3 February 2009

Keith Ewing, President of IER

Politicians need to address the contradictions and stupidity of the Posted Workers’ Directive and recent European Court of Justice decisions. If not, current expressions of discontent will continue to boil over as the recession deepens.

We do not know yet under what terms and conditions the Italian and Portuguese workers at the East Lindsey Oil Refinery are employed. We do not know if they are being paid in accordance with Italian and Portuguese collective wage agreements; if they are being paid at least the same as British contractors would have been paid; or if they are being paid less. But in a sense it does not matter, for what the current dispute provides is a glimpse into a future where the toxic mix of globalisation and weak labour standards meets economic recession.

Global companies based in Europe are free under EU law to tender for British building and service contracts, and they are free to hire their own direct labour force in their own countries. The workers can then be ‘posted’ to this country under terms and conditions established in the country of origin. These terms and conditions may be less than the contractual terms and conditions operating here. No matter – all the Posted Workers’ Directive of 1996 says is that workers posted here must be paid the minimum terms laid down in British legislation.

That means that workers posted to this country must be paid only the statutory minimum wage, which despite being part of New Labour’s mantra of achievement is extremely low (at less than a half the national male average wage), particularly if it is to be applied to skilled workers. There are no overtime rates, and while the Posted Workers’ Directive requires foreign owned companies to observe our maximum hours laws, these are laws with individual opt outs tailored in, following the British government’s achievement in destroying the Working Time Directive.

In some cases, posted workers must also be paid the rate laid down in collective wage agreements. But this only applies where workers are posted to countries where collective agreements are ‘universally applicable’, within a given sector and geographical area. That is not the case in the United Kingdom where collective agreements typically are negotiated at enterprise level. So under the terms of the Posted Workers’ Directive, collective wage agreements in this country can be undercut by companies based overseas, obliged only to pay the statutory minimum.

The problem has been compounded by four decisions of the European Court of Justice, made since 11 December 2007 (See IER Briefing) These decisions have concluded that the minimum requirements of the Posted Workers’ Directive are also a maximum beyond which Member States cannot go. So

• the government of Luxembourg was told that it could not by legislation require foreign based companies to apply collective agreements which were not universally applicable; and
• the government of Lower Saxony was told that it could not as a condition of the contract require Polish contractors on a prison project to observe the terms of collective agreements which had not been declared universally applicable.

In addition, in the famous Laval judgment, the Swedish building workers’ union was told that it could not by industrial action seek to compel a Latvian company to pay posted workers under the terms of a Swedish collective agreement. The Laval case came a week after the court had issued its equally famous Viking judgment which – with shades of Taff Vale – gave rise to the possibility of trade unions being liable in unlimited damages for taking industrial action in breach of the EC Treaty.

These decisions – driven it seems by neo-liberal ideologues on the European Court of Justice – have created a massive problem, which it is now the responsibility of the political classes to address. But determined to deny their citizens any voice on the future of the Union, the EU and its Member States can hardly complain if their Canute-like opposition to worker protection leads to expressions of discontent, which will continue to boil over as the recession deepens. This is not to concede to protectionism or to oppose free movement, but to insist on fairness.

If we are to avoid serious problems of the kind that we now see in Lincolnshire, the government needs to get its weight behind an ETUC proposal for a protocol with a view to amending the EU Treaty, to make it clear that the constitutional rights of business must not always have priority over the subordinated interests of workers. Secondly, the government needs to initiate effective reform of the Posted Workers’ Directive, so that employers posting workers here are required to observe the terms of appropriate collective agreements as well as minimum terms laid down in statute.

Finally, in these troubled times, the government needs to take a leaf out the books of a Tory government, written to deal with the Depression of the 1930s. One step taken then was to increase the coverage of collective wage agreements, presumably to boost the spending power of workers. Once standing proudly at 85% of the labour force (as continues to be the case throughout much of the EU), the coverage of collective wage agreements in the UK has fallen to only 33% of the workforce, by a long way among the lowest of the original 15 Member States.

At a time when active steps are being taken to increase the money supply, it does not need an economist to contemplate the contradiction of a labour market policy geared to low standards. Nor – in current circumstances – does it need an economist to contemplate the stupidity of labour laws such as the EU’s Posted Workers’ Directive and the accompanying ECJ judgments, which remove more of the remaining fences in the galloping ‘race to the bottom’.