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3 Implementing International Standards at the National Level The second session of the workshop provided more concrete examples of assessing compliance with international standards, expanding on relevant issues at both the national and sectoral levels. The presenters, luan Amor Palafox (University of the Philippines) and Lejo Sibbel (International Labour Organization LILO]-Cambodia), provided the National Academies Committee on Monitoring International Labor Standards (CMILS) with a more indepth look at some of the critical factors affecting the coverage and implementation of national laws in the Philippines as well as the lessons learned from the unique role of the ILO in monitoring garment factories as part of a U.S. trade agreement with Cambodia. lean Amor Palafox Dean, School of Labor and Industrial Relations, University of the Philippines Mr. Palafox began with a brief background of socioeconomic condi- tions in the Philippines. He noted that the contextual data for the Philip- pines (Box 3-1) are essential to understanding the country's experience with core international labor standards. Especially significant is the Philippines' high population growth rate, which tends to exacerbate socioeconomic problems. In the transition from agriculture to services, the Philippines seems to have skipped the development of manufacturing. "But even if the service sector has captured most of the employment share, it's not lost on 17

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18 NATIONAL LEGAL FRAMEWORKS our economists that it's a very poor kind of employment share" with mar- ginal jobs in certain parts of the Philippines service sector, such as retail trade, small transport, and personal services. Mr. Palafox added that an- other important element of the economy of the Philippines is the large number of overseas workers, approximately six million, who send more than $6 billion home annually. Labor Law and Implementation in the Philippines After providing this contextual information on the labor market in the Philippines, Mr. Palafox turned to the legal framework, which he described as "the most strict, the most complete, most comprehensive set of social labor legislation." All of the ILO's fundamental rights are addressed in the

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IMPLEMENTING INTERNATIONAL LABOR STANDARDS 19 Constitution and national laws of the Philippines. However, as Professor Weiss discussed earlier, assessing the coverage and implementation of these rights in practice requires a more thorough analysis than can be obtained by simply looking at the content of the laws. For example, only 3.8 million workers (or 12 percent of the labor force) are unionized, and even a smaller number, less than half a million, are covered and protected by collective bargaining agreements. Mr. Palafox said that monitoring whether a sector is "organizable" or not may require examining larger enterprises in the for- mal sector separately. He estimated, for example, that if one looks at enter- prises of 200 or more employees in the Philippines, almost 80 percent of these enterprises are organized. More types of data are needed to fully understand the nature of workers' organizations and their activities in the Philippines. For example, in many cases, Mr. Palafox contends that unions are organized "not by expanding membership, but rather by raiding from other federations," but data on certification elections and challenges are lacking. Similarly, data on the causes rather than the mere occurrence- of strikes are needed because it may be the case that there are "more strikes arising out of inter-union conflicts than out of bargaining tissues]." Turning to the problems of implementation, Mr. Palafox said that cer- tain provisions of the law allow the Secretary of Labor to intervene in strikes by assuming jurisdiction and mandating a settlement if the Secretary views the industry involved in the strike as "vital to national security." Another problem is the significant backlog of cases received by the National Labor Relations Commission (NLRC). Each year the NLRC receives more than 20,000 cases, and the 150 adjudicators are able to dispose of only 60 per- cent of those cases. Institutional capacity of the inspectorate is also an issue, with only 183 inspectors covering 80,000 enterprises. Mr. Palafox said that each year nearly half of these enterprises are cited for violations, most often relating to wages. While the Philippines does have a minimum wage, for the majority of non-union workers, the minimum wage most often serves as a ceiling. The legality of providing "wages in kind" in the form of lodging, meals, and products has also offered employers a method of significantly reducing take-home wages. He added that employers have also been known to withhold benefits simply because the workers are not aware of what is due to them under the law. Mr. Palafox discussed several issues relating to specific worker catego- ries that often fall outside the coverage of national labor law. First he de- scribed the "grim picture" (see Box 3-2) of child labor in the Philippines, citing poverty as the primary cause. He then turned to protections in the

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20 NATIONAL LEGAL FRAMEWORKS

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IMPLEMENTING INTERNATIONAL LABOR STANDARDS 21 Philippine labor code that result from the high rate of overseas workers. These are primarily in the form of regulating recruitment agencies, includ- ing the requirement that contracts must be filed with the government. In practice, however, overseas workers still face many violations of their rights, such as "contract switching," underpayment or nonpayment of wages, lack of rest days or vacation leave, unsafe working conditions, and physical and sexual harassment. Mr. Palafox concluded by listing several issues to consider for an im- proved understanding of national compliance with international labor stan- dards, based on the experience of the Philippines: Population growth, levels of poverty, unemployment, and economic development should always be the context for a deeper understanding of compliance with international labor standards. . The effectiveness of implementation of social legislation hinges on the development of the formal sector. With a large informal sector, em- ployment becomes a matter of survival, rather than job quality. The Philippines social and labor legislation is geared primarily to- ward the wage and salaried sector, yet more than half of the country's workforce are in agriculture or small or micro-enterprises or are own-ac- count workers. ~ The government needs to be aggressive in its campaign to include these workers in its social protection. The inspectorate arm of the government is considered too small and ineffective to be taken seriously. The funds allocated toward imple- mentation of standards would probably be an excellent measure of a country's commitment to enforcing labor standards. Another measure would be developmental (education, awareness programs, and campaign) strategies in core areas. Recognizing the role of the informal sector in the economic devel- opment of the country would provide more incentives for regulation and, at the same time, encourage people involved in this sector to comply with minimum standards. According to the International Classification of Status in Employment (ICSE), "Own- account workers are those workers who, working on their own account or with one or more partners, hold the type of job defined as a 'self-employment job,' and have not engaged on a continuous basis any 'employees' to work for them during the reference period. (The part- ners may or may not be members of the same family or household.)" Further information on the ICSE is available at wWw.ilo.org/public/english/bureau/stat/class/icse.htm.

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22 NATIONAL LEGAL FRAMEWORKS Poverty is the root of child labor. Until poverty is reduced to mini- mal levels, no amount of program funds can totally eliminate child labor. There must be more guarantees of protection for overseas workers. There are rampant violations of standards that are supposedly protected in the Philippines, but once abroad, the Filipino worker is at the mercy of the employer. Recipient countries must recognize parallel rights among for- eign workers and their local counterparts. Lejo SilDIDel Chief Technical Advisor ILO Garment Sector Working Conditions Improvement Project in CamIDodLia Mr. Sibbel began his presentation by providing some background in- formation on the U.S.-Cambodia Bilateral Textile Agreement of 1999. As part of this agreement, the ILO was asked to assist in ensuring the availabil- ity of information on Cambodia's compliance with international labor stan- dards. The agreement set export quotas from Cambodia to the United States for 13 categories of textiles and allowed a 14 percent annual bonus increase in that quota as long as Cambodia supported "the implementation of a programme to improve working conditions in the textile sector, in- cluding recognised core labour standards, through the application of Cam- bodian labour law." The original three-year agreement was extended for an additional three years at the end of 2001, and the possible annual bonus was increased to 18 percent. Monitoring Working Conditions in Cambodia While the initial ILO project was to include three components ca- pacity building, monitoring of working conditions, and legislation and edu- cation Mr. Sibbel's primary focus has been on the monitoring compo- nent. The ILO has recruited and trained eight Cambodian monitors, and there are currently 195 factories registered for the project. Participation of factories in this "voluntary" program has been increased by the requirement instituted by the Cambodian Ministry of Commerce that factories must be registered before they can export items to the United States. But the ILO monitors do not have any enforcement powers. They "can advise on what the law is, what the law says, and how improvements can be made, but they cannot hand out fines or slap employers on the wrist." Monitors are trained to look for violations of the following: minimum age; forced labor; free-

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IMPLEMENTING INTERNATIONAL LABOR STANDARDS 23 dom of association; collective bargaining; wages; hours of work; leave; and hygiene, sanitation, safety, and health. Monitoring activities are generally carried out through half-day or one-day visits to the factories. The factory size, which ranges from 35 employees to 7,000, dictates the amount of time required for the visit. Each monitor uses a checklist of 156 questions (not including subquestions) to interview managers, worker representatives, and the workers themselves, both on and off the premises as necessary to pro- vide confidentiality. Monitors also perform a physical inspection of the enterprise. Visits are unannounced. Mr. Sibbel said that the task of monitoring the application of both Cambodian law and core ILO standards is simplified by the fact that the Cambodian law was drafted with assistance from the ILO (in particular Arturo Bronstein, a speaker in the first session of the workshop). This has led to an assumption that the relevant international standards are incorpo- rated into the national law, but there are still cases in which there are gaps or the national legislation is unclear. To overcome this, the ILO has used a tripartite Project Advisory Committee (PAC) to review all of the 156 items from the monitoring checklist. This protects the project from criticism about the standards applied in its work. Complaining factory owners are told that the Garment Manufacturers Association of Cambodia, through the PAC, has endorsed the checklist. After a review of the information provided by the monitors, a report is drafted and sent to the management of the factory. As Mr. Sibbel said, "At face value we believe more or less what the workers tell us." But providing a copy of the report to factory management gives management the oppor- tunity to dispute or disprove any allegations with additional documenta- tion. The final report, which is sent to the parties of the trade agreement and posted on the ILO website, describes problems, makes recommenda- tions for improvements, and notes whether the factory management has agreed with the ILO's findings.2 Four synthesis reports were produced between November 2001 and September 2002. The third report contained information for 30 factories, gathered after a three- to four-month "grace period" and follow-up monitoring visits to the factories. Box 3-3 contains samples of the implementation status by subject and by factory from that report. Table 3-1 contains key findings from the first three ILO reports. 2The synthesis reports are available at ww~v.ilo.org/public/english/dialogue/ifpdial/ publ/cambodia.htm.

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24 NATIONAL LEGAL FRAMEWORKS

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IMPLEMENTING INTERNATIONAL LABOR STANDARDS TABLE 3-1 Key Findings from ILO Monitoring Reports on Textile Sector in Cambodia 25 November 2001 April 2002 June 2002 1. No evidence of child labour 2. No evidence of forced 1. No evidence of child labour, except one minor incident 2. No evidence of labour forced labour 3. No evidence of sexual 3. No evidence of harassment discrimination, except three incidents of sexual harassment 4. Incorrect payment of 1. No evidence of child labour 2. No evidence of forced labour 3. No evidence of ,. . . . . . .. olscrlmlnatlon, 1nclualng sexual harassment 4. Incorrect payment of wages occur with some frequency frequently wages 5. Nonvoluntary overtime 5. Nonvoluntary overtime 5. Improvement with regard to 4. Improvement with regard to wages occurs the incorrect payment of work occurs in a work occurs in a ensuring that overtime work substantial number of substantial number is undertaken voluntarily factories of factories 6. Overtime hours beyond 6. Overtime hours beyond 6. Improvement with regard to legal limit occurs in a legal limit occurs in a ensuring that overtime substantial number of substantial number hours are within legal limits factories of factories 7. Freedom of association 7. Freedom of association 7. Improvement with regard to is a problem in some is a problem in some ensuring freedom of factories factories association 8. Strikes not organized 8. Strikes not organized in line in line with the law with the law 8. Strikes not organized in line with the law According to Mr. Sibbel, when his project team provides suggestions for improvement, the team tries to find practical solutions, often looking at whether the intent of the law has been satisfied, rather than applying for- malistic requirements. Mr. Sibbel admitted that he was a bit surprised at the level of improvements that have occurred thus far. He attributed this success in part to the ILO project but also acknowledged that there are other nongovernmental organizations working on these issues. He con- cluded that the combined effort of all of these actors, along with the --car- rot" (increased quotas) and the "stick" (publication of factory names), has promoted positive change in Cambodia's garment industry. .. . ^ - ~ .. ~ . . .. . ..

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26 NATIONAL LEGAL FRAMEWORKS Mr. Sibbel attributed the success of the ILO project to several factors. The first is the independence and credibility of the ILO, which he believes has led to greater access for ILO monitors than provided to others under- taking unannounced visits. Second, because the project covers the entire garment sector, the ILO has created a "level playing field.'' Each factory is held to the same standard, rather than having wide variations when differ- ent codes of conduct are applied to individual factories. Limiting applica- tion of the standard to a sector that is "relatively small" has also facilitated consistency and contributed to a successful start. The monitoring program has encountered some problems, however. First, it had to confront disparate expectations of various stakeholders. The unions thought that the ILO would serve as an intermediary in industrial disputes, and the employers "thought that we would nail them to the cross." Mr. Sibbel explained that the perceived lack of transparency in the process of determining bonus allocations by the United States can continue to frus- trate factory managers and call into question their incentives to participate in the monitoring program. The Cambodian government has taken the view that ILO monitors can replace the ineffective national labor inspec- tors and has ceased inspections in participating factories. Inspectorate in- stitutions have been weak for a variety reasons, one of them being the ab- sence of political will. The fact that factories can be managed and owned by government officials significantly complicates enforcement. For ex- ample, one factory is owned entirely by the military, and "No labor inspec- tor dares go inside that factory." Mr. Sibbel referred to monitoring as a means to an end. "You use that information to identify problems and then build capacity so that the people directly involved management, workers, government can fix those prob- lems by themselves." He concluded by noting that the ILO is not necessar- ily a better monitor than any other institution performing these functions. As noted above, the relative success of this ILO project seems to derive from the existence and leverage of the trade agreement and the small size of the sector being monitored. Therefore, while some aspects of this program may be replicable in other countries, "each country requires its own model." DISCUSSION The discussion period was led by Mo Raj an. He asked the presenters to elaborate on the issues of political will and the motivations of employers to participate in the quota program, particularly in light of the upcoming

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IMPLEMENTING INTERNATIONAL LABOR STANDARDS 27 abolishment (in 2005) of all existing textile quotas under the Multi-Fiber Agreement (MFA) of the World Trade Organization (WTO). Mr. Sibbel responded that the motivation for factory managers stems from the desire to create a positive image in the hope of securing a share of the market before 2005 "when people expect big sucking sounds from China." Em- ployers are starting to put pressure on the Cambodian government to en- force the laws because they realize that several bad actors could reflect badly on the sector as a whole when future sourcing decisions are made. Mr. Sibbel added that the majority of employers "are not necessarily of ill will but they simply don't know what the law is, and without knowing the law, they don't necessarily know how they can make sure that their procedures and practices are in line with what the law wants." Once they understand the law, he said, often the assistance required to ensure compliance is mini- mal, and there is no resistance on the part of the managers. Employers are also hoping, Mr. Sibbel said, that improved conditions would lead to fewer strikes, which are planned during the "high season" to impose the greatest cost on the businesses. Mr. Palafox, referring to greater resistance to compliance in the Philip- pines, said, "It is a common belief among Philippine employers, at least in small and medium enterprises, that compliance costs money. And, there- fore, there's no motivation toward voluntary monitoring, inspection, or compliance." In the Philippines, greater productivity has not accompanied increases in nominal or real wages, so employers have not been encouraged to improve their compliance in that regard. Nor have they embraced vol- untary monitoring. Mr. Palafox reported that he knows of only six interna- tional companies with codes of conduct and third-party monitoring, while no local enterprises have engaged in similar programs. Mr. Rajan also asked a question concerning the availability and quality of information relating to compliance with labor standards. Mr. Palafox responded that the Department of Labor in the Philippines gathers a great deal of information but focuses solely on the formal sector, which com- prises perhaps only 10 percent of the workforce in the Philippines. Responding to a question from Theodore Moran, a professor at Georgetown University and chair of the CMILS, Mr. Palafox discussed the relationship between unions and labor-management councils (LMCs) in the Philippines. He noted that almost all American companies, particu- larly in the electronics sector, are using "positive HRM Human resources management], which means they mimic unions, they offer competitive wages, they offer participatory mechanisms for decision-making, good

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28 NATIONAL LEGAL FRAMEWORKS working conditions, benefits, so I think consciously there have been efforts to prevent unions." Regulation of LMCs is included in national labor laws, but there have been conflicting government policies in promoting them. The Philippines Department of Labor encourages LMCs only in organized or unionized sectors, where the law stipulates that the unions will auto- matically be represented on the LMC. However, the Philippines Depart- ment of Trade and Industry promotes LMC formation in nonunionized sectors. Mr. Palafox added that there is "spotty information" on the effect of LMCs. Both Mr. Palafox and Mr. Sibbel pointed out that the evidence presented on this issue, perhaps not surprisingly, has been contradictory. According to Mr. Palafox, organized labor, which has "always looked at LMCs as conflicting, contradictory forms of mechanisms," provided evi- dence this year that LMCs have not improved conditions. On the other hand, Mr. Sibbel, who attended an annual conference of LMCs in the Philippines, said that the evidence presented at that meeting showed that LMCs "were functioning in some way or another, including improving . .. .. won ung cons citrons. Professor Srinivasan asked about the costs associated with the monitor- ing program in Cambodia. Mr. Sibbel responded that the program has a budget of $1.4 million for three years of monitoring. The funding comes from three different sources $1 million from the U.S. government and $200,000 each from the Cambodian government and the Garment Manu- facturers Association of Cambodia. The number of workers employed in the factories is approximately 190,000, so the cost per worker of the pro- gram is less than $2.50 per year. Participants addressed the question of whether there have been efforts in Cambodia to share the information and expertise of the ILO project with inspectors and other monitors. Mr. Sibbel said that when the ILO monitors are investigating child labor cases, they have occasionally brought government inspectors with them to the villages. However, he reminded participants of his earlier point: The government's initial perception was that ILO monitors may replace inspectors. And he added that they have tried to distinguish the information-gathering role of monitors from the enforcement function of inspectors. On the question of sharing informa- tion with other monitors, Mr. Sibbel said that there is a "distinct monitor- r '' . 1 ng tatlgue as numerous monitors repeat tne same questions covering an array of codes. However, the ILO signs a memorandum of agreement with factories, agreeing not to share any information except that contained in the public synthesis reports.

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IMPLEMENTING INTERNATIONAL LABOR STANDARDS 29 The discussion then focused on the distinction between compulsory overtime and forced labor; the summary of findings from the reports (Table 3-1) showed that compulsory overtime was a problem in a substantial num- ber of factories, but there was no evidence of forced labor. According to Mr. Sibbel, the basic distinction was that employees were free to refuse the overtime, even though the result might be that they lost the job. Forced labor cases involved a "menace of a penalty" beyond unemployment, such as penal sanctions or other losses of rights and privileges. "The economic reality is that a lot of workers do not have that freedom because they need that job, but from a legal ILO point of view, there is a difference between forced labor and forced overtime," Mr. Sibbel said.