Why American Chamber of Commerce and Association of Businessmen are against new labour code

Aleksandra Laliashvili

Georgia is heading to the West and strives for integration in European institutions.

One of main precondition for deepening of the EU-Georgia relations is the labour code complying with EU standards. A month ago, the government together with United Labour Union and Association of Employers reached agreement on amendments in labour code of Georgia. United Labour Union has designed package of amendments to be made in the labour code. However, there are many opponents of the new labour code, especially Association of Businessmen and American Chamber of Commerce in Georgia. Why are they opposing amendments of labour code and how they might impede attraction of investment in Georgia?
The main remarks of the EU and International Labour Organization toward labour code of Georgia are that it does not comply with the standards of the EU and International Labour Organization. At the same time, it contradicts with “Social Charter of Europe” approved by Georgia in July 2005, in such fundamental principles as overtime pay and duration, termination of the employment contract, collective negotiations etc. Refinement of labour code is the direct requirement of the EU and implies protection of employed people. Georgia took this obligation within the framework of Europe’s Neighbouring Policy. Due to imperfections of existing labour code European Union might abolish GSP+ for Georgia. The GSP+ enables Georgia to export goods with some benefits.
“We address European Committee and call it to stop GSP+ for Georgia. This system of preferences must be based on respect of human’s fundamental rights. However, the labour code operating in Georgia is an infringement of these rights. The EU has already stopped GSP+ for Belorussia due to same problems” – dedared Secretary of European Trade Union Confederation, Josef Niemec, at the united conference of Labour Union of Georgia on Sep- 26. ETUC is cooperating with the EU government, parliament, and Association of the EU Employers and thus it can influence Europe’s policy toward Georgia.
United Labour Union of Georgia started to actively work on amendments of labour code one month ago. Amendment considers following clauses: in case of dismissal, compensation should be paid according to the length of service; overtime work should become payable, and issuance of explanatory note on dismissal obligatory. At the same time, organization will have to ground theof rejection of some candidature on announced vacancy. United Labour Union has already designed amendments. The head of the organization, Mr. Irakli Petriashvili declared that amendments will become operative in successive steps.
“The existing law impedes development of civil society and thus changes are essential. International society requests change of labour code and these amendments are to be necessarily made. Otherwise, this will be negatively reflected in the country’s policy” – noted Mr. Petriashvili.
He reckons that this will put an end to the constant discrimination of employees. For instance, according to the existing legislation, employer has the right not to explain the reason of dismissal to the employee. In the future, this will become obligatory.
“Employer is obliged to name the reason of dismissing some employee and afterward this might become matter of court dispute. Employer should prove in the court that employee is truly unqualified. By our initiative, in case of dismissal, employer must be obliged to pay fine in amount of salary multiplied one hundred times” – said Mr. Petriashvili.
Business Association of Georgia and American Chamber of Commerce are actively involved in the process of labour code reform. The mentioned organizations already addressed the Ministry of Labour, Health and Social Protection with the letter grounding priority of protection of employer concerns and further development of liberal economy.
Business Association of Georgia and American Chamber of Commerce reckon that project of new labour legislation is too left-wing and opinions of the businessmen are not impartially taken into account. The president of Georgian Business Association and CEO of the company UGT, Mr. Giorgi Tchirakadze reckons that existing labour code of the country is liberal and he does not support adoption severer labour code.
“This increases prices on our goods and services and impedes entering European market. Of course, Europe is willing of Georgia’s integration with its institutions, but first of all, it protects own business instead of Georgian. We should take care of our country. We have many controversies, but this does not imply that we should accept every requirement of Europe. Therefore, I do not agree with Europeans in specific issues. We already have liberal labour code that is a big achievement of our government. If we return to Soviet Union labour code, the only one who suffers damage out of this is Georgia” – Declared Mr. Tchirakadze in his interview with “Banks and Finances”.
The Press release of American Chamber of Commerce and Association of Businessmen of Georgia states:
“Business Association of Georgia together with American Chamber of Commerce have analysed new labour code in detail. New labour code has been designed according to the recommendation of Labour Union of Georgia and ILO. It is well-known that labour draft bill offered by Trade Union is oriented towards protection of workers and bears extremely socialistic character. New bill on labour is not impartial and does not consider concern of businessmen; and negative effect that the mentioned bill might have on attraction of long-term investments in the country”. They reckon that important basis of liberal economy is a liberal labour legislation. While, left-wing labour code creates actual dangers of restricting freeentrepreneurial activity. Investors are paying special attention to tax rates and protection of property rights and labour code of the country that regulates relation of employer and employee. Moreover, working places in private sector are created by local and foreign businessmen; consequently considering opinion of businessmen is of special importance.
“Extremely left-wing labour code that operates in highly developed European countries is influend by socialists. Such labour code decreases competitiveness of European goods toward American and Asian production. We reckon it unacceptable to adopt European type of labour code in the country that strives for rapid economic development. Nobody has achieved economic miracle and leap with socialistic labour code yet, this is a luxury that only wealthy countries can afford” – reckons the president of Business Association of Georgia, Mr. Giorgi Tchirakadze.
The president of American Chamber of Commerce in Georgia, Mr. David Lee declared that “Georgians should decide what is more important in the process of economic development: to increase number of employed people by attracting foreign and local investors, create new working places and new enterprises that encourages local production and export; or to apply the methods that would be oriented toward regulation of employer and employee relations instead of economic development of the country”.
Business Association of Georgia and American Chamber of Commerce hope that government of Georgia, together with representatives of employees, Trade Unions and ILO consider opinions of Georgian businessmen concerning labour code of Georgia and thus support liberal labour code that is a foundation stone of economic reforms of the country and its strategic development.
Allow me to remind that Business Association of Georgia has been founded in autumn of this year and it unites leading business organization of the country. One of main goals of the association is economic development of Georgia and encouragement of entrepreneurial activities and participation in the process of legislative reforms connected with it. American Chamber of Commerce has been operating in Georgia over ten years. Members of the Chamber are American, Georgian and international business organizations. Main aim of the Chamber of Commerce is the development of commercial relations among Georgian, American and international business societies and lobbing of such legislative initiatives that encourage development of business organizations and business in general, in the country.
It seems that big controversies are appearing around new labour code. Local Trade Union, European Committee and ILO are confronting with Business Association of Georgia and American Chamber of Commerce. It truly difficult to choose – what is of first-priority – concerns of employees and protection of their rights or encouraging business development and attraction of investments? One should find a golden mean in this. As it seems, amendments of labour code will be followed by big scandal.