In Israel, Public Sector Unions Have a Friend in Court

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Several motions have been placed before district labor courts in recent weeks. They include two by the Israel Electric Corporation which, fearing blackouts over the summer due to power shortages, petitioned that its employees be ordered to connect private power plants to the national electricity grid. Another, by the government, asked that pilots captaining tugboats at Ashdod Port be instructed to honor an arbitration ruling about wages paid for not showing up for work.

In these cases and others the courts ruled in favor of narrowly constructed legal arguments by union representatives even though they are not grounded in any law and are even in violation of the law, or at the expense of the public good, or denying management authority over government-owned companies.

The arguments raised by unions representing employees of state-owned monopolies admittedly are legitimate. But these days public discourse is dominated by the need to encourage competition to spur growth and increase productivity, concern over the middle class and the “unconnected,” and calls for economic justice and equal sharing of the burden.

But it seems the labor courts are still rooted in a world where they see their function as protecting the large and powerful unions rather than seeing to the interests of all the other Israelis shouldering the excessive costs of inefficiency, self-dealing and corruption.

Aiding IEC strikers

Three months ago the IEC’s 372-megawatt Gezer power station was knocked out of service, apparently due to a lapse in proper operating procedures, just as the peak summer season was approaching. This led to worries that the utility would have to impose rolling blackouts during peak usage hours. Panicked over the prospect of a state commission of inquiry, IEC searched the globe for alternatives. It finally bought a used generator in the Netherlands for triple the price of a new one, so long as it would reach Israel and begin operating in July.

But the government had other ideas on how to prevent power shortages. The Electricity Authority reached an accord with the privately owned Dorad power plant, which was meant to go online at the end of the year, to partially begin operations during the summer if the need arises in exchange for higher rates.

When the agreement became known, a strange thing occurred: IEC employees immediately abandoned the Dorad site in Ashkelon where they had been connecting the station to the national power grid. At the government’s request, IEC management urgently petitioned the Haifa District Labor Court to order the workers back to the worksite to finish connecting the plant to the grid. The court’s response two weeks ago came as a shock.

Despite the electricity shortage and legal provisions covering the situation, the court permitted the workers not to connect Dorad to the grid as long as negotiations are still underway. Moreover, the court instructed the electric company to prepare to sever Dorad from the grid if talks fail to lead to an agreement.

In other words, not only did the court require the government to conduct talks with the workers under its protection and according to a schedule it dictated itself, it also hung a sword of Damocles over the state. It did so without at all addressing the financial implications of cutting off a huge 840-megawatt power station or the IEC’s exposure to lawsuits by Dorad and its customers which will ultimately be paid by the public.

And what about the blackouts? “The steps taken by the worker representatives aren’t within the scope of a strike that disproportionately disrupts the electricity supply,” the court ruled.

Not a week went by and a similar thing happened on the construction site for Israel’s largest power plant belonging to Dalia Power Energies. Three days before the cornerstone-laying ceremony in the presence of President Shimon Peres, IEC employees were ordered by their union to stop work at the site and cut off its electricity supply.

As a supplier of vital services, IEC is obligated to connect every consumer to the grid. But the ceremony eventually took place with generators that were rented privately after workers’ committee chairman David ‏(Miko‏) Zarfati made it clear the compound would not be connected with electricity − regardless of the court.

IEC employees are worried that the government is trying to institute “reform” through the back door by introducing competition without compensating them with fat bonuses for their consent to go ahead. For years they’ve been thwarting every attempt to restructure the company, bringing political and other pressures to bear in order to halt initiatives for changing the industry.

When the state threw in the towel and decided instead to foster private initiatives without demanding internal reforms at IEC, the tables turned. Suddenly the workers’ committee began chasing after the government to implement some type of structural change.

Seeking toothless reform

To be precise, what it is after is a contrived reform lacking any teeth and void of all content to ensure their continued control over the master switch, including NIS 9 billion to line its pockets from the public kitty. The government has no way of coming up with NIS 9 billion and imposing further decrees on the public is certainly out of the question.

In any case, the Electricity Sector Law passed in 1996 already provides for opening the electricity industry to competition from private electricity producers.

The Haifa District Labor Court has already produced a number of astonishing rulings the past few years in rushing to the rescue of IEC’s mighty and entrenched union, even at the expense of other workers and the public. For example, under the court’s protection workers avoided connecting power plants in the north to the natural gas pipeline due to a dispute with management. That move that came at the expense of workers at plants using the gas and costing the economy $1.5 million a day in damages.

Damages sustained by the economy from the country’s seaport unions are even more pronounced. According to the Antitrust Authority, low productivity at the ports costs the economy about NIS 5 billion annually, but this doesn’t take into account a series of recent decisions by the labor courts about the goings on at Ashdod Port.

The port was shut down early this year by a wildcat strike after Zehavit Ben-Abu, an assistant to the CEO and considered to have ties with the workers’ committee, was transferred from her job on the instructions of the state comptroller and the Government Companies Authority.

Immediately, the port operations personnel and heavy equipment operators slowed the loading and unloading of freight containers, delaying the entry of 15 ships outside the harbor. Other port workers joined the informal strike, including administrative staff who cut off electricity and the phone and Internet lines to the management offices. Industrialists estimated the damages they suffered at NIS 18 million a week while the port posted a NIS 28 million decline in profits for the first quarter.

The Finance Ministry tried to use its legal authority to dock the pay of strikers for the hours in which they engaged in sanctions, but Judge Nili Arad, president of the National Labor Court, has forbidden such a move for three months despite the illegality of the action and the damages to dozens of private businesses and their employees that depend on the port’s services.

Arad also prohibited the port from standing in the way of employing the relatives of workers in sensitive positions and sent the port to discuss the matter with the Histadrut − which for its part hasn’t been in a hurry to do so.

In general, the labor court tends to only concern itself with “unilateral” actions when these are taken by the state or management. Wildcat strikes by port or railway workers in recent years have hardly ever been censured by the labor courts, even when causing great damage to the users of a vital service.

Containers at Ashdod Port. The ports were among the most profitable government companies in 2013.Credit: Tomer Appelbaum
David Zarfati.Credit: Eliyahu Herskovitz
Nili Arad. Credit: Eliyahu Hershkovitz

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