World Bank Labor Troubles in Timor

A labor dispute in Timor-Leste (East Timor) is putting the World Bank's "dream [of] a world free of poverty" to the test.

The dispute challenges the Bank to apply to itself the standards the institution claims to promote, including a commitment to rule of law, poverty elimination, fundamental labor rights and sustainable development.

On December 3, 2003, security guards and custodial workers at the World Bank headquarters in newly independent Timor-Leste went on strike after eight days of informational picketing. They were protesting a unilateral 30 percent wage reduction by their employer Chubb Protective Services, a multinational subsidiary of the conglomerate United Technologies Corporation, which had been contracted by the Bank. Chubb, which has a history of poor labor relations in a number of countries, sacked the 32 striking workers the next day.

The Timor Lorosa'e Trade Union Confederation (KSTL), which represents the striking workers, alleges that in December 2002, Chubb instructed workers to sign a new contract -- written in English, a language that many did not understand -- cutting their monthly wages from $133 to $94. Using threats of termination to coerce signatures, union representatives say Chubb offered no explanation at the time for the cut. KSTL officials say they were bounced back and forth between Chubb and the Bank in its protracted efforts to negotiate a resolution -- with each shifting blame to the other.

Since the strike, the fired workers and their families have struggled to support themselves. Some have returned to work for Chubb, where, according to KSTL, company staff has warned rehired workers not to engage in union activity. The union has also alleged that "termination without reason, termination without warning, unpaid overtime, discrimination on salary, and recruitment without contract" characterize Chubb's operations in Timor-Leste.

The union says Chubb has violated articles 50, 51 and 52 of Timor-Leste's constitution, providing for the "right to work," "right to strike and prohibition of lock-out" and "trade union freedom," and that it has also violated Timor's Labor Code.

"We condemn" Chubb's "exploitation and violation of workers' human rights," say the Chubb workers in a statement.

In a letter to United Technologies Corporation and Chubb Protective Services, the World Bank reminded the companies that it "supports the promotion of the International Labor Organization's (ILO's) Core Labor Standards and expects its contractors to follow such in accordance with the applicable national law. The World Bank recognizes the important role the core labor standards can play in advancing economic, social and human development." One of the core labor standards is the right of freedom of association and collective bargaining.

Despite this reminder, the Timor-Leste workers say the Bank has evaded responsibility for its subcontractor's treatment of workers at its own facility.

The Bank insists it "is not a party to the dispute between Chubb and its employees, and the Bank has no right to direct a settlement of this dispute, or direct Chubb to re-hire any particular person." Global pressure has forced multinational corporations like Nike to accept accountability for the actions of their subcontractors, however, and the unionists and their supporters say no less should be expected of the Bank.

Part of the dispute is rooted in the Bank's policy to promote, rather than require, respect for the ILO's core labor standards. Thus, like many of its borrowers, the Bank in Timor-Leste has voluntarily opted out of the very policies it claims to encourage.

This labor dispute also raises questions about the Bank's commitment to poverty elimination. The first of the UN Millennium Development Goals, which the Bank has actively endorsed, is to "eradicate extreme poverty and hunger," with extreme poverty defined as living on less than one dollar a day. The Bank itself contends that a dollar a day represents an absolute poverty line. At $94 per month, the new Chubb wage would support about three people at the absolute poverty line, but most of the sacked workers are the primary wage earners for larger families.

In a letter to global unions which have contacted the Bank in solidarity with the Timor-Leste workers, the Bank contends that it "requires that Chubb provide its employees with fair wages, leave and medical benefits." Chubb must "pay salary and benefits commensurate with industry averages for the area, that meet or exceed local labor codes and guidelines, and which are benchmarked against government pay scales, where applicable." However, the workers say that if a "fair wage" is interpreted as a living wage, then in Timor-Leste, the Bank is choosing an impoverishing market wage. An unskilled worker should be paid $109-$160 per month, according to an August 2003 international nongovernmental organization voluntary salary scale.

"Chubb's normal business practice is to offer employees terms and conditions that are consistent with local regulations," says the company in a statement. "Our employees in East Timor were offered a competitive market rate as well as free medical service for themselves and their families. During a dispute over pay in the last year, some workers took action, which Chubb believes to have been illegal." The company says it "is confident that its actions were both legal and fair."

Chubb also reports that it sold its Timorese business to a local manager at the start of September.

The East Timor Action Network and several labor organizations, trade unions and union federations have protested Chubb's actions to United Technologies Corporation and the World Bank. In the meantime, KSTL has taken its case against Chubb to the Dili District Court, where it is now being heard.

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