EU: Pressure mounts for revision of Posted Workers Directive
A high-profile dispute over the use of foreign labour at a UK oil refinery in January-February 2009 has added fuel to an EU-wide controversy over the interpretation of the 1996 Posted Workers Directive and has intensified calls for the Directive to be amended.
On this page:
The Lindsey dispute
Posted Workers Directive
ECJ rulings
Controversy over judgments
European Parliament joins debate
European responses to the Lindsey dispute
UK views on revision of Directive
Commission response.
Key points
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The Lindsey dispute
On 28 January 2009, several hundred workers employed by construction contractors at an oil refinery at Lindsey in Lincolnshire (owned by Total, the France-based petrochemicals multinational) started an unofficial strike. In the days that followed, construction workers employed at other oil and gas refineries and power stations across the UK took unofficial industrial action in sympathy with the Lindsey strikers.
The dispute centred on a decision by Jacobs Engineering, a US-based company with a contract from Total, to install new facilities at Lindsey, in order to subcontract some of the work. Following a tendering process, the work was awarded to IREM, a company based in Italy. IREM planned to use its own existing workforce, made up of Italian and Portuguese workers, to do most of the work. It was primarily the fact that the work would be carried out by foreign workers, and that UK workers would not have the opportunity to apply for the jobs, that sparked the unofficial strike. Fears about similar situations arising at other facilities contributed to the sympathy action by construction workers elsewhere.
As well as perceived discrimination against UK workers, other matters at issue in the dispute included possible undercutting by IREM of the terms laid down by the UK national collective agreement for the engineering construction industry (though it appears that this was not the case to any significant degree), and a lack of transparency with regard to the pay and conditions of IREM employees at Lindsey.
Following talks brokered by Acas, a deal was reached to end the strike on 5 February, whereby 100 or so new construction jobs at the Lindsey site would be made available to UK workers.
At the request of the Government, Acas conducted an inquiry into the circumstances surrounding the dispute and published its findings (PDF format, 268K) (on the Acas website) on 13 February. It found no evidence that Total, Jacobs Engineering or IREM had broken the law in relation to the use of posted workers or entered into unlawful recruitment practices. Further, Acas received assurances from IREM that it would abide by the national collective agreement for the engineering construction industry, although there were “clearly some issues of interpretation to be determined between management and the trade unions”.
Acas states that the Lindsey dispute has thrown up a number of issues - notably the application in the UK of the EU Directive on posted workers and its relationship with the UK’s industrial relations system - and notes that these issues have been highlighted by the recession. Beyond the UK, the dispute has further fuelled a longer-running controversy over the Posted Workers Directive and intensified calls from some quarters for the Directive to be revised.
Posted Workers Directive
Posted workers are those employed in one EU member state but sent by their employer on a temporary basis to carry out work in another member state, especially in the context of the “transnational provision of services”. This occurs, for example, where a service-providing company wins a contract in another country and sends its employees there to carry out the contract (as in the Lindsey case). Freedom to provide services across borders is guaranteed by art. 49 of the Treaty establishing the European Community. The European Commission estimates that there are currently around 1 million posted workers within the EU.
Posted workers are given special protection by the EU Directive (96/71/EC) (on the EUR-lex website) on “the posting of workers in the framework of the provision of services” . This provides that such workers should be covered by a minimum set of the national employment rights applicable in the country to which they are posted, relating to:
- maximum work periods and minimum rest periods;
- minimum paid annual holidays;
- minimum rates of pay;
- the conditions of hiring-out of workers, in particular by temporary work agencies;
- health, safety and hygiene at work;
- protective measures for pregnant women, women who have recently given birth, children and young people; and
- equality of treatment between men and women and other anti-discrimination provisions.
The rights concerned are those laid down by law, regulation or administrative provision in the host country. In the specific case of building work, the rights applicable to posted workers are also those laid down in collective agreements (or arbitration awards) that have been declared “universally applicable”. Further, member states are free to choose to apply relevant rights laid down by such agreements to other sectors. They may also apply to posted workers terms and conditions of employment in areas other than those referred to in the Directive, on the grounds of “public policy”.
As well protecting the workers concerned, the Posted Workers Directive aims to prevent “social dumping”, whereby foreign service providers might import cheap foreign labour and undercut national pay and conditions.
The Directive had to be implemented by the then member states by 1999. In the UK, the authorities did not consider it necessary to adopt any specific instrument to transpose the Directive, since domestic employment law applies to all workers regardless of their situation or nationality. Implementation entailed only minor amendments to several items of employment rights legislation. UK law (unlike that in many member states) does not contain any mechanism for declaring collective agreements (or arbitration awards) universally applicable, and the Government did not choose to rely on collective agreements as a source of any of the rights guaranteed by the Directive. Workers posted to the UK are therefore covered only by the relevant rights laid down by law or administrative provision.
ECJ rulings
Over 2007 and 2008, the European Court of Justice (ECJ) issued a series of rulings relating to the application of the Posted Workers Directive, and more widely to the relationship between workers’ rights and the EU’s rules on the economic freedoms of businesses. The key cases are Viking (case C-438/05), Laval (C-341/05), Rüffert (C-346/06) and Commission v Luxembourg (C-319/06).
With specific regard to the Posted Workers Directive, the ECJ ruled that:
- member states cannot require employers posting workers to their territory to comply with standards that exceed the terms of the Directive, for example adherence to pay rates other than minimum rates or to standards in areas not listed in the Directive;
- member states cannot require employers posting workers to their territory to comply with standards laid down in collective agreements that have not been declared universally applicable;
- the Directive’s provision that member states can apply to posted workers terms and conditions in areas not listed in the Directive, on grounds of public policy, must be interpreted strictly and only the national authorities, and not parties to collective agreements, can rely on this exemption; and
- trade unions may not take industrial action, in a member state in which the minimum rights protected by the Directive are mainly contained in legislative provisions, to force a foreign service provider to negotiate a collective agreement whose terms are more favourable than those of the relevant legislative provisions or relate to matters not referred to in the Directive. More generally, industrial action whereby a trade union in one country seeks to force a foreign company providing services in that country to enter into negotiations and sign a collective agreement constitutes a restriction on the freedom to provide services.
Controversy over judgments
In the view of trade unions across Europe, the ECJ rulings referred to above affect the balance between the economic and social aims of the EU, and have far-reaching implications for fundamental workers’ rights, collective bargaining and industrial action in the member states. The European Trade Union Confederation (ETUC) described the judgments in September 2008 as “a threat to workers in terms of unfair competition on pay and working conditions, and unequal treatment between migrant and local workers”. Further, the ECJ had limited “the possibilities for certain member states to safeguard the role of collective bargaining in dealing with the effects of increased cross-border mobility”.
The ETUC expressed strong concerns about the ECJ’s interpretation of the Posted Workers Directive and called for a review to ensure that the Directive fulfils its initial objective, which is to promote the transnational provision of services in a climate of fair competition and respect for workers’ rights. The ETUC also called for a legally binding “social progress protocol” to be added to the EU treaties, in order to “remedy the harmful effects of the ECJ judgments and to restore balance between economic market freedoms and fundamental rights”. The protocol should confirm “that the single market exists to serve social progress, that fundamental social rights have priority [and] that enterprises cannot circumvent national laws and practices in order to engage in unfair competition on pay and working conditions.”
Trade unions pressed these demands at a “forum on workers’ rights and economic freedoms” organised by the European Commission in October 2008 to debate the implications of the ECJ rulings and the relationship between economic freedoms and fundamental social rights. The forum was attended by politicians, social partner representatives and experts.
Speaking for employers at the forum, BusinessEurope took a very different line on the judgments. It supported the ECJ’s interpretation of the Posted Workers Directive, arguing that it will lead to a more coherent application of the Directive, with positive effects for companies that provide cross-border services using posted workers. BusinessEurope denied that the rulings affect the right to conclude collective agreements or their content, open the door to social dumping, or prevent member states and/or the social partners from applying more favourable terms and conditions of employment to posted workers.
While acknowledging that the application of the Directive was not perfect, BusinessEurope saw no need to revise the Directive, which “remains a valid instrument to ensure fair competition between companies and avoid social dumping in the single market”. BusinessEurope also rejected the idea of adding a social progress protocol to the EU treaties.
As well as organising the forum, the Commission invited the EU-level social partners to undertake a joint analysis of the ECJ rulings and of the balance between economic freedoms and social rights. BusinessEurope and the ETUC both took up this offer and the analysis is reportedly under way.
European Parliament joins debate
On 22 October 2008, the European Parliament made its contribution to the debate by adopting a resolution on “challenges to collective agreements in the EU”. The resolution asserted that the ECJ rulings demonstrate that “it is necessary to clarify that economic freedoms, as established in the treaties, should be interpreted in such a way as not to infringe upon the exercise of fundamental social rights as recognised in the member states and by Community law, including the right to negotiate, conclude and enforce collective agreements and to take collective action, and as not infringing upon the autonomy of social partners when exercising these fundamental rights in pursuit of social interests and the protection of workers”.
The European Parliament argued that current EU legislation “has both loopholes and inconsistencies and therefore may have lent itself to interpretations of the [Posted Workers Directive] that were not the intention of the Community legislator, who was looking for a fair balance between the freedom to provide services and the protection of workers’ rights”. It therefore called on the European Commission to prepare the “necessary legislative proposals which would assist in preventing conflicting interpretation in the future”. Review of the Directive should be based on “a thorough analysis at national level of the actual challenges to the different models of collective agreement”, and deal in particular with issues such as “applicable working conditions, pay levels, the principle of equal treatment of workers in the context of free movement of services, respect for different labour models and the duration of posting”.
When the Czech Republic took over the EU presidency for a six-month term in January 2009, the ETUC, referring to the European Parliament resolution, called on the Czech Government to promote an in-depth debate within the Council of EU on the revision of the Posted Workers Directive. It argued that "although the Directive was adopted by a large majority in the European Parliament and the Council, the recent ECJ rulings challenge the original intention of the European legislator, so a fresh democratic debate must now be launched". The ETUC also reiterated its call to add a social progress protocol to the treaties as soon as possible.
European responses to the Lindsey dispute
The high-profile dispute at the Lindsey oil refinery further fuelled the heated controversy over posted workers, and the ETUC intensified its calls for revision of the Directive. Speaking at the beginning of the dispute, the ETUC general secretary, John Monks, commented: “We do not yet know all the details of the contractual arrangements made in the UK regarding the Lindsey oil refinery. But it is apparent that, while we support strongly the free movement of labour, we need clearer and stronger traffic rules in the European Union which guarantee equal treatment of workers regardless of nationality, and that collective agreements are fully respected by employers. Some employers are undercutting such collective agreements and workers’ anger should be directed at them and not at the migrant workers. ETUC is calling for a revised [Posted Workers Directive] and a social progress protocol attached to the European treaties to counter recent adverse decisions of the European Court of Justice, which permit employers to ignore established agreements and, in effect, give them a licence to undercut wages and conditions.”
The three EU-level trade union federations covering the sectors affected by the Lindsey dispute - the European Federation of Building and Woodworkers (EFBWW), the European Metalworkers’ Federation (EMF) and the European Mine, Chemical and Energy Workers’ Federation (EMCEF) - issued a joint statement on the affair on 4 February. They interpreted the industrial action as an expression of “anger at the prevailing EU settlement which prioritises the needs of business and capital over those of labour” at a time of economic crisis and anxiety about the future of employment. However, “such episodes carry the danger of setting workers against each other and creating a climate of xenophobia which all trade unionists must unite to resist. Instead, unions must fight for a new settlement across Europe, which meets the crisis in the interests of workers rather than corporations, and prioritises measures which underpin employment, union organisation and secure pay and conditions.”
The EFBWW, EMCEF and EMF argued that, following the ECJ rulings, the Posted Workers Directive “has been turned on its head” and member states and trade unions are no longer entitled to enforce working conditions for posted workers above a minimum level. “The fundamental principle of equal pay for equal work has been replaced by a principle of minimum pay for equal work”, the unions claim. In the light of the ECJ judgments, “unions cannot defend workers' rights without the threat of litigation, even where there is legitimate cause. Companies have all the cards in their hands to set worker against worker. This is an unsustainable imbalance of power which will fuel social unrest if maintained.”
The statement called for measures to address indirect discrimination against local workers in cases such as Lindsey and to prohibit explicit exclusion of local workers by subcontracting companies. Further, the EFBWW, EMCEF and EMF demanded that the “imbalance” between fundamental worker rights and internal market freedoms caused by the ECJ judgments be redressed by revising the Posted Workers Directive and “restoring” the Directive to “a minimum Directive allowing for a higher protection of workers”. They also backed the ETUC call for a social progress protocol.
In a letter sent to the European Commission on 6 February, BusinessEurope said that it was “greatly concerned about recent actions aimed at preventing legal employment of foreign European workers in some member states”. It understood “workers’ concerns in the face of the economic crisis” but argued that “protectionist reactions are unacceptable” and “counterproductive as a well-functioning single market is key for the creation of more growth and jobs in the EU”. The posting of workers is essential because it enhances international trade in services and plays a crucial economic role in filling temporary labour shortages in certain occupations. The European Commission should give a clear signal that violations of fundamental EU treaty freedoms cannot be tolerated in member states. BusinessEurope remains convinced that the Posted Workers Directive provides adequate protection to workers and ensures fair competition in the internal market. Action is needed to improve compliance but it is not necessary to revise the Directive, according to the employers’ body.
On 4 February, the socialist group in the European Parliament issued a statement expressing solidarity with the British, Portuguese and Italian workers affected by the Lindsey dispute and, in the light of the ECJ judgments, called on the European Commission to review the Posted Workers Directive in order to prevent social dumping. Further, a group of MEPs from the UK, Germany and Italy signed a written declaration arguing that the ECJ rulings have “seriously undermined workers’ rights across the EU” and that their consequences have been “used by unscrupulous right-wing groups to promote racism and xenophobia in Britain and elsewhere”. The declaration calls on member states and the commission to amend the Directive so that “its original intention to provide equal treatment for all workers is restored”, and suggests that European Parliament support for the new European Commission, to be appointed later in 2009, should be conditional on the latter making a commitment to urgent revision of the Directive.
UK views on revision of Directive
As well as dealing with the specifically UK-related aspects of the Lindsey dispute, British trade unions highlighted the perceived problems relating to the Posted Workers Directive. Brendan Barber, the TUC general secretary, said: “'Unions have fought hard for decent conditions for migrant workers and back the free movement of labour within the EU, but that is entirely compatible with wanting to see new jobs recruited fairly, with everyone given the chance to apply and be judged on the basis of their skills. There is much concern among unions at recent decisions of the European Court of Justice - particularly the Viking-Laval cases - that appear to allow companies to undermine existing pay, working conditions and pensions by moving workforces around Europe in this way. European governments must close this legal loophole that drives a huge hole through social Europe.”
Commenting on the Acas report, Barber added: “It is hardly surprising that the Acas inquiry has found that no laws have been broken, as the major union complaint is that the law does not properly protect UK-based workers - wherever they were born. The EU’s Posted Workers Directive has been implemented in the UK in a way that fails to guarantee UK agreements, and recent EU court judgments have raised even more worries that the law favours employers that try to undermine existing standards.”
Unite, one of the unions involved in the Lindsey case, called for the overturning of the ECJ precedents that give “employers a licence for social dumping” and prevent unions from taking action to prevent “the erosion of UK workers’ pay and conditions”. The ECJ rulings have fundamentally altered the balance of power between the European social model and rights of business, according to Unite. The events at UK refineries and power stations were the result of “Europe’s politicians failing to heed our warnings and ignoring the consequences for working people of their decisions”. The responsibility for the dispute “lies not with working people and trade unions, of any nationality, but with Europe’s politicians, governments and business community”. Unite argued that: “Without fundamental and rapid changes the situation we have seen in the UK … has the potential to be replicated across Europe. Europe’s workers will no longer stand being played off against each other by business. Unite is ready to work with all sister unions across Europe to overturn the ECJ judgments, ensure a true [Posted Workers Directive] that actually protects the rights of Europe’s workers and ensure a European Union whose foundation is social progress not the maximisation of profit for the business elite.”
Speaking to the UK Parliamentary Home Affairs Committee on 3 February, John Cridland, the deputy director-general of the CBI, stated that his organisation saw no need to amend the Posted Workers Directive in the light of the Lindsey dispute or the ECJ rulings
In a television interview on 1 February, Alan Johnson, the Secretary of State for Health, said that the ECJ judgments “have distorted the original intention” of the Directive and that “we need to bring in fresh Directives to make it absolutely clear that people cannot be undercut in this way.” However, subsequent statements by Lord Mandelson, the Secretary of State at BERR, gave no support to this view and he specifically rejected the idea of amending UK legislation to apply collectively agreed terms to posted workers.
Commission response
Any revision of the Posted Workers Directive would have to be proposed by the European Commission.
The Commission has so far taken the view that the Directive does not require amendment, but that its implementation needs to be improved. In a communication published in 2007, the Commission identified a series of shortcomings in the Directive’s implementation, application and cross-border enforcement. In April 2008, it issued a Recommendation, setting out a series of actions to remedy these shortcomings, notably: better administrative cooperation between the member states; better access to information for service providers and posted workers; and exchange of information and best practice among the member states through a proposed new high-level committee. These measures were endorsed by the Council of the EU in June 2008.
In response to the furore over the Lindsey affair, the Commission has restated its position that amendments to the Directive are not necessary at present; but at the same time it seems to be leaving the door open for possible future changes.
In a statement on the UK strikes issued on 4 February, the EU Commissioner for Employment, Social Affairs and Equal Opportunities, Vladimír Špidla, said that he was “very aware of the lively debates” over the Posted Workers Directive, which he described as “an essential instrument to ensure the balance between protection of workers and economic freedoms and to avoid unfair competition”. The problems encountered in its application should be addressed in the framework of better cooperation between member states and more efficient control of working conditions. At this stage, the Commission “does not see the need for a legislative proposal”. However, it remains “vigilant” and has launched a series of projects and studies to “better understand the impact of the Directive on the ground” and the consequences of the ECJ judgments. Špidla pointed out that the social partners have agreed to conduct a joint analysis on workers’ mobility in Europe, including the relevant legal aspects. On the basis of this analysis, the Commission will be better equipped to consider whether revision is necessary: “The Commission is always ready to study and develop the measures necessary to accompany a continuously changing world.”
This article was written by Mark Carley, editor of European Employment Review.
European Employment Review 422 (EER 422) contents
