CWS 3.0: April 18, 2012

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EU to Boost Protections for Seconded Workers

Secondment refers to when an employee is temporarily assigned to another subsidiary or affiliated company — or sometimes to a different company or (non-profit) organization entirely. In the European Union, legislators refer to the secondment of employees to other countries as “posting,” and, since 1999, the EU Posted Workers Directive has governed the minimum employment and salary conditions that must be met when employees are temporarily posted to another EU member state. The directive also protects contingent workers assigned by a staffing firm to a client operating in another member state.

The Posted Workers Directive was envisaged as a compromise to allow the free movement of labor within the European Union while preventing distortions of competition and bringing forms of so-called “social dumping”: the posting of workers from countries with lower labor costs to countries with higher labor costs. Such situations bring a double risk: that workers will not be covered by the protective rules in the host country and that companies based in the host country will face unfair competition, notably in the areas of labor costs and with respect to rules governing working conditions.

Under the directive, employees seconded temporarily to another country within the European Economic Area must benefit from the protection of a minimum “hardcore of protective rules” which include minimum wages, working time, holidays, public holidays, discrimination, maternity leave, dismissal rules, social documents, health and safety, leasing of employees and local language requirements. Although the specific rules do vary per country, failure by employers to correctly abide by these rules can result in a range of fines.

Each year, around 1 million workers are posted by their employers across EU borders to provide services (0.4 percent of the total EU workforce). The biggest “sending” countries are Poland, Germany, France, Luxembourg, Belgium and Portugal. These workers play an important role in filling labor and skill shortages in various sectors and regions like construction, agriculture and transport. Posting also plays an important role in providing specialized, high-skilled services, such as information technology.

After findings suggested that minimum employment and working conditions are often not respected for posted workers, the EU announced on March 21 that it plans to increase the protection of workers temporarily posted abroad. To address the specific issues of abuse where workers do not enjoy their full rights — for example, pay or holidays, especially in the construction sector — the Commission has put forward concrete, practical proposals for the enforcement of the directive, to increase monitoring and compliance and to improve the way existing rules on posted workers are applied in practice. The aim is to ensure a level playing field between the businesses involved, excluding companies that don’t follow the rules.

“The free provision of services within the internal market represents a major growth opportunity,” said José Manuel Barroso, president of the EU. “But the rules need to apply equally to all. This is not always the case for workers posted in another Member State. Today, the European Commission is taking concrete action to stamp out the unacceptable abuses. We want to ensure that posted workers enjoy their full social rights across Europe.”

Under a proposed Enforcement Directive, the EU aims to improve the way the directive is applied in practice, without changing its provisions. In particular, the Enforcement Directive would:

  • set more ambitious standards to inform workers and companies about their rights and obligations;
  • establish clear rules for cooperation between national authorities in charge of posting;
  • provide elements to improve the implementation and monitoring of the notion of posting to avoid the multiplication of “letter-box” companies that use posting as a way to circumvent employment rules;
  • define the supervisory scope and responsibilities of relevant national authorities;
  • improve the enforcement of workers’ rights, including the introduction of joint and several liability for the construction sector for the wages of posted workers as well as the handling of complaints. Joint and several liability would be relevant if, for example, a direct subcontractor fails to pay posted workers and can no longer be held accountable because of insolvency. Under the new Enforcement Directive, the posted workers affected would be able to sue the main contractor at their place of work. Such liability already applies in several member states and the aim of the new directive is to harmonize the system throughout the EU.

The Enforcement Directive also clarifies the issues raised in two judgments by the European Court of Justice, Viking Line and Laval, which triggered an intense debate about the extent to which trade unions are able to defend workers’ rights in cross-border situations, involving posting or relocation of companies. Some stakeholders have interpreted the judgments to mean that economic freedoms would prevail over social rights and in particular the right to strike. The new directive confirms that this is not the case.

BusinessEurope, the EU employers’ organization, said it supports tightening up the directive in principle but warned about the costs of compliance, saying it imposes “an EU system of joint and several liability” that will hurt business. The shifting of responsibility to enforce social rules on companies will create additional administrative burdens. “Companies’ role is not to monitor the wages and payslips of their suppliers’ workers in a different language,” said Philippe de Buck, BusinessEurope’s director general.

While the European Commission accepted that the new system of joint and several liability “may restrict the freedom to provide services” in the single market, they justified the move given the wider social benefits. “Temporarily posting workers should be a win-win for EU labor markets and for businesses,” emphasized László Andor, EU Commissioner for Employment, Social Affairs and Inclusion, “but it cannot be used as a way to sidestep minimum social standards.”

For the full Enforcement Directive, click here

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