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Zh.S.Yelyubayev Ж.С.Елюбаев
TCO & Labor Legislation
Tengizchevroil (TCO) is a joint venture founded by the Republic of Kazakhstan represented by NOC KazakhOil, Chevron Corporation, Mobil and LUKARCO B.V. In the course of seven years of a successful development of the Tengiz Field TCO became the biggest oil company in the country and a leader of oil and gas industry of the Republic of Kazakhstan. All TCO activities are regulated by Agreements on the Tengiz Project approved by the Decree of the President of the Republic of Kazakhstan and by special Resolutions of the Government of the Republic of Kazakhstan. The Republic of Kazakhstan has admitted and agreed that a number of basic provisions of these agreements has the force of a law and prevail over the country’s legislation. However, TCO administration, while carrying out its economic activities in Atyrau Oblast, takes all measures to ensure observance of requirements of national legislation, in particular of the provisions of laws «On Labor» and «On Labor Protection». Company’s management does its best to ensure that the employees, most of which do their job in a difficult climatic and working environment, are provided with normal labor and rest conditions. It is worth mentioning that TCO was one of the first legal entities in the region to begin implementation of a program of certification of its production facilities. The program was started in October of 1998 and was based on the provisions of laws binding employers to secure employees’ rights, environmental safety at production facilities, sound labor conditions, observance of sanitary and hygienic standards. The examination of production facilities was held by modern methods partly agreed on with the Ministry of Labor and Social Protection of the Republic of Kazakhstan. Highly professional specialists working in the enterprise, both national and foreign were involved in the process. The facilities where new technologies had been introduced, equipment sophisticated, the process flowsheet adjusted, control system computerized, which led to a significant improvement of labor conditions and safety, were the first to go through the process of certification. The certification results proved that there were no evidence of hazardous and dangerous for health factors at the facilities that went through reconstruction and where new highly technological and environmentally friendly equipment was installed, which provided a basis for employees’ transition to new conditions of work while preserving their privileges. This fact proves that there exists a necessity to transfer all TCO facilities to new technologies in order to resolve the environmental and safety issues to the maximum extent possible. For the sake of fairness, it should be noted that the results of the certification of production facilities, especially at the initial stage, were ambiguously, and sometimes even negatively, met by a part of the work collective and by trade unions. However, a thorough examination of the certification results by an imposing commission of the Ministry of Labor and Social Protection of the Republic of Kazakhstan, as well as the investigation on environmental situation at TCO facilities made by an independent expert review group destroyed all doubts that existed with regard to that problem. Presently, a special commission as well as respective TCO services continue the work on examination of Company’s facilities and their certification in order to provide employees with normal conditions of work and rest. It should be mentioned that the previous work order remained at the production facilities where hazardous and dangerous conditions of work had been disclosed in the course of certification. The issues of labor protection can not been considered separately of the issue of employees’ rest, especially because of the fact that, as you know, a substantial part of our employees work on a rotational schedule and live in TCO rotational village. Proceeding from this point, TCO administration makes its best to ensure that the employees have everything needed for normal life and rest. Our personnel working on rotation are provided with a free high-calorie and varied meal three times a day, good accommodation facilities, free transportation and medical care. In the village, there are all-season covered swimming pool, gymnasium with various sports equipment, tennis courts. So, a complex system for rest and recreation of employees is existing in TCO, which significantly contributes to the safety of work operations. TCO has achieved a really world-class record of safety - more than 8 million hours (544 days) of work without a lost work day injury. There is also a complex program of environmental protection in TCO, a successful implementation of which is directly connected with occupational safety and health of TCO employees. Company has established the highest standards of occupational safety and health. Primary, periodical, extraordinary and special briefings on a safe conduct of work at production facilities with the purpose to make the employees familiar with general rules and safety standards, basic provisions of labor legislation, internal labor rules, rules of conduct at production facilities, characteristics main hazardous and harmful production factors are a must. In TCO, to achieve the goals set by so called «occupational health protection» (defined by ILO and WHO as «improvement and ensuring of the highest level of physical, mental, and social well-being of the workers of all specialties») medical personnel, industrial hygienists, safety engineers, and other specialists conduct obligatory medical examinations and supervision over work conditions at the production facilities. Medical examinations are conducted at the level of highest standards and in compliance with legislation of the Republic of Kazakhstan, Chevron and TCO policies. According to the results of professional medical examinations conducted in 1999, 96.5% of the employees were considered fit for the work at the enterprise, 0.3% needed to be transferred temporarily to a more easy work, 2.9% had restricted working abilities which needed further assessment, 0.3% of the employees examined were found unfit. These figures can be interpreted as a positive factor providing evidence of a good state of occupational safety at the enterprise. Analyzing basic provisions of agreements and contracts on the Tengiz Project, it is worth to mention that the Republic of Kazakhstan, attracting world class petroleum companies as investors to the country, provided TCO with a freedom of action in many aspects of its activities, particularly in the issue of hiring personnel, including foreign employees. Thus, pursuant Article 12 of the Project Agreement, our Company has the right to hire personnel on the terms and conditions stipulated in agreements and contracts on the Tengiz project without any requirement from the side of government bodies of the Republic of Kazakhstan on obtainment of any additional consents, approvals, licenses, etc. It is worth mentioning that this provision of the Agreement is still being recognized by both local and central government bodies of the Republic of Kazakhstan authorized to regulate labor relations. TCO and its Partners’ position on these issues is supported by Atyrau Oblast Akimat as well. Nevertheless, it should be noted that from time to time differences arise between TCO administration and related state agencies on the issues of use of foreign employees who are citizens of near and far abroad. It is always connected with the requirement of obtaining permits for employment of foreign workforce, which contradicts to the basic provisions of the Tengiz Project Agreement. That is why TCO administration and our founders have been always defending our right for license free activity in this sphere. Our position on this issue is based on the fact that a certain number of TCO employees being CIS citizens worked at TCO facilities long before (from the end of 80-s) the joint venture was formed, and they automatically became bound with labor relations with TCO when it was formed. Naturally, in the Soviet time there was no need to obtain any permits or licenses for the use of their labor in Kazakhstan, because they had equal rights with the citizens of our country. Only when the law «On Employment» was passed on December 15, 1990, the use of foreign employees without licenses became prohibited in the enterprises located in the territory of Kazakhstan. However, the provisions of this law have no retroactive effect and can not be applied to employees who were working at TCO facilities even before it was formed (provisions of Article 39 of the Constitution and Article 37 of the law «On Statutory Instruments»). By the way, that is also the position that the Supreme Court of the Republic of Kazakhstan adhere to. In this context, in order to increase the national employee ratio in the TCO workforce, TCO has developed a constructive strategic staffing plan designed to reach the 80% target for national employees by the year 2004. However, any reduction in the expatriate workforce, including CIS employees, to less than 20% would, in our opinion, have an adverse effect on TCO business efforts and would result in extra organizational costs. Then again, any reduction in the number of expatriate personnel, CIS included, must be subject to the provisions of the country's Labor Law. Sadly, we see inadequate legislative support in this dimension. For all that, our vision for increasing the proportion of national employees in the company workforce in keeping with the employment law of the Republic of Kazakhstan includes streamlining business management, with the resulting redundancies among personnel, including expatriates, plus termination of expatriate employees of statutory retirement age - although merely reaching statutory retirement age does not in itself warrant termination under the applicable law. This points to the need for retirement incentives, such as good severance pay. Regarding compliance with the law in TCO employment practices in respect of national employees, I need to make the following points. TCO national employees (who currently account for 70% of the workforce) are hired under contracts of employment as provided for in the country's updated Labor Law. Incidentally, before it came on the statute books, TCO had relied on contracts made under the old Republic of Kazakhstan Labor Code and based on the Western (British and American) forms and practices, and some contract clauses were not entirely consistent with the labor legislation of the Republic of Kazakhstan - such as the provision that «an employee who has failed to undergo an occupational health examination» or «an employee who has twice failed a job skills qualification test» could be terminated at managerial discretion. Fortunately, TCO has never terminated any national employees on these grounds and thus has not violated their employment rights. As mentioned above, the staff of TCO Human Resources and Negotiations & Legal have now developed new forms of what is called «Individual Employment Agreements», which no longer contain any standards or provisions contrary to ROK employment law. Such contracts are signed by all new hires, transferred employees, and those who are employed under old-type contracts but want new ones. There is a plan to re-do contracts with all TCO employees on new forms. TCO operates in strict compliance with those employment law provisions which regulate systems and procedures in the workplace, time off work, compensation, safeguards, reimbursement, motivation and disciplinary rules. At this point, the overwhelming majority of employees work 40 hours a week, as required by the employment law as at present in force, while the other employees, who work at continuous process units and dedicated facilities and do more than normal week, are paid overtime. The number of rotational personnel has been going down by the year, with more and more managers and supervisors going over to the 5/2 schedule. Work is now in hand to draft a new collective agreement. To this end, there is a lot of interaction with the work units, with the trade unions (there being two trade unions in TCO), and with workers' representatives. The provisions of the old collective agreement will remain in full force and effect until a new one is put in place. Talking of compliance with employment law brings back memories of the 1998-1999 dispute (almost 18 months long) which involved TCO management, a number of TCO departments, the trade union, and some 60 former TCO employees. The controversy was very much in the news, with Prosecutor's Offices of every tier, higher trade union bodies, courts of every jurisdiction all the way to the Republic of Kazakhstan Supreme Court - all were embroiled in the dispute. The conflict, provoked as it was by the trade union and former TCO employees, spelled huge costs to TCO. The dispute had an impact on the image and good name of the company. Now the reason I am remembering it is that its final outcome showed TCO actions to have been lawful and justified all along as the courts in a judicial review threw out the reinstatement claims brought by Transportation employees terminated by reason of redundancy. The rationale behind the decision was that in implementing an organizational restructuring by way of contracting out some of company functions (to an independent body corporate), with the resulting redundancies, TCO had been fully in compliance with the applicable provisions of the employment law then in force. Now the reason why the dispute proved such a long-drawn-out affair was that the local courts and government bodies were biased and overly preoccupied with politics, whereas the proper way to perform their duty was to give the issue careful consideration up front and resolve it in the first instance. TCO will not tolerate any misconduct in its ranks, especially in connection with alcoholic intoxication. Almost every instance of gross misconduct has been looked into by company investigators, with disciplinary action, up to and including termination, taken as mandatory follow-up. Here, again, TCO management has received no support from the trade union, for it would seldom go along with management decisions on employee termination (such union consent being a statutory condition under the old Labor Code). Those controversies have triggered litigation sagas; witness the unwarranted reinstatement by the Zhylyoi District Court in 1998 and 1999 alone of 22 employees sacked for being drunk at work. Just about all these court rulings were found wrong and were reversed by the higher courts, which thus signaled positive support for TCO efforts to prevent drinking in a hazardous work environment. What deserves special mention in this context is that the administration of a business enterprise - if it operates within the law and as required by contracts, agreements or other arrangements - ought to be protected against unwarranted meddling on the part of non-governmental organizations such as trade unions as well as government regulators and watchdogs. This freedom of legal enterprise is expressly provided by Article 10 of the Republic of Kazakhstan Civil Code. Indeed, we should always bear in mind that unless business owners or stewards have a right to handle their production, administrative and management issues on their own - certainly, within the pale of law - we can neither expect a successful performance nor preclude labor disputes or social conflicts. TCO has been doing a lot to safeguard the rights and interests of its employees by providing good working conditions and recreation facilities, high wages and salaries, and a variety of fringe benefits outside statutory requirements - such as three free meals a day, free travel to and from the worksite, free living accommodation and other social amenities in the rotational village, severance pay equivalent to six months' pay packet for employees terminated by reason of redundancy, interest-free housing loans for a term of ten years, a flexible bonus system, etc. As for trade unions and other voluntary organizations, they should focus their efforts on constructive and lawful protection of workers' interests, rather than provoking social conflicts and labor disputes. They must work to ensure compliance with the law, employment law, first and foremost. As a law-abiding company, TCO is committed to respecting the laws of the Republic of Kazakhstan and does not demand any special treatment or privileges. At the same time, as a Kazakhstan-based entity with foreign partners, TCO will always make every effort to assert its rights enshrined in the Tengiz Project Agreement and expects to see a constructive and unimpeded cooperation to mutual benefit with Kazakhstan's business community. We can give the assurance that TCO will always honor the laws of a sovereign country in the name company prosperity, in the best interests of our partners, and in order to promote the rule of law and to develop a free market system in Kazakhstan.
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