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Sara Petrosyan

Former Employees Take Deno Gold to Court Over Back Wages (Part II)

See also: Former Employees Take Deno Gold to Court Over Back Wages (Part I) 

Deno Gold plays trump card in negotiations with government 

The Kapan Mountain Enrichment Combine, now called Deno Gold Mining CJSC, is considered the sustaining lifeline of Kapan; the guarantor of Kapan’s social stability. This fact has been well recognized by the companies that operated the Kapan mine over the years. These companies, once gaining control of the mine, have taken advantage of this fact to obtain as many privileges as possible. However, the social stability heretofore existing in Kapan has begun to give way when the parties involved decide to resolve their problems at the expense of the rank and file workers; by neglecting their interests. Every few years, ownership of the Combine changes hands and the story begins anew. This is what happened in 2004, when the Combine’s owner, the Swiss Deno Company, facing bankruptcy, was relieved from a 100 million AMD debt owed to the workers. The mine’s new owner, Deno Gold Mining Company, CJSC, has executed a similar policy ever since operating the mine in 20005. They have been able to do so because those organizations in Armenia, like the State Labor inspectorate and trade union, whose purported aim is defend the interests of the workers, have forgotten what their stated mission is… 

Striking miners get no help from national union 

The above is a fitting explanation of the five day strike at the mine that started on November 7, 2008. The work stoppage received no support from the Republican Trade Union Organization. Souren Toumanyan, former president of the Combine’s trade union, says that the strike had been ungovernable and that, with the expectation of receiving assistance, he applied to the Anastas Pahlivanyan, Branch President of Armenia’s Miners, Metallurgists and Goldsmiths Trade Union, on three occasions. “He answered that he could do nothing. At the time of the strike, 950 of the 1,500 workers belonged to the trade union organization. 150 of them resigned from the union. I had been transferring 20% of the local union dues to the nationwide trade union. Nevertheless, they refused to help on all issues,” says Mr. Toumanyan. When I asked Edik Toumasyan, President of Armenia’s Federation of Trade Unions (FTU), why they didn’t get involved in the workers’ struggle, he answered, “They asked for help and their plea dovetailed with the directives of the prime minister and ministers to visit the site. All our aims converged at the site – a readiness to defend the workers. In only a matter of days, we were able to achieve some satisfactory results. The workers were defended and some even started to get paid a minimum salary.” Edik Toumasyan from the FTU also participated in the negotiations with Deno Gold management, as well as the FTU’s Legal Division Head Mikayel Piliposyan and A. Pahlivanyan, Branch President of the Mine Workers. “We discussed some very serious issues with Den Gold’s executive director and I personally met with him and the strikers. It was explained to the strikers that the prices of metals were indeed dropping and that it was advantageous to the owner that they not work. We explained to the workers that they would be performing a great service to the company by not working and they understood. It is true, the official approach, levers, were put to good use, The Minister of Energy and Natural Resources saw to it that jobs weren’t lost, and, at a certain point we reached a consensus,” Mr. Toumasyan said. The Combine’s union had no collective contract with the employer, and the union’s first priority and demand should have been to place this matter on a legal footing. Mr. Toumasyan agrees that a collective contract when dealing with such organizations is a necessary condition. When asked what steps were being taken to this effect, he said that the Mineworkers Union branch was involved in the matter. Branch President Anastas Pahlivanyan said that a draft collective contract was ready and that he thought the company owners and union would sign by November 15-20. 

Deno Gold avoids collective contract 

“The owners generally avoid signing a collective contract, but now, they should be ready to do so. They have jointly reviewed the package,” Mr. Pahlivanyan said. He also confessed that the owners are ready to increase wages but not to sign a collective contract. However, he pointed out that “The contract is our passport. It’s hard to work without one.” The realism displayed by Mr. Pahlivanyan is commendable. The executive director of Deno Gold confessed that he had no intention of signing a contract. “I said that I was ready to discuss any and all the demands presented by the union. I was presented with two proposals that were unacceptable, and now a third collective contract has been put on the table. I have not had the time to look at it. But I surely will,” said the director. Lawyer Irina Manoukyan, who is representing former Deno Gold workers in court, finds it strange that the Combine’s union president has a collective contract with the workers but not with the employer. “If you don’t take that step, it means that you have some sort of internal understanding with the employer, that you cannot force him to do anything. You just collect the union dues and spend them as you wish.” What type of mutual arrangement could have existed between the company owners and the FTU if the most important issue, that of a collective contract, had never been signed? A few months after the negotiations ended, the Combine’s union received the decision of Mr. Pahlivanyan regarding scheduling elections for union head. Mr. Souren Toumanyan says that new elections had been scheduled even though he still had four months to serve as union head. He says that this decision was at the insistence of Deno Gold Executive Director Robert Faletta. When I asked Mr. Pahlivanyan the reason for the snap election, he said that Deno Gold management and the union president just couldn’t work together and that new elections had been held on April 30, 2010. He added, ‘4 months here or there doesn’t change anything.’ “It is not the job of the union to stage strikes. We believe what they did wasn’t right. The union should have presented their demands beforehand in writing to the owners and discussed the together. The owners might have possibly agreed to the demands. But they immediately staged a strike action.” The Branch President of Armenia’s Miners, Metallurgists and Goldsmiths Trade Union confessed, however, that the strike had an impact and forced the government to dispatch a delegation to Kapan. Otherwise, the workers would be sent on mandatory eave for none months and not be paid. After elections for a new union head, Mr. Pahlivanyan says that the situation greatly improved and that 140-160 workers rejoined the union. Artur Ghazaryan, legal affairs advisor for the “Ecological Security and Democracy Development” NGO in Kapan, says that another agreement had been reached between Deno Gold and the FTU. In October, 2009, Deno Gold Mining signed an agreement with Mikayel Piliposyan, head of the FTU’s Legal Affairs Division, making him an advisor to the company’s human resources department. He was paid 1.5 million AMD. Edik Toumasyan, President of the FTY, says this never happened. “How can such a thing happen? Mr. Piliposyan is very aware of the work code. He took him along with us to study the demand petition of the workers; that was the impression created,” says Mr. Toumasyan. 

Government delegation visits striking miners

Upon the directive of Armenian Prime Minister Tigran Sargsyan, Energy and Natural Resources Minister Armen Movsisyan, Energy Minister Nerses Yeritsyan, and former Labor and Social Affairs Minister Arsen Hambardzoumyan, visited the towns of Kapan, Kajaran and Agarak, in Syunik Marz, on November 9, 2008. They went to review the deteriorating situation at all the mining operations in the region. The ministers were directed to review the situation in the mining sector, to meet with the companies and union representatives, and to draft a list of possible solutions to be presented to the RA Prime Minister within three days upon their return to Yerevan. On November 13, 2008, Minister Armen Movsisyan, who served as the chief negotiator and was the chief official responsible for the mining sector, presented his report at a government session Minister Movsisyan said that market metal prices had been seriously impacted during the past two months due to the global economic crisis. He pointed out that prices had fallen two fold and that the price drop was continuing. “Such a state of affairs in the global marketplace has also impacted the mining sector in Armenia, since most of what is produced is exported,” the minister said. The minister stated that solutions must be balanced and must take the employment of workers and social security issues into account. He added that the interests of the companies must also be included in any equation. The minister said that preliminary agreements had been reached with the companies so that layoffs would not occur in the next three months and that wages would not be cut to the extent possible. Three months hence, based on the situation in the global markets, appropriate decisions would be adopted after a round of joint discussions. “Armenian Prime Minister Tigran Sargsyan stressed that dialog had been achieved and agreements reached that satisfied both sides. PM Sargsyan argued that the results of the ministerial visit to the region were positive since the workers’ collectives understood that they weren’t being neglected and that many of the issues they had raised were directly issues of guaranteeing social justice. PM Sargsyan stressed that the burden would have to be shared equally by the parties involved and not by the workers alone. The companies and the government would also have to shoulder their share, along with the workers.” (This is taken from the official release of the government session.) One of the participants at the negotiations, who wished to remain anonymous, said that it was proposed to Deno Gold’s executive director that he steer clear from fomenting social tensions, otherwise the company might be deprived of government assistance in other matters that arise in the course of doing business; matters on which the government had “turned a blind eye” till then. 

Deno Gold emerges on top after negotiations 

Thus, based on our sources, at the end of three days of negotiations, an agreement was signed by Deno Gold Mining Executive Director Robert Faletta and RA Energy and Natural Resources Minister Armen Movsisyan, according to which: - Deno Gold Mining CJSC returns the Central mine for which it had received a 25 operating license - The Ministry of Energy and Natural Resources agrees to extend the license to operate the Shahoumyan mine by 12 years. (The company had assumed the license for 15 years. This mine has rare metals more expensive than gold) - To change the amounts extracted from the mines as noted in the licensing contract according to the draft reappraisals. To set the yearly amount of extracted ore at 300,000 tons. - The government will assist Deno Gold to have certain areas rezoned from farming, forest and other classification to industrial, within a reasonable time. - Given economic crisis conditions, the yearly defined production amounts would automatically decrease according to the level of production idleness caused. - The government will assist in the VAT payment process, so that they are paid on time. - The government has returned VAT payments to the company made in past years and to which the company is entitled to as an exporter. - The ministry agrees to assist the company in the matter of compensation for unpaid night-time wages as of July 1, 2009. The company will make payments within a reasonable timeframe agreed to by the Ministry. Naturally, the contents of the agreement were never publicized. We should point out that 7 of the 8 points making up the accord are obligations assumed by the RA government. Only one is a responsibility assumed by Deno Gold. The government has achieved the obligations it assumed by way of the agreement and Mr. Faletta is pleased with the government’s attitude. But Mr. Faletta believes that the issue of the return of the Central Mine license remains unresolved. “When those documents are signed, the realization of our joint obligations will be completed. Yes, I am satisfied,” he stated in an interview to Hetq. The Deno Gold Executive Director added that his company had also met all its obligations. I should remind readers that Deno Gold Mining had assumed the obligation of t preserving jobs, to pay workers two-thirds wages during mandatory leave, to bring them back on a rotation basis, and to pay back night wages from July 1, 2009 according to the agreed timetable. I reminded Mr. Faletta that according to company records 428 workers had been let go during 2008-2010. 

Faletta justifies layoffs

He justified the layoffs by pointing to the halt in exploratory work at the Shahoumyan mine, where 400 people had been working. According to our sources at Deno Gold, 250 of those laid off were employed in the exploratory unit and the others worked at the mine site. The company has also failed to meet its other obligations. It is still only paying portions of the nighttime wages owed from 2007-2008, and this only to the Combine’s current employees. The debt from 2005-2006 and 2009-2010, remains. In addition, the company isn’t paying those have been let go. These include many who have since died or have left Armenia. This issue has again been raised by the “Ecological Security and Democracy Development” NGO. In a May 19, 2010 letter sent to the Minister of Labor and Social Affairs, it wrote: “After the latest check conducted by the State Labor Inspectorate, it was expected that the company would have to pay these amounts, but inexplicably, the inspection produced nothing tangible. We request that you compel Deno Gold Mining to pay the 2005-2009 nighttime wage debt not only to those workers who have sued in court, but to all current employees.” According to the agreement reached between the government and Deno Gold, the State Labor Inspectorate would make sure that the workers were paid what they were owed within one year starting from July 1, 2009, as per the timetable. 

Labor Inspectorate fails to monitor payment process 

The Inspectorate never answered when we asked about fulfillment of the payment process at present. They just didn’t know. Mr. Faletta told us that a timetable had indeed been drawn up and those payments were being made accordingly. “If I’m not mistaken, 2007-2008 wages should have been paid,” he said. I then asked Mr. Faletta about the workers who had been laid off and the fact that they hadn’t been paid for years as well. “Maybe you’re talking about wages from 2005-2006, when Deno Gold didn’t own the company. Nevertheless, we’d like to rectify this as well,” he said. 

Deno Gold seeks out of court settlement 

When I asked what he felt about these workers going to court to sue, Mr. Faletta replied, “No, we will not wait for the courts to pass sentence. The company will get in touch with these individuals. When the time comes, the money will go to them directly, not to the lawyers.” Mr. Faletta claimed that Deno Gold Mining took over management of the Combine in October, 2006, but that it signed a licensing agreement with the Armenian government in April, 2005. Mr. Faletta highly praises the economic policy of Armenia in terms of foreign investors. “I believe that Armenia has great potential and that the government is taking significant strides to attract foreign investors. Our company has amicable relations with the government and the authorities have proven their willingness to cooperate over the years. Our source at Deno Gold said that the concessions made by the government when it signed this latest agreement with the company have no precedent in Armenia. This is strikingly true regarding the return of the Central Mine to the company. Mr. Faletta, however, minimizes the significance of the matter. “The Central Mine used to be a good producer at one time, but little ore is left to be mined today. The deeper you dig into the mine’s vein, the weaker it becomes. It was economically profitable for us to operate it.” (Frequent press reports had talked about the elective operation of the Central Mine; only the richer veins would be mined) Energy and Natural Resources Minister Movsisyan has yet to answer our following question – Which of the parties benefited the most from the agreement; the workers, the government or Deno Gold? During the past six weeks he has been too “busy” to meet with this reporter. On November 15, 2010, Minister Movsisyan visited Kapan. During an interview afterwards, he stated that there hadn’t been any layoffs at Deno Gold. Had he stated that workers had indeed been let go, the government would have to explain why it made all those concessions to the company. Minister Movsisyan said nothing about the most painful of all issues to the workers and the one at the core of their struggle – wage payments. The only apparent achievement of the negotiations was that the workers were partially paid during the nine months of leave, and this was the case only because the government returned the VAT taxes Deno had paid. While in Kapan, Minister Movsisyan painted a positive picture to the assembled crowd. He told them that come next year, Deno Gold was planning to hire new workers and that the company would be making a profit. The economy was now on the uptick, the minister argued.

 P.S. – On November 30, 2010, Deno Gold’s representative made an offer to settle out of court with thirteen plaintiffs, expressing the company’s willingness to pay their monetary demands by December 26. (

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

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