Cablegate: Pemex Technical Staff Objects to Individual Work

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RR RUEHCD RUEHGD RUEHHM RUEHHO RUEHJO RUEHMC RUEHNG RUEHNL RUEHPOD
RUEHRD RUEHRS RUEHTM
DE RUEHME #6285/01 3621917
ZNR UUUUU ZZH
R 281917Z DEC 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 0026
RUEHC/DEPT OF LABOR WASHDC
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUEHXI/LABOR COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEAHLA/DEPT OF HOMELAND SECURITY
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
RHMFIUU/CDR USSOUTHCOM MIAMI FL

UNCLAS SECTION 01 OF 04 MEXICO 006285

SIPDIS

SIPDIS

DEPT FOR DRL/AWH AND ILCSR, WHA/MEX, WHA/EPSC, EB/IDF/OMA,
EB/ESC, USDOL FOR ILAB, DOE FOR INTERNATIONAL AFFAIRS,

E.O. 12958: N/A
TAGS: ELAB ECON ENRG EPET PGOV PINR MX
SUBJECT: PEMEX TECHNICAL STAFF OBJECTS TO INDIVIDUAL WORK
CONTRACTS

REF: MEXICO 3993

1. SUMMARY: This past July, Petroleos Mexicanos, Mexico,s
national petroleum company (Pemex), and the Petroleum Workers
Union (STPRM) announced an agreement on a new collective
bargaining contract for 2007-2009 (REFTEL). One of the most
significant elements of this contract was an agreement
between the company and the union to grant Pemex greater
latitude in making personnel decisions. As a part of this
newly granted leeway Pemex is requiring that some 32,000
members of its technical staff sign Individual Employment
Contracts. According to Pemex these contracts will, for the
first time ever, establish unambiguous work requirements for
the company,s technical staff and clearly define the roles
of the technical staff and their supervisors. PEMEX says the
contracts are needed to help reduce the nearly USD 750
million it pays out annually in labor dispute related law
suits. The president of a newly forming union representing
the technical staff and separate from the STPRM, says the
Individual Employment Contracts will allow the company to
fire tenured workers, renege on previously agreed to wages
and benefits, outsource a large number of what are now
permanent positions and ultimately lead to the privatization
of Pemex. In examining the respective claims of Pemex and
the technical staff it seems apparent that both sides have
legitimate concerns. What is not yet apparent is a genuine
willingness on either side to find a way to reach a
negotiated settlement of their differences. END SUMMARY.

NEW CONTRACT ALLOWS NEW RULES
-----------------------------

2. In July 2007, Petroleos Mexicanos, Mexico,s national
petroleum company (Pemex), and the Petroleum Workers Union
(STPRM) announced an agreement on a new collective bargaining
contract for 2007-2009. At the time the contract was both
condemned and hailed by many labor and petroleum industry
observers. The 2007-2009 Contract was condemned for the
extremely generous wage and benefits package it granted the
workers and their union and hailed because the company
obtained significant new latitude in making personnel
decisions. For example one of the concessions grants the
company considerable leeway in transferring employees. As of
July 2007, Pemex had some 16,000 workers who were only
marginally employed that it wanted to transfer for business
or production reasons. This has now changed. Previously
these employees could not be obliged to transfer for any
reason but they can now be compelled to go wherever the work
is.

3. In a further exercise of its newly granted latitude on
personnel matters Pemex management, has decided to institute
Individual Employment Contracts (IEC) for the roughly 32,000
members of its technical staff. According to an attorney for
PEMEX, the IEC,s will, for the first time ever, establish
specific job responsibilities and work requirements for the
company,s technical staff; and clearly define the authority
of and the relationships between members of the technical
staff and their supervisors. The Pemex lawyer also indicated
that the company expects that the IECs will allow it to
reduce the 8 billion Pesos (approximately USD 750 million) it
pays out annually in law suits and legal fees arising from
labor disputes. Beginning roughly in mid-2005, Pemex began to
define its technical staff as &trusted employees8 which, in
the company,s view, allows them to be characterized as
management level employees. Management level employees do
not enjoy the same collective bargaining benefits and
protections as working level staff.

THE TECHNICAL STAFF SEES THINGS DIFFERENTLY
-------------------------------------------

4. Although from Pemex,s perspective its reasons for
implementing the use of IECs are straightforward and logical
the members of the company,s technical staff see things
differently. According to Moises Flores Salmeron, President
of the fledging National Union of Trusted Workers of the

MEXICO 00006285 002 OF 004

Petroleum Industry (UNTCIP), signing an Individual Employment
Contracts would be tantamount to surrendering employee
benefits and legally established labor rights. Flores and
the UNTCIP have denounced the IECs as a violation of worker
rights.

5. One of the main issues for UNTCIP is its disagreement
with Pemex,s unilateral decision to define &trusted8
employees as being fully equivalent to management level
staff. Mexican labor law implicitly recognizes a class of
workers who are neither labor nor management and who are
often referred to as &trusted employees8. Such persons are
usually hired because they possess some type of technical
skills and they are normally paid at a salary grade
equivalent to a mid-level manager. From a legal viewpoint a
&trusted employee8 is not covered by collective bargaining
agreements and as such an employee in this category would not
be entitled to the same protections as a unionized worker. A
&trusted employee8 might or might be authorized to exercise
the same level of authority as a manager.

6. In a meeting with Mission Mexico,s Labor Counselor,
Flores and several UNTCIP members clarified that at present
the UNTCIP was only a civil association and not yet a legally
recognized union. UNTCIP, they said, had applied for union
status but federal labor authorities denied the application
on a technicality because their use of the phrase &trusted
employees8 did not meet the legally accepted definition.
According to UNTCIP, in order to be considered &trusted
employees8 as legally defined its member would have to meet
four criteria; hold mid-level positions, function as
supervisors, exercise inspection authority and be authorized
to hire and fire. UNTCIP members meet the first three
criteria but they cannot hire or fire.

7. For the most part UNTCIP members are engineers,
accountants, geologists, and other technical specialists with
limited supervisory responsibilities. The position of the
UNTICP members is that since Pemex never granted them the
full authority to make management level decisions (even if
they do earn management level salaries) it cannot
unilaterally now define them as management. They recognize
that they are not legally part of the STPRM union but they
contend that Mexico,s constitution, as codified in various
articles of the country,s Federal Labor Law, grants them a
certain floor level of benefits which all employers, Pemex
included, are required to respect.

NEITHER SIDE OPEN TO THE OTHER,S PERSPECTIVE
--------------------------------------------

8. In the disagreement between Pemex and UNTCIP over IECs
neither side seems particularly open to the concerns of the
other. For its part Pemex is trying to resolve a situation
that was years in the making. At some point in its past
Pemex began hiring skilled technicians on what was
undoubtedly thought to be on an as needed basis and temporary
basis. Ultimately thousands were hired but without going
through the process of documenting them technical permanent
employees of the trouble and expense of formally terminating
them. For the most part these employees were treated as
permanent unionized staff and routinely received all of the
benefits extended to workers formally covered by collective
bargaining agreements. Over time these employees began to
think of themselves as unionized workers and to insist on
receiving equal status as that accorded to their union
coworkers. However, as these employees were not unionized
and their employment status left intentionally vague,
whenever a labor dispute or human resources related
disagreement arose the only legal framework available for
deciding these disagreements was Mexico,s Federal Labor Law.

9. Mexico,s Federal Labor Law significantly favors the
employee over the employer. This preference given to the
employee is often unevenly applied in cases involving private
sector employers. However, in the case of the public sector,
and Pemex is a government entity, the norm is for the courts
to give not just preference but rather overwhelming
preference to the employee and against the employer (i.e. the

MEXICO 00006285 003 OF 004

GOM). This partiality in favor of the employee against Pemex
has lead to cottage industry in legal suits against the
national petroleum company. According to an attorney for
PEMEX,s as of September 31, 2007 there were 22,000 labor
related legal suits pending against the company and
approximately 30 legal firms whose sole business is dedicated
to litigation against Pemex. From the national oil
company,s perspective, the IECs offer a way to resolve a
long neglected personnel issue and bring to an end the
endless labor suits against it.

10. Looking at the matter from UNTCIP,s perspective, IECs
are an attempt by the company to impose upon them the legal
framework needed to terminate their employment. UNTCIP
believes that the current system under which they are
employed by Pemex can be modified to address the company,s
without violating their legal rights. If imposed as is the
IEC,s, they say, will eliminate the current system for
hiring &trusted employees8, prevent such employees from
earning overtime, eliminate benefits routinely given to other
(unionized) employees, do away with seniority currently help
by &trusted employees8, convert permanent employees in
contract employees hired on a annual basis, allow PEMEX to
transfer employees at will, even against the wishes of the
employee and will prevent &trusted employees8 from filing
legal actions against Pemex in cases when the worker believes
his/her employment has been terminated without cause.

11. In November the UNTCIP presented PEMEX with a petition
signed by over 2,000 employees urging the company to
discontinue its forced imposition of IECs. To date there has
been no public response to this petition. UNTCIP is
convinced that Pemex intends to impose IECs on them with or
without their consent. Once that happens the UNTCIP
contends, IECs will be used to facilitate the outsourcing of
job currently held by &trusted employees8 after that the
company will have nothing to prevent it from opening the door
to the privatization of Pemex. Thus far there is little
reliable information to support this contention and it may
simply be a parroting of PRD (Mexico,s main opposition
party) political slogans. Nevertheless several UNTCIP
members asserted this point to post,s Labor Counselor as if
it were an inevitable fact. UNTCIP is completely distrustful
of Pemex,s intentions with regards to the IECs and seems
unable to credit that the oil company might simply wish to
address significant shortcoming in is personnel system and
reduce the problems and expense generated annually by nearly
endless litigation.

COMMENT
-------

12. The long running problems of PEMEX,s haphazard
personnel system for &trusted employees8 clearly needed
some sort of solution and the decision to address this
dilemma with IECs was certainly one way to address the
situation. Undoubtedly the IECs will take care of the
problem from the company,s perspective. However, it seems
that Pemex did not anticipate (and may not have cared) that
the changes it believes make sense from the perspective of
ease and efficiency might not be viewed that way by the
employees being asked to sign the IECs. Some advance
consultation with the effected employees would have been
useful. On the other hand, the employees affiliated with
UNTCIP are not being realistic in accusing Pemex of only
wanting to get rid of them, cut back their benefits and then
privatize the national oil company. The irregular employment
situation and the mounting legal costs arising from this long
neglected personnel arrangement could not be allowed to
continue indefinitely. At this point it is unlikely that the
issue of IECs will have any immediate impact on Pemex,s
operation but if the matter is not dealt with properly it
could become another intractable labor issue on top of the
many others the oil company already has.

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