New EU Directive on Posting Workers establishing the principle of 'equal pay for equal work in the same place'

Directive 96/71/EC concerning the posting of workers in the framework of the provision of services has to be amended in order to address unfair practices and promote the principle that the same work at the same place shall be remunerated in the same way.

The destination countries for the posted workers (Austria, Belgium, France, Germany, Luxembourg, the Netherlands and Sweden) have supported the modernisation of the Directive hoping for a new legal framework in which social dumping could be effectively combated.  Bulgaria, Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Slovakia and Romania argued that the principle of equal pay for equal work in the same place may be incompatible with the single market, as pay rate differences constitute one legitimate element of competitive advantage for service providers.

Both sides will be most probably disappointed with the Commission proposal, result which in my view is perfectly logical. When destination countries have a claim supporting equal payment, what they mean is a defence of their competitiveness in specific socially/politically sensitive sectors. When source countries act as defenders of free movement of services within the EU, they also think about maintaining the competitive advantage implied - in their case - by lower labour costs. This is why the national politics does not rhyme with the objective of achieving a complete internal market, since at the national level it seems that neither the EU competitiveness as a whole nor the social welfare of the EU citizens in general has any relevance (just taking notice of the current discourse). 

The answer of the Commission addressed to the Eastern European countries is that competition must be based on quality of the service, productivity, costs (of which labour costs are but one part) and innovation. The Western European countries have been reminded that the lack of clarity of labour market rules in their jurisdictions constitutes a hindrance to cross-border service provision, especially among SMEs.

Three main changes have been proposed:

–it suppresses the reference to the "activities referred to in the Annex" in the second indent;

–it replaces the reference to "minimum rates of pay" by a reference to "remuneration";

–it adds a new subparagraph imposing on Member States an obligation to publish information on the constituent elements of remuneration.

The rules on remuneration applicable to local workers, stemming from the law or collective agreements universally applicable within the meaning of Article 3(8) become applicable to posted workers. Moreover, Member States will have to publish in the website referred to in Article 5 of Directive 2014/67/EU the constituent elements of remuneration applicable to posted workers. 

Remuneration will comprise according to the proposed amendment, "all the elements of remuneration rendered mandatory by national law, regulation or administrative provision, collective agreements or arbitration awards which have been declared universally applicable and/or, in the absence of a system for declaring collective agreements or arbitration awards to be of universal application, other collective agreements or arbitration awards within the meaning of paragraph 8 second subparagraph, in the Member State to whose territory the worker is posted". 

"Corporate Europe" is not happy with this change that implies an increase of the labour costs from the minimum to the average salaries in the relevant economic fields. The Trade Unions are also unhappy, though for the opposed reason, namely that lower salaries are still possible. The new proposal resemblances a kind of King Solomon judgment, in the trial of "equal pay for equal work" within the EU. (Why is this principle not yet effective in relation to the equal pay of men and women? This is a very good supplementary question that should be posed by anyone who needs to know why I made the comparison between King Solomon and the European Commission). I cite from the recital of the proposal:

(13)The elements of remuneration under national law or universally applicable collective agreements should be clear and transparent to all service providers. It is therefore justified to impose on Member States the obligation to publish the constituent elements of remuneration on the single website provided for by Article 5 of the Enforcement Directive.

(14)Laws, regulations, administrative provisions or collective agreements applicable in Member States may ensure that subcontracting does not confer on undertakings the possibility to avoid rules guaranteeing certain terms and conditions of employment covering remuneration. Where such rules on remuneration exist at national level, the Member State may apply them in a non-discriminatory manner to undertakings posting workers to its territory provided that they do not disproportionately restrict the cross-border provision of services.

In Case C?341/05, Laval refused to sign the agreement, since it was not possible for it to know in advance what conditions would be imposed on it in relation to wages. In Sweden the collective agreements have not been declared universally applicable and the possibility provided for in the second subparagraph of Article 3(8) of the directive was not used. Sweden cannot rely on Article 3(1), because its legislation has not established any minimum rates of pay. In the newer version of the Directive, the conditions of employment concerning:

• (a)maximum work periods and minimum rest periods;
• (b)minimum paid annual holidays
• (c)remuneration, including overtime rates; this point does not apply to supplementary occupational retirement pension schemes;
• (d)the conditions of hiring-out of workers, in particular the supply of workers by temporary employment undertakings;
• (e)health, safety and hygiene at work;
• (f)protective measures with regard to the terms and conditions of employment of pregnant women or women who have recently given birth, of children and of young people;
• (g)equality of treatment between men and women and other provisions on non-discrimination;

will have to be transparent and clear and determined in advance for all undertakings subject to those rules. This extension of the scope of the obligation to provide information on the terms of employment goes against the so-called Swedish model which in fact relies on the absence of  generally applicable rules (erga omnes) or statutory provisions on remuneration of workers. The negotiations are local and the collective agreements concluded between employers and trade unions serve only as a starting-point.  

Another significant amendment refers to the connecting factor "place where the work is habitually carried out". The Rome I Regulation stipulates that the country where the work is habitually carried out shall not be deemed to have changed if he is temporarily employed in another country. However, in case of posting lasting for periods higher than 24 months, the host Member State is deemed to be the country in which the work is carried out. This is also a good point to mark. Posting workers cannot be anything else than a temporary form of employment situation. The prolongation may be seen as a form of circumvention of the labour laws of the host state.

As Sen. Bernie Sanders, the independent-socialist Vermont senator running for the Democratic presidential nomination in the U.S.A., puts it, "Protectionism & Nativist Economics is Neither New Nor Smart". However, within the EU such an approach is simply beyond superannuated and insensate, once we all agree that the common interests must prevail in a situation of conflict of views between the Western and the Eastern European countries. The only way to defend the Swedish Model is to rebaptise it as the European Model convincing the other "non-believers" why it must be preserved in its current form. Labour protection is too important to be kept "secret" or defined as culturally unique.