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Venezuela's labour market subject to government control

By Maryolga Girán C.

05.05.06 | Never before has the labor market been so subject to government control as it is today in Venezuela. The imposition of the Labor Compliance Certificate is the latest proof of the government’s willingness to meddle in the affairs of the private business sector. This is true despite the fact that the International Labour Organization (ILO) considers that labor relations should be handled with the same privacy that family relations are, and that disputes between workers and employers should be settled without state intervention.

Following fast on the heels of the Workplace Prevention, Conditions and Environment Law (Lopcymat in Spanish), and the hard impact it had on the Venezuelan business world, now come the new labor-compliance certificate requirements. As was to be expected, reaction by the parties involved was almost immediate. The business sector views them as yet another hurdle in the red-tape obstacle course; the pro-government unions see them as a victory favoring the workers; and the anti-administration organized labor movement considers them to be a strictly a political tool that does nothing to benefit workers. In the midst of all these conflicting opinions, it is hard to arrive at an objective opinion at this point in time, before it becomes clear how the government intends to use this tool. For now, our analysis will focus on these differing positions in an effort to reach an even-handed conclusion.

Is the certificate unconstitutional?

Conindustria harbors no doubts that it is, for the following reasons: First, because Decree 4,248, enacted by the President does not meet the formal requirements provided for in the law governing the Public Administration.

Secondly, because the authority to pass legislation on a matter involving fundamental rights is vested solely and exclusively in the National Legislature. It is obvious that Decree. 4,248 openly violates the principle reserving for the legislature the power to hand down laws governing certain matters by making the right to obtain employment and to economic freedom subject to a set of conditions and requirements, imposed in a statute that was not enacted by the legislative branch of government and, much less, by means of a top-ranking law.

Thirdly, because Decree 4,248 violates the right to economic freedom provided for in Article 112 of the 1999 Constitution, by placing an unreasonable and unjustified burden on all companies doing business in the country.

Fourth, because this decree runs roughshod over the right to be judged by one’s natural judge, by placing extremely far-reaching decisions in the hands of the labor inspectors. Under Decree 4,248 labor inspectors have the authority to deny or to revoke previously issued labor compliance certificates for reasons described in terms that are extremely vague and imprecise and, thus, unconstitutional. For example, based on the Decree, companies can be prevented from engaging in economic activities simply because some government agency in charge of labor matters raises an “objection,” regardless of how serious the matter involved may be or how mandatory compliance is. These are overly discretionary and dangerous guidelines that the legislature has neither designed nor outlined. The Public Administration cannot assign itself such broad, vague and ill-defined powers to limit the right to do business.

Fifth, the rules set in Decree 4,248 can lead to high levels of corruption and politicization in the field of labor, given that the causes for which labor compliance certificates can be denied or revoked are extremely vague, even capricious; this could give rise to practices that go against the interests of the State, to the obvious detriment of the Venezuelan industrial sector.

Sixth, companies will be running the risk of not being able to receive foreign exchange, not being allowed to bid on contracts, or not being able to import or export inputs or products in the event of any slight difference of opinion with the respective administrative authorities. One of the aims of this decree would seem to be to force the business community into complying with any order or instruction, regardless of the legality or severity thereof, or run the risk of being prevented from operating.

Seventh, Decree 4,248 restricts access to justice and due process, whether administrative or in court, by imposing, a priori, legal burdens or consequences that either discourage or hinder access to legally established procedures for challenging accusations or objections made by administrative bodies in charge of labor matters.

As a precautionary measure, Conindustria has asked for a temporary suspension of the effects involved in application of this decree until the Supreme Tribunal of Justice (TSJ, in Spanish) hands down a decision on the merits of its appeal.

The decree is discriminatory

In addition to the defects of unconstitutionality listed by Conindustria in the appeal filed before the TSJ, the decree is also discriminatory in that private-sector employers alone are subject to the obligation of having a labor-compliance certificate. This is true despite the fact that many court decisions ordering reinstatement of fired workers have not been obeyed by government-owned companies and government agencies. This places government employees in a situation in which they are unable to defend their rights.

Is the certificate a political tool?

All one can do is hope that it is not. Unfortunately, however, over the past three years we have witnessed an unprecedented situation in the employment area here in Venezuela: job discrimination based on the political views of the applicant.

Although some measures, such as the exchange controls, have not been used as a political tool, it is no less true that the discretionary power being handed to the labor inspectors could engender politically based discrimination.

Furthermore, it is quite obvious how some measures designed to favor workers are not being used impartially by the government -- the institution entrusted with guaranteeing the rights of all citizens-- but that laws are used for the purpose of allowing one political group to curry favor among the people.

Another noteworthy fact is that the labor-compliance certificate requirement came in response to a request made by the pro-government labor movement. This group not only objects to the suspension of enforcement that Conindustria has requested, but they are also suggesting that lists of companies they consider non-compliant be made public. Not only would a measure such as this subject the victim company to public discredit, it could lead to further deterioration of relations with its workers and a greater risk of labor disputes.

What will it achieve?

Presumably, the government is interested in having a country with more jobs and greater job stability. The way to foster job creation, however, is not by more state meddling in labor relations, but by promoting private investment, the only kind that can lead to sustained and productive employment. It is these investors who establish companies which, in turn, begin looking for manpower. Nevertheless, these investors do have a set of conditions, among others: Rules of the game that are clear and determined in advance; an impartial, non-politicized judiciary; economic freedom, an item that includes not only free access to foreign exchange, but to bidding processes, business rounds and the like; tax incentives; contracting freedom; personal security; non-politicization of work; peaceful labor relations; and legal certainty.

It is unlikely that implementation of this labor-compliance certificate will do away with the disagreements inherent in the employment relationship. These must, however, be discussed in more temperate terms and settled in a manner satisfactory to both parties, without government intervention.

The labor-compliance certificate will do little or nothing to foster employment, ensure that it is sustainable and stable, much less to attract new investment, foster development of companies or creation of new jobs. In the long run, it will simply become one more strip of red tape in corporate dealings with the government.

Maryolga Girán C.
Corporate labor specialist
Girán Abogados & Asociados
Translated by: Francine Jacome

Source Veneconomy

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