Posted workers: free movement and establishment in the post-covid EU

Present covid-pandemic affected almost all aspects of workers’ life, including free movement and establishment in Europe. National governing bodies have to apprehend existing changes and challenges for workers moving and posted in other EU states and adopt resolute steps to facilitate adaptation of workers and companies to new realities in the EU’s single market. Besides, just a few months before the deadline for the implementation of a revised (about 30 years old) Posting of Workers Directive has been indefinitely delayed due to post-covid effects. All in all, both the uncertain legal background for workers’ movement and immanent difficulties for national governance have made the issue a hot agenda in perspective integration…

The EU’s basic law’s “ever closer Union” concept includes mobility of workers, companies and their “establishment”: it has been elaborated further on with some legal and administrative measures including the posting of workers. Already in 1971, the then 15 European Communities’ states adopted s special directive with the aim of facilitating economic growth by increasing workers mobility in the European integration.

However, due to pandemic, the posting of workers’ process (simply “postings”) has been dramatically damaged and changing postal workers rights e.g. limiting travelling facilities, changing sectoral industry rules and imposing strict and authorized conditions by local authorities, etc. Thus, in addition to imposed border control, companies have to comply with existing social security and tax obligations and ensure that postings in the EU states must be dully registered with a competent host state’s labour authority; otherwise, companies may be subject to sanctions and fines. National authorities’ inspections and controls have been greatly increased through the post-pandemic time; hence, employers were taking seriously the rules for postings, including the registration of posted workers with the local authorities in a host country.

Note: On consequences of postings for sensitive economic sectors such as construction and transportation, including job loss and job prospects, see Z. Rasnača, “Essential but unprotected: highly mobile workers in the EU during the COVID-19 pandemic”, – ETUI Policy Brief, N°9/2020.

 

Labour law experts, trade unions, employment agencies as well as national governing institutions are well aware of the technological revolution’s effects and challenges for posting workers and their rights while generally unanimous about necessary redrafting of the current postings’ normative framework; some EU states have already implemented reforms and others intend to do so in the near future. However, as soon as technological and innovative solutions are taking place much faster than the rulemaking, all sorts of legislation are becoming often quickly outdated and/or becoming insufficient. Nethertheless, several regional European scientific bodies are quite active in assisting the EU states in drafting new legal instruments in postings: e.g. the European Trade Union Institute (ETUI), the European Lawyers for Workers (ELW), the network of the European Trade Union Confederation (ETUC), supported by the European Association of Lawyers for Democracy and Human Rights (ELDH). For example, the ELW aims to unite lawyers and legal scientists in their work for trade unions and workers in the EU member states; the ELW was founded in 2013 with the membership of more than a dozen states, e.g. Belgium, the UK, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Poland, Portugal, Russia, Spain, Sweden, and Turkey. It actively cooperates with several European trade and labour unions, as well as with the ETUC and the ETUI.

More in: https://elw-network.eu/

 

Postings: history and present  

In the initial Posting of Workers Directive from 1971 (so-called PWD), the “posted workers” could be sent by their employers to another EU states for carrying out – temporarily – some activities and services; at that time among 15 European states at that time. The task was not really difficult, as these states have had almost equal workers’ conditions and facilities due to “unanimous” free-market economic systems. Posted workers sent by their employers could stay in the host country only temporarily and should not “be integrated into the labour market of the host state”. 

In modern EU, the posting of workers has been particularly important in such sectors as construction (with over 40 percent of the total postings), road transportation, agriculture, machine installations, software development, etc. The posting of workers is also important for other national economic sectors in host countries, such as industry (21.8%) and commercial services (10.3%); however, according to Eurostat’s factsheet on posted workers, more than half of all postings are taking place between neighbouring countries. Besides, there are some services that are during and after pandemic, which can be provided on-line and by teleworking without practical postings.

The term “mobility” is used in the PWD as geographical movement and circulation of labor forces rather than the occupational issue (On the difference between geographic mobility and occupational mobility, see J. Long, J. Ferrie, “Labour Mobility”, – Oxford Encyclopedia of Economic History, 2003.

Reference to: https://www.robert-schuman.eu/en/doc/questions-d-europe/qe-591-en.pdf .

 

Note: The Posted Workers Directive 96/71/EC is an EU directive dealing with the free movement of workers within the EU states. It makes an exception to the Convention on the Law Applicable to Contractual Obligations 1980, which ordinarily requires that workers are protected by the law of the member state in which they work. After a controversial set of decisions by the European Court of Justice, CoJ the Directive has come under criticism for reducing rights of posted workers and undermining the rights of workers in a home nation; the date of transposition – the end of 1999; current PWD’s consolidated version in: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A01996L0071-20200730.

See also the PWD original text in: https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:31996L0071&from=EN, where it is said that “this Directive shall ensure the protection of posted workers during their posting in relation to the freedom to provide services, by laying down mandatory provisions regarding working conditions and the protection of workers’ health and safety that must be respected”, art.1).

On the Convention (with exceptions for Denmark), see: https://en.wikipedia.org/wiki/Convention_on_the_Law_Applicable_to_Contractual_Obligations_1980

 

Thus, the directive generally applies in cases where: a) a company agrees to provide a service to a client in another EU state by sending staff there in order to carry the agreed work; b) a worker is posted to another country through the agreement within a group of companies, and/or with the parent and subsidiaries based in different member states; and c) a worker is posted through an agreement between an employer and an employment agency in another EU state.

The EU state hosting a posted worker must ensure that a worker is protected by the minimum standards (PWD’s art. 3, point 1), which include: conditions for working time (hours, holidays, pay, etc.); some standards applicable to posted workers in health and safety (as well as in pregnancy and maternity protection); and in rules against discrimination. For example, in the building and construction sectors, collective agreements shall include standards that are “universally applicable” in a certain geographic region.  

In 2014, the Enforcement Directive 2014/67/EU (or ED) has been introduced in order to ensure that EU states implement in a “more uniformed manner” the provisions of the PWD with respect to the monitoring and enforcement of labour conditions of posted workers. While most EU states transposed the ED only recently into their legislation, the European Commission proposed in March 2016, a reform of the posting of workers’ rules by applying the so-called “remuneration´ principle rather than the “minimum rates of pay” of the host state in order to promote the principle of “equal pay for equal work at the same place”.

This proposal has been particularly sensitive, as it touched upon controversial interests between the old-Western EU states and the new Central-Eastern EU members. However, as expert indicated, despite the protection provided by the PWD, the concept of posting has been often “misused” by companies to recruit cheap labour.

In April 2020, some EU states and private companies asked the European Commission for an extension of the transposition deadline of the revised PWD (2018/957) to make a broader scope of working conditions for posted workers; the revised PWD extends the array of working conditions to be observed for posted workers. The European Commission excluded an extension of the transposition period and underlined the importance of the new rules, especially the shift from minimum pay rates to comparable remuneration (also called “equal pay principle”) during the difficult posy-pandemic times. The deadline for implementation of the revised PWD in the EU states remained 30 July 2020; in addition, in December 2020 the European Court of Justice (CoJ) rejected the annulment actions by Hungary and Poland against the revised directive.

See: European Council, Proposal to amend Directive 96/71/EC concerning the posting of workers in the framework of the provision of services, recital 12a.

 

The Posted Workers Directive, PWD has been controversial from the initial draft; recent EU Court of Justice, CoJ’s case law just proves that, as Court of Justice’s case law makes the PWD compared with international private/public law, such as the ILO Conventions and the EU Social Charter, etc.  The CoJ’s case law is also problematic because of the fact that a normative framework results from its decisions which impinges upon fundamental features of collective labour law and industrial relations: it both entails restrictions on the kinds of terms and conditions of employment which can be imposed, and encroaches upon freedom of collective bargaining more broadly. The autonomy of the EU states is also limited and the effectiveness of national industrial relations regimes compromised with highly undesirable outcomes.

Reference to: Cambridge Yearbook of European Legal Studies, vol. 12 , 2010 , pp. 151-182; DOI: https://doi.org/10.5235/152888712802636157

 

Legislative “transformations” in postings: Services Directive

To protect workers in one EU country from workers sent by their employer to carry out work in another state –though temporarily, the PWD provides that the “basic rules” in the host country (or country of destination) needs to be observed; the Directive was amended several times and in the present form is working from 1996 with the consolidated version of 2020 (see reference above). In the legal sense, the PWD did not bring anything new in the EU labour law that was not already in the EC Treaty as interpreted by the Court of Justice. Thus, the “country of origin” principle had been gradually introduced into law through the concept of the freedom of movement of goods (see the Cassis de Dijon case in 1979) and soon after into other areas such as services and establishment.

As soon as the EU secondary legislation (directives, decisions and regulations) has to be in line with the fundamental treaties, the Services Directive original text (see the Services Directive nr. 123 of 2006) was not a novelty, but a clarification of the CoJ case law and a continuation of the “country of origin” principle, which had already been applied in some other secondary laws, e.g. the TV Without Frontiers Directive, the Second Banking Directive, the Third Insurance Directive, the E-Commerce Directive and others.

The Services Directive in the internal market has been completely implemented by the EU states by the end of December 2009, covering a vast range of businesses such as hotels and restaurants, car hire, construction, advertising services and estate agencies, to name a few. It also covers advice provided by professionals such as architects, and certain public services, such as social care and environmental services; however, the whole range of European “services” was roughly divided into two parts: those subject to a free movement/establishment and those subject to national authorisation. Thus, for example, the following services were excluded from a directive’s “free establishment”, including broadcasting, postal services, audiovisual services, the work of temporary employment agencies, some social services, public transport, gambling and healthcare (legal services, initially excluded, were later put back into the directive by some member states).

Each country must provide a “one-stop-shop” for foreign companies, which will deal with all the formalities, instead of obliging them to deal with different authorities at national, regional and local level; the companies are meant to be able to provide all information by electronic means.

More in: http://news.bbc.co.uk/2/hi/europe/4698524.stm

 

These although limited sets of “posted rights” must be seen within the context of the EU basic law (e.g. TFEU art. 56, on top of the freedom of movement) on the freedom of establishment, and also the right to freedom of association under the European Convention on Human Rights (art. 11) and the EU Equality Directive. Thus the EU basic law provides for a certain mechanism of “justified restrictions for the protection of essential requirements in the general interest”, which the CoJ has consequently reminded.

Reference to:  https://en.wikipedia.org/wiki/Posted_Workers_Directive_1996  

For example, in 2007, the European Court of Justice made two vital decisions stipulating that employers in a host country are only required to pay their workers the rate they would receive in their home country, provided this matches the minimum wages and working conditions in the country of posters.

See more on these cases in: a) Laval Un Partneri Ltd v Svenska Byggnadsarbetareforbundet [2008] IRLR 160 (C-319/05, see also (C-319/06), on free movement of services; and b) ITWF v Viking Line ABP [2008] IRLR 143 (C-438/05), on freedom of establishment.

 

Services Directive has been vital for posting workers: the so-called Bolkestein directive (named after the then European Commissioner for internal market and officially titled “Services in the Internal Market Directive, 2006/123/EC”), has been a Union’s secondary law aimed at establishing a single market for services among the EU states. The directive has been seen by observers as an important initial kick-start to the Lisbon Agenda which, launched in 2000, was a European strategy to make the EU “the world’s most dynamic and competitive economy” by 2010. However, from a very beginning, the directive was criticised by the left-wing EU politicians, who stated that it would lead to competition between workers in different parts of Europe – hence the expression “Polish plumber” – resulting in social dumping. After the 2004 original draft had been substantially amended, the proposal was approved on 12 December 2006 by the European Parliament and Council, and adopted as the Directive 2006/123/EC.

More in: https://en.wikipedia.org/wiki/Bolkestein_directive; and Lisbon Agenda in: https://en.wikipedia.org/wiki/Lisbon_Strategy.

 

The EU’s provision of services recognizes the right for companies, established in one member state, to provide services in another EU state: thus businesses may send their workers from the domestic state (or the “sending state”) to another EU state, or the host state in order to provide the services. This concept also referred as “posting” raises the question which labour legislation should apply to the working conditions of the posted worker during the period of posting. Taking into account -from an economical point of view- the cross-national differences regarding labour standards among the EU countries, a service provider that sends workers from a state with relatively low labour standards has a competitive advantage in another state with higher labour standards.

Note: reference to the following link: https://elw-network.eu/revision-posted-workers-directive-towards-full-level-playing-field/; See also: e.g. Cremers J. In search of cheap labour in Europe – working and living conditions of posted workers, – International Books, 2011; Berntsen L. Precarious Posted Worlds: Posted Migrant Workers in the Dutch Construction and Meat Processing Industries. – International Journal of Comparative Labour Law and Industrial Relations, no. 31 (vol. 4), 2015. Some authors have already offered some analysis of the posting of workers’ situation during the pandemic, identifying main challenges faced by the states, EU institutions and businesses, as well as showing potential future perspective developments.

Reference to: – Foundation Robert Schuman Policy papers. European issues n°591, 13 April 2021 “The impact of Covid-19 on posted workers: the new posting framework”, by S. Stefanova-Behlert and M. Menghi; the publications on the site of: www.robert-schuman.eu.   

 

Presently, the posting of workers –as a rule- takes place in those sectors where the employees’ activities, because of their specific nature, cannot be performed remotely, since they require the worker to be physically present at the workplace, for instance, in the construction and transportation sector. For these types of work, the pandemic has had immediate negative impact: first, some posting companies were forced to postpone or cancel some scheduled postings; second, the companies have reviewed some of their assignment plans: as a result, many construction sites were closed in lockdown.

See, as an example, the Austrian case, illustrated in the study of the European Centre for Social Welfare Policy and Research, by L. Geyer, S. Danaj and A. Scoppetta, “The impact of COVID-19 on the posting of workers and their workplace safety”.

 

Resolving controversies  

Still presently, there are different interests involved in the two concepts: i.e. between a sending and a receiving EU state. National governing bodies approach differently two main models of posting: the so-called skills-driven model (covering the lack of certain qualified workforce in a receiving state) and the labour-cost-driven model (i.e. taking cheap labour). The former, by definition, approaches temporary workers’ movement driven by skills shortages, in particular in the digital economies; the latter is still driven by the existing labour costs’ differences among numerous EU states.

Both models, however, are having at their economic sense the global/regional competitiveness, high value chains taking place in trade and lack of unskilled workers in construction, transport and agriculture sector in the western-part of the EU. These are the primary negative consequences for the posted workers in the post-pandemic period, particularly in terms of socio-economic consequences and health issues; coupled with serious restrictions in travel conditions. The pandemic crisis has at the same time revealed certain importance of posting in some economies, including health care and food specialist, as well workers in construction and transport sectors.

Note: on consequences for sensitive sectors such as construction and transportation, including job loss and job prospects, see Z. Rasnača, “Essential but unprotected: highly mobile workers in the EU during the COVID-19 pandemic”, ETUI Policy Brief, N°9/2020, European Economic, Employment and Social Policy.

 

It is quite common that national worker-protection measures are imposed in the EU states: e.g. the issues connected to the so-called “Molière clauses” in France (restrictions imposed on workers posted to France) have been regarded as protectionist. For example, French lawyers argued that French national measures “were adopted not to ensure the protection of the health and safety of employees, but to exclude workers posted from regional public procurement and favour regional companies” (for a reference, see the decision of the administrative tribunal in Lyon on 13 December 2017, nr. 1704697).

Besides, often the public health argument is used in some EU states to justify measures to protect national markets; although such an argument is not be fully compliant with the EU internal market principles, according to the CJEU’s opinion, the argument of health protection shall “not constitute a means of arbitrary discrimination or a disguised restriction.

See for instance the judgment of the Court of 25 July 1991, in Säger, C-76/90: a restriction of the free provision of services has to be justified by overriding reasons of public interest, the restriction has to be non-discriminatory to nationals and non-nationals, the restriction has to be objectively necessary, and the restriction must not go beyond what necessary in order to attain the objective.

 

The protection of public health is among the basic “public goods” in the EU law, i.e. in the treaties and, particularly, in the Charter of Fundamental Rights of the European Union, which is since 2000 a part of the EU basic law. The pandemic has brought about intensive national inspections followed by a dramatic decrease of postings (e.g. short-term postings) for some “alternative forms of services”; however, the health emergency measures and lockdowns have increased compliance awareness, to be a factor of restriction in the revised PWD through the national measures limiting free movement of people (by the way, health protection measure have been used in numerous Court of Justice’s cases as an argument to justify restrictive measures imposed by the states).  

 

Note: for additional references see, for example, the following CJEU decisions including the health protection arguments: CJEU, 19 January 1999, Criminal proceedings v. Donatella Calfa, C-348/96, CJEU, 18 May 1982, Rezguia Adoui v. Belgian State and City of Liège; Dominique Cornuaille v. Belgian State, joined cases 115 and 116/81, CJEU, 19 February 1981, Criminal proceedings v. Fabriek voor Hoogwaardige Voedingsprodukten Kelderman BV, 130/80, CJEU, 26 June 1980, Criminal proceedings v. Herbert Gilli and Paul Andres, 788/79.

See also: the 2007 decisions in Case C-438/05 International Transport Workers’ Federation, Finnish Seamen’s Union v Viking Line ABP, OÜ Viking Line Eesti [2007] ECR I-10779 (‘Viking Line ‘) and Case C-341/05 Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet, Svenska Byggnadsarbetareförbundets avd. 1, Byggettan, Svenska Elektrikerförbundet [2007] ECR I-11767 (‘Laval ‘), and the 2008 decisions in Case C-346/06 Rechtsanwalt Dr Dirk Rüffert v Land Niedersachsen [2008] ECR I-1989 (‘Rüffert’) and Case C-319/06 Commission of the EC v Luxembourg [2008] ECR I-4323 (‘Commission v Luxembourg’).

 

Conclusion

Creation of a level playing field in labour law with the present differences in the labour costs would be almost impossible (with the relevance to posted workers) as soon as a generally applicable collective agreement imposed on all EU states. Under the current legislation, based on a detailed wage scale in the collective agreements, posted workers are entitled to receive the same gross wage as local workers; as a partial consequence, the wage gap between local and migrant workers would be minimal in terms of the gross wage.

However, presently, the posted workers are not covered by a generally applicable agreement; hence, they have to rely on the “statutory minimum wage” of the host state: as a consequence, a wage gap arises between local workers and migrant service providers. The situation is not likely to change: the revision of the PWD establishes a protection based on legislation and/or generally applicable collective agreements.

Under the revised PWD, “commonly” applicable collective agreements are vital for the creation of a level playing field among the EU states. Nevertheless, even if both local and posted workers are receiving the same gross wage (if covered by a generally applicable collective agreement), the posters are likely to have a competitive advantage based on social security contributions, taxation, etc. In the present legal framework for posting workers, it is feasible for companies to gain competitive advantages by posting workers from the EU states with relatively low social security rates compared to states with relatively high social security rates. Besides, personal income tax rates vary significantly among the EU states (from about 15 to 50 percent); hence, in absence of a generally applicable collective agreement, the posted workers would still be in comparative disadvantage.

Thus, as a consequence, the wage gap between local and posted worker can rise as the statutory wage would be significantly lower than the average wage in most economy sectors. A couple of the “big EU enlargements” during last two decades brought even more problems with greater differences in wages’ rates and employment conditions among the “western” EU member states and their “eastern neighbors” (e.g. a Latvian worker gets about 5-8 times lower salary then, for example his/her German colleague).

Therefore, presently a full level playing field between local and foreign workers is highly improbable; the proposed PWD revision would not improve this situation since both taxation and social security are excluded from a problematic generally applicable collective agreement, an issue on which there is no common background among the EU-27 states.

Thus, in order to minimize so-called social dumping in postings, the EU states should focus on adequate monitoring tools and effective enforcement mechanisms with respect to the labour conditions of posted workers. In order to reach this goal, the EU should focus on further coordination and cooperation among all EU states for the benefit of perspective integration.  More in: https://elw-network.eu/revision-posted-workers-directive-towards-full-level-playing-field/

Leave a Reply

Your email address will not be published.