State Inspections Reveal On-Going Violations at Mining Company 

 Ashot Grigoryan, a former employee of Deno Gold Mining CJSC, has gone to the courts to make the company pay him his unpaid wages for the past years. Grigoryan was dismissed from Deno Gold in April, 2009. He applied for the dismissal, but under pressure. Grigoryan says he couldn’t cope with the company’s crazy attitude. “I’d tell them that I was working so I had to be paid. Their response was – if you don’t like it, leave.” Grigoryan says he petitioned company management for eight months for a raise and was told he wasn’t working up to snuff. “What’s meant by working well? I have no demerits against me during all my shifts.” The former Deno Gold security employee says that layoffs began in his department back in 2008. Six out of twelve workers were dismissed and thus the work load fell to those remaining. Their wages weren’t increased even though the work was. “Rather than working one shift every three days, they were now demanding a shift every two days. Normally, I would work 180 hours per months, but now I was putting in 290 hours. But they weren’t posting the extra hours. They were just showing the amount I was working beforehand,” says Grigoryan. In his court case, Ashot Grigoryan is only asking payment for his night hours, since he couldn’t present evidence of the extra hours. They were never registered anywhere. There is no administration stamp on the work schedule. 

Wage demands lead to worker protests 

“In the past, any extra hours you worked would go on the chart and be signed and stamped by the director. They’d pay for the extra hours. They’d paid like that for 4-5 months and we got 100,000 AMD monthly. But later the Deno Gold director refused to pay. Later, they signed a new work contract with us that started at 75,000 AMD monthly. They told us that the night hour’s wages was included in that amount. However, there were guys who only worked the day shifts and they were getting 75,000 as well. The same with me,” Ashot says with a degree of amazement. Thirteen other former Deno Gold employees took the company to court in May of 2010. The court has yet to rule on any of the cases, Irina Manukyan, an attorney representing the workers, says that the delays are the result of the attitude of Deno Gold’s owners. “They haven’t given us the salary documents of the claimants. We’ve had to motion the court for the paperwork and the court has agreed. But the bailiffs have to be called in and the process is a lengthy one. During the five month trial, we’ve been able to obtain the wage notices of the claimants from the company. But they don’t answer our written inquiries and thus the court has decided to demand evidence. Now, we must present to the court the accounting of the night hour wages of the 13 claimants.” According to published Deno Gold Mining figures, there were 1,492 employees at the company in 2008. In 2009, the number dropped to 1,168. This year, there are 1,050 employees. The company says that during 2008-2010, 442 employees were laid off. Unofficially, the number is said to be 476. The number of those applying to the courts is increasing. Sixteen have already gone to the courts. The rest are perhaps waiting. Deno Gold argues that the layoffs in 2008 were a result of the global economic crisis. Artur Ghazaryan, President of the “For Ensuring Ecological Safety and Developing Democracy” NGO, says that those dismissed were mostly those who went on strike in November, 2008, demanding that they get paid for the night hours worked since 2005 and for unpaid extra hours and hazardous work. The company, by raising the economic crisis issue, sent them home on obligatory leave and they were gradually let go. Those who have sued say that all the strike activists were essentially laid off and that today, all those courageous enough to demand payment for night work will face the same fate. 

Deno Gold’s Falleta announces layoffs and wage cuts

Souren Tumanyan, former president of Deno Gold’s labor union describes the company’s activities in the town of Kapan thusly. He says that on November 7, 2008, at 11 am, Deno Gold’s Executive Director Robert Falleta called a meeting of the company’s administrative and production unit employees. Falleta declared that he had decided to lay off 60% of the work force and cut the salaries of those remaining by 50%. Tumanyan recounts that Falleta’s words came as a shock to all and resulted in cries and boos from the angry workers. Once the impromptu meeting was over, the workers demanded that the union take preventative action. That same day, Falleta met with the workers from the Shahumyan mine and told them the same thing. “After the meeting, the mine workers demanded that we converge on the administrative building. They were adamant that a strike be called. I counter-proposed a two hour warning stoppage, but they didn’t agree. A strike committee was formed by the activists and a list of demands was sent to the director – not to layoff anyone, and not to cut wages to the extent possible,” recounts Tumanyan. The strikers told Director Faletta that the company found itself in a crisis due to the incorrect management of the work carried out by local and foreign partners. Tumanyan says that all of this has a history behind it. In September, 2008, Tumanyan wrote a letter to Falleta, reminding him of Article 184 of Armenia’s Labor Code and demanding that the company pay the workers what they were owed for night wages. 

Union forced to call in State Labor Inspectorate

 “From 2005 onwards the company owed debts of 360 million AMD in unpaid night wages to the workers. By law, the wage rate for every one hour of night work is defined as 150% the regular rate. They were only paying 50%. The director refused to accede to our demands. On December 9th, Director Falleta issued the following statement: ‘We are no longer able to provide you with office space so you and your union staff must vacate the premises within three days,” recounts the union leader. The union hall had been located at the same premises for forty years. Tumanyan says that it was only after the intervention of Armenia’s State Labor Inspectorate (SLI) staffers that Falleta relented and allocated the union space in another building outside the administrative office. On November 10, Faletta also rejected the demands presented by the strikers. Former union leader Tumanyan says they were left no choice but to petition the SLI, given that Deno Gold’s executive director had violated Article 116, Point 1, of Armenia’s Labor Code; i.e., the number of employees to be laid off must be made known to the State Employment Service three months in advance. Based on the workers’ protests, the Inspectorate began an investigation of the company. According to the information at our disposal, the number of the layoffs was indeed not based on the economic crisis. Moreover, at the time, there wasn’t even talk of any crisis and it just happened to conveniently coincide with incidents at Deno Gold. In February, 2008, Robert Falleta assumed the post of executive director at Deno Gold. He directed his staff to take a look at the workings of the company and report back. Their probe showed that the plant had racked-up huge amounts of unpaid wages from 2005 onwards; that the company hadn’t paid employees for nighttime work, overtime and hazardous works. 

Multiple violations cited at Deno Gold

In May of 2007, the State Labor Inspectorate conducted investigations of its own and reported the following violations:

• The company has no internal disciplinary code.
• There are 200 unregistered employees working in the company.
• Workers are being paid less in wages for nighttime hours than specified.

Despite uncovering these violations, the Inspectorate fined the company the minimum allowable – 100,000 AMD. In its report, the Inspectorate failed to mention the breakdown of the penalty amount. It did, however, warn the company to remove the violations. The Inspectorate conducted another investigation on October 16, 2008 and noted the following violations:

• About 1,000 work contracts were drawn up in violation of Armenia’s Labor Code. All lacked Addendum 1, and the signatures of the parties and the company’s seal was missing in Addendum 2.
• The evacuation plan was not properly posted in all areas.
• The company continued to pay insufficient wage rates for nighttime work by miners.
• The company had no set of work regulations, etc.

According to the Inspectorate’s findings, Deno Gold owed 11 million AMD in monthly back wages for nighttime work. In other words, the company owed 264 million just for nighttime wages for the year. It uncovered that the nighttime wage debt began in September of 2007. The State Labor Inspectorate gave the company a grace period to pay the back wages. One year later, the Inspectorate again proposed that the company change its wage rate for nighttime work – base salary plus 150% Our sources also state that the penalties for the violations uncovered amounted to 135 million AMD, of which 50 million could have been levied only for the lack of work contracts. The remainder was for violations concerning the non-payment of nighttime wages and other infringements. However, according to our sources, the company was fined only 10 million for paying less than the set rate for nighttime wages. An agreement was reached between the company and the Inspectorate and a one year timeframe was set for the payment of the nighttime salaries.

Why was the Inspectorate so accommodating? 

We preferred to hear about the “sympathetic” stance taken by the Inspectorate straight from the horse’s mouth; from the Inspectorate’s top management. It turns out that they had no explanation either. Regarding the investigations conducted between September 30 and October 16, they state that – “As a result of our investigations, the work contracts of 100 employees do not adequately meet the criteria of Armenia’s Labor Code. An administrative fine was levied of 5 million AMD, according to Article 169.5, Point 1, of the RoA Administrative Violations Code.” In this response, the Inspectorate has decreased the number of inappropriate work contracts from 1,000 to 100, while there is no mention whatsoever regarding nighttime wages. This was the case even though the problem existed for the company then and continues to date. But why shouldn’t the Inspectorate make a note of this? We can regard this information made available by the RoA State Labor Inspectorate as not definitive, given that our correspondence to Armenia’s Minister of Labor and Social Affairs resulted in answers without any official seal of verification; i.e., that anyone at the ministry even bothered to see what was being sent out. Armenia’s State Revenue Committee also conducted investigations of Deno Gold in October of 2007. According to the information it provided, the company hasn’t paid profit tax, VAT, environmental fees and social security fees. “Rather than increasing salaries for overtime work by a factor of 1.5, they increased them by half and additional salary for hazardous work was not recorded,” the declaration notes. For all the violations made by the company, the tax authority fined the company a total of 39.1 million AMD. Our Deno Gold source claims these fines and penalties were the reason for company director Robert Falleta’s anger, and that, as a result, he declared the layoffs and wage cuts. However, the company employees argue that they weren’t at fault but rather the administrative staff. What infuriated the local workers was the gross difference in wages between what they were getting and what was being paid to foreigners and those from Yerevan. What’s interesting is that as a result of its 2009 investigations, the State Revenue Committee (SRC) again noted the same violations in its act of December 25 – profit tax, VAT, environmental fee, social security payments, etc. This time the SRC fined the company 20.8 million AMD. The SRC report read: “The company was in violation of RoA Decision N1907 of December 2003; it was paying nighttime wages of 50% base salary instead of 150%.” In November, 2009, Deno Gold was also inspected by the State Labor Inspectorate. Again, this agency recorded that the company owed 18 million AMD in back overtime wages to employees. 1. Nighttime work performed by equipment operators, their assistants and drilling operators wasn’t recorded and set overtime rates weren’t paid for every hour worked; amounting to 11,367,374 AMD. 2. Article 9, Point 2, of the RoA Law on Wage Payments, dealing with hazardous work, was not taken into account and workers weren’t paid the required 50% of base salary; amounting to 6.742 million AMD This time, the company wasn’t fined. Armen Smbatyan, Deputy Director of the State Labor Inspectorate, explained this by saying, “Our aim was to see that the labor code was being implemented. In such case, we give the employer a written directive to see to it that the rights of the workers have been restored.” As to why such a situation was created and continues till today, Mr. Smbatyan told us: “For nighttime work, not less than 1.5 times the base pay should have been paid up until August 7, 2010. Afterwards, a new rate would have been set. The company understood this formula as 50% and not 150%. Deno Gold incorrectly calculated the overtime and the State Inspectorate issued them a written directive on the issue.” In essence, from 2007 onwards, the SLI has issued the company the same directive. At least in regards to nighttime wages and to date the same violations continue to appear in the records of inspectors. This means that the company continues to pay the penalties and fines, but that the violations remain. 

Faletta argues the law itself is open to interpretation 

Perhaps, the reason is that Deno Gold Executive Director Robert Faletta remains convinced that the correct rate to pay is 50% of the base. During our conversation, Mr. Faletta pointed to possible translation inconsistencies as the culprit. “Given that the company’s management is comprised of foreigners, naturally, what they read has been translated from Armenian into English. And that section of the Labor Code dealing with night wages, I understood as meaning that we had to pay 50% and not 150%. Furthermore, even Armenians reading the original Armenian text were of two minds as to the meaning. From the start, 150% was never envisaged as the rate. It simply was composed in such a manner and understood thusly. The author of the Labor Code had 50% in mind, not 150%.” We asked Armen Smbatyan from the SLI what measures his agency is supposed to take when a company like Deno Gold pays the penalties levied against it but fails to resolve the underlying infractions and violations. He answered that the SLI sets a deadline for the payment of the penalties, but since the case is now in the courts, the SLI’s jurisdictional functions have been exhausted and the case dropped. We reminded him that Deno Gold had been employing the above wage rate formula for years on end. Furthermore, those who have petitioned the courts are former company employees. Nevertheless, Deno Gold has yet to pay their back wages. “Yes, but since the case is being reviewed in the courts, the issue has completely reverted to a individual rights matter,” Mr. Smbatyan again asserted “In other words, other employees wanting to get the wages owed them must resolve the matter in the courts?” we asked. “Yes,” replied Smbatyan. 

The Danish Association for Investigative Journalism (SCOOP) assisted in this investigation)