Management Board Report on the activity of the JSW S.A. Capital Group for 2012

4.7. Relations with trade unions

Parent company

There are 38 active Trade Union Organizations operating in the Parent Company. In the period from March to November 2012, the relations between the JSW S.A. Management Board and the trade unions were dominated by talks related to two collective disputes that the Joint Representation of the Trade Unions commenced with the JSW S.A. Management Board on 29 February 2012. One collective dispute concerned the immediate withdrawal by the employer from the decision to introduce new employment contracts for newly-hired employees. The other dispute concerned a raise of the base salary rates by 7%, which would procure real payroll growth in 2012. Negotiations on those disputes ended with the parties drawing up discrepancy reports.

On 13 June 2012, the Joint Representation of Trade Unions at JSW S.A. appointed the Inter-Union Protest and Strike Committee (“MKP-S”) at JSW S.A. which on 20 and 21 June 2012 held a referendum concerning the collective disputes in JSW S.A. mines and in the Material Logistics Center. 14,144 employees, i.e. 61.75% of the total headcount at JSW S.A. took part in the referendum (in 2011, 78.5% of the total headcount at JSW S.A. took part in the referendum).

The result of the referendum authorized MKP-S JSW S.A. to carry out strikes at JSW S.A. according to the Act on Resolving Collective Disputes. On 6 July 2012, a 2-hour warning strike was held in organizational units of JSW S.A. in all shifts.

The talks on the collective disputes were renewed and conducted in working teams, but they failed to bring the Parties together. As a result, on 19 October 2012, the MKP-S held a 24-hour strike in all the organizational units of JSW S.A. in all shifts. 5,465 employees, i.e. 24% of the workforce, participated in the strike.

On 24 October 2012, representatives of the Trade Unions met with members of the JSW S.A. Supervisory Board. Another meeting was held on 8 October 2012, at the initiative of the JSW S.A. Management Board. At that meeting the JSW S.A. Management Board and the trade unions signed the agreements that ended the collective disputes raised on 29 February 2012.

According to the agreement on the 7% increase of basic salary rates to ensure salary increases in 2012, as of 1 November 2012 basic salary rates increased by 3.4% and a one-off bonus was paid out. Additionally, the agreement adopted a method of shaping salary increases for employees of JSW S.A. in the years 2013-2015, by the inflation rate assumed for the budget legislation in the given year, possibly reconciled to the actual inflation by negotiation between the JSW S.A. Management Board and the trade unions.

In performance of the Agreement on the immediate withdrawal by the employer from the decision to introduce new employment contracts for newly-hired employees, the JSW S.A. Management Board modified the provisions of employment contracts with the employees hired by JSW S.A. after 15 February 2012. The changes pertained to both the term of the employment contracts and the method used to calculate seniority-related allowance (dodatek stażowy) and the requirements for eligibility for the annual bonus on Miner's Day and the “14th salary”.

In 2012, the social dialog in JSW S.A. which was dominated by the two collective disputes was a significant disruption in the work on the Collective Bargaining Agreement for JSW S.A. employees and on the consultations on the Labor Rules and Regulations. 17 meetings on that subject were held in the period from January to June 2012. No provision of the Collective Bargaining Agreement or the Labor Rules and Regulations was agreed upon during those meetings. Moreover at the meeting on 6 September 2012, the JSW S.A. Management Board conducted talks with the trade union organizations to work out an appropriate arrangement that would finally regulate the standardization of jobs and the payment of a standardization allowance. The parties however did not reach a common stance in this matter.

Group companies

Spółka Energetyczna Jastrzębie S.A.

There are two Trade Unions operating in the company. In the period covered by this report, one collective dispute took place in SEJ. The subject matter of the dispute was to determine the average salary increase in SEJ in 2012 at 7.5% per year, determine the rate of charge to the Company Social Benefit Fund per employee at 60% of the average remuneration in the country and reinstate “prophylactic meals” for employees in the form of food stamps.

In the final agreement signed by the parties to the dispute, they agreed to set the average salary increase in 2013 at 2.7%, separate a Key Management payroll fund from the general payroll fund, credit the Company Social Benefit Fund with a one-off amount of PLN 420 thousand, guarantee jobs to SEJ employees and to update the Company Collective Bargaining Agreement for SEJ employees by 31 December 2013.

Przedsiębiorstwo Energetyki Cieplnej S.A.

There are two trade unions operating in the company. The principal topic of meetings between the Company's Management Board and the trade unions was to allocate shares to eligible employees. On 8 February 2013 the trade unions accepted the share allocation proposal presented by the Company's Management Board. A wage agreement incorporating the clauses of the Social Guarantee Pact was signed by representatives of the trade unions functioning in PEC and the Management Board of Spółka Energetyczna Jastrzębie S.A.

Jastrzębskie Zakłady Remontowe Sp. z o.o.

On 31 December 2012 JZR Sp. z o.o had five trade unions in operation with the company's unionized membership equaling 58%. On 20 February 2012 the company signed a wage agreement with the trade unions according to which as of 1 March 2012 the prevention allowance was raised from PLN 12.00 to PLN 14.00, the cash equivalent for 1 ton of the free coal allowance was raised and new base salary rates with a 3% payraise for employees hired in laborer and non-laborer positions were introduced as of 1 March 2012. On 28 September 2012 a new wage agreement was concluded between the Employer and the trade unions concerning the pursuit of compensation policy in 2012. According to this Agreement, the payment of a single bonus was agreed and an analysis of the current wage rates by rank was conducted while paying special attention to the ranking of employees with the lowest wages. According to the concluded agreement the parties declared their willingness to continue talks to construct a motivational compensation system.

Koksownia Przyjaźń S.A.

In Q1 2012, as a result of negotiations with the Inter-Company Trade Unions, the “hot” bonus for employees providing work on certain positions of the Coke Production Division – on “hot” positions, was paid out for the previous year. Additionally, negotiations were conducted with the trade unions with regard to payment of a profit-sharing bonus for 2011. In April 2012, the Rules and Regulations in this matter were signed and the performance was paid out on 31 May 2012. In Q2 2012, the trade unions operating in the company addressed the Management Board in writing with postulates to increase the salary of each employee PLN 500, effective from 1 September 2012, and pay out financial performances in the form of quarterly bonuses of PLN 2,000 for each employee for Q3 and Q4 2012. As a result of the negotiations held during the meetings with the trade unions, on 16 October 2012 the Parties signed an internal agreement, by the power of which eligible employees were paid bonuses for the effective time of work. Moreover, the trade union organizations demanded talks to, among others, determine the compensation policy for 2013, which would include an increase of a charge to the Company Social Benefit Fund in 2013, setting the date and amount of salary raises in 2013. After negotiations, the Parties reached an agreement to increase the charge to the Company Social Benefit Fund by a gross amount of PLN 5,000 for each employee of the company working as at 1 January 2013. In Q4 2012, the trade unions signed the internal agreement specifying the positions on which employees will receive meals and beverages.

Zakład Przewozów i Spedycji SPEDKOKS Sp. z o.o.

There are 6 trade union organizations operating in the company. In 2012 two collective disputes arose in the company. The first dispute was initiated on 29 March 2012 and was related to the setting of the terms and conditions for the transfer of employees of Zakład Przewozów i Spedycji SPEDKOKS Sp. z o.o. to the new employer, JSK. The dispute ended with signing a memorandum of understanding on 24 April 2012. The other dispute was initiated on 12 October 2012 and was related to a demand of a basic salary raise of PLN 500 for every employee, effective from 1 October 2012, and payment of quarterly awards for Q3 and Q4 2012, in the amount of PLN 2,000 each. The dispute ended with signing a memorandum of understanding on 30 October 2012.

Wałbrzyskie Zakłady Koksownicze Victoria S.A.

There are 6 trade union organizations operating in the company. In 2012, as part of the cooperation between the company's management board and the trade union organizations, an agreement was signed on 29 May 2012 on the increase of the average monthly salary in the company by 4% as compared to the actual numbers for 2011. On 9 November 2012, another agreement was signed which stipulated that the average monthly salary growth in 2013 will be 2.7% compared to the actual numbers from 2012. Nevertheless, the agreed salary growth will depend on the company's economic and financial standing. The Management Board also accepted an obligation that it would recommend to the owner to keep the principle of including employees in the distribution of the 2012 profit and to increase the charge to the Company Social Benefit Fund to the level comparable to the Group's other coking plants.

Przedsiębiorstwo Gospodarki Wodnej i Rekultywacji S.A.

There are two trade unions operating in PGWiR. In 2012, pursuant to the existing Collective Bargaining Agreement concluded on 1 July 1998 as amended by additional Protocols, the Management Board of PGWiR and the trade unions agreed an increase in personal remuneration rates from 1 July 2012. The rates were increased by the same amount of PLN 0.42 / hour for laborers and PLN 70 / month for non-laborers. This change in rates resulted in a salary increase by an average of about 2.5% as compared to the period before the change.

There were no collective disputes in other companies of the JSW S.A. Capital Group in 2012 and no material events were recorded in relations with the trade unions.