Procedures and Remedies Under the NAFTA Labor Agreement
John S. McKennirey

The title for this session “Procedures and Remedies” is fortunately broader than the term “dispute resolution”, when one is discussing the NAFTA Labor Agreement. For, despite much hoopla, many high profile cases, public hearings, official reports and plans of action, and a significant amount of controversy, there has never been a dispute. In fact events have never come remotely close to having a dispute, and one might well wonder when, if ever, there will be a formal dispute under this Agreement. (One might point out that neither have their been any disputes under the NAFTA Environment Agreement, and there have only been three under the NAFTA’s similar Chapter 20 process.) But we have seen the use of new procedures and we have seen new forms of what might be called “remedies” under the NAFTA Labour Agreement. And perhaps, therefore, in a broad sense, one could say we are finding ourselves dealing with a new form of international law.

I would like to present a policy perspective on the procedures and remedies of the NAFTA Labour agreement, rather than presenting a description of them in detail. The procedures (generally) are not exceptionally complicated and are publicly available. I will not discuss the institutions created by the Agreement (the tri-national Commission and its Secretariat and the National Administrative Offices) nor its “cooperative” aspects in order to concentrate on the procedural aspects.

These procedures and remedies clearly break new ground in international relations in regard to a sensitive area of domestic governance, namely the administration of labour law, by entering this area using international instruments. As such they contribute a new governance dimension to the rapidly expanding globalization process.

The Labour Agreement was added to the NAFTA package to provide some assurance that free trade between Mexico the United States and Canada would not have negative consequences for labour standards within the region, and, on the contrary would actually have positive effects. A negative effect was considered possible if non-compliance with labour standards were to become a factor in competition.

In order to assure that international competition would be on an approximately equal footing in respect of labour standards, it was agreed that each country’s system of labour laws would be accepted at par, but that obligations would be established to ensure that those laws would be enforced in traded sectors at an effective level. Thus, all companies engaged in trade would effectively be required to comply with some set of labour standards, even though those standards would contain significant variations between jurisdictions.

This was obviously a compromise solution. It did not provide perfectly equal conditions for competition in terms of labour standards, since the three countries continued to have different standards. And it did not satisfy those who wanted to see free trade bring into play a new and higher set of international labour standards which would raise domestic standards to a new level and provide for international enforcement to compensate for the weaknesses of domestic systems.

And so the idealists on both sides of the debate were not satisfied, neither those who felt the whole idea of tying non-commercial, social areas to trade agreements was wrong-headed; nor those who wanted a new international labour code to correct for the weaknesses of the tired and politically encrusted national ones.

However, The NAFTA Labour Agreement (the NAALC), albeit based on the continued primacy of national systems of labour law, domestically enforced and domestically legislated, does subject the enforcement of those national systems to a new international discipline, opening the formerly closed world of domestic labour administration to international procedures and remedies, involving new forms of transparency and accountability.

But let it be stressed to avoid any possible confusion: the NAFTA Labour Agreement does not create an international court of appeal for the application of domestic labour laws. There is a workforce of about 180 million in North America. To provide a system of individual international redress for the application of labour standards throughout North America would be nothing short of monumental, not to mention the profound implications for national sovereignty.

Thus the NAFTA Labour Agreement specifies that decisions of labour officials, or administrative tribunals or courts cannot be reopened or revised under the terms of the Agreement. It is interesting that despite this clear statement, many of the petitioners under the Agreement have sought just this kind of remedy. They have sought to have individual workers reinstated, election results overturned or unions recognized over against the decisions of domestic authorities. And the NAALC has been declared a failure by some labour activists for not being able to provide these remedies.

What can be pursued under the Labour Agreement is the systemic, not the individual. Specific instances may be used to illustrate systemic problems, of course, and indeed many of the 20-some “public communications” under the NAALC have been based on specific factual circumstances.

The NAALC procedures run as follows. Six articles define the obligations of the Parties to ensure effective enforcement of their labour laws. These obligations cover governmental administrative action (such as systems of inspection), individual rights of access, procedural guarantees and due process, publication and public information.

Obligations are followed by procedures to provide accountability. There are two categories of procedures: procedures between the public and a government and procedures between governments.

Regarding the first category, the Agreement specifies only that each Party must provide for the submission and receipt of communications from the public “arising in the territory of another Party” pertaining to labour law matters. Each national government must establish a National Administrative Office (NAO) to review such communications in accordance with nationally established procedures. In the two years after the coming into force of the NAALC all three Parties had published their procedures for handling public communications.

These procedures or guidelines have significant variations; for instance, the US calls for a public hearing in all cases where a public communication is accepted unless the Secretary of the NAO has cause not to hold a hearing (which has not yet occurred). In Canada, there is no such onus, and “public meetings or consultations” are listed simply as one option for obtaining information. In Mexico there is no provision for public hearings or information sessions.

The guidelines specify time periods and stages in the process of receiving a communication, how it will be evaluated, notification to the submitters, consultations with the other Party or Parties involved (in the sense that only national governments are Parties to the Agreement), reports to the Secretary or Minister of Labour, and ultimately public reports. In all three systems, public communications will be accepted only if the government receiving the communication is satisfied that the communication has raised a matter of substantial significance to the obligations concerning effective enforcement of labour law.

It is important to note that this review of a public communication is not a judicial process and it is not determinative of rights. There are no rules of evidence, no powers of subpoena, no oaths, no rights to cross-examination. The procedures adhere generally to the basic principles of natural justice: the complainant’s right to submit the complaint and to know of its outcome; the “defendant’s” right to be informed of the complaint and to present a response; the NAO’s duty to be fair, timely, impartial and transparent and to render a reasoned decision.

In the event of a public hearing, the US and Canada ensure that the interested parties are informed of the hearing and have the opportunity to attend, to hear the information that is presented and to present their information and express their perspective. No one is required to attend nor to participate in any way. While the head of the NAO may question presenters, this is only for the sake of clarity.

It is very interesting that these procedures defining the interaction between a government and the public which are demanded but not at all specified in the NAALC have become, in practice, the central operational piece of the Agreement.

There have been over twenty public communications since the coming into force of the NAALC in 1994, raising fundamental and far-reaching questions of labour law in all three countries. Issues range from the ability of non officially supported unions to organize in Mexico, to the structure of the Mexican labour boards, to the treatment of migrant workers in the United States, to workplace safety and health, to the use of pregnancy testing in hiring practices in Mexico and the use of workplace closings to avoid unionization in Canada and the US. These public submissions have themselves brought forward much new information about labour law application throughout North America, and an equal contribution has been made in course of the review of the submissions and public reports of the NAOs and in the extensive follow-up plans of action.

It is also interesting to note the novel quality of the political accountability generated by these procedures. Governments are accountable, in the first instance, to hear the concerns of their own citizens about the action of another government in regard to the enforcement of its labour laws. There is an implied further accountability to address those concerns, if merited, with the other government on the basis of mutual obligations. The “other” government is accountable to its trading partner to respond to concerns and to assist in addressing the issues that are raised. It may be appropriate to suggest that there is a new form of international relations here that may tell us something about the emerging politics of globalization.

Now let us turn to the procedures governing interactions between the governmental Parties themselves, some of which are specified in much greater detail both in the NAALC and in subsequently developed rules of procedure.

It is interesting that the procedure which has the least degree of specification, very little at all, is the only procedure to have been used to date; while other highly specified procedures have not yet been employed.

Three different procedures between the Parties may be used according to different areas of labour laws. Labour laws are defined according to eleven labour principles, each covering a general area of law. The first three principles relate to the right to organize, to bargain collectively and to strike. In these areas, only the procedure called Ministerial Consultations applies.

This procedure allows any Party (i.e. any national government), to request formal consultations at the Cabinet Secretary or Minister level, with another Party. Neither the conduct of the consultations nor the possible outcomes are prescribed. Ministerial Consultations may be requested in response to a public communication (and this has in fact always been the case), but this is not a necessary condition. Consultations may address the obligations of the Agreement (again this has always been the case to date) but they are not necessarily limited to such matters.

What has emerged as a matter of practice, and which is not at all so much as implied in the Agreement, is the publication at the conclusion of the Consultations of an agreed action plan through which the governments attempt to address the issues that have been raised in the public communication process. These action plans have included conferences and seminars, public hearings, special studies, distribution of information to workers, and even policy clarifications. They have involved public officials, Ministers, labour boards, independent researchers, and union and management representatives. In effect these action plan outcomes are a form of “remedy” to the systemic issues that have been raised. In that sense they constitute an innovation in their own right.

In two instances Ministerial Consultation “remedies” have effected actual changes in policy (in regard to the issues of pregnancy testing in Mexico and the use of labor inspectors for immigration checks in the US). But in most cases the remedies have been to expand and inform public debate about important matters of labour law and administration which, in turn, contributes to the broad, small-‘p’ political process in each country. Indeed, this so-called “sunshine effect”, and its influence on public opinion, was meant to be a remedy at the time of negotiating the Agreement; but the specific form the remedy would take was only developed in practice.

To date, no matter has been taken beyond this stage under the NAALC. Now we move on into the realm of the possible.

The next procedure, or level of treatment as it is sometimes called, is termed an Evaluation Committee of Experts. Any one government, having held Ministerial Consultations, can request the establishment of an ECE to look into the enforcement of labour law in all three countries in any area except the three already mentioned. The Committee of Experts will be chosen from a roster established by the Council of Ministers, it will be supported by the Secretariat of the Commission for Labour Cooperation, it will operate according to a very detailed set of rules of procedure negotiated between the Parties (which have been published), and it will report within a tight time frame (unless the Parties agree otherwise). It may make recommendations, but these are not enforceable.

At this point in time, we do not yet know what political threshold will need to be crossed before a Party will call for such an independent study. Although the NAALC expressly states that the ECE study shall be tri-national and “non-adversarial” in nature, the Parties are clearly reluctant to use the mechanism. Only actual practice will tell in what circumstances a Party will call for an ECE, how workable the rules of procedure will be, and how an independent group of experts will respond to them.

In principle, an ECE report is intended to provide an objective, internationally comparative assessment of the state of enforcement in a particular area of labour law. This will be a new and unique procedure in international labour affairs should it occur. This report itself, and the recommendations it may contain, would constitute yet another “remedy” under the NAALC.

For almost all areas of labour law this will be the end of the matter. But for three areas, viz. child labour protections, minimum wages and safety and health, there is a third and final procedure available.

On the basis of an ECE report, two Parties may combine to call for dispute resolution procedures if they are of the view that there is a persistent failure by the other Party to enforce its labour laws in one of these three areas.

The dispute resolution process is patterned closely on the general dispute resolution process of the NAFTA. It begins in further consultations and proceeds to the establishment of an independent arbitral panel. The panel makes its own evaluation of the evidence from the ECE and the Parties and may issue orders for corrective measures. These orders may be enforced by fines of .007% of total trade between the Parties. A fine once collected is provided to the Commission for Labour Cooperation to be returned to the defendant Party to be used to remedy the problem. Clearly, the enforceable orders of an Arbitral panel are the most compulsory and traditional form of remedy under the NAALC.

The NAALC itself is quite detailed in regard to the various stages in the dispute resolution process (which make up the longest and most complex part of the Agreement); and even further rules of procedure for the Arbitral Panels have yet to be negotiated by the Parties.

It is important to note that a dispute requires two governments to assert a persistent failure of a third government to enforce its own law in one of the three specified areas, after extensive study and equally extensive efforts at consultation and remedy. The Agreement takes into account that the governments have limited resources and must make decisions among competing priorities and that there is a normal exercise of discretion in all enforcement action. In order to put an end to the dispute a government must do no more than take reasonable measures to enforce its own law. It is quite apparent that the likelihood of such a process being invoked and proceeding to its end stages is remote, for not only is the process itself inductive of a resolution by agreement, but also there arises the internal constitutional obligation of any government to enforce its own law.

Let me conclude with some observations and some questions about these procedures we have been discussing. Our focus is on procedures and remedies in an international context. It goes without saying that the international context takes us outside the normal realm of the force of law, into a territory where “procedures and remedies” are fundamentally different than they are within the borders of a sovereignty, where exists the single and effective power of the state. We are dealing in relations between sovereign entities.

Having noted that we are in international waters, we have found in the case of the NAFTA Labour Agreement that we are talking about, in some instances, detailed procedures between governments that have never been used; in other instances, simple procedures for Consultations that have evolved new formalisms on their own; and in another instance, new procedures defining relations between the public and governments that were called into being by one simple line of an international Agreement and have become its centrepiece.

Why have certain extensive formal procedures never been used? And why have other procedures almost completely lacking definition evolved so rapidly?

It is interesting to note certain distinctions:

• between “transactional” issues and “systemic” issues;

• between commercial issues and social issues;

The NAALC dispute resolution process, unlike NAFTA’s Chapter 19 or the investor/state process of Chapter 11, is intended to deal with systemic issues, more like NAFTA’s Chapter 20 process. It is worth pointing our that there have been only three disputes initiated under this process. Systemic issues do not deal with of specific factual situations or provide individual remedies. They involve wide ranging analyses based on extensive data and imply remedies that are structural, administrative and policy based in nature, not case specific. They generally do not admit of rapid remedy but only of more gradual change.

Secondly, social issues such as labour regulation are fundamentally different from commercial issues. Commercial relations exist as conditions between two separate national Parties, but social issues exist as the conditions within the Parties. Commercial issues may be said to be “exterior” to the Parties while social issues are “interior”. The potential level of “intrusion” in social issues, the question of sovereignty and the need to respect local differences and particularities (the “olive tree” in Thomas Friedman’s language) is thus much greater than in commercial issues.

The brief history of the NAALC procedures may also point us to two important dimensions of the emerging politics of globalization that call for new structures, namely: structures for interaction between the public and governments about trans-national issues; and structures for interaction between governments about important domestic matters that have trans-border implications.

We are also finding that new “procedures and remedies” in the new relationships of globalization, are needed to address new issues and new forms of political and legal accountability transcending national boundaries. What the right set of “procedures and remedies” might be for this emerging context is not so clear, and may admit of variations yet to be devised.

The trade and labour field is continuing to evolve. The United States several months ago concluded a free trade agreement with Jordan which contained a labour chapter. In this model, as in the NAALC, the obligations of the parties are to ensure the effective enforcement of their labour laws. But dispute resolution is fundamentally different. A third party panel is used in an effort to resolve a dispute, but that panel is not given the final word and its recommendations are not binding. Instead either Party can decide ultimately on its own if the other Party has fulfilled its obligations and, if not, can decide to impose “appropriate and commensurate” trade measures. The Jordan model also refers to labour enforcement matters “affecting trade between the Parties” as a basis for dispute, which is a new concept that is yet undefined.

The role of the International Labour Organization in the growing field of labour agreements associated with trade agreements raises yet other questions that many are now beginning to consider, following on the WTO’s recent reference to the role of the ILO and the ILO’s recent adoption of a set of core labour standards in the Declaration of the Fundamental Principles of Rights at Work in 1998.

And so we are in the midst of a period of intense development in regard to globalization and labour, and no doubt there will be many new international “procedures and remedies” yet to emerge.

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