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Raffles Refuted: An Anatomy of Union-Busting

Posted to the IUF website 06-Jul-2004

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Raffles Singapore and the company's Cambodian manager Stephen Gnaegi are engaged in a defensive public relations maneuver to fend off growing international criticism of their union busting in Cambodia. When even the US-based International Republican Institute - normally not a militant advocate of action to defend trade union rights - calls for an international boycott of Raffles Cambodian hotels, Raffles clearly has a problem. On June 21, the Institute's Cambodian director Jackson Cox took part in a union press conference outside Raffles Phnom Penh Le Royal Hotel. "I am here to encourage the international community to continue to boycott Hotel Le Royal. Right and wrong in this case is, of course, clear. You are right and Raffles is wrong," Cox told the workers.

Gnaegi failed to return phone calls to the local press seeking his comments. He has, however, taken the time (or more likely hired someone to do it for him) to send a detailed response to the many e-mail messages sent to him via the IUF web site. Here's what he has to say.

Allegation: The unions are indicating that the hotels have a legal obligation to reinstate the collection of Service Charge and distribute it in full, in cash, to the employees.

Facts. The labour law of Cambodia does neither (sic) impose a Service Charge, nor does it specify the distribution. In view of the ambiguity of the labour law in regards to the collection and distribution of Service Charge, Raffles Hotel Le Royal and Raffles Grand Hotel d'Angkor have together with other international hotels in Cambodia discontinued to collect a Service Charge since then but have continued paying a fixed allowance to all staff of the hotel.

What the law actually says

Articles 134 and 135 of the Cambodian Labour Code deal with the collection, distribution and supervision of gratuities (tips)

Article 134 states: Tips are remuneration made by clients to personnel of certain establishment such as hotels, restaurant, cafes, bars, and hair salons, and received by the employer as a mandatory percentage added to the client's bill with a note "service charge" These tips must be collected by the employer and distributed in full to the personnel in contact with the clientele.

Article 135: The employer shall clearly justify the receipt and the payment to his staff of the amount of tips covered by the preceding article.

Neither the IUF nor the Cambodian Tourism and Service Workers' Federation (CTSWF, our Cambodian affiliate) have asserted that the law imposes a service charge. We have simply stated that where service charge is collected, the requirements are abundantly clear. The CTSWF estimates the total amount of outstanding service charge owed to hotel workers at 5-star Cambodian hotels, including Raffles' two properties, at USD 3 million for the past three years alone.

The Cambodian Arbitration Council has repeatedly ruled (at Raffles and other hotels) that the service charge must be distributed to employees in full and on a monthly basis. On January 27, 2004 the Arbitration Council specifically ordered Raffles to implement full service charge distribution on a monthly basis. Service charge collection was discontinued effective February 1 - a clear sign of bad faith.

What kind of sums were involved? We may never know, if Raffles persists in rejecting the decisions of the Arbitration Council. Accounts were never given of the money collected, which is why the dispute arose originally.

Here's what happened with the service charge collection and distribution at the Hotel Cambodiana, a 5-star Phnom Penh establishment which is not part of the Raffles chain.

The Cambodian Arbitration Council in August 2003 determined that the collective bargaining process had broken down due to management intransigence and instructed management to distribute to all employees 100% of the amount collected in a clear and transparent way. Management at that time accepted the ruling of the Arbitration Council and proceeded to distribute the service charge in full. Previously, each worker had received an average 30 to 40 USD per month in the form of a “reward” payment. Following the change to full distribution of the service charge. Payments rose to USD 160 in November 2003, USD 120 in December and USD 97 in January 2004. At that point the Cambodiana decided to discontinue service charge collection.

When Raffles, the Cambodiana and the other 5-star hotels decided in March to again reject the rulings of the Arbitration Council and renege on a commit to reinstate the service charge, they rejected the collective bargaining process. The union thus had no alternative but to walk off the job at Raffles and other 5-star Cambodian hotels from April 5-12.

Apart from Raffles, the other hotels in the dispute eventually decided to return to the path of negotiation. Not Raffles. The service charge dispute at that point became a conflict over fundamental rights.

Raffles is not only attempting to weaken the union. It is attacking and undermining the authority of the only national, transparent and independent body competent to deal with such matters under Cambodian law. By refusing to implement the Council's decision on the service charge, Raffles unilaterally imposed a substantial loss of income on its employees in violation of the basic principles of collective bargaining.

We can now turn to Gnaegi's second point.

Allegation: the International Union Federation (IUF) [sic] in its mailing with the headline "Raffles Must Comply with the Law" accuses the company of "exploiting Cambodians." Gnaegi then goes on to describe the generous wages and benefits at this hotels.

What the IUF actually says

The word exploitation doesn't appear in the text, which is posted on the IUF web site.

Readers in search of an appropriate adjective to describe working at Raffles Cambodia can consider how best to characterize employment in a 5-star hotel where large sums of money are collected from customers who believe they are being distributed to employees when they are not. They can look at a pay sheet for the month of December 2003 prepared by the Raffles Grand Hotel's human resources manager. The document lists two workers as being paid 1 US dollar a day to do "river cleaning" on a 30-day contract. Others on the list include 19 workers paid USD1.67 a day for gardening, valet, laundry, room attendance and cooking work and two workers paid USD2 a day. They can search for descriptive words to characterize a situation in which workers have to strike to get the law enforced, are fired from their jobs for belonging to a union and taking part in a peaceful industrial action and then have their union office looted by the hotel personnel manager, who tears up the government certificate establishing their organization as the representative trade union representing Raffles employees. If they're still searching for adequate expression, they can consider that all this is taking place in a country whose annual GDP per capita is close to the cost of a luxury Raffles suite…for one night.

We don't need to talk about exploitation. The facts speak for themselves.

Gnaegi goes on to describe the extensive training which Raffles employees receive. The fact is that all hotels - particularly upmarket ones like Raffles Cambodian units - require a highly trained staff, otherwise they can't get away with charging the prices they do. Some do it better than others. Mr. Gnaegi has a lot of training to do now that he has fired hundreds of experienced Raffles workers.

Gnaegi then defends his record of compliance with the law, stating

The company has always been in compliance with the laws of Cambodia and stands firm to exercise its rights as a registered company and as the most prominent foreign investor in the hotel industry in Cambodia. The parties with a dispute at the Arbitration Council can opt for binding or non-binding arbitration proceedings. We have opted for non-binding proceedings and therefore have a right to object to the award and to move the case to the Municipal Courts of Phnom Penh (Raffles Hotel Le royal) and Siem Reap (Raffles Grand Hotel d'Angkor).

Raffles, the Law and the Arbitration Council Decisions

The Arbitration Council is a highly respected tripartite body established in May 2003 to address conflicts arising from the interpretation of labour law and to facilitate the implementation of Cambodian law in this regard. According to the Minister for Social Affairs, Labour, Vocational Training and Youth Rehabilitation "The Arbitration Council is an important institution for Cambodia because it helps to solve the most serious of industrial disputes, collective disputes, before they have a chance to escalate, causing damage to the economy and to social harmony." It is the only national body thus empowered, and its level of transparency contrasts sharply with the notoriously opaque workings of the Cambodian judicial system. According to a June 30 Human Rights Watch press release on the investigation into the murder of trade union leader Chea Vichea, "Cambodia’s judicial system has been widely condemned by the United Nations and many of its member states for its lack of independence, low levels of competence, and corruption."

It is true that the parties can opt for non-binding arbitration. Employers can utilize this loophole to throw decisions back into the corrupt Cambodian courts. This does not negate the validity of Arbitration Council decisions, which in fact are made at a higher level than the municipal courts. The fact that the law is weak on enforcement is no excuse for rejecting legitimate authority.

When the Arbitration Council clearly ruled in favor of the workers on the service charge issue, Raffles went looking for a more compliant court.

Raffles has never submitted legal arguments to explain their repeated rejection of the Arbitration Council's decisions, other than indicating that they were displeased by the results. They have a history of walking out. Beginning May 17, Raffles Le Royal was involved in arbitration hearings on the firing of union members who took part in the peaceful April 5-12 walkout. The council concluded that the creation of a phony "union" to supplant the CTSWF, and the announcement of a hastily improvised "collective agreement" with the paper organization, fell within the scope of the arbitration hearings. They ordered the hotel to produce documents concerning the "election" of worker delegates as well as copies of the "agreement" they signed. Stephen Gnaegi was ordered to appear as a witness on the afternoon of the 19th. Rather than comply with these legal requirements Raffles quit the arbitration hearings. By refusing to provide the requested documents and then quiting the arbitration process, Raffles showed its contempt for and willingness to violate the law.

Raffles assertion of so-called "rights as the most prominent foreign investor in the hotel industry in Cambodia" in fact lays claim to an imperial prerogative. Raffles has no more right than domestic investors to undermine the only independent national body set up to adjudicate industrial disputes.

Raffles also denies that they are disregarding international law. The Arbitration Council on June 8 ruled that Raffles acted illegally when it sacked hundreds of union members and set up a yellow union in the context of mass dismissals. Here is what the Arbitration Council wrote in its decision:

"In pursuing this strategy the employer party has shown a flagrant disregard for the right to freedom of association and the right to bargain collectively as provided for by the Constitution and laws of the Kingdom of Cambodia not to mention ILO Conventions on Freedom of Association and Protection of the Right to Organize Convention (C87) and the Right to Organise and Collective Bargaining (C98) which Cambodia has ratified."

ILO Conventions have the force of international treaties - they are binding on member states. The fact that there are no internationally binding laws to rein in a lawless company does not mean that there aren't established international norms. If the legal registration of what the Arbitration Council calls an illegal organization - Raffles' yellow union - is allowed to stand, the government of Cambodia will be the subject of a complaint at the Freedom of Association Committee of the ILO. Legally sanctioning mass dismissals, union-busting and yellow unionism violates International Conventions, on the part of the government, and international norms on the part of the company.

Now more Raffles "facts":

The authorities have declared the strike of December 2003 and the one of April 2004 illegal. As a consequence of these rulings, the Courts in Phnom Penh and Siem Reap ordered the striking employees to return back to work within 48 hours. Workers who fail to return to work by the end of the 48 hours period are considered guilty of serious misconduct, and the company has a right to terminate their employment.

What actually happened

To halt the strike Raffles applied at the municipal courts for interim back-to-work orders, issued without notice and with no opportunity for judicial review, i.e. in violation of a basic principle of justice where both parties have to be heard. It was a judge, not the court, who issued a return to work order after the company repeatedly turned its back on legitimate decisions of the Arbitration Council. Moreover, these orders are subject to further hearing where both parties are called before the order is reversed or confirmed. This hearing has not been scheduled yet.

When the judge issued the return to work order (which legally gives workers the right as well as the obligation to return to their jobs) the president of the Le Royal union called all workers to assemble and report for work. Raffles' security guards prevented them from entering the hotel. Other hotels involved in the dispute took back the striking workers and have agreed to arbitration of the service charge and related issues. Not Raffles.

Concerning the retaliatory firings of union members following the strike, here's what the Arbitration Council determined:

"The Arbitration Council finds that the workers did indeed try to return to work on April 11, 12, and 13,2004 but that they did not agree to register and sign their names on the register prepared by the employer. The Arbitration Council finds that the requirement that the workers register their names and promise not to participate in further strikes was not reasonable because the workers have the right to strike legally in accordance with the Constitution and the Labour Law (1997). On this basis the Arbitration Council finds that the workers had a valid reason, in accordance with Article 337 of the Labour Law, for not returning to work within 48 hours of the Court decision.

"For these reasons, the 97 workers of the Hotel Raffles le Royal did not commit the acts of serious misconduct within the meaning of Article 337 of the Labour Law of which the employer accused them and which the employer used as the basis for their dismissals."

Workers who attempted to return to work within the 48 hour period at the Raffles Grand Hotel in Siem Riep were also prevented from returning to their jobs, despite public appeals to be allowed to do so. The Arbitration Council is now preparing a decision in this case.

In other words, Raffles refused to let the workers return to their jobs and then fired them for…not reporting to work.

Finally, Raffles contends that it did not "put in place a handpicked Workers Representatives Committee and sign an illegal Collective Bargaining Agreement", as alleged by the IUF (and by nearly all other non-Raffles observer of the situation). Elections to the new organization, according to Raffles, proceeded in accordance with the law, and the new "Collective Bargaining Agreement" was "negotiated and signed".

Here is what the Arbitration Council had to say on June 8 about the situation at Raffles Le Royal. The Council, it will be recalled, is tripartite and includes employer representatives:

"Within two weeks of improperly dismissing 97 union members, including all of the union leadership, the hotel Raffles Le Royal organized an unlawful election of worker delegates and entered into a collective bargaining agreement with this group.

These actions reveal a clear intent on behalf of the ownership and management of the Hotel Le Royal to bypass the union, which had the sole right to represent workers in the collective bargaining process. In pursuing this strategy, the employer party has shown a flagrant disregard for the right to freedom of association and the right to bargain collectively." And again:

"The employer party did not follow the proper procedures but rather entered into an agreement with the new workers delegates who were themselves chosen illegally."

The facts in this dispute really do speak for themselves. Gnaegi's attempts at positive "spin" are cut from the same cloth as the statements to the international business press by Raffles' Markland Blaiklock, managing director of Raffles Hotels and Resorts, that the dispute was "resolved" when the hotels signed the phoney "agreements" with their own company unions.

Unions around the world will continue to pressure Raffles to reinstate the sacked workers, repudiate their fake "agreements" with organizations having no legitimacy and begin a process of genuine negotiations with the CTSWF. Raffles' public relations exercises convince no one, and bring them no closer to "resolving" this dispute. The CTSWF will fight for its rights, and unions will support them internationally, for as long as it takes.