On August 19th, Chilean Congress approved, with 22 votes in favour and 14 opposing, a Labour Reform that will modify significantly the current provisions addressing unions and collective bargaining proceedings. A deadline was set to provide comments and amendments by September 7th.

Below we have addressed the more significant changes that come with the reform and what are their true implications from a legal perspective

Expanding coverage of collective bargaining proceedings.

This particular change is directed in order to incorporate workers - that were previously forbidden to negotiate collectively - in collective bargaining proceedings. Now workers under apprenticeship contracts, workers hired temporarily to execute specific works as well as those who do not have express powers of representation and do not perform administration tasks will be able to negotiate collectively and become union members.

Currently in Chile, it is possible to hire an employee in order for him/her to be exempt from complying with a specific work shift (requirements are set forth in article 305 of the Chilean Labour Code). The advantages of hiring under this format are that the worker was not entitled to payment for overtime and that the worker can't take part in collective bargaining proceedings. With the employment reform, employees who do not have to comply with specific work shifts will now be able to become union members and take part in collective negotiation proceedings. However, employees that are granted representation powers, can act on behalf of the company and/or have management responsibilities won't be entitled to participate.

Unions will have the legal entitlement of the right to collective bargaining.

Unions will be the main actor entitled to exercise collective bargaining rights excluding other minor negotiating groups within the company. They will also be able to take part in regulated and non-regulated negotiations.

If there is no union within the company, workers may unite in order take part in a semi-regulated collective bargaining. It is important to point out that in this type of collective bargaining, workers will not be entitled to legal rights of organized labour, such as protection of union officials from dismissal or transfer on account of union activities.

Freedom to become and quit being union members.

Workers will be able to quit and become union members at their sole discretion. However, there are a few points to bear in mind regarding this specific change:

  1. In order for employees to be entitled to the negotiated benefits and agreed covenants in a collective bargaining agreement they will have to become union members. Furthermore, for the employee to extend the benefits agreed upon by a collective bargaining proceeding to non-union members is considered an anti-union practice.
  2. If an employee decides to quit being a member and has already adhered to a collective bargaining agreement, such agreement will stay in force during the complete term set forth in the same. He/she will also be obliged to pay the pertaining Union instalments.

Establishes the concept of minimum negotiating position.

The term for collective bargaining agreements to stay in force have been reduced from 4 years to 3 years. At the end of the term of each collective bargaining agreement new negotiations will commence and the minimum bargaining position for the employer will be the terms, conditions and benefits set forth in the previous collective bargaining agreement.

Union's Right to be informed.

This right can be deconstructed into the following:

  1. Right to Regular Information.

    1. This right consists that larger and mid-sized companies are obliged to provide their Union with relevant and financial information in a regular basis.
    2. Documents to be provided are: Balance sheets, financial statements and other pertaining and relevant documents.
    3. These documents need to be provided to the Union within 30 days from the day they were made available.
  2. Right to Specific Information of Negotiation.

    1. Unions are entitled to have access to specific and necessary information to prepare for collective bargaining proceedings.
    2. Upon request from the Union the company must provide the following information:

      Payment of Salary Sheets, Re-adjusted value of bonus and other benefits set forth in the collective bargaining agreement currently in force, Overall labour costs of the company for the past two years, Other information set forth in the labour reform.
  3. Right to Information pertaining position and duties of employees.

This refers to the company's obligation to provide information on compensation of workers in accordance to their position and duties within the company.

The replacement of workers on strike is forbidden and constitutes an anti-union practice.

This last point is probably the most controversial change in the new labour reform since it adds a significant amount of leverage to unions.

Currently, it is possible to replace union members that went on strike by complying with certain requirements set forth in the Chilean Labour Code but this situation is going to end with the new labour reform.

This point is still to be submitted for discussion within Congress and the decision of implementing such change is not final. However, it does bring a level of uncertainty, especially to mining companies where dealing with Unions is a certainty.

General Thoughts

It is fairly obvious that the overall purpose of this new legislation is to provide incentives for employees to become union members and grant unions more leverage when it comes to collective bargaining proceedings.

However, there are strategic approaches to mitigate these contingencies. For example, one of the options that we are exploring for a client who is considering a significant service contract in Chile is to sign a collective bargain agreement as soon as they have enough personnel to form a union in order to ensure an uneventful service for at least 3 years. This option would require initiating renegotiations of the collective bargaining agreement before the deadline of its term.

It is also worth mentioning, that at the present moment in Chile, there is not an antagonistic environment between employees and employers. Most collective bargaining negotiations tend to be resolved within the collective bargaining proceedings.

Lastly, in our experience with our clients, we have observed that foreign companies in Chile are very well regarded (especially Australian and Canadian companies) since they implement a "paternalistic" approach when dealing with their employees. This approach includes providing decent bonuses, more vacation leave, co-founding scholarships and post graduate degrees, providing support to employees with terminally ill members of their families, among others.

We will provide an update again once the definite text of this new Labour Reform is published.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.