Past its sell-by date

03 Feb 2017
Late: the new Spanish Government has not yet moved to comply with EU law on port labour reforms

Late: the new Spanish Government has not yet moved to comply with EU law on port labour reforms

Spain’s port labour system is overdue for reform, as Mike Mundy explains

Rumours abound that Spain is about to formally adopt a new law that will provide the framework for the end of restrictive practices in its ports sector.

Spain’s current port labour arrangements are not in compliance with the principle of freedom of establishment enshrined in Article 49 of the EU Treaty. Specifically, the European Court of Justice ruled in December 2014 that the current Spanish legislation, which requires Sociedad Anonima de Gestion de Estibadores Portuarios (SAGEPS) to be set up in major ports, is in breach of Article 49.

SAGEPs manage the process of recruiting port workers and putting them at the disposal of terminal operators and other cargo handling companies. The law relating to SAGEPs further requires all companies seeking to provide cargo handling services to join and financially support SAGEP. 

In effect this limits the options of port worker employers as to how they source labour. Only if the workers proposed by SAGEP are limited in number or are not suitable can employers look elsewhere to source labour. In turn, practically speaking, this effective ‘closed shop’ means the continuance of inefficient and expensive work practices – practices that are out of sync with modern ways of working. 

Despite the ruling against it, however, Spain has not buckled to meet EU requirements. It had until February 2015 to communicate to the EU the measures it had undertaken to achieve compliance but did not do so. Since then it has again been referred to the Court of Justice and is now in a position where substantial financial penalties are being incurred. A fine of €15.6m was levied in July 2016 and since then a fine of €134,000 per day.

What next?

The beginning of 2017 has brought little clarity regarding the new Spanish Government’s willingness to achieve compliance.

Non-compliance previously was hardly a surprise with Spain entrenched in a political quagmire which saw two general elections – December 2015 and June 2016 – and months of subsequent bickering before a Conservative-led government emerged, with this only being achieved via the abstention of the Spanish Socialist Party, PSOE.

If it has the will to do so, and the courage to face the wrath of unions who are strongly seeking to preserve a lucrative status quo for their members, then the way is now open for the current government to modernise its labour laws. Facing the reality of substantial ongoing fines it certainly seems to make sense to do so.

It is, however, not just fines that provide a major incentive to achieve port labour reforms. The following are also key considerations:

Structural: SAGEPs are a key element in facilitating the desire of port unions to negotiate Collective Bargaining Agreements (CBAs) that maintain existing privileges for port labour. While employers are financial contributors to SAGEPs, the port unions have de facto control, particularly via their role of granting stevedoring permits, selecting and appointing new stevedores, providing continuous training and ability to promote workers. The power of the unions under the SAGEP structure is effectively amplified via their ability to implement co-ordinated measures such as slow-downs and the reduction of available labour as part of campaigns to achieve CBAs. The main union, CTM, is known to play a leading role in this respect. 

Practical - Work arrangements: there are many examples of outdated work arrangements. Two key examples are: In diverse situations there has been no reduction in work gang sizes despite the extensive deployment of automated handling technology or information technology; and there is an inherent lack of flexibility in how labour can be assigned to particular jobs. Typically, there is no matching resources to requirements resulting in frequent over-manning and it is also impossible to assign the same team to work on different docks during the same shift. 

Practical - Costs: The maintenance of old style work arrangements/practices promotes high costs of operation. Direct costs are one thing – one major port reports that the current average salary of a stevedore is over €90,000 per annum - but another important aspect is the union directed action that takes place, like work slowdowns, which seeks to secure CBAs that maintain out-of-date work practices. The cost of labour action in one major container port over the summer of 2015 is put at approaching €15m. And the incidence of such action is increasing as the unions push to secure new CBAs and in at least one port to extend their sphere of influence to non-core cargo handling activities. 

Reforms essential

Spain’s port labour sector is clearly well past its sell-by date and needs to move on to achieve a more modern basis of operation. It is painstakingly evident that the country’s government should move quickly to comply with EU legislation and thereby open the gate on sector reforms. 

Stevedores should be employed under the general labour law and CBAs adjusted to the new system. 

The reforms implemented should also:

·        Confirm the ability of agencies supplying temporary labour to enjoy free access to the port sector market.

·        Ensure that no pool agency or organisation supplying temporary workers should enjoy exclusivity or preferential rights regarding the supply of workers to the port sector and similarly no specific category of workers should have exclusive or preferential rights to be employed in ports. 

Last but by no means least, the reform of the port labour system, properly done, should involve severance pay for SAGEP workers. The consensus of opinion among employers is that should be paid by Puerto del Estados, the government agency managing ports in Spain. In particular, this is seen as fitting due to the public damage generated by the current restrictive port labour system empowered by Government.



THE TRUE COST OF MONOPOLISTIC MANAGEMENT 

In 2014, the SAGEPs paid just over €440m to employ 6,400 stevedores which equates to a gross salary per stevedore of around €68,900. Port employers in Spain suggest this level of salary is up to 50% higher than that which would apply in a free market. Taking the 50% figure then this means the financial ‘hit’ taken by employers as result of the monopoly of SAGEP workers performing cargo handling services was €220m. 

There are also, of course, costs that are difficult to measure – damage to reputation, loss of potential new business and so on. It is not just a question of ship owners moving from one Spanish port to another if they have a bad experience; particularly where transhipment activity is involved there are numerous other port hubs, outside Spain, that can be selected. 

And where high port costs are experienced they will be passed on along the transport chain ultimately ending up with the consumer or producer. This makes the cost of goods for industry or retail in Spain more expensive and exporters less competitive.