GUATEMALA'S LABOR LAW ENFORCEMENT AND COURT RULINGS

UNCLAS SECTION 01 OF 02 GUATEMALA 000280

SIPDIS

USTR FOR CLATANOFF

E.O. 12958: N/A
TAGS: ELAB ETRD PREL PGOV EAID GT
SUBJECT: GUATEMALA'S LABOR LAW ENFORCEMENT AND COURT RULINGS

REF: GUATEMALA 56


1. Summary: The Guatemalan Labor Inspectorate has at least
been temporarily stripped of its power to impose fines on
employers found to be in non-compliance with labor laws, due
to an August 2004 Constitutional Court decision. Inspectors
must now take their findings to labor courts for
court-ordered sanctions. The decision also made other
changes, including the possible transfer of liability to
companies (including foreign companies) for labor law
violations committed by their contractors in Guatemala. The
government's inter-agency Labor Relations Working Group is
developing proposals to replace the labor provisions lost in
the Constitutional Court ruling. End summary.

Removing authority from the Ministry
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2. Several USG offices and agencies have discussed the
powers of the Guatemalan Labor Inspectorate recently in
regard to the Generalized System of Preferences (GSP) and a
potential Central American Free Trade Agreement (CAFTA). For
this reason, we provide the following analysis of the labor
law enforcement regime and the ramifications of the
Constitutional Court's August 2004 decision.


3. The Guatemalan Labor Inspectorate does not currently have
the authority to impose fines or other sanctions unilaterally
upon employers found not to be in compliance with Guatemalan
labor law. This power stemmed from the 2001 labor reform,
which this embassy and the International Labor Organization
(ILO) strongly supported. In January 2004, however, the
umbrella business organization CACIF filed a lawsuit
challenging this authority. In August 2004, the
Constitutional Court ruled in CACIF's favor and overturned
the relevant articles of the 2001 reform. (Note: Employers'
associations were displeased with the former regime due to
the multiplicative effect of some of the fines. Low level
violations had correspondingly low fines, but in certain
cases these were multiplied by the number of workers
affected. Thus, a factory with a 5,000 person workforce
could end up with a huge penalty for a relatively minor
infraction. Fines for more serious violations ranged from
ten to fifty times the minimum monthly wage, with possible
additional escalations. End note.)


4. As reported reftel, following the Court's decision, the
Ministry continued to assess fines on non-compliant
businesses, as the ramifications of the decision were
unclear. Appellate Court decisions, however, began to
overturn the fines based on the larger Constitutional Court
ruling. Faced with these Appellate Court interpretations,
the Ministry of Labor finally accepted the block to its
powers in late November 2004. For this reason, inspectors
now take their findings to labor courts for court-ordered
sanctions; a process that Ministry of Labor officials
consider cumbersome and inefficient. In the two months since
this decision, Labor Courts have imposed no sanctions.


5. The Ministry of Labor is developing an options paper to
address the situation within the inter-agency Labor Relations
Working Group, which includes the Ministries of Foreign
Relations and Economy, the Attorney General's Office, tax
authorities, the Bank of Guatemala, relevant Presidential
commissions, Congress, and other institutions. By tradition
-- and by ILO recommendation -- draft legislation involving
labor law is also reviewed by the Tripartite Commission, in
which government, employers, and unions participate.

Comment: Our reading of the legal Decision
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6. We have spent many hours with GOG officials, business
groups, and NGOs attempting to develop an understanding of
the Constitutional Court's decision. The reason the MOL
continued its standard operations until late November 2004 is
that the decision itself contains a number of inconsistencies
and ambiguities. We understand that the Labor Inspectorate's
assessment of fines was struck down because the Constitution
grants sole authority to levy fines and other penalties to
the judiciary. We further understand that it may be possible
for the Labor Inspectorate to assess fines if it does so on
the courts' behalf. Many of these points are subject to
interpretation and there have not been any test cases to
refine the legal understanding. The analysis below
represents our views and is not established by writ or
precedence in the Guatemalan Labor Code.


7. Comment continued: The labor law sections cited below
were directly affected by the Constitutional Court's
decision. For the complete text of the articles, readers are
advised that Guatemala's labor law is available at the U.S.
Department of Labor-funded website, leylaboral.com. The text
available on this website is up-to-date and includes the
revisions from the Constitutional Court's decision.

--Article 81: The article originally noted that primary
companies and subcontractors would each be liable for labor
abuses. The court decision struck out the Spanish word
"solidariamente" in relation to the mutual liability. This
changes the entire meaning of the article, placing liability
solely on the primary company. Thus, if a U.S. company
contracted a Guatemalan maquila to produce apparel items, any
abuses in the workplace would be the legal responsibility of
the U.S. company. As virtually all Guatemalan maquilas
produce for the U.S. market, this interpretation could have
far-reaching consequences.
--Article 243: The Court struck down the final paragraph;
however, it is unclear if the decision refers to the final
block of text or all of subsection (c). We believe the
former, thus abrogating the President's ability to suspend a
strike if he deems that it threatens essential services.

--Article 269: The right of the Labor Inspectorate to assess
fines in the second paragraph was struck down. Also, the
word "administrativa" in the same paragraph was struck out.
The latter point refers to the executive branch's authority,
leaving behind the implication that labor courts can assess
fines.

--Article 271: The Court struck down the phrase "General
Labor Inspectorate" (la Inspeccion General de Trabajo) in
subsection (b),in regard to determining a potential fine.
Interestingly, the court did not strike down the word
"administrativa" as in Article 269, thus still leaving the
possibility of action by some unspecified executive branch
actor, which would include, theoretically, the Ministry of
Labor.

--Article 364: The Court struck down the final paragraph,
although that paragraph appears to be merely an amplification
of the previous paragraphs regarding judicial action in
response to non-compliance with labor law.

--Articles 209, 214, 216, 233, 272, 281, 379, and 380:
Although noted in the Constitutional Court ruling, none of
these articles appear to have changes.


8. Comment continued: we continue to engage all levels of
the GOG in regard to this issue. Replacing the gains of the
2001 labor reform and taking action on the pending 2004 labor
reform, which addresses child labor, sexual harassment,
discrimination, and domestic labor, are necessary advances.
We are urging the GOG to re-empower the Labor Inspectorate in
a Constitutionally acceptable manner as soon as possible,
whether by executive decree, new legislation (which will
probably be necessary),or a combination of both.
HAMILTON