European Labour Law Lecture 04A

Let us look more closely to the exceptional rules in the Rome I – Regulation and the Social Security Coordination regime. First of all they have determined, that workers, working in two or more countries, often are subject to (much of the mandatory) rules of labour law and the social security law of the country of residence of the employer. This has paved the way for major changes in international road transport. Many companies in rich countries have established or taken over daughter firms in the low wages countries of the EU and have now done their international road transport by much cheaper drivers from these countries, engaged by those subsidiaries Exceptions – Road Transport 1

Correctly so, but sad for thousands of drivers in the high wage MS who lost their job. In theory the same is not possible in internal road transport services. There the wages etc. must be paid according to the lex laboris main rule. However, apparently in this field the abuses are abundant and difficult to stamp out Exceptions – Road Transport 2

The exceptional rules of the Convention of Rome and of the Social Security Coordination regime have determined, that workers, temporarily posted abroad, remain under the labour law and the social security law of the country of residence of the sending company. These rules opened the possibility, that companies in high wage countries can outsource work to employers in low wage countries and so, by “importing” low wage work, undermine the usual wages in the high wage country Exceptions – Posted Workers 1

This risk initially appeared to have been solved by the ECJ in the Rush Portuguesa case, in which the Court indicated – basing itself on Art 7 of the Convention of Rome - that MS are free to impose their mandatory laws, and also their collective agreements binding erga omnes on workers temporarily posted in their country. However, later it was realised that implementation of this rule (certainly applied on the posting of workers from one country with highly developed labour rules to another country with highly developed labour rules) could entail the possibility that the employer had to comply cumulatively with the burdens of two legal systems, which could virtually prevent such cross-border rendering of services Exceptions – Posted Workers 2

So the Court in later case law has made its position more nuanced: these companies need not to comply with the provisions of the host state if they complied already with comparable provisions in their state of residence. In these cases the ECJ has become increasingly critical to MS, who imposed on foreign companies, rendering services in their country, all sorts of burdens, as in that way the freedom of services, guaranteed in the Treaties, would be violated Exceptions – Posted Workers 3

In this way the Court followed the political debate that had been sparked by the Rush Portuguesa case. There was a lot of pressure on the European Commission to come forward with legislation to make more precise which rules exactly MS could impose on the foreign companies sending out posted workers to that State workers and which not. The result was the Directive on Posted Workers of 1996, based on the freedom of services and not on the freedom of movement of workers!!! 4.2. Exceptions – Posted Workers 4

In this Directive MS were ordered to prescribe a “hard core” of their own employment rules on such workers: - Maximum working hours and minimal periods of rest - Minimum holidays with pay - Minimum wages - Health and safety at work - Protection of maternity and youth -Non-discrimination 4.2. Exceptions – Posted Workers 5

All this as far as those rules are laid down in the national statutory/administrative rules or a generally binding collective agreement in the construction sector (which was supposed to be hardest hit by abuses). However, the MS were allowed (but nor ordered) - To apply also the same set of “hard core” rules contained in collective agreements binding erga omnes other than the construction sector - To apply other national mandatory provisions on these workers and their companies by way of their public policy Exceptions – Posted Workers 6

The rules of the Posted Workers Directive have been very often contested in national courts and the CoJ EU. The latter court has increasingly become restrictive in defining the “hard core” – seeing the Directive list as “exhaustive” - and in allowing MS to impose additional standards by way of public policy. The last is now strictly defined as follows: “A public policy provision may be relied upon only if there is a genuine and sufficiently serious threat to a fundamental interest of society” (Commission vs Luxembourg case 2008) Example: Icelandic case 4.2. Exceptions – Posted Workers 7

What is the result of all this: By using “posted workers” you can still import cheap labour as the list of prescribed subjects is far from complete (lacking are notably wages above the minimum, dismissal costs, social security, etc.). On the other hand you cannot go as far down as the very low wages costs in some C&E European states. So the politicians and the CoJ made again a compromise in the middle of the road Exceptions – Posted Workers 8

Still this compromise may have bad outcomes for national workers in the rich countries: companies not hiring or even laying off national workers as they can have the work more cheaply done by posted workers. In Belgium this already in 2005 led to strikes of workers not accepting such policies of their employers. However, for Belgium the situation was not so worse as Belgium has quite a lot “hard core” labour law in its statutory rules and collective agreements Exceptions – Posted Workers 9

Things stood different and became extremely political in the Swedish Laval case, Sweden has no national minimum wage nor collective agreements erga omnes. The tradition is, that Swedish unions force employers to follow the collective agreement by operating boycotts. They did so faced with the Latvian Laval company which wanted to do construction work in Sweden with posted workers from Latvia on the basis of Latvian wages and social security. In the end the company went bankrupt through the boycott of the unions and went to court. The ECJ condemned the Swedish practises Exceptions – Posted Workers 10

In the German Rueffert case appeared another unexpected consequence of the Posted Workers Directive approach. In a number of MS already for many decades the application of collective agreements is supported by the state by way of its public procurement. Tenders are required to promise the application of the existing collective agreement. This instrument is even “consecrated” in an ILO Convention. In Rueffert the CoJEU pronounced that such a practice cannot be applied to tenders hiring workers in conformity with the Posted Workers Directive Exceptions – Posted Workers 11

In other MS, notably Belgium and Luxembourg, politicians are increasingly claiming that the Posted Workers Directive and the CoJEU case law are so complicated and difficult to enforce, that there is now massive use or abuse of these rules by way of imported “cheap labour” from poor Central and Eastern European States. Western European trade unions are advocating a revision of the Posted Workers Directive. They simply want that posted workers shall be treated like national workers: equally! The Commission in another “leaked” document shall shortly propose only a Directive to better enforce the existing Directive, not to revise it Exceptions – Posted Workers 12