Posting of workers – strengthening labour rights while securing free movement of services?

It constitutes one of the crucial collision points where one of the single market’s freedoms, namely the freedom to provide services in the EU[1] runs into the fundamental principle of equal treatment of workers coming from different EU Member States.[2] The posting of workers as a legal construct authentically symbolizes the principles of a dual polity Europe has been conceived upon (Maslauskaite 2014). It is a reminder that the “economic constitution” was the constitutional supranational raison d’être of the EU and therefore “social policy was treated as a categorically distinct subject“ (Joerges and Florian Rödl 2009).

The term ‘posted workers’ reveals the essence of the concept of posting, indicating that the base of the employment relationship remains in the Member State they have been posted or sent from (the sending country). This raised therefore the question of the choice as to which employment standards should be applied to posted workers: those of the sending country, those of the host country, or some combination of the two. The Posted Workers’ Directive[3] was intended to give clear answers about how this choice should be exercised, but until now the directive has proven to be insufficient and ambiguous.[4] According to the Directive, there shall be a core of minimum labour standards according to the labour law of the host country, which will be applicable for the posted workers.[5] Apart from that core of minimum standards, the employment relationship of the posted workers should essentially be regulated by the labour law of the sending country.

It should be emphasized that the posting of workers encompasses a very broad spectrum of persons in dependent employment, from high profile management staff to low qualified workers. This article rather focuses on low and semi qualified workers posted from Central and Eastern EU countries to Germany, mainly set in the construction and meat processing industry. Especially since the introducing of the unlimited access to the German labour market for the EU-8 Member States in 2011, EU-2 in 2014 and Croatia in 2015, the issue of emerging labour market deviations and precariousness in the context of mobility, particularly for posted workers, has been growing in relevance in the political and academic discourse in Germany and Europe wide. The article would try to give a brief overview of the current situation of the posted workers in Germany as regulated by the German Posting Act[6], in the light of the novelties introduced by the Enforcement directive 2014/67 and the new Commission’s proposal for a targeted revision of the Posted Workers’ Directive[7]. Starting from a more general perspective, the article will present the relevant challenges and existing possibilities for the posted workers to enforce their rights, based on literature, research and the experience of the German “Fair Mobility” Project[8].

Trends of posting and regulation

The current statistics show that between 2010 and 2014 the overall number of postings has increased by almost 45%. That increase would sound reasonable considering the fact that the transitional arrangements regarding full access to the German labour market for the EU-8 Member States have been reversed 2011. Around 1, 9 millions of people have been posted in Europe; 414 000 to Germany. Since the focus here falls on the posted workers from CEE Member States, it is important to mention that the posted workers from the EU 8 and EU 2 make some 80% of the entire amount of posted workers in Germany.[9]

The main sending countries, posting workers to Germany are Poland, Romania and Hungary, followed by Slovenia, Bulgaria and Slovakia etc. The main industries making use of posting from CEE countries are construction and the meat processing industry (until the introduction of the generally binding minimum wage for the sector in 2013). But according to data from the Berlin Office for counselling posted workers and the DGB “Fair Mobility Project” the number of postings in other industries such as the health care industry, transport or metal and electro industry is also constantly increasing.  While in the construction industry the generally binding minimum wage has a longer tradition, in the meat processing industry the wages agreed in the sending countries applied to the posted workers in Germany until mid July 2013, thus a decrease of posted workers in this sector could be stated. Concerning the establishment of minimum labour standards for posted workers as required by the Posting directive, Germany took actions quite early compared to the other Member States. Germany has transposed the Posting directive through its Posting Act from 1996 and since its revision of 2009, Art. 2 contains exhaustively all the industries covered by universally binding collective agreements. The Minimum Wage Act (Mindestlohngesetz - MiLoG), the Posted Workers Act (Arbeitnehmer-Entsendegesetz - AEntG) and the Act on the Provision of Temporary Workers (Arbeitnehmerüberlassungsgesetz - AÜG) lay down certain minimum requirements for the terms and conditions of employment as well as reporting obligations for the users of labour supplied by an employment agency established abroad.

Almost two decades after the adoption of the Posting directive, the Enforcement directive has been introduced in order to improve the implementation of the original Posting of workers directive. The enforcement directive 2014/67 dated 15th May 2014 is mainly the result of a Council compromise between the EU Member States which were against a review of the measures in force - firstly the UK and the countries of Central and Eastern Europe - and countries which supported a strengthening of upstream controls, like France.

The Enforcement Directive 2014/67/EU[10] provides several innovations that claim to address some of the above presented issues the posted workers are facing with (See Wagner 2015). It uses access to information and administrative assistance rules to provide for the ‘enforcement’ of those legal principles enshrined in both the old and new Posted Workers’ Directives (Morton 2013). Apart from aspiring to launch mandatory counselling for posted workers and posting companies as well as enhancing the cooperation among involved stakeholders on national and European level, the Enforcement Directive also aims to offer substantive provisions concerning supply chains in procurement contracts and ‘letter-boxing’ practices (Freedland and Prassl 2015). For example, it intends to extend the liability along procurement supply chains so that subcontracts are covered by the same employment conditions as the primary contractor, but only in a limited manner (Morton 2013).

Current developments in in the field of posting of workers in Germany

Having in mind the lower salary levels and the weaker protection of the national labour law of the CEE countries in comparison to Germany, one could argue that the concept of posting institutionalizes inequality at the work place. Therefore, it could be stated that the posted workers are a category of workers facing triple vulnerability, being: employees (waged labour), non-nationals and per definition unequal with their directly employed co-workers. Many would turn towards the Posting directive for answers and it would not be naïve to do so. However, one should bear in mind that the original aim of the Posted Workers’ Directive was to abolish the obstacles and uncertainties that impede implementation of the freedom to supply services and not to constitute a pendant on a Social Charter for posted workers.[11]

In Germany, as well as in the other most significant Member States attracting posted workers, the working conditions for posted workers remain predominantly unfavourable and even exploitative.[12] Having worked in the “Fair Mobility” project of the Confederation of German Trade Unions as a counsellor for mobile and posted workers from Central and Eastern Europe on the German labour market, I could permanently witness posted workers having been cheated out of pay: receiving no pay at all or less than what was agreed upon; having worked overtime without receiving overtime payment; having received threats from their employers that they would be dismissed; not having a written work contract; not being able to take sick-leave with pay if falling ill for a couple of days; or having residence-related problems in the case of posting of third country nationals through EU-based undertakings.

 Having in mind that not an insignificant number of the postings takes place through letterbox companies based in CEE countries, one can state that the enforcement of their rights in their sending country might not bring much to the workers. Especially in the most common case of outstanding payments, it is rather difficult to claim a couple of month-salaries from a bankrupt letterbox company with already frozen bank accounts. Even if the posted workers would claim their rights before the labour tribunals in their sending countries and even if they would win the trial, there would be probably not much to be done in order to execute these court decisions. The current possibilities available for the posted workers to effectively claim and enforce their rights in the host countries are also quite poorly developed. In this regard, the potential of the instrument of liability within the contracting chains will be briefly introduced.

Case from the Fair Mobility practice: It is dark and late in the night as the bus with Slovenian number plates finally turns off the engine and the passengers begin to wake up. Suddenly, it becomes noisy and one could feel uneasiness among the passengers as the most of them have already realized that their bus has just parked in front of the only building their eyes were able to catch on the endless dark field. “This cannot be Dortmund”, shouts somebody in the crowd and almost everybody shouts approval. “Where are we?” asks another one of the group. Confused and tired of the journey, they take their modest possessions out of the bus and head to the only building they see. On the entrance they are greeted by the landlord, who explains he has been expecting them earlier that day and seems to be angry the bus arrives that late in the night. He explicates in fast German that each of them will share the room with five other colleagues and there will be one bathroom for the entire floor. Hardly a few of the group could partially understand those statements and while the best German speaker in the group is collecting question from the others, the landlord was already gone. The last information they caught was that a bus coming at 5 a.m. will bring them to the construction site the next day. The crowd of about twenty grown men is in a middle of a flustered discussion, looking for answers. Only an expert in South-Eastern European languages could tell which languages are used to communicate in the group. One hears Serbian, Macedonian, Bosnian, Croatian and Bulgarian, which is not hard to imagine, having regard to the fact that a significant percentage of the Slovenian construction sector consists of migrant workers from the neighbouring countries. Having no other choice and having in mind that the first working day starts in a couple of hours, the group decides to take a rest and see if the next day will bring an explanation. Before they got on the bus in Ljubljana, their new Slovenian employer (whom they have not work for before being posted to Germany) told them that they should work on a construction site in Dortmund, a bigger industrial city in Germany, 8 hours a day, receiving the German minimum wage for the construction sector. In reality, they landed in a decayed overcrowded accommodating facility, trapped in the middle of nowhere, with no other inhabitants in the next 30 km, being forced to travel two unpaid hours by the bus every day. The entire group has been working under these conditions two whole months and for that period they have only received single advance payments of ridiculously small amounts. Since their rent has consequently remained unpaid, the landlord was threatening the workers that they will be expelled, as long as they are not able to pay for it. At that point they contacted a counselling office of the trade union based “Fair Mobility Project”.

Liability within the contracting chains

This case depicts a real scenario of posted workers, victims of a posting through a Slovenian company to Germany. In this case, one would ask, who should be held responsible for the misfortune of the twenty construction workers who made all their way from Slovenia to Germany and ended up cheated like this? Is it the Slovenian company? Or the Slovenian authority issuing the A1 certificates with no further examination of the credibility of the posting company? Should one blame the German prime contractor or a subcontractor in the chain awarding the contract for services to the Slovenian company? Or at the end, the German authorities supposed to supervise the postings?

At the end of the day, the concerned group of posted workers from the aforementioned case was forced to get back to their five different home countries, which would make conducting a successful court procedure practically impossible.  

Especially in the cases of posting happening through subcontracted letterbox companies leaves not many alternatives to the posted workers to claim their rights against their employer in the sending country, making the liability in sub-contracting chains a very relevant part of the regulations protecting the rights of posted workers. This instrument is mostly relevant regarding the violations against posted workers in terms of remunerations. In most cases, claiming the unpaid salaries against the direct purchasing company, other subcontractors or the prime contractor within the chain is the only way for the posted workers to come to their outstanding payments. However, it is far from a simple procedure and the posted workers as claimant in a labour court procedure bear the burden of proof (See Haidinger 2016).

Regarding the fact that many of them do not have written contracts, A1 certificates or documentation of their working hours, it is quite difficult to proof their demands before the labour courts in Germany. Especially the third-country nationals posted through companies based in CEEU countries are in a malposition as they are often uncertain if they reside legally in Germany at all. Being doubtful if their employers have arranged the proper visa for them, in the most cases they would not even try addressing a public official or a labour court in Germany. Sometimes not even a trade union. Therefore, the current trade unions’ discourse on available possibilities for protecting this precarious category of workers certainly needs to come up with some new strategies. Because of the special condition of uncertainty regarding their residence (work) permit, one could identify features of this category of transnational posted workers, which are considered typical for undocumented workers rather than for EU posted workers. Therefore, the trade unions could not count on the common strategies applicable to regular EU mobile or posted workers, but have to consider more specific strategies of trust building whilst approaching this category of posted workers.

Pursuant to Article 13 of the Minimum Wage Act (Mindestlohngesetz – MiLoG) and Article 14[13] of the Posted Workers Act (Arbeitnehmer-Entsendegesetz - AEntG) a company is liable if a contractor commissioned by that contractor, or any of that contractor’s subcontractors, fail to ensure compliance with the minimum conditions of employment.

In Germany, in the construction industry the liability provision for minimum wages contains an unconditional chain liability, that is, joint and several liability; such liability extends to the principal contractor, client, intermediary contractor or user company. In addition, regarding social security contributions, a joint and several liability exists – under certain conditions; the conditions are, for instance, that the transaction must aim to circumvent the law and that the total value of the building services amount to €500,000 or over. If such conditions are fulfilled, the health insurers as collecting agencies have the right to choose to claim on the client, principal contractor, intermediary contractor or user company (the building owner is excluded); these parties are all jointly and severally liable.

The Commission’s new proposal for the targeted revision (8 March 2016) includes a possible indemnity for a contractor who has undertaken due diligence, although it does not define the concept of due diligence. However, it gives the example that the contractor can ask the employer to provide evidence with regard to the observance of the core employment conditions that apply in the host state. To this end, the employer can, for example, produce payslips and evidence of payment of wages and compliance with its obligations in respect of social security and taxation. This already is the case in Germany.

One of the main complaints by contractors regarding the liability within the contracting chains is the administrative burden. However, an increase in the administrative burden is unlikely to be sufficient reason to decide to drop the chain liability. In Wolff & Müller[14] the additional administrative burden and costs resulting from a German regulation of chain liability were put forward as an argument. However, this objection was rejected. According to contractor Wolff & Müller, the chain liability was contrary to the free movement of services – in particular, it could result in national contractors having to carry out particularly intensive checks and obtain evidence from foreign subcontractors. The European Court of Justice considered that on an objective view, the chain liability ensures the protection of posted workers. Inasmuch as one of the objectives of the national legislature is to prevent unfair competition on the part of undertakings paying their workers at a rate less than the minimum rate of pay, such objective may be taken into consideration as an overriding requirement capable of justifying a restriction on freedom to provide services. Therefore, a chain liability and the accompanying increase of the administrative burden is appropriate and proportionate.

As the contractor’s or the chain liability remains to be considered a relevant instrument at disposal of the posted workers, it still has to be empirically evaluated to what extend it is used in Germany. Except for the in-depth analyses of the current legislation, the most challenging part for a further study is to find out how the attempts of the posted workers to enforce and to claim their individual labour rights in the host country turned out. Except for some medially expose cases or cases brought to the labour courts by the trade unions, there are not many lawsuits known to be filed by posted workers in front of the German labour courts. Finding out how posted workers act towards enforcing their rights and what are the greatest constraints for them for starting a court procedure in the host country may contribute to eliminating some of the actual obstacles and making the liability within the contracting chains even more efficient, as aspired with the targeted revision of the Posting directive.

Conclusion

From all stated above, it could be concluded that the current position of the posted workers on the EU labour market remains to be generally unsatisfactory. Various factors contribute to the current situation of this category of workers and the existing enforcement instruments appear to be insufficient. The causal relationship between the existing regulation and the actual position of the category of posted workers in the European labour market should be further explored in order to come to answers to the remaining questions. Which law and non-law related factors have been and are still creating the unfavourable conditions for posted workers in the labour market? What legal remedies could the posted workers reach for and how effective could they be? For the assessment of the actual contribution of the Enforcement Directive and later on the Targeted Revision to the improvement of the current situation, its transposition and implementation in the national legal systems of the EU Member States has to be analysed in details. It must be consequently stated whether they would bring actual changes and how the individual posted worker would benefit from it.[15]

References:

Bariatti, S. (2011). Cases and Materials on EU Private International Law, Bloomsbury Publishing.

Consolidated Version of the Treaty on the Functioning of the European Union art. 56, 2008 O.J. C 115/47.

Directive 96/71/EC concerning the posting of workers in the framework of the provision of services and amending Regulation (EU) No 1024/2012 on administrative cooperation through the Internal Market Information System (‘the IMI Regulation’), O.J. L 159/11, 28.05.2014.

Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services, O.J. L 018, 21/01/1997 P. 0001 – 0006.

European Commission (2003b). The Implementation of Directive 96/71/EC in the Member States, COM (2003) 458 final, 25 July 2003.

European Commission Press Release, Posting of workers: EU safeguards against social dumping, Brussels, 12 December 2013.

Haidinger, B. Liability and co-responsibility in subcontracting chains, Social Standards at Risk: Making the case for Labour Citizenship in Europe, LABCIT Project 2016.

Joerges, C., and Rödl, F. (2009). Informal politics, formalised law and the ‘Social Deficit’ of European integration: reflections after the judgments of the ECJ in Viking and Laval. European Law Journal 15(1), 1-19.

Morton, A. (2013). The Posted Workers Enforcement Directive and the ‘Monti II’ Regulation, European Public Services Briefings 5, European Services Strategy Unit.

Wagner, I. (2015). Labour citizenship and enforcement gaps in a Pan-European labour market,         migrationonline.cz, 11. 8. 15, online under https://migrationonline.cz/en/labour-citizenship-and-enforcement-gaps-in-a-pan-european-labour-market.