07 January 2014

By LJB Hayes, Cardiff University

In December 2013, the long awaited statement on the enforcement of the Posted Workers Directive was published by the European Council. Despite the new efforts and the compromise proposal made by the European Council, the European Trade Union Confederation (ETUC) announced that their concerns have not been fully addressed. The ETUC believe that it is essential to include in legislation the right of members states to place control measures necessary to protect workers' rights and assure fair and equal working conditions.

Bernadette Ségol ETUC Secretary General said: "Despite efforts made by some governments to meet our demands and move towards a more social Europe, this compromise text does not meet our expectations: our demands remain on the table".

"In the upcoming negotiations ETUC will look to the European Parliament to clear ambiguities and ensure that mechanisms are put in place so that all EU workers enjoy fair and equal working conditions. "

IER asked one of its legal experts, Lydia Hayes, to critically examine the European Council's proposals. Lydia recently contributed a chapter on Posted Workers in an IER publication, Labour Migration in Hard Times: reforming labour market regulation?

The issue of 'social dumping' and wage competition between workers from different member states is under intense public scrutiny. In the UK, attention has focused on the extension of free movement rights to Bulgarian and Romanian nationals whereas elsewhere in the EU, the issue of posted workers stands out as a political hot potato.

Employers are legally entitled to ‘post’ workers on a temporary basis into other EU member states to fulfill service contracts. Service providers in low-wage EU member states such as Poland and Lithuania have the competitive advantage of lower labour costs when bidding for contracts in higher wage countries such as Germany or France. The Posted Workers Directive 96/71/EC (PWD) was designed to promote the free movement of services at the same time as pursuing fair competition and respect for worker rights. However, it is now generally accepted that the PWD has been poorly enforced and critics point out that the rules pay insufficient regard to human rights while promoting aggressive wage competition.

After lengthy controversy, EU Employment ministers have now agreed proposals on the implementation, application and enforcement of the PWD. Approval by the European Parliament is far from certain, but EU elections are looming and there is a sense of urgency about negotiations prior to the last plenary session of the current Parliament on 14-17th April 2014.

Enforcing the Posted Workers Directive

Article 3 of the PWD is its regulatory backbone. Accordingly, member states must ensure that posted workers are guaranteed terms and conditions fitting a list of seven employment matters including hours of work, holidays, minimum wages, agency work, health & safety, pregnancy and equal treatment on grounds of sex, race etc.

Up until 2007 it was thought that this list laid down a bare minimum of entitlement. However, following the cases of Laval, Viking and Ruffert, the European Court of Justice made clear that the list set the limit of employment matters on which posted workers could receive legal protection. In addition, terms and conditions falling under any one of the list headings would only qualify if they were laid down in national law or administrative regulation. Posted workers in construction and building work could also draw on minimum terms and conditions laid down in collective agreements but the eligibility rules are very stringent. Furthermore, trade unions are heavily restricted in taking collective action to defend terms and conditions from undercutting by posting arrangements.

Some initial comments on the proposals:

The proposals appear mainly concerned with rogue trading and abuse of the rules. Member states will be required to nominate ‘competent authorities’ with responsibility for checking that service providers are genuinely established in the member states they claim to originate from. They will also be able to explore whether postings to receiving states are genuinely intended to be temporary. However, the remit of competent authorities is circumscribed heavily by reference to Article 3 of the PWD. Hence ‘competent authorities’ may turn out to be hollow policing units, with a limited remit, and an exclusive focus on enforcing minimum standards.

Inspections relating to posted workers in receiving states must be neither discriminatory nor disproportionate. In the absence of risk-based evidence, member states with a poor track record of using inspection to enforce minimum labour standards (and one might include the UK) may be unable to justify more frequent inspections of posted worker arrangements.

Although Article 2 of the proposals makes explicit reference to the right to strike and collective bargaining, the design of the regulatory scheme offers limited individual redress and does not promote collective organisation. Member states must ensure mechanisms for posted workers to lodge complaints against their employer and institute legal proceedings. The ability to do so in receiving states is limited to the extent of ‘sustained loss or damage as a result of a failure to apply applicable rules’. Within these proposals, it is on an individual basis that trade unions may represent a posted worker.

The fresh proposals are weaker than MEPs had hoped for, particularly in regard to liability within contracting chains. Since posted worker status depends upon the existence of contracts for service provision, MEP’s had requested joint and several liability in all sectors in order to make contractors responsible for enforcing conditions. However, the proposals say only direct subcontractors are liable and step back even from the restricted list of seven employment matters, to include liability only for minimum pay. Further, member states are entitled to exempt contractors from liability if they have taken ‘due diligence’ measures as required in national law.

The proposals improve access to information and communication between sending and receiving states. However, the PWD is reaffirmed as a mechanism for maintaining posted workers at the bottom of the labour market in receiving states. The new regulatory approach is organised around an expectation that a basement-level of labour standards can be ‘policed’ by member states in the absence of trade union representation or effective collective bargaining. It is hard to see how inferior labour rights, exploitative pay levels and lack of regard for posted workers’ health and safety will improve as a result.

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