The Lindsey Oil Refinery dispute - the legal issues examined

In light of the recent wildcat strikes arising from the Lindsey Oil Refinery dispute, consultant editor Darren Newman examines the legal issues surrounding the employment of foreign workers in the UK.

The wildcat strikes arising from the dispute at the Lindsey Oil Refinery may be over, but the debate that surrounded them raises some important employment law questions about the extent to which foreign workers can be used to undercut the terms and conditions enjoyed by those based in the UK. In the Lindsey case, there was allegedly no undercutting, but that did not affect the fervour with which the arguments on either side were put. Whatever the true facts of the situation, the legal issues are worth considering.

Under art.49 of the Treaty establishing the European Community, businesses in the European Community are entitled to provide their services in other member states. An Italian firm is therefore entitled to bid for, say, a construction contract in the UK. If it wins the contract, it can bring its own workers over to perform the work. This raises two issues. First, on what terms and conditions the workers should be engaged and, second, whether or not lower pay for the posted workers could amount to discrimination.

In relation to the first issue, we look to the Posted Workers Directive (96/71/EC). This provides that nationals posted from one EU country to another shall be entitled to the same terms and conditions of employment as are laid down in the host country by "law, regulation or administrative provision". This essentially gives workers posted to the UK the minimum employment rights enjoyed by workers in the UK, for example the right to be paid the national minimum wage and the right to receive the rest breaks and holiday entitlement provided for in the Working Time Regulations 1998 (SI 1998/1833). As it happens, foreign workers in the UK are entitled to this even without the Directive - UK employment standards apply to all legal workers in the UK, whatever their nationality.

A further provision in the Directive specifically entitles posted workers in the construction industry to the same terms and conditions that domestic workers enjoy under collective agreements that have been declared "universally applicable". These are agreements that "must be observed by all undertakings in the geographical area and in the profession or industry concerned". In the UK, in contrast to the situation in much of the rest of Europe, collective agreements do not meet this criterion.

When the time for implementation of the Directive came in December 1999, the UK Government therefore took the view that it was not necessary for any formal steps to be taken. Minimum legal standards already applied to posted workers and there were no universally applicable collective agreements. Under UK law there is, therefore, nothing to stop a contractor paying posted workers below the rate enjoyed by British-based workers.

Given that the UK Government took the view that the Directive did not require any implementing measures in the UK, it seems a trifle unfair for Alan Johnson to accuse the European Court of Justice (ECJ) of undermining the protection of the Directive - as he did on The Andrew Marr Show on 1 February. It is true that, in April 2008, the ECJ held in Dirk Rüffert v Land Niedersachsen C-346/06 ECJ that a law requiring posted workers on public sector construction projects to be employed on terms that matched a specific collective agreement was unlawful in light of art.49. However, Rüffert would not prevent the UK from legislating to make a national agreement in the engineering construction industry "universally applicable" to both domestic and posted workers operating within the industry. Such legislation is out of the question of course, but that is because of the politics and industrial relations history of the UK - it is not the ECJ's fault.

Given that there is no prospect of a law preventing the undercutting of the domestic workforce by posted workers, we are left with discrimination as an issue. In the UK, it is unlawful under the Race Relations Act 1976 for a contractor posting workers to the UK to discriminate on the grounds of nationality in how it pays its workers. However, simply paying its workers less than other employers do will not amount to discrimination, if it happens not to employ any UK nationals. Should the contractor need to recruit new workers, it would constitute direct discrimination for it to turn down applicants on the basis of their nationality, and it might be indirect discrimination if the recruitment exercise were carried out entirely in the home nation, thus effectively denying British-based workers the chance to apply. However, if UK workers are given the chance to apply, the employer can offer whatever terms and conditions it chooses. It does not constitute discrimination merely to offer a rate of pay that workers are likely to find unattractive.

It would therefore seem that there is no legal route to preventing a foreign contractor from undercutting domestic workers. If a union organised industrial action to prevent such a move, that would very probably be held by the ECJ to be unlawful as undermining art.49 (Laval Un Partneri Ltd v Svenska Byggnadsarbetareförbundet and others [2008] IRLR 160 ECJ). The Lindsey dispute was solved by the promise of extra jobs sourced in the UK, but only after wildcat industrial action. Although the action was unofficial, its organisation and coordination were impressive. The legacy of Lindsey may be the return of the unofficial strike as a factor in UK industrial relations.

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