 9481, Articles 234 and 245 of the Labor Code now contain the following provisions:

ART. 234. Requirements of Registration – A federation, national union or industry or trade union center or an independent union shall acquire legal personality and shall be entitled to the rights and privileges granted by law to legitimate labor organizations upon issuance of the certificate of registration based on the following requirements:

1. (a) Fifty pesos (P50.00) registration fee;

2. (b) The names of its officers, their addresses, the principal address of the labor organization, the minutes of the organizational meetings and the list of the workers who participated in such meetings;

3. (c) In case the applicant is an independent union, the names of all its members comprising at least twenty percent (20%) of all the employees in the bargaining unit where it seeks to operate;

4. (d) If the applicant union has been in existence for one or more years, copies of its annual financial reports; and

5. (e) Four copies of the constitution and by-laws of the applicant union, minutes of its adoption or ratification, and the list of the members who participated in it.

ART. 245. Ineligibility of Managerial Employees to Join any Labor Organization; Right of Supervisory Employees - Managerial employees are not eligible to join, assist or form any labor organization. Supervisory employees shall not be eligible for membership in the collective bargaining unit of the rank-and-file employees but may join, assist or form separate collective bargaining units and/or legitimate labor organizations of their own. The rank and file union and the supervisors’ union operating within the same establishment may join the same federation or national union.

The effects of these amendments are the relaxation of the requirements on charter registration (by national unions or labour federations) of union locals or chapters, because now national unions or labour federations acquire legal personality and are entitled to the rights and privileges granted by law to legitimate labour organisations upon issuance of their certificate of registration based on the requirements in Article 234, and the eligibility of the unions of rank and file employees and supervisors in an establishment to join one and the same national union or federation. A closer examination of DO No. 40-F-03, Series of 2008 would reveal that these important changes were not addressed (DoLE, 2008).

A union 2008 initiative illustrates the dual use of common law and case law to define and extend the foundations of labour relations. The case of Standard Chartered Bank v. Standard Chartered Bank Employees Union (2008) is significant because it illustrates two possible sources of rights and obligations that coexist in an organised establishment. Whereas a collective bargaining agreement was used to establish spousal maternity leave entitlements, Article 100 ⁷ of the Labor Code, which lays down the principle of non-diminution of existing employee benefits, was used to secure outpatient medical reimbursement.

Whereas voluntary bargaining or arbitration is the preferred method of dispute resolution, Book V of the Labor Code authorises compulsory arbitration in industries deemed indispensable to the national interest. The Office of the President of the Philippines has power to designate such industries, and also to arbitrate. The Secretary of the Department of Labor has authority to assume jurisdiction over disputes in indispensable industries. DoLE DO No. 40-G-03, Series of 2010 further amended DoLE DO No. 40-03, to clarify the conditions under which the Secretary may assume jurisdiction over such disputes, among others, for speedy case disposition (DoLE, 2010a).

As mentioned, a major objective of labour relations regulation reform during this decade was to further implement the preference for voluntary modes in settling labour disputes under the 1987 Constitution and the Labor Code. To this end, in 2010, a process based on a single-entry approach (SEnA) was implemented via DO No. 107, Series of 2010. This mandates a 30-day conciliation–mediation period for all labour and employment cases (DoLE, 2010b). In conciliation–mediation, the conciliator, by cooling tempers, aids the parties in reaching an agreement, while the mediator studies the position of each side and makes a proposal, but does not render an award or decision.

Reflecting both the increase in female employment and the increased temporal flexibility of the labour market, in 2011, Republic Act No. 10151 repealed the prohibition on night work for women. The law allows employment of night workers – employed persons whose work requires performance of a substantial number of hours of night work which exceeds a limit fixed by the Secretary of Labor after consulting workers’ representatives/labour organisations and employers.

Finally, responding to the further growth in precarious forms of numerical flexibility in the labour market, an attempt was made to address the gaps in DO 18-02, Series of 2002. In November 2011, DoLE DO 18-A, Series of 2011 was promulgated. This Order was designed to ensure better enforcement of workers’ security of tenure, and rights to labour standards. While recognising subcontracting as a legitimate business undertaking, it tightened requirements so that only legitimate entities can subcontract jobs or services (DoLE, 2011a, 2011b).

Needless to state, rules influence action and action has outcomes. In turn, the interpretation of outcomes affects rules (Figure 1).

Figure 1. The learning cycle.

Source: March (1994: 81–82). ⁸

Conceptualisations of work matter (Budd, 2011). This observation is cogent particularly in the application of rules via action and interpretation of outcomes. If the actor (e.g. an employer) and the interpreter of the outcomes (e.g. a labour arbiter or judge) both see work as a mere ‘commodity’ – ‘an abstract quantity of productive effort that has tradable economic value’ (Budd, 2011: 14), but the rules say otherwise in that work is regarded as ‘an activity pursued by human members of a community entitled to certain rights’ or ‘occupational citizenship’ (Budd, 2011), the efficacy of the rules is stymied by the action and interpretation. For instance, the modification of Serrano (2000) by Agabon (2004) seems to indicate how work is conceptualised, that is, as a commodity, since terminating the employment of a regular employee has become less difficult.

With this in mind, we turn to a systematic empirical investigation of whether the framework of legislation, jurisprudence and administrative interpretation/application of the law through DoLE Orders has served to strengthen employee voice, union organisation and the enhancement of productivity through the decentralised adoption of distributive bargaining.

Indicators – Changes to labour market operations, productivity and welfare

Table 1 summarises the changes to labour relations regulation outlined above. Have these changes in law and public policy been associated with any increases in union density, CBA coverage, number of workers involved in industrial action and labour productivity, among other indicators of the direction of changes to labour markets, labour relations and welfare? Have the changes influenced the use of voluntary approaches? Or have the increasingly transitional nature of the labour market, and the growth of numerical flexibility, resulted in a growing divergence, rather than convergence, between the interests of capital, labour and society? These questions are addressed through a descriptive analysis of trends reflected in recent aggregate quantitative data from the DoLE’s Bureau of Labor and Employment Statistics (BLES).

Table 1. Major changes in, or new, laws, rules or jurisprudence, Philippines, 1999–2011.

Source: Sale (2011) and this study.

CBA: collective bargaining agreement; NLRC: National Labor Relations Commission; DoLE: Department of Labor and Employment; DO: Department Order; LSEF: Labor Standards Enforcement Framework.

After a severe decline in union membership and density between 1999 and 2002, Figure 2 illustrates stabilisation and a slight membership growth between 2003 and 2009. This growth did not quite keep pace with workforce growth and appears to have lost some momentum in 2010 and 2011. The enactment of Republic Act No. 9481 – the law passed by Congress to strengthen the right to self-organisation – and issuance of rules to implement it, and the promulgation in 2007 of King of Kings Transport, Inc., et al. v. Mamac, coincided with some increases in union membership (Figure 2).

Figure 2. Union membership and union density, Philippines, 1999–2011.

Source: BLES (2013b: Table 18.2).

BLES: Bureau of Labor and Employment Statistics.

There was also small and uneven growth in new CBA coverage, but not sufficient to compensate for the decline in coverage by existing CBAs (Table 2 and Figure 3). By far the most common provision was for wage increases, with emergency and educational loans the only other significant benefit and maternity/paternity aid negotiated in only 10% of agreements. Of supplementary benefits and bonuses, the most common were longevity/loyalty pay. The incidence of productivity pay clauses declined (BLES, 2013b: Table 19.3).

Table 2. Existing and newly filed private sector collective bargaining agreements (CBAs), Philippines: 1999–2012.

Source: BLES (2013b: Table 19.1).

BLES: Bureau of Labor and Employment Statistics.

Figure 3. Workers covered by CBAs, Philippines, 1999–2911.

CBA: collective bargaining agreement.

As Table 3 and Figure 4 indicate, there has been a marked decrease in industrial disputation since 1999. The difference in all years between dispute notices filed and actual strikes and lockouts suggests that the act of filing has itself operated either as a negotiating tactic or (more likely) as a strategy for seeking arbitration or conciliation. Nevertheless, strong decline in dispute notification and industrial action is not an indicator of the growth of effective distributive bargaining. It is more likely to reflect an ongoing reliance on state arbitration and on non-collective litigation and may also reflect a growing disengagement from workplace dialogue, resulting from growing insecurity in flexible labour markets.

Table 3. Industrial Dispute Indicators, Philippines, 1999–2011.

Source: BLES (2013b: Table 21.1); Sale (2011).

BLES: Bureau of Labor and Employment Statistics.

Figure 4. Workers involved in strike/lockout notices, Philippines, 1999–2011.

Source: BLES (2013b: Table 21.1).

BLES: Bureau of Labor and Employment Statistics.

Figure 5 indicates that indeed original and appealed compulsory arbitration cases and money claims handled by DoLE Regional Offices remained high between 1999 and 2011. Figure 3 indicates over 40,000 compulsory arbitration cases a year, with the number of appealed cases peaking at 19,153 in 2008. DoLE Regional Directors are authorised to adjudicate claims up to P5000, and the incidence of such claims has shown no diminution.

Figure 5. Compulsory arbitration cases, Philippines, 1999–2011.

Source: DoLE, cited in Sale (2011: 93, 96).

DoLE: Department of Labor and Employment.

Sale (2011: 93, 96) has argued a significant negative relationship between trends in union membership and compulsory arbitration, and between the incidence of CBAs and of applications to regional offices for small claims adjudication. Thus, in contrast to risk-sharing through the distributive negotiation of collective bargaining agreements, disputants not covered by collective bargaining agreements are still reliant on the all-or-nothing risk of resorting to compulsory conflict resolution.

We turn now to the question of the possible productivity implications of an industrial relations system that is heavily reliant on state adjudication. The Philippine Bureau of Labour and Employment Statistics (2013b, Explanatory Notes) defines labour productivity, measured at the national level as the ratio of Gross Domestic Product (GDP) to total national employment. While this ratio, measured in constant terms, increased from year to year between 2000 and 2011 (Figure 6), the annual rate of growth, in constant 2000 prices, was uneven, and vulnerable to climatic factors and the external shock of global economic downturn in the years after 2009 (Figure 7).

Figure 6. Labour productivity (actual prices), Philippines, 1999–2011. ⁹

Source: BLES (2013b: Table 10.1).

BLES: Bureau of Labor and Employment Statistics.

Figure 7. Labour productivity growth rate (constant 2000 prices), Philippines, 2000–2011.

Source: BLES (2013a: Part B).

BLES: Bureau of Labor and Employment Statistics.

It is very important to recognise the uneven nature of outcomes across regions and sectors. CBA coverage, union density, number of workers in strike notices, labour productivity, unemployment, number of small and bigger enterprises and minimum wages are higher in the National Capital Region (NCR) compared to other regions of the Philippines.

The incidence of underemployment and poverty has been higher outside the NCR. Figure 8 indicates the high incidence of both poverty, as officially measured by the Philippine Statistics Authority (National Statistical Coordination Board, 2013), and of underemployment (BLES, 2013b), which give a fuller picture of the welfare effects of labour market outcomes than do unemployment statistics alone.

Figure 8. Incidence of poverty, unemployment and underemployment by region, Philippines, 2009–2011.

Source: National Statistical Coordination Board (2013); Sale (2011) based on BLES data; BLES (2013b: Table 4.1).

BLES: Bureau of Labor and Employment Statistics.

Horizontal axis: Regions

1 – National Capital Region; 2 – Cordillera Administrative Region; 3 – Ilocos Region; 4 – Cagayan Valley; 5 – Central Luzon; 6 – CALABARZON; 7 – MIMAROPA; 8 – Bicol Region; 9 – Western Visayas; 10 – Central Visayas; 11 – Eastern Visayas; 12 – Zamboanga Peninsula; 13 – Northern Mindanao; 14 – Davao Region; 15 – SOCCSKSARGEN; 16 – Caraga; and 17 – Autonomous Region in Muslim Mindanao.

As Table 4 indicates, outside the NCR, the economy is dominated by small enterprises (defined as those employing less than 10 workers). About 92% of establishments in the Philippines are small enterprises. This helps to explain the low coverage of collective bargaining. Significantly, almost two-thirds of new agreements and over half the workers covered by CBAs were located in the NCR in 2011 (BLES, 2013b: Table 19.2). In small enterprises not covered by self-assessment and inspection under the LSEF, workers with money claims file cases with the NLRC or DoLE Regional Offices. The relationship of enterprise size to productivity can be seen from Table 4.

Table 4. Enterprise size and labour productivity by region, Philippines, 2010.

Source: Sale (2011); BLES (2013b: Table 10.2).

BLES: Bureau of Labor and Employment Statistics.

Labour productivity measured as ratio of Gross Value Added to employment.

Meanwhile, other factors linked to levels of productivity and poverty are the growing size of the services sector, which now accounts for more than 50% of all jobs (Figure 9), and employment in the informal sector, which is also rising. In a study of informal employment in 47 countries, the International Labour Organization (ILO, 2012) estimated informal employment in the non-agricultural sector by removing the double-counting in two overlapping measures: persons employed in the informal economy and persons in informal employment (ILO, 2012). The resulting figures identify the Philippines as having the highest rate of informal non-agricultural employment of the 47 countries studied: 70.1% of non-agricultural employment (Table 5). A simple addition of informal sector employees and informal employees outside the informal sector arrives at a proportion of well over 80%, but includes in the count approximately 3 million people with formal jobs and the labour rights. Even when these are excluded from the count, in 2008, there were still 15,150,400 people in informal non-agricultural employment.

Figure 9. Employed persons by major industry group, Philippines, 2010 (‘000).

Agriculture – agriculture and fishing; Industry – mining, construction, electricity, gas and water and manufacturing

Source: BLES (2013b: Table 3.6).

BLES: Bureau of Labor and Employment Statistics.

Table 5. Persons in informal employment as a proportion of the non-agricultural sector Philippines, 2008.

Source: ILO, 2012: Figure 1, Annex 2 and detailed excel files.

ILO: International Labour Organization.

Globalisation has contributed to the rise, rather than the decline, of flexible employment and the spread of informalisation in new parts of the service economy. However, advances in information and communications technology have enabled multinational companies to have work done off-shore (Montecillo, 2011). The information technology-business process outsourcing (IT-BPO) and global in-house centre industry in the Philippines has reportedly grown at an annual rate of 30% over the last decade (Miraflor and Manalac, 2012). However, there is no documented case of unionised establishments in the industry (Bool-Sale and Sale, 2010).

Labour market flexibilisation, decollectivisation and informalisation of labour markets were in fact facilitated by some of the regulatory changes that occurred during the decade to 2011. Serrano v. NLRC and Isetann Department Store (2000) and changes to contracting and subcontracting rules in 2001 and 2002 tended to encourage a shift away from regular employer–employee relationships and towards service agreements between employers and contractors (external service-providers). While some self-organisation and collective bargaining rules were amended in 2005, Agabon, et al. v. NLRC, et al. (2004) tends to contribute to the practice ‘dismiss now, pay later’, by making termination of the employment of regular employees less difficult.

The 2007 enactment of the law strengthening the right to self-organisation (Republic Act No. 9481), and the promulgation in the same year of the King of Kings Transport, Inc., et al. v. Mamac judgement, protecting against arbitrary or unjust dismissal, have not been accompanied by any increase in union membership, either in absolute numbers or as a proportion of total wage and salary workers. Existing CBAs, and CBA coverage, have remained low and, at some points, even decreased. The number of workers involved in industrial disputation has declined, and voluntary approaches, like conciliation–mediation when notices of strike or lockout are filed, are hardly utilised. SEnA started in 2010, yet compulsory arbitration cases and money claims handled by the NLRC and DoLE Regional Offices continue to predominate. Most labour disputes are converging towards the compulsory conflict resolution modes of arbitration (by the NLRC) and adjudication (by DoLE Regional Offices), although data across regions and sectors show uneven or divergent outcomes.

Conclusion

It has been established that changes to industrial relations regulation in the Philippines between 1999 and 2011 have not served to increase union density, CBA coverage or number of workers involved in the preliminaries (such as strike/lockout notices) to bargaining. Nor have there been increases in labour productivity, among other indicators of beneficial economic outcomes. Ambiguous, inconsistent, incoherent, incongruent or incompatible laws, rules or jurisprudence do not contribute to workplace or labour productivity.

Rules influence actions, actions have outcomes and, in turn, the interpretation of outcomes affects rules. Rules or institutions are repositories of history and learning. Labour disputes per se require less regulation by government and more collaboration by parties–disputants, while self-organisation and collective bargaining, paradoxically, require more and more effective regulation (Sale, 2011). Hopefully, in time, SEnA will provide the impetus for a shift to greater more collaborative and constructive resolution of the competing interests of disputants. On the other hand, the absence of implementing rules for the amendments made (via Republic Act No. 9481) to Articles 234 and 245 of the Labor Code illustrates why regulation is a prerequisite for self-organisation and collective bargaining. How work is conceptualised matters (Budd 2011). And the long-term effects, if any, of SEnA, Republic Act No. 10151 and DoLE DO 18-A, Series of 2011, which are relatively new, on union density, number of CBAs and CBA coverage remain to be studied in future research.

The mixed outcomes, or simultaneous patterns of convergence and divergence, documented in this study, have been influenced by changes in the structure of the labour market, such as high unemployment and underemployment rates, accompanied by a high incidence of poverty. The growth of numerical flexibility has been accompanied by a prevalence of small enterprises and the spread of informal employment even within the formal sector. Globalisation has spurred services sector growth which has coincided with the growth of informal labour markets based on small entrepreneurship and the displacement of employment by contracts for services, for example, in telecommunications. Inadequate wages and skills in the agriculture sector have pushed workers to move to urban areas seeking better wages in the formal sector, but they have not been absorbed. Small domestic enterprises flourish as bigger enterprises find it hard to compete in larger markets dominated by multinational enterprises (Sale, 2011).

It has been argued that the hybrid common law and civil law origins of Philippine labour law have not converged well with transitions in the shape of the labour market, with detriment to the management of social welfare. Compared with Australia, the Philippines has not moved safely from reliance on state-centred arbitration to a less centralised system of workplace-level productivity bargaining. Legal changes in the Philippines between 1999 and 2011 have been unable to foster the voluntary self-organisation of distributive bargaining at enterprise level. While union density has declined in both countries, Australian workers are more likely to have collective agreement coverage underpinned by a convergent safety net of wage-earner and citizen welfare entitlements. The Philippine system tends to have more administrative regulations on employment and collective relations, in consonance with its civil law origin, but lower effective coverage. Between 70% and 80% of non-agricultural workers are located in unregulated labour markets and with a limited welfare safety net. Industrial law has not been able to work in a convergent way with other institutions of civil society to counteract the structural effects of global flexibility on Philippine capital, labour and society.