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European Parliament – Posting of Workers

Friday 18 April 2014

Workers posted abroad temporarily will get more protection under a draft law agreed by Parliament and Council negotiators and approved through voting on Tuesday 15 April 2014. Parliament’s negotiators strengthened…

… the draft to clarify the rules for companies, by distinguishing genuine postings from attempts to circumvent the law, but also gave EU member states some flexibility in carrying out inspections.

The note details the new rules aimed at improving enforcement of the 1996 directive on the working conditions of workers posted from one EU country to another to provide services for a limited period.

Posted workers in the EU

What is a “posted” worker?

A posted worker is a person who is sent by his or her employer to work for a limited period in an EU member state other than that in which he or she normally works.

In sending a worker to work in another EU member state, the employer is exercising the freedom to provide cross-border services, as laid down in Article 56 of the Treaty on the Functioning of the European Union.

What are the weaknesses of the 1996 Directive and how is it abused?

The directive suffers from various legal, administrative and enforcement weaknesses that have led to the rise of abusive practices throughout Europe.

These weaknesses include a lack of legal clarity on the posting situation, a lack of administrative monitoring due to insufficient cooperation among member states to exchange information, too little information being made available to companies and posted workers and difficulties in enforcing rights and handling cross-border complaints.

The above weaknesses have led to distortions and abuses by many posting companies. A widely-used way to minimise social security contributions, is to create so-called “letter box” companies in member states where labour taxes are lowest. Companies using this technique do not carry out significant economic activity in their home country, and are often constructed as a complex, multi-level net in different member states, which make them very difficult to track and hold to account.

Another type of abuse is false “self-employment”. Many regulations relating to working time, taxes and wages, which should be guaranteed under the directive, are not systematically applied to self-employed workers. So some posting companies persuade or oblige workers to accept “self-employed” status, whereas in reality, there is a relationship of subordination.

Lastly, posted workers are often vulnerable due to language barriers and lack of information of their rights.

The new text improves legal clarity by helping member states to assess whether a posting is genuine or an attempt to circumvent the law.

To determine whether a company really supplies services abroad, national authorities will be able to ascertain where it is registered, where it pays tax and social security contributions, where it recruits posted workers, where its business activity takes place and how many contracts it has to supply services.

To assess whether a worker is really posted temporarily, member states will be able to ascertain for how long the service is supplied and the date on which the posting began. The absence of an “A1” social security certificate may also indicate that the posting is not genuine, says the agreed text, which includes a requirement to identify posted workers.

Member states which suspect that a worker is falsely “self-employed” may also check whether work was done and assess work relationships, including his or her subordination and remuneration, adds the final text, at Parliament’s request.

When there is no genuine posting situation, the Rome I regulation (on the law applicable to the contractual obligations) applies, so as to ensure that employees are not deprived of protection.

The implementing directive also improves access to information, both for member states and those providing services. Parliament inserted clauses to ensure that this information will be transparent, and provided free of charge, in an accessible format on a single official website, in various languages, taking into account demands in the host member state’s labour market. The information on the website will describe labour and social conditions applicable to posted workers, and procedures for making complaints.

Cooperation among member states will also be enhanced through the use of the Internal Market Information System (IMI). The deadlines for transferring information from one member state to another are 25 working days at most for normal cases and two working days for urgent cases.

The deal strengthens checks and enforcement of fines. To ensure that the 1996 directive is properly enforced, the deal provides the inclusion of a list of national control measures, to which host member states could nonetheless add others. For example, service providers would be obliged to make a declaration, at the latest at the time they start to supply the service, including the company’s identity, the number of posted workers, its representative in the host member states, the duration of the posting, and the nature of services justifying the posting.

Member states would have to communicate new control measures to the European Commission, but as Parliament insisted, this does not constitute a prior authorisation requirement, and leaves member states the necessary flexibility to carry out checks.

The compromise text says any member state may introduce a system of “joint and several liability” to tackle fraud and abuses. This means that in cases where work is contracted out, both the main contractor and the direct subcontractor would be held jointly and severally liable for any failure to pay posted workers. For the building sector, this system or other appropriate measures are mandatory. Member states may also introduce stricter provisions and include other sectors. Austria, Germany, Spain, Finland, France, Italy, the Netherlands and Belgium already have joint and several liability systems.

Once the new rules enter into force, member states will have two years to transpose them into their national laws. The European Commission would be required to report on their application, and if necessary propose further measures, within the following three years.

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