Round Table Summary: Foreign Employees – Second Class Workers?

The purpose of the closed round table conference was to exchange information and experience among governmental and non-governmental entities from the participating countries – the Czech Republic and Germany. A large part of the debate focused on the various forms in which labour regulations were being circumvented when employing third-country nationals in both the Czech Republic and Germany, and on the possible ways of dealing with this issue through various legislative and other systemic measures. The Czech experience was presented by PhDr. Kateřina Štěpánková from the Ministry of Labour and Social Affairs, JUDr. Jaroslav Stádník from the Regional Labour Inspectorate, PhDr. Marie Jelínková, PhD. from the Association for Integration and Migration, NGO and JUDr. Vít Samek from the Bohemian-Moravian Confederation of Trade Unions. The German side was represented by Dr. jur. Armin Knospe from the Federal Ministry of Labour and Social Affairs, Dr. Marta Böning from the German Confederation of Trade Unions (DGB), Dr. Sebastian Klähn representing the EURES network and the German Confederation of Trade Unions ( DGB), and Dr. Barbara Weiser from the Caritasverband für die Diözese Osnabrück, NGO. The discussion was moderated by JUDr. Martin Rozumek, Director of the Organisation for Aid to Refugees.

An introduction of the Foreign Workers in the Labour Market project, of which the round table was a part, was followed by a presentation by Dr. Barbara Weiser, who spoke about the situation of foreign workers in Germany and the main factors that define it. Having first explained the general situation, Dr. Weiser focused on specified-purpose contracts, purpose-seeking self employment, posting of labour force and workers, and the hiring out of workers through agencies. In answer to the question as to why foreign workers were at greater risk of being exploited at work, she said that especially in the case of third-country nationals this was linked to the necessity of retaining their work and residence permit, without which they would not be able to work in the country. This requirement puts them in a position of dependency on their employers. Another factor that plays a role is the bans and constraints on certain professions entering the labour market as well as on access to the social security system. Dr. Weiser also commented on the implications of foreign workers working on the basis of specified-purpose contracts. The practice is that the contract owner places an order with another entity or person to execute a certain job. If, however, the supplier employs other entities to do the job, the system turns into a complex web of sub-suppliers or subordinate employees, which is sometimes difficult, or even impossible, to disentangle and, for instance, check out to see whether the supplier  was doing the job in accordance with certain guidelines[1]. Germany is currently contending with yet another issue – the foreign posting of employees. This applies to situations when individuals are being posted in Germany as employees of, for example, a Rumanian or Bulgarian company. The posting of such workers is governed by relevant EU law, especially the directive concerning the posting of workers in the framework of the provision of services  (Directive 96/71/EC) and, more recently (May 2014), the adopted directive on the enforcement of regulations applying to the posting of workers. To give a simple example, the minimum wage is governed by the rules of the country where the employee performs the work while everything else (labour regulations etc.) is governed by the rules of the sending country. However, in real life it is very difficult to control the diverse systems and to know whether such workers are adequately protected and are able, for instance, to take sick leave in case of need etc. Germany is facing a problem common also in the Czech Republic where it is called the “Švarc system” – pretence of specified-purpose contracts when the reality is in fact employment. The most frequent motivation for implementing the “Švarc system” is especially tax avoidance. Dr. Weiser sees the solution to these abuses in, for example, the recommendations of the German Confederation of Trade Unions of 2013, which propose the provision of social security conditions - especially accident and other insurance – comparable to those commonly enjoyed by employees also to posted workers and to those in other more flexible forms of employment. Besides this, the recommendations emphasise the necessity of spreading information among the workers, of providing counselling services and ensuring that structures needed to support the affected individuals are in place.

A view of the situation in the Czech Republic was presented by Marie Jelínková, PhD., who discussed the impact of public policies on the structure of foreign workers in the Czech Republic. Her paper was mainly focused on the measures adopted by the Czech Republic in the field of migration policy and on their effect, if any, on the number of migrants in the Czech Republic and their position on the Czech labour market. The presentation of the not very satisfactory development pointed to the essential problem of the lack of analyses and local level microanalyses, and especially to the fact that the number of foreigners working in less steady and less safe jobs had been increasing sharply also as a consequence of state policies.

A similar development in Germany was noted also by Dr. jur. Armin Knospe, who pointed out, however, that the same problem was beginning to affect the native population too. In Germany, for example, up to one in five workers receive the minimum wage (Geringfügige Beschäftigung in German, i.e. €450 a month), which means that in reality they are not well protected from the social security point of view. At the same time there is an ongoing debate in Germany on population ageing and the need to ensure labour force. A glance into the newspapers will, however, offer a rather different angle – that of domestic unemployment; this does not speak much in favour of migration, which could provide a partial answer to the first problem. Another emerging debate in Germany today concerns “social tourism” – an absolutely misleading and improper concept portraying job-seekers in Germany as individuals arriving primarily to sponge off the German welfare system. This changes nothing about the fact that labour migration sometimes has its shady, illegal aspects. Nevertheless, it is fundamentally important here to understand why such unlawful activities take place and to look at them from different angles to be able to arrive at appropriate and comprehensive solutions. For example, from the point of view of labour market segments, the employment status of foreign workers in Germany is most problematic and precarious in construction, agriculture and the meat industry. Moreover, many foreigners working in these industries work on the basis of specified-purpose contracts, although in reality they are in an employment relationship. Another problem is the absence of trade unions in certain industries and services - for example catering - and here the status of employees is much worse than elsewhere. Dr. jur. Knospe concluded by stressing that the fight against infringement of employment rights could be effective only if the appropriate legislation was in place.

During her introduction of the foreign migration and employment agenda of the Czech Ministry of Labour and Social Affairs (MLSA) and presentation of the Czech statistics on foreign migration and employment, PhDr. Kateřina Štěpánková mentioned a sensitive theme in the Czech Republic - the enormous drop in the number of non-EU employees after 2008 and the related question of what  happened to them. She also presented the official numbers of Bulgarians and Rumanians living in the Czech Republic, pointing out that this group of foreigners had probably become the most vulnerable one on the labour market. In response to this fact, the MLSA is implementing a new project - Prevention of Labour Exploitation through Innovation, focused especially on the prevention of work exploitation of Bulgarian citizens in the Czech Republic.

JUDr. Jaroslav Stádník expounded the numbers of detected cases of illegal employment in the Czech Republic and the amounts of fines imposed in connection with the infringement. Punishment of individuals who perform work illegally is not a priority of the labour inspectorates, which are more interested in sanctioning the employers. Ninety-one per cent of the controlled foreigners who worked illegally in the Czech Republic are Vietnamese and Ukrainians. The most frequent occupations were in catering, construction and demolition, and renting of flats and office space. In cases when the foreigners had the status of self-employed persons – which is one way of facilitating labour market access to foreign workers from non-EU countries - they were often actually in a disguised employment situation; one of the tasks of the inspectorates was establishing proof of such employment. Recently, labour inspectorates have been dealing with cues from the Bulgarian Embassy in Prague that a number of Bulgarian citizens had not been receiving their wages from different employers for several months.  The subsequent inspection found that these Bulgarians had not been included in lists of employees and were not insured. The Bulgarian Embassy, however, had no idea where these people, from whom more information and testimony was needed, were. Thus, the inspections produced no results. JUDr. Stádník also added that the job description of the labour inspectorates included provision of free counselling. This service, he said, was used frequently, but mainly by Czech workers only.

Dr. Sebastian Klähn spoke about work in the cross-border partnership region of Saxony/Czech Republic/Poland.  He pointed out that 99 % of the mobile workers were not members of trade unions and thus did not have access to membership-funded TU services in Germany. Nevertheless, there were ways and projects that made it possible to surmount this obstacle, e.g. through membership in the Pan-European Regional Council (PERC), which entitles a Polish metalworker, for example,  to protection at work in Germany. In most cases, however, mobile workers from the Czech Republic and Poland working in Saxony do not have enough money to pay for legal aid. Still, there are good examples of successful cooperation. Recently, several Czech women have approached Czech labour offices with the complaint that they had been working as hotel cleaners in Germany where they were not being paid for overtime, were not allowed to take sick leave etc. The Czech labour offices then established cooperation with the EURES[2] network, which started dealing with the problem together with the German trade unions and organised seminars on the steps that should be taken in similar circumstances. The affected workers joined trade unions and the matter will now be decided in court, which is expected to rule in their favour.

Dr. Marta Böning pointed out the fact that the debate on the status of foreign workers has been concentrating on two types of issues. The first concerned the legal conditions, which, in her view, were unsatisfactory and did not allow adequate responses to newly emerging situations. The second were factual issues which in the end meant that foreign workers had limited options to assert their rights. The trade unions have drafted standards to deal with the first problem. The new German government has agreed to take steps against the abuse of specified-purpose contracts and other forms of illegal work when German companies not infrequently use the Švarc system and many employment relationships are hidden under the veil of specified-purpose contracts or leasing of personnel. On the one hand, it is necessary to look into the criteria governing specified-purpose contract hiring and personnel leasing contracts, and to revise the rules. On the other hand, it is necessary to stipulate minimum framework conditions for the use of such contracts, for example to prevent the replacement of non-contingent employees by agency-provided contingent workers. German trade unions have reacted to the rather unsatisfactory practice by submitting specific proposals. Further, it is necessary to enforce the most similar wage conditions possible for various forms of employment and to continue working on more accurate definitions of employment etc. to avoid purpose-seeking self-employment activity. German trade unions have defined five criteria, which could be used to assess the Švarc system; they hope they will be able to have these criteria made part of law, thus allowing initiation of court proceedings against any employer/contract owner who does not meet them. The most vulnerable group of foreign workers in Dr. Böning’s view involves those who come to Germany for just a couple of months – their problems are often left unresolved and this group of workers is very difficult to monitor. As for workers from Rumania and Bulgaria working on German territory, Dr. Marta Böning regretted having to point out that they had very little interest in joining trade unions. This, according to her, was due to cultural and historical reasons as well as to the fact that these workers usually came to Germany only for short periods. One way of dealing with this problem would be through the now almost non-existent supranational trade unions, and, in this regard, Dr. Böning welcomed the supranational cooperation taking place within the German, Polish and Czech framework.

The last speaker, JUDr. Vít Samek, pointed out that Czech trade unions were obliged by law to represent all employees, not only trade union members. As far as the discussed themes were concerned, Czech trade unions considered as essential their activity in the legislative sphere – from lobbying to proposing specific legislation (e.g. relating to the definition of employment). A major problem, in JUDr. Samek’s view, was two-faced policy when Europe was closing its eyes to the double standards in the evaluation of work – the work of an insurance covered employee against the work of somebody who was self-employed. Social dumping disguised as self-employment must be abolished; otherwise the state would be sowing the seeds of social problems. Another issue was the frequently mentioned policy objective of reducing secondary labour costs, which may sound nice but in fact conceals the price of insurance – health, social, sickness and pension insurance. Such a road leads to poverty in old age and is a time bomb heralding the social crisis in Europe which would arise if the gap between capital gains and labour cost continues to widen. Simultaneously, as a consequence of the priorities and positions of the previous Czech government, the principles of collective protection and law enforceability are on the wane. From JUDr. Samek’s  point of view, the possible/necessary solutions are the following: 1) increase of the minimum wage and introduction of the obligation to implement minimum insurance premiums for the self-employed, thus bringing closer together the dual prices of labour (employees vs. self-employed persons); 2) reinforcement of counselling services and, especially, of free legal aid, which is extremely difficult to access in the Czech Republic (inspiration may be found in the Austrian labour chambers); 3) reinforcement of inspection; 4) effective fight against organised economic mafia at European level; 5) systemic instruments for the fight against the mafias controlled by certain foreign groups in the Czech Republic. The status of migrants must be perceived from the perspective of an ageing Europe, this will make migration more common than it may seem at present. In the Czech Republic problems associated with migration have been marginal so far, but it is of course necessary to develop well working structures now, structures that are not based on charity and are projected for a time when the numbers of migrants will be significantly higher than they are today. In this context, the chairperson, JUDr. Rozumek, remarked that civil society organisations were waiting, and have been trying in vain for 15 years to promote a vision of Czech migration policy, and that the Czech Ministry of the Interior had not been capable of coming up with such a vision. In response, JUDr. Samek noted that this vision should be offered in the first place by politicians and that a look into the history of the world would show that this was nothing new or ground-breaking. The history of Australia, Canada and New Zealand was a shining example.

After that, the round-table discussion focused on measures against exploitation at work. Germany believes that the newly introduced flat minimum wage will have a significant impact in this regard. The Czech side, for its part, lamented the fact that the minimum wage in the Czech Republic was 300 euro and, since it was so low, it did not provide much protection and in fact supported secondary forms of work. Both sides considered effective the idea of labour chambers, such as those common for various professions in Austria. If foreigners were members of labour chambers, then well-defined rights and duties as well as structurally well-designed options of legal aid and representation would apply to them. A long discussion followed about the notion of functioning structures for the acceptance of foreigners outlined above, which the Czech side considered to be an area with much space for needed improvement.

The discussion of the following theme opened with the statement that in the case of third-country workers there could be no claim that they were enjoying “equal working conditions” since working conditions involve not only paid leave and protective equipment but also the option of changing employers and free movement on the labour market, which non-EU foreigners (during the time prior to acquiring permanent residence status) do not have. Public law provisions, unfortunately, bind them to a certain employer. The problem then also is that, due to their factual dependence on the employer, foreign workers may be more advantageous to employ than domestic labour, as foreigners are usually more likely to accede to worse working conditions.

The discussion about the exploitation of foreign workers involved the question of the degree to which foreign workers were being exploited by their countrymen. It was pointed out that although there certainly were such cases, it was not possible to approach this issue from the angle of this being “their” problem; on the contrary – on Czech and German territory the same national laws must apply to everybody. Moreover, Czech migration policy is set up in such a way that a third-country national wanting to take a job position for which there is no Czech/EU applicant will find it very difficult to learn in Hanoi or Kiev of the availability of such a vacancy – this fact alone implies the common necessity of an intermediary. The proliferation of such organisations  – which do not always function merely as intermediaries or in compliance with the law – implies considerable risk of the emergence of consecutive alternative, and sometimes also exploitative, forms of employment. What is also important is that once such alternative forms of employment start spreading, it is very difficult to remove them. A partial replication of such structures has been observed, with concern, in the current manner of employment of Bulgarians and Rumanians. One view voiced in this context was that at least in some of the cases it would be helpful if contract owner liability were in place. In other words, the entity assigning the job should be liable for observance of the rights of the workers by its suppliers or subcontractor chain. Observance of labour law and sanctions in case of any infringement can be included by the contract owner in the contractual relations with his suppliers. Currently it is very difficult – if at all possible – to enforce liability for non-compliance with labour rights in the case of more complex subcontractor chains.

In conclusion to the round table, it was pointed out that there was considerable pressure to extend precarious forms of work, which were being presented today as common alternatives to the employment relationship. What used to be the standard (for example an employment contract for an indefinite term) is no longer common and the labour market is moving towards flexibility, which has an effect on (not only) foreign workers. This flexibility is not accompanied, however, by adequate social protection. It is no exaggeration to state that the discussed issues are becoming very acute in the Czech Republic and that many areas which the round table discussed just fleetingly (e.g. the situation of posted workers) will, within several months or years, become essential and certainly not easy topics in the Czech Republic too.