WHAT DOES A GUY HAVE TO DO GET FIRED AROUND HERE?

UNCLAS BRATISLAVA 000946

SIPDIS

SENSITIVE
SIPDIS

USDOC FOR MROGERS

E.O. 12958: N/A
TAGS: ECON ELAB LO
SUBJECT: WHAT DOES A GUY HAVE TO DO GET FIRED AROUND HERE?


1. (U) Summary. Slovakia's Ministry of Labor and Social
Affairs is busy preparing new legislation to overhaul its
labor code in early 2007. Business interests are happy with
the current law and concerned about forthcoming changes,
especially since the drafter of the new proposal, MOL State
Secretary Emilia Krsikova, is considered strongly pro-labor

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and a tough customer in general. Krsikova has not released
her plans to anyone, even to high-ranking members of her own
party (Smer),and is not meeting with core stakeholders.
Expected changes would primarily affect domestic industries,
but U.S. investors will likely feel a pinch as Slovakia
harmonizes its labor code with EU norms. The Embassy is
weighing in by coordinating dialogue between companies and
MOL on proposed changes. End Summary.

Brief Background
--------------


2. (U) Slovakia's labor code has been changed dramatically by
each of the past two governing coalitions. In 2001, despite
the presence of a primarily center-right coalition led by
SDKU, pro-labor voices in the government were able to push
through revisions that strengthened the hands of unions.
Among other changes, the maximum number of working hours was
set at 40, and employers had to get trade union approval in
order to fire employees. In 2003, the new, uniformly
right-of-center ruling coalition enacted a revised labor code
that strongly favored business interests. The new law
extended the working week to 48 hours, dramatically
liberalized hiring/firing laws, authorized use of rolling
indefinite-term contracts without benefits, and limited
severance pay, among other changes. Trade unions retained
the right to bargain collectively, but lost all mechanisms to
provide leverage within the process.

Labor Smer, Business Smer
--------------


3. (SBU) Further changes are expected from the new government
since Prime Minister Robert Fico's Smer party is nominally
the party of labor, enjoying support from the trade union
confederation KOZ. To satisfy KOZ, the PM staffed the
Ministry of Labor with ardent critics of the 2003 labor code
reforms, including Minister Viera Tomanova and State
Secretary Krsikova, both fellow Smer members. Fico's

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promises to organized labor have always been vague, however,
and the PM consults primarily with the business wing of his
party, such as financier Juraj Siroky. (On December 5, Fico
met with KOZ president Eugen Skultety for the first time
since the June election.) Most coaltion members have limited
interest in labor rights issues. In the past week, Smer- and
HZDS-appointed State Secretaries at the Ministries of Finance
and Economy have told us that they would oppose any
significant changes to the labor code. In turn, Tomanova and
Krsikova recognize that they have limited allies even within
a Smer-led government, and are very secretive about
forthcoming legislative changes. All stakeholders are
excluded, even unions. For example, when Tomanova's advisor,
MP Robert Madej, introduced an amendment earlier this month
to change the administration of the social insurance system,
KOZ had not been notified in advance and completely disagreed
with the proposal.

Outlines of a Proposal
--------------


4. (SBU) Due to lack of information from the primary source,
the contents of forthcoming labor legislation are now a
matter of speculation for all parties. Based on
conversations with business leaders, labor leaders, Smer MPs,
and mid-level MOL officials, there seems to be a generalized
consensus about what substantive changes are expected to be
introduced as proposed legislation in early 2007. They
include the following:

- Businesses would not be allowed to employee long-term
employees as contractors. The 2003 labor code enables
employers to require many classes of employees to acquire
tradesman licenses and work as contractors, which allows
companies to entirely avoid paying Slovakia's high payroll
taxes for health and other social insurance programs.
Business associations argue that the current law provides not
only greater flexibilty but also results in higher wages for
workers as a result of lowered tax burdens. Unions argue
that the system has created a growing class of workers
ineligible for social benefits. Primary sectors affected by
this law include construction, forestry, agriculture, and
education -- all of which are domestic industries. While the
practice is widespread in Slovakia, international investors
looking to attract a talented, stable labor force rarely
utilize such contracts.

- The 48-hour work week would be retained, but with more
limited opt-out options and fewer available overtime hours.
It is not expected that the change would fully enforce the
1993 EU directive authorizing the rigid 48-hour work week (as
only Italy and Luxembourg have done),but the proposal will
more closely resemble countries such as Germany, which offers
exceptions for emergency service workers but generally
follows the directive. This marks a depature from the
previous government, which closely aligned with the British
position promoting maximum flexibility. The potential impact
on U.S. and other foreign investors is quite real but
difficult to assess at this point.

- Collective bargaining between unions and employers may be
required to reach settlement within the tri-partite
negotiating process. According to changes made in the 2003
labor law, businesses are required to bargain with unions but
in case of an impasse the dispute can be sent to arbitration
courts. Existing labor law broadly enables the courts to
decide in favor of employers in case of labor stoppages, as
they did during the 2003 railroad workers strike and the 2006
health care workers strike. Proposed changes would have
greatest potential affect on unionized businesses, including
US Steel, and three major auto manufacturers, Volkswagen,
Kia, and Peugeot-Citroen. Other foreign investors such as
Dell and ATT&T have non-unionized workplaces. These
companies generally have worker councils that do not enjoy
collective bargaining rights.

- The new legislation would remove the right to dismiss
employees working on definite term contracts without stating
an official reason. No one expects, however, that unions
would regain their right to sign off on hiring and firing
decisions. Nor is there any sign that the government would
interfere in the hiring and firing process.

- Part-time workers on definite contracts would receive
health and social benefits equal to those of full-time
workers.

Reactions and Next Steps
--------------


5. (SBU) The domestic and international business communities
obviously view the proposed changes above with concern,
though they have not been especially aggressive on the issue.
Many are not even aware of the changes under discussion. To
gain further insight, the American Chamber of Commerce in
Slovakia has tried to meet with Ms. Tomanova and/or Ms.
Krsikova, but has not been granted an audience as of yet. To
facilitate communication, the US Embassy will work to
organize a lunch at the Ambassador's residence between
Minister Tomanova and various US business interests. During
a charity event sponsored by the Chamber on December 5,
Tomanova and Ambassador Vallee spoke briefly on the subject.
She tentatively agreed to attend a labor-code related
luncheon in January. Also, the DCM told State Secretary
Krsikova that MOL plans to make the labor code "more like
France, Belgium and Germany" could undercut steps that made
Slovakia so attractive to investment in the first place.


VALLEE