Read the essay and answer the following questions. Labor Relations on the Brink in Belgium: A Cautionary Tale for Firms Doing Business in Today’s Europe.
1. What is your view of how the company handled this problem? What moral stance does the company seem to be operating from? Did it handle things correctly? Why or why not?
2. What did it do wrong? What were the key problems in its approach to this situation?
3. What is your view of how the employees and unions handled the situation? What could they have done to provide a satisfactory solution to the impasse?
4. What are the policy implications for U.S. firms and those of other countries doing business in Europe, and in Belgium in particular? What specific factors should be considered as they enter and operate in Europe?
Labor Relations on the Brink in Belgium: A Cautionary Tale for Firms Doing Business in Today’s Europe
Brink’s, Incorporated, currently based in Richmond, Virginia, was founded in 1859 in Chicago, Illinois, and is famous for its armored car delivery business. Now one of the largest providers of logistics solutions and secure transport services, it employs 60,000 people in over 150 countries. About three quarters of Brink’s total revenue comes from business outside North America. In fact, about 17% of its 2010 revenue came from France and 40% total from Europe. In principle, the EU is one coordinated economic bloc with free movement of goods and services. For businesses on the ground, especially foreign firms such as Brink’s, features such as taxes, labor costs, and business-related laws vary.
This variance can create challenges and hurdles, as it did for Brink’s in 2010 in its Belgium business. Since the mid-1970s, Brink’s has had two subsidiaries there: a money-making Brink’s diamond delivery business (mostly in the Antwerp diamond district); and Brink’s Belgium, a cash delivery unit that provides services to banks. The latter has been losing money (up to $10 million a year), which the firm has attributed to high labor costs. Belgium does have the highest labor costs in the EU. The percentage of employer-paid social security is 31%, nearly twice that of the United Kingdom (17%). Table 9.4 shows that, as of 2013, some 55% of workers were unionized in Belgium (the fifth highest percentage in Europe). Law also provides for generous and lengthy paid sick leave, severance for a lost job, and full benefits.
Willem Candel, a senior director at Brink’s, characterized the problem: “65% of our costs were labor costs. We were no longer competitive.” In the first half of 2010, the firm had losses of $7 million on $32 million in sales, making it clear to management that something had to be done. Their analysis told them that one thing was driving a good bit of the problems: the nearly 500 staff members who drove the armored cars and serviced the ATMs were classified as white collar (professional) instead of blue collar (hourly/manual labor) This distinction was the result of a late 1800s law that was very favorable to employers and that made Belgium a low-labor-cost country. It was “the China of Europe” at the time. Blue-collar workers were to be paid by the hour, less for overtime, and could be laid off more freely than white-collar employees. Brink’s claimed that its large number of white-collar employees cost the company $4.5 million more per year than if the workers were correctly classified as blue collar. Brink’s claimed that this mistake prevented the company from winning contracts.
While unions continued their efforts to eliminate the job distinctions, Brink’s developed a strategy. In late 2010, it announced a plan to lay off about 60 workers and to reclassify staff from white collar to blue collar. The unions were stunned and announced a strike. Fearing a prolonged union conflict and more losses, Brink’s declared bankruptcy as a way to escape financial problems. Employees of the cash delivery business were laid off, and management moved to the Netherlands. The lucrative diamond delivery business was spun off ahead of bankruptcy proceedings.
The union quickly filed suit, contending that changing employees’ job status and not providing severance pay was illegal. The union’s representative stated that “Brink’s acted as if we wouldn’t be vigilant, but we have lawyers too.” Expert observers say the company probably erred in not providing severance, but Brink’s defended itself, arguing that “we never refused a dialog with the unions … they refused to work.” Those same experts point out that U.S. firms cannot act the same way about a bankruptcy in Europe, with one suggesting that “U.S. law treats employees as unsecured creditors … it’s very different in Europe.”
There is one postscript and a big challenge for Brink’s—a Brussels court recently rejected the firm’s bankruptcy filing. It held that Brink’s had no grounds to turn its more profitable diamond transport business into a new firm ahead of the bankruptcy plea. The court suspended Brink’s license to operate this business. Court-appointed administrators filed a nearly $29 million claim against Brink’s. Brink’s has offered $10 million to employees to drop the suit.