EUROPEAN COMMISSION Brussels, 31.5.2017 SWD(2017) 186 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT

Accompanying the document

Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) 561/2006 as regards minimum requirements on maximum daily and weekly driving times, minimum breaks and daily and weekly rest periods and Regulation (EU) 165/2014 as regards positioning by means of tachographs



and



Proposal for a Directive of the European Parliament and of the Council amending Directive 2006/22/EC as regards enforcement requirements and laying down specific rules with respect to Directive 96/71/EC and Directive 2014/67/EU for posting drivers in the road transport sector

{COM(2017) 277 final}

{COM(2017) 278 final}

{SWD(2017) 184 final}

{SWD(2017) 185 final}

{SWD(2017) 187 final}



1Introduction 1.1Brief description of the legislative framework of the social rules in road transport 1.2Evaluation of the existing road transport social legislation 1.3Contribution to the reduction of the regulatory burdens 2What is the problem and why is it a problem? 2.1Policy context 2.1.1Complementarity with parallel initiatives on the review of road transport legislation 2.1.2Complementarity with the revision of the Posting of Workers Directive (PWD) 2.1.3Complementarity with the social dialogue 2.1.4Links with pending infringements cases 2.2Market context 2.2.1Market changes 2.2.2Market-based challenges 2.3What is the problem? What is the size of the problem? 2.3.1Problem of distortions of competition between operators 2.3.2Problem of inadequate working and social conditions of drivers 2.4What are the main legal issues underlying the problems on the ground? 2.4.1Unclear or unsuitable road transport social rules 2.4.2Inconsistent and ineffective enforcement of the road transport social rules

2.4.3Application of PWD rules to road transport sector 2.5How would the problem evolve, all things being equal (baseline scenario) 2.5.1Distortions of competition and inadequate working and social conditions 3Why should the EU act 4What should be achieved? 5What are the various options to achieve the objectives? 5.1Discarded policy measures 5.2Retained policy measures 5.3Identification of policy packages (in addition to a baseline scenario) 5.3.1Methodological consideration for identification of policy packages 5.3.2Identification of two sets of policy packages 6What are the impacts of the different policy options and who will be affected? 6.1Analysis of social impacts 6.1.1Compliance with the EU social, labour and market rules in road transport 6.1.2Impacts on working conditions 6.1.3Impacts on road safety and occupational health 6.1.4Changes in employment levels and types of work contracts 6.1.5Impacts on non-discrimination, equal treatment and equal opportunities 6.2Analysis of economic impacts 6.2.1Impacts on businesses/SMEs (operational, compliance, administrative costs)

6.2.2Impact of costs and benefits for national authorities 7How do the options compare? 7.1Coherence 7.2Preferred options and combined effects 7.3Preliminary assessment of possible delivery instruments for PP4 8How would actual impacts be monitored and evaluated?

1Introduction This Impact Assessment accompanies two proposals of the European Commission modifying Regulation (EC) No 561/2006 , Directive 2006/22/EC , Directive 2002/15/EC and Regulation (EU) 165/2014 . These legal acts form together a legislative framework for the social rules in road transport and for their enforcement. This initiative also concerns the proposal to establish sector-specific rules (lex specialis) for posting of workers in road transport sector, which will take precedence over the relevant provisions of the cross-sectorial Directive 96/71/EC on posting of workers and Directive 2014/67/EU on enforcement. 1.1Brief description of the legislative framework of the social rules in road transport Since 1969 the EU has developed an extensive framework of social rules for road haulage operators and road passenger transport operators. These rules aim at: improving working conditions for road transport mobile workers , enhancing road safety for all road users and ensuring fair competition between road transport operators in the single market. They apply to all professional drivers (employed and self-employed) and to all transport undertakings engaged in the carriage of goods by vehicles above 3.5 tons or in the carriage of passengers by vehicles for more than 9 persons. The existing social rules in road transport are set in two main legislative acts : 1) Regulation (EC) 561/2006 (also known as the Driving Time Regulation) establishes the minimum requirements on daily and weekly driving times, breaks and daily and weekly rest periods to be observed by drivers and road transport operators. 2) Directive 2002/15/EC (also known as the Road Transport Working Time Directive) lays down rules on the organisation of the working time of drivers. It establishes the requirements on maximum weekly working times, minimum breaks in work and on night-time working. It applies to drivers falling in scope of the Driving Time Regulation, including self-employed drivers. The minimum requirements for enforcement of the provisions of the Driving Time Regulation are in: 1) Directive 2006/22/EC (also known as the Enforcement Directive), which establishes minimum levels of roadside checks and controls at the premises of transport undertakings to be carried out every year by Member States. 2) Regulation (EU) No 165/2014 (also known as the Tachograph Regulation), which sets the requirements on the installation and the use of tachographs in the vehicles in scope of the Driving Time Regulation. The tachograph serves as the main tool for monitoring and controlling compliance with the provisions of that Regulation, in line with control requirements in the Enforcement Directive. The Road Transport Working Time Directive is not accompanied by any EU uniform requirements for monitoring and controls. The global cross-cutting objective of the existing road transport social legislation is to support the completion of a fair, socially responsible and efficient single market for road transport. Thus, they are closely interlinked with the internal market rules on access to the occupation of road transport operator, on access to the international road haulage market and on access to the international passenger road transport market . Existing road transport social legislation only covers the social aspects that relate to the organisation of drivers' work and rest periods. There are other rules relating to working and social protection conditions that apply when transport operators based in one Member State, in the framework of transnational provision of services, carry out transport operations on the territory of another Member State. These rules are laid down in Directive 96/71/EC on posting of workers (also known as the Posted Workers Directive or PWD), which applies to all sectors , including to road transport whenever the conditions for a posting situation are fulfilled. It lays down a nucleus of mandatory terms and conditions of employment that ensure undertakings established in a Member State guarantee workers posted to the territory of another Member State the conditions of employment of the Member State where the work is carried out. The nucleus of mandatory rules include the following: minimum rates of pay, minimum paid annual holidays, health, safety and hygiene at work and other provisions of non-discrimination. This Directive is accompanied by the common enforcement rules set in Directive 2014/67/EU (called the PWD Enforcement Directive).

1.2Evaluation of the existing road transport social legislation The ex-post evaluation of the existing social legislation in road transport was carried out in 2015-2017 covering the Driving Time Regulation, the Road Transport Working Time Directive and the Enforcement Directive. The Tachograph Regulation was not part of this evaluation as it was adopted only in 2014, repealing its predecessor - the Council Regulation (EEC) No 3821/85. The ex-post evaluation assessed the implementation of the social legislation in the years 2007-2014 and its main effects taking account of the developments in the EU road transport market. The evaluation was supported by the external study and based on a thorough review and analyses of available data and – like the impact assessment itself – on a variety of consultation activities of stakeholders, including Open Public Consultation and SME Panel Survey . The evaluation concluded that the legislation remains a relevant tool, but it is only partially effective in improving working conditions of drivers and ensuring fair competition between operators. The effects in terms of enhancing road safety were positive. However, although road safety levels have improved in the period covered by the evaluation, the impact of the social legislation could not be discerned from the impacts of other road safety measures implemented across Member States. The insufficient effectiveness and efficiency of the social legislation is mainly due to unclear and unsuitable rules, diverging national interpretations and application of the rules, inconsistent and ineffective enforcement practices and a lack of administrative cooperation. The results of the ex-post evaluation are to a large extent reflected in this impact assessment as shown in Table 1 Table 1: Links between the conclusions of the ex-post evaluation and the Impact Assessment. Main ex post evaluation conclusions Impact Assessment Conclusions on relevance Some of the uniform rules do not fit the specificities of particular transport services (e.g. passenger transport, multi-stop transport operations, construction site deliveries, etc.) This issue is developed in the problem definition in section 0 as one of the main factors contributing to stress and fatigue of drivers and in section 2.4.1 on unsuitable and unclear rules. Furthermore they are addressed by policy measures in section 5.2. Conclusions on effectiveness Undistorted competition between operators has not been fully achieved due to diverging national interpretations and implementation of the rules and inconsistent enforcement practices, including diverging national penalty systems. The Impact Assessment recognises that the problems on the ground with the distortions of competition are linked with the deficiencies of the legislative framework as well as with the market pressures. These are mentioned in section 2.2 on market context and discussed in detail in section 2.3.1 of the problem definition. The risk of non-compliance remains due to ineffectiveness and inconsistency of enforcement, in particular as regards working time rules This problem is specifically discussed in section 2.4.2 which is dedicated to ineffective and inconsistent enforcement and poor administrative cooperation. It is further addressed by enforcement measures under Policy Package 2 (section 5.2) Unintentional non-compliance persists due to unclear or inflexible rules and discrepancies in their implementation and enforcement. This problem is analysed in problem definition in sections 2.3.1.1, 2.4.1 and 2.4.2. Several policy measures address these issues (section 5.2) The risk of deterioration in working conditions (e.g. long periods away from home, inadequate rest conditions, time pressure and stress, inadequate pay) has not been effectively addressed due to abuses or deficiencies in the current rules and the lack of flexibility in applying the rules, and market pressures. This problem is the topic of section 2.3.2 and substantiated by the underlying causes described in section 2.3.1.1and 2.4.1. Several policy measures address these issues (section 5.2) Conclusions on efficiency Enforcement costs increased slightly and this increase has not been sufficiently compensated by the increase in cost-effectiveness of enforcement due to insufficient use of available tools for targeting controls and systems for exchange of data and information and due to poor administrative cooperation between Member States. These issues are dealt with mainly in section 2.4.2 and Policy Package 2 Compliance costs for operators have increased by 1-3% of the annual transport-related turnover although these have been somewhat offset by benefits related to more harmonised legal framework for carrying out business. Sections 2.3.1.2 and 2.4.3 of the problem definition describe these issues. Coherence and coordination Lack of coherence and coordination with the rules on posting of workers This finding of the ex-post evaluation is the reason for enlarging the initial scope of the initiative from existing social legislation to social rules applicable to road transport. This is explained in the policy context (section 2.1.2). Furthermore the measures on posting in road transport have been assessed in section 6 The full text of the ex-post evaluation report is annexed to this Impact Assessment. Certain issues identified within the ex-post evaluation are not addressed in this Impact Assessment. This is mainly due to lack of evidence that they constitute significant social or economic problems at the EU-level or because EU intervention would create excessive regulatory burden or because other EU instruments are intended to address some of these issues. The unaddressed issues include: (a) whether drivers of Light Goods Vehicles (vehicles below 3,5 t) should be subject to the same requirements regarding driving, working and resting times; (b) whether self-employed drivers should be excluded from the Road Transport Working Time Directive; (c) diverging levels and types of penalties; (d) unequal implementation of the principle of co-liability for infringements; and (e) inconsistent training for enforcers. The detailed description of unaddressed issues and the reasons why they have not been taken up in this Impact Assessment are provided in Annex 5. 1.3Contribution to the reduction of the regulatory burdens The initiative is mentioned as a REFIT initiative in point 11 of Annex 2 to the Commission Work Programme 2017. It is thus part of the Commission's Regulatory Fitness and Performance programme that aims at making EU laws simpler and less costly. The REFIT objectives are reflected in the specific objectives of this Impact Assessment, and special attention is given to the simplification of the rules, their enforceability and to the analysis of the impacts on regulatory burdens on companies and on authorities. 2What is the problem and why is it a problem? 2.1Policy context The social aspects in the road transport sector have gained considerably in importance over the last decade. The White Paper on Transport (COM(2011)144) made clear that the creation of a Single European Transport Area should go together with a higher degree of convergence and enforcement of social rules. It adds that market opening needs to go hand in hand with quality jobs and working conditions. The Juncker Commission has established as one of its priorities the goal of creating a deeper and fairer internal market for road transport . This includes actions aimed at combatting social unfairness and unfair competition and to create a social framework for new employment opportunities and fair business conditions. 2.1.1Complementarity with parallel initiatives on the review of road transport legislation The ex-post evaluation of the existing social legislation and the separate ex-post evaluation of the rules on access to occupation and to haulage market, which was carried out in 2014-2015 , established that social and market challenges in the sector are interdependent. Illegal business practices, such as 'letterbox' companies or illegal cabotage (i.e. abuses of the rules on access to occupation and access to haulage market which are described in a separate impact assessment ) are usually linked with illicit employment practices and circumvention of the working time rules. These deprive drivers of their rights, such as to adequate working and resting conditions and to adequate remuneration reflecting living costs and conditions. These social and market challenges are largely caused by ambiguities in the current social and market rules in road transport, the deficiencies in their enforcement and inadequate implementation of the PWD in the road transport sector (the market forces behind these challenges are described in section 2.2). Addressing these challenges requires a holistic approach whereby the social, internal market and posting of workers' rules work better together to ensure both fair working conditions for drivers and fair competition between operators. Therefore, this initiative on social aspects in road transport should be seen as part of a coordinated all-embracing response to the current social, market and technological challenges faced by the sector (further described in Annex 7). 2.1.2Complementarity with the revision of the Posting of Workers Directive (PWD) This initiative should also be seen as complementary to the on-going revision of the PWD, which aims to clarify and update the provisions adopted more than twenty years ago and to ensure that the Directive still strikes the right balance between the need to promote the freedom to provide services and the need to protect the rights of posted workers. The PWD revision deals with general issues, such as broader set of remuneration rules or maximum periods of posting to be applied to all sectors. In the explanatory memorandum to the proposal of 8 March 2016 the Commission emphasized the complementarity of the ongoing revision of PWD with the initiatives for the road transport sector announced by the Commission in its Work Programme 2016. Further, in recital (10) of the proposal, the Commission states that: Because of the highly mobile nature of work in international road transport, the implementation of the posting of workers directive raises particular legal questions and difficulties (especially where the link with the concerned Member State is insufficient). It would be most suited for these challenges to be addressed through sector-specific legislation together with other EU initiatives aimed at improving the functioning of the internal road transport market. This is a clear mandate to take action at EU level to adjust the application of the posting rules to the specificities of the road transport sector through the road transport legislation.

2.1.3Complementarity with the social dialogue In September 2016 the EU Social Partners launched the social dialogue negotiations in accordance with Articles 154 and 155 of the TFEU. The objective is to reach an agreement on working standards, outside the existing EU rules to be observed by all parties in a transport operation chain, the so called Social Code. The overall goal of the initiative is to further enhance the social and working conditions in the sector and reinforce the responsibilities of both sides of industry for meeting these standards. The Social Partners established six topics for negotiations:(1) conditions at loading/unloading points, (2) access to medical assistance for drivers en route, (3) conditions during rest, (4) applicable labour law, (5) return home, and (6) language of labour contracts. The Commission actively supports the Social Dialogue negotiations on the Social Code. The potential agreement of Social Partners, in particular on the issue of conditions during rest and at loading/unloading points, would complement and reinforce the social dimension of this initiative. 2.1.4Links with pending infringements cases The important component of the policy context for this initiative is on-going infringement cases. The case Vaditrans BVBA (C-102/16) concerns the issue of unclear provision in the Driving Time Regulation as to the regular weekly rest. The Advocate General issued an opinion in February 2017 to the effect that a driver may not take regular weekly rest periods inside the vehicle. The Court judgment will interpret the current text of the Regulation on driving and rest time. This does not however prevent the Commission from assessing the relevance of the current rule and, if justified, to propose new provisions on the taking of regular weekly rest which are better suited to business needs while ensuring a high level of protection for drivers. The Commission also launched infringement procedures against the German, French and Austrian national measures, in 2015, 2016 and 2017 respectively, on the grounds that the application of their minimum wage measures to foreign road transport operators leads to unjustified restrictions to the freedom to provide services. This initiative considers how best to clarify the relevant rules in force on posting of workers to ensure that they are consistently and proportionately implemented throughout the EU. The Commission considers that establishing the EU-wide solution is more effective and sustainable than clarifications provided on case-by-case basis through infringement proceedings. As explained in more details in annex to this Impact Assessment, it is considered that judgments of the Court of Justice, even if they confirm the interpretation of the Commission in the infringement procedures against the 3 above Member States, will not be sufficient to ensure a balanced and harmonised application of the PWD in the EU. All these elements together form a solid policy context for this REFIT initiative, which aims to clarify and improve the legal framework to ensure that the rules are fit for purpose and reflect adequately the social and economic needs of the sector, that they are enforceable and enforced consistently throughout the EU whilst also seeking to ensure that enforcement and compliance with those rules does not impose excessive regulatory burdens. 2.2Market context 2.2.1Market changes Since the adoption of the social rules, the social and business environment of the road transport sector has changed significantly. The liberalisation of the internal market for road transport facilitated the free movement of goods and of workers and the freedom to provide cross-border road transport services, which are cornerstones of the EU single market. The positive effects in terms of increased efficiency of the transport operations, enhanced competitiveness and gains for the European consumers and economy have been weakened by the economic downturn in 2007-2008 and the Eurozone crisis that started in 2009. This, combined with the EU enlargements of 2004 and 2010 and the low level of compliance with the EU and national rules, led to increasing competition creating downward pressures on profits and wages. The road transport market has always been highly competitive and price-sensitive because it is dominated by a large number of small companies and owner-operators. 90% of enterprises in the sector have fewer than 10 employees and account for close to 30% of turnover (including self-employed) (Eurostat, 2016b). Since the supply of and demand for road freight transport services is generally rather homogenous, these firms tend to compete mainly on price, with labour costs being a key determinant. A limited number of large firms that provide complex logistics services are able to differentiate their services based on range and quality of the services as well as price. A number of reports argue that the sector is faced with decreasing profit margins driven by growing competition from EU-13 based operators, which have contributed to strong downward pressure on prices of services and subsequently on drivers' wages and other working conditions. On the trunk lines of European corridors, reported (2015) freight rates have fallen sharply to as low as €0.7 per vehicle-km or less. This corresponds to a reduction of some 30% compared to the previous market prices (2010-2011) of about €0.9 to €1.0 per vehicle-km . It appears that hauliers, in looking to improve margins, are focusing on reducing operational cost and this can be to the detriment of drivers’ working conditions. In absolute terms, labour costs (remunerations and social contributions) in the Member States that joined the EU in 2004 and 2007 remain lower than in the longer-established EU Member States (EU-15). It is true that the gap is steadily narrowing, but the cost differentials (mainly in labour costs and social contribution costs) between Member States remain significant. In this context, driver costs play an important role, since they represent a significant part of the operating costs of hauliers, ranging from around 20% to around 40% of overall operating costs, depending on the Member State of employment. As shown in Figure 1 the most important cost components are the driver’s wages and fuel, followed by vehicle purchase costs. Figure 1: Percentage of operating costs per hour in selected Member States Notes: Driver costs indicate wages; maintenance includes general vehicle maintenance and tyre replacement Source: (Bayliss, 2012) Although there are some signs of labour cost convergence across Europe, there are still considerable differences between Member States. Figure 2 presents data on drivers’ actual remuneration which are available for 16 EU Member States (BE, BG, CZ, DE (East and West), ES, FR, HU, IT, LT, LU, PL, PT, RO, SI, SK). For example, the remunerations of a French driver is 2.4 times higher than a Polish driver. Also differences in social insurance contributions are quite substantial. As an example, the estimated amount of the employers’ mandatory (net) social security contributions for a driver in France is €736 per month; €446-630 in Germany, €481-584 in Spain, as compared to €316 in Slovakia and €111 in Poland . Figure 2: Structure of remuneration of an average international truck driver in 2016 (excluding employer's social contribution) Source: (CNR, 2016)

2.2.2Market-based challenges The market-based differentials described above give rise to increasingly fierce cost-based competition. In combination with legislative loopholes and enforcement deficiencies, it creates incentives for unfair business and employment practices (e.g. letterbox companies, illegal cabotage, bogus self-employment, downward pressures on rest periods and pay, etc) applied by certain operators and for protectionist national measures (e.g. imposing sanctions for weekly rest in the vehicle, disproportionate application of national measures on minimum wage to foreign operators, national restrictions on cabotage) being adopted by some Member States in response. Social and competition issues are clearly interdependent, because business practices that allow operators to gain unfairly a competitive advantage often deprive drivers of their fundamental rights of social protection and adequate working conditions, including minimum rates of pay. On the other hand the smooth functioning of the internal road transport market is hampered by illegal practices such as 'letterbox' companies, illegal cabotage, illicit employment arrangements including false self-employment and abuses of the road transport social rules. All these obstruct fair access to market for operators and fair working conditions for drivers, including adequate pay. This leads to a phenomenon, which is commonly called 'social dumping. The Employment Committee of the European Parliament issued in 2016 a "Report on social dumping in the European Union" , in which it states that there is no universally shared definition of social dumping, but sets out the view that "the concept covers a wide range of intentionally abusive practices and the circumvention of existing European and national legislation (including laws and universally applicable collective agreements), which enable the development of unfair competition by unlawfully minimising labour and operation costs and lead to violations of workers' rights and exploitation of workers". The discussion on the issue of 'social dumping' is indeed highly polarized. In general, EU-15 Member States, EU-15 operators and trade unions regard this phenomenon as a race-to-the-bottom in social standards leading to exploitation of drivers (particularly from EU-13), undercutting cost-based competition by the EU-13 operators and posing risks of job losses for EU-15 drivers. On the other hand, EU-13 Member States, operators and industry organisations, consider that benefitting from cost-differentials is legitimate as long as the relevant EU laws are respected, and that problems of 'letterbox' companies and illicit employment practices are mainly caused by non-compliant EU-15 operators. They regard the national measures adopted by some EU-15 countries to combat the 'social dumping' as protectionist and discriminate against EU-13 operators by imposing on them excessive administrative costs and restricting freedom to provide services. Overall, therefore, the EU road transport market appears to be divided in two opposing camps as regards perception of the social and market challenges. 2.3What is the problem? What is the size of the problem? Two main problems on the ground are: (1) distortions of competition between transport operators and (2) inadequate working and social conditions of drivers. They may impact negatively on the integrity of the EU road transport market leading to its fragmentation, deteriorate the social standards in the profession leading to job losses and aggravate road safety affecting all road users. As indicated in sections 2.1 and 2.2 these competition and social problems are closely interlinked. Their root causes relate to two different sets of rules: a) 'existing' social road transport legislation on driving, working and resting times and b) application of the PWD and its enforcement Directive. In addition, they are exacerbated by market pressures and abuses of the rules on access to the profession and access to market. Figure 3 illustrates the structure of the problem definition. Figure 3: Problem tree diagram 2.3.1Problem of distortions of competition between operators The distortions of competition occur when road transport operators are put in disadvantaged position in relation to competitors in terms of conditions of carrying out the road transport services. It is particularly true for the cross-border provision of transport services, but it also concerns domestic operations (cabotage), in particular when it comes to circumventing the law by non-compliant operators to gain the competitive advantage. The existing social legislation in road transport provides for certain harmonisation across Member States with regard to the organisation of the working, driving and resting times of drivers and other minimum requirements that transport operators must respect. Nevertheless, as identified in the ex-post evaluation, it has not managed to ensure a sufficient level of fairness in terms of competition. The persisting cases of non-compliance with the rules in force give undue advantage to those breaking the law. For instance, increasing the working and/or driving times of their drivers, reducing rest times, avoiding or reducing breaks, etc., can contribute to the increased productivity of drivers and an enhanced utilisation rate of their vehicles, ultimately bringing down operation costs (Broughton et al, 2015). The increasing likelihood of being detected and high penalties do not discourage effectively all operators from seeking benefits of circumventing the rules and putting in a disadvantaged position those who comply with them. Another source of distortions of competition is that the legislation leaves certain aspects open for interpretation. National differences in implementation, monitoring and enforcement put local and foreign operators in the situation that they are treated differently depending on the national practices of the Member States where they operate. Box 1.For instance, some Member States (BE, FR) impose sanctions for taking a regular weekly rest in the vehicle. Other Member States (e.g.: DK, FI, HU, IE, NL, PT, SE) consider that this is not explicitly spelled out in the Driving Time Regulation, and they do not therefore enforce this. Others (e.g. CZ, RO, BG, LT, LV, LU, SK) regard prohibition of spending regular weekly rest in the vehicle cannot be complied with by hauliers due to lacking resting facilities and safe parking areas.

However, the main source of distortions of competition lies in various developments that are unrelated to the social rules. In particular, market competition in the road transport sector (see section 2.2) has become increasingly intense and this exacerbates the risk of non-compliance by undertakings or drivers who are under greater pressure to remain competitive. The economic crisis alsoamplified these issues due to the contraction of profit margins within the sector (KombiConsult, 2015). The Open Public Consultation shows that fierce competition is regarded by the majority of respondents as the main market challenge in road transport (on average 70 % out of 1154 respondents). Other aspects contributing to distortions of competition concern the problems of letterbox companies and illegal cabotage. These issues have been examined extensively in the parallel ex-post evaluation study on Regulations (EC) No 1071/2009 and (EC) No 1072/2009 (rules on access to the profession and access to haulage market) and are addressed in a parallel Impact Assessment. The main incentive for setting up letterbox companies and carrying out illegal cabotage is to reduce costs, which is primarily achieved due to lower wages of drivers (the major factor), followed by taxes and social contributions. These problems, although going beyond the existing social legislation, are relevant for this initiative as they are linked to illicit employment practices and inefficient or inadequate application of the Posting of Workers Directive in road transport, which is one of the issues discussed in this Impact Assessment. For instance, some road transport operators from Member States with high labour costs and social standards establish 'letterbox' companies in low-cost Member States employing drivers therein under the local terms and conditions of employment, whilst these drivers work regularly or constantly in the Member States with higher labour costs. Illegal cabotage also exploits the economic differences between the Member States and profits from ineffective enforcement of the EU road transport market rules and of PWD. In such cases, again, drivers employed in a low-cost home country under the terms and conditions of that country carry out regularly cabotage operations in a high-cost host country. Through such practices, as described above, operators save on labour costs and offer cheaper transport services, gaining competitive advantage over the operators employing their drivers in high-cost Member States. This leads to distortions of competition, in particular with micro enterprises who cannot cope with the race-to-the-bottom in terms of labour costs. On the other hand, such practices also deprive drivers from the low-cost Member States of the higher remuneration and social protection of the host Member States where they carry out significant amounts of work and where their daily living costs are higher. Overall, as the road transport sector is highly price-sensitive the distortions of competition are mainly based on differences in costs faced by companies. The continuing cost differentials (particularly labour costs) between Member States add to the pressure to cut costs, which is an incentive for illegal activities (such as abuse of the EU social, labour and market rules). Also different national rules and administrative barriers to providing road transport services contribute to the distortions of competition by putting foreign competitors in a disadvantaged position. Another source of distortions is discrepancies in implementation, application and enforcement of the current EU legislative framework. All these problem drivers and root causes are described in the following sections. 2.3.1.1Problem driver: Abuses of social, labour and market rules in road transport Non-compliance with the EU social, labour and market rules is a main source of distortions of competition between operators. The results of the controls of compliance with the provisions of the Driving Time Regulation from 2009 to 2014 indicate a diminishing trend in the number of infringements reported. For the period 2013-2014, nearly 3.3 million offences were detected in the EU, reduced from the 3.9 million offences reported in 2011-2012 and the 4.5 million in 2009-2010. Nevertheless, level of compliance of the social rules remains suboptimal. The decreasing level of infringements reported cannot be interpreted simply as an improvement in compliance, for several reasons. Firstly, the overall enforcement capacity of national authorities in terms of the number of trained enforcement officers decreased by around 35% (from 38.595 to 25.148) between the reporting periods 2009-2010 and the latest one of 2013-2014 . Consequently, the total average number of controls carried out in EU in 2013-2014 decreased by 4.8% compared to 2011-2012 . Secondly, as reported by enforcement authorities in the course of the ex-post evaluation and during frequent meetings with enforcement network organisations , the techniques of manipulation and circumventing the rules have developed, making it more challenging to detect infringement. These factors appear to have negatively affected infringement detection rates, which diminished from 3.1 offences detected per 100 working days checked in 2009-2010, then 2.4 offences detected in 2011-2012 to 2.17 offences detected in the latest reporting period of 2013-2014. Overall, the enforcers consulted within the ex-post evaluation study estimate that the actual compliance is much lower than the infringement data would suggest, as a number of intended or unintended infringements may remain undetected due to random, insufficient and ineffective checks as well as sophisticated manipulation techniques. There has been a continuous pattern of types of infringements since 2007-2008, with the provisions on breaks and rest periods being breached most frequently, followed by the infringements concerning driving times and driving time records. The manipulation of recording equipment or lacking records has a smaller share of infringements detected at the roadside and at the premises of the company . The data on infringements against the working time provisions are not available, since there is no legal requirement for Member States to carry out regular controls on compliance with those rules. Compliance levels, however, are regarded as low by all stakeholder groups. Almost half out of 36 drivers participating in the survey in the course of evaluation reported that they worked more than maximum allowed 48 hours on average per week. Non-compliance with the rules reduces the protection of workers and gives a competitive advantage to those breaking the law by allowing for cost reductions and productivity gains. However, the precise advantages of non-compliance with existing social rules for undertakings are difficult to quantify, as they depend on the type of transport operation that is carried out, the underlying contract and terms agreed with the contractor, and the type of infringement that is committed as well as its extent. In practice, the benefit will vary with each transport operation and the severity of the violation. Non-compliance with the market rules on access to the profession and to the haulage market is addressed in more details in a parallel Impact Assessment. The fraudulent practices of letterbox companies and illegal cabotage hinder the effective controls of compliance with the social rules, including those on posting of workers. Therefore, they are also considered in this problem definition as one of the contributing factors to distorted competition. The ex-post evaluation support study estimated that there were at least 430 letterbox companies in 2012 in the EU and that the cost advantage of setting up a letterbox company for hauliers reaches 31% compared to a properly-established company. The level of illegal cabotage is reported to be relatively low (below 1% of all cabotage activity). However, these practices have a significant economic and social impact on the sector. These elements give an idea of the magnitude of illicit employment schemes applied which renders the implementation of social rules ineffective.

Box 2.In March 2017, there was an investigation by the Belgian authorities into Belgian hauliers having established letterbox companies in Portugal and Slovakia. The Belgian authorities found 25 letterbox companies registered in the same address in Slovakia. The estimated unpaid social contributions in Belgium amounted to €6-€7 million . Other business practices constitute abuses of the provisions of PWD. This is the case of operators legally established in low-cost Member States and providing transport services regularly or for long periods on the territories of other Member States without applying the core terms and conditions of employment, including pay, of those host States. Box 3.For instance, a big company established in Hungary, disposing of around 3500 vehicles, employing around 3500 drivers from EU-13 Member States mainly under Hungarian labour contracts. Only 950 of those drivers operate in/from/to Hungary. Majority of them carry out habitually international transport operations from/to/within other Member States, mainly from EU-15. Around 1200 vehicles are constantly in Germany, 750 in France, 700 in Italy, etc. The Open Public Consultation shows that among legislative challenges affecting negatively compliance the most important was different application of the rules (including those on posting of workers) by Member States and diverging enforcement practices, with 55% of individual respondents (drivers, operators, etc.) and 70% of institutional respondents (authorities, controllers, industry associations reporting such problems. 2.3.1.2Problem driver: High regulatory costs for operators and Member States' authorities Regulatory burden linked to the existing road transport social rules The regulatory costs related to compliance and enforcement of the existing road transport social legislation do not appear to constitute a significant common problem, as these are generally outweighed by the benefits in terms of more effective enforcement and more harmonised working and business conditions. However, the analysis performed shows a room for improvement in the reduction of the regulatory burdens for transport operators (to comply with the EU social rules) and for national authorities (to enforce the EU social rules). Box 4. In some Member States, controllers require from the driver a full record for all periods when the driver is not working or working outside the scope of the Driving Time Regulation, whilst in other States only those daily activities when driving in-scope need to be recorded. Some national authorities do not accept manual records or the 'EU form for attestation of activities' as a proof of driver's activities when he was away from the vehicle and could not make records in tachograph. In Austria the EU 'form' is still required if retrospective entries for such activities on the tachograph were not possible. In Finland and Latvia, the use of the EU form is allowed, but also other types of proof can be provided, while other Member States, such as France and Greece, disregard the EU form and require other types of proof for such activities. Different interpretations of EU law and enforcement practices lead to a regulatory burden involved in determining and applying national administrative and control requirements, and in particular where information is not easily accessible or there is a language barrier. This increases compliance costs and leads to higher risks of unintentional non-compliance and subsequent fines. For the national authorities, diverging interpretations of EU law and diverging national measures, as well as inconsistent enforcement systems, appear to be major factors in rendering the cooperation between the Member States difficult. Inefficient and uneven use of control tools and systems such as the risk rating system, and insufficient data exchange between Member States, lead to higher than necessary enforcement costs resulting in regulatory burdens that could be avoided by better exploitation of the existing possibilities. Regulatory burden linked to the disproportionate application of posting rules to road transport A significant burden for the industry has arisen with regard to the national measures on the application of the PWD by a number of Member States (notably Germany, France and Austria) to the transport sector. This has resulted in different administrative and control requirements to be complied with by foreign operators providing services on the territory of these Member States. The identified difficulties (based on a number of complaints , petitions, etc.) with the application of these national measures suggest that operational and administrative costs borne by affected operators are excessively high compared to the benefits for drivers. In particular, where transport operations are not frequent and/or the amount of work performed is insignificant, these regulatory costs appear unjustified and disproportionate compared to the benefits in terms of fair competition and working conditions. A better balance between administrative costs for operators and benefits for drivers in terms of higher remuneration and better social protection would, however, be reached in cases where a driver works for long periods in a host Member State (see Box 3 ) with higher labour and social standards. According to the operators engaged in international road transport operations carried out in/from/to the territories of countries applying a national minimum wage, it is not the payment of minimum wage that constitutes the main concern, but the extensive (and divergent) administrative requirements and control measures imposed on them to demonstrate compliance with the minimum wage law which creates disproportionate administrative costs. The estimated costs related to the national measures on minimum wage are described in detail in section 2.4.3. 2.3.1.3Problem driver: Unequal treatment of drivers and operators Unequal treatment of drivers and operators is based on different levels of control of compliance of the rules in force, stemming from different national interpretations of those rules and different control measures that may have discriminatory effects. Diverging interpretations of the EU rules lead to situations where a behaviour considered compliant in one Member State constitutes an infringement in another one and leads to unexpected sanctions on operators. The evidence (see Box 5 ) shows that such diverging interpretations may result in losses of thousands of Euros for an operator resulting from immobilisation of vehicles, financial fines, prosecuting fees, costs of appeal, and losses resulting from non-executed service contracts with client. Box 5. For example, the Belgian authorities regard that transporting (driving) a new vehicle intended for the final customer should be subject to the driving time rules and tachograph requirements (i.e. tachograph must be installed and the driver's card used) and that such operations benefit from an exemption provided for in the EU legislation for new vehicles not yet put into service. As a result, the vehicles were immobilised and a manufacturer, drivers and their employers have been unexpectedly penalised with fines of 25,000 € per vehicle and 50,000 € and 75,000 € per transport company. Also widely diverging national penalty systems (as regards the type and level of penalties for the same infringement) lead to unequal treatment of drivers and operators depending on the country in which the infringement has been committed. However, this issue is not being addressed by this Impact Assessment, as explained in Annex 5. Diverging interpretations and implementation of the provision on the regular weekly rest (see Box 1 ) also cause legal uncertainty and result in unequal treatment of drivers and operators engaged in international operations. Box 6. Belgium and France introduced national measures in 2014, penalising operators and drivers for spending the regular weekly rest in the vehicle. In France the fine is up to €30,000 for the operator and a year's prison sentence, whereas in Belgium, fines are up to €1,800 and in Austria up to €5,000. Other Member States do not prohibit taking regular weekly rest in the vehicle and other regard enforcement of such prohibition to be unfeasible.

These national measures on weekly rest mainly affect primarily foreign drivers engaged in long distance international operations (in particular from peripheral countries such as Portugal), because drivers carrying out domestic or short distance international operations usually return to their home/base for a regular weekly rest. In the context of a general shortage of adequate resting facilities and secured parking areas in the EU, international drivers engaged in long distance operations usually take their weekly rest in their vehicle, which often offers better rest conditions than those otherwise available. However they are then exposed to the risk of fines as BE and FR, which consider this practice to be an infringement. Another example of different interpretation and enforcement leading to unequal treatment of drivers concerns the provision on recording driver's activities when away from the vehicle. As explained in Box 4 different evidence is required and/or accepted by the national enforcement authorities with regard to the presentation of records for periods when a driver could not use a tachograph when being away from the vehicle. This leads to the situation where the same set of driver's records is regarded as compliant in one Member State and is subject to sanctions in another. As regards illicit employment practices linked with letterbox companies, illegal cabotage and uncertainty as to the application of PWD to road transport, these affect directly drivers and their right to equal pay for equal work. It concerns mainly EU-13 drivers who are employed under the terms and conditions of the Member State with lower labour costs and who work regularly or perform significant amount of work in host Member States with higher labour and social standards. Often drivers accept such working conditions because they fear losing their job or because they are not aware of their rights to choose the applicable labour law or the right to host country's terms and conditions of employment in case of posting situation. Box 7.Anecdotal evidence suggests that Polish operators employ drivers from Romania at rates of pay that are up to 50% less than what is paid to Polish drivers – rates that are only possible if the requirements regarding applicable terms and conditions of employment are not complied with. It has also been reported that Spanish operators revert to drivers from mainly Romania and Bulgaria, who accept net salaries in the range of EUR 1,000 per month (CNR, 2013). Such illicit employment practices affect also indirectly the EU-15 drivers whose jobs are threatened (rate of pay, as such, is not at risk as it is guaranteed by the national law or collective agreements) by unfair cost-based competition from operators (both from EU-15 and EU-13) applying such fraudulent business and employment practices. However, no evidence is available to show the magnitude of those risks. The compliant operators, in particular from EU-15, suffer from a competitive disadvantage when having to compete with other operators active in the same Member State, but illegally established and employing their drivers elsewhere, where labour and social costs are significantly lower. Such illegal practices have wider-reaching consequences. Several Member States have adopted measures such as imposing national rules on a minimum wage under the PWD to fight what they consider illegal practices. These national measures have significant consequences on the internal market in terms of high regulatory costs (also for the compliant hauliers) . 2.3.2Problem of inadequate working and social conditions of drivers Working conditions of drivers cover a broad range of aspects, from working time (hours of work, rest periods, work schedules) to remuneration, as well as the physical and mental aspects of poor working conditions. The result of two parallel ex-post evaluations (evaluations of road transport social legislation and of internal market rules) show that abuses of the EU social and market rules in force (see section 2.3.1.1) affect negatively working conditions of drivers. For instance, Tassinari et al (2014) highlighted continued issues of above-average long, atypical and irregular working hours reported by professional drivers when compared to other sectors. In addition, not all risk factors have been adequately or sufficiently addressed by the current rules. These include long periods away from home, time pressure, inadequate resting facilities and performance-based payments which have also adverse effects on drivers’ working and social conditions. Drivers have been increasingly subject to greater work demands, along with a loss of autonomy, which poses the risk of unhealthy stress levels and potentially a range of stress-related illnesses (Broughton et al, 2015). Increasing cost-based competition and the emergence of complex, and sometimes illicit, business and employment practices amplify the problem. High regulatory costs (section 2.3.1.2) not only distort competition, but also create risk of depriving drivers from their protection rights when working temporarily in another Member States, because there is a higher incentive for operators to circumvent the rules. Box 8. BBC article of 15/03/17, illustrates the inadequate working and social conditions in the road transport sector, due to illicit practices. It describes the situation of drivers coming from poorer countries, also non-EU countries, who are employed by haulage companies based in Eastern Europe and brought to Western Europe to transport goods around. They are paid low Eastern European wages while working for several uninterrupted months in Western Europe. A Romanian driver who transported goods in Denmark, claimed that his monthly salary averaged to 477 EUR, whereas a Danish driver can expect a salary of EUR 2,200. These drivers have usually no access to adequate sleeping, toilet or hygene facilities and are exposed to long periods away from their homes. The risk of deteriorating working conditions also negatively affects the image and attractiveness of the driving profession, leading to driver shortages and a risk of higher pressure on the drivers that remain . The main relevant causes of inadequate working and social conditions addressed by this Impact Assessment are described in the following sections. Problem driver: Stress and fatigue and low level of social standards of drivers The following factors contributing to stress, fatigue and deterioration in social standards are analysed in this section: long periods away from home and inadequate rest facilities, illicit employment practices, performance-based remuneration, and stringent enforcement of the social rules. Long periods away from home and resting facilities Various reports note that working conditions have deteriorated with respect to issues such as long periods of work away from the driver's home base leading to issues of difficult work-life balance . These periods away from home appear to have significantly increased over the last decade due to the internationalisation of the transport market. The studies show that long periods away from home contribute to driver stress and fatigue, in particular when combined with inadequate accommodation for rest periods and lack of access to sanitary facilities. Long periods away from home also have adverse effects on drivers’ health because of inadequate access to proper nutrition, which is frequently the case for drivers away from their home base, as well as poor quality sleep and work-related sleeping disorders.

The research and stakeholder consultations and other studies carried out as part of the ex-post evaluation appear to confirm the increasing problem with long periods away from home/base. It was found that out of the 25 drivers engaged in international transport operations who responded to the targeted survey, 7 (or 28%) typically spend their regular weekly rest (of 45 hours) on-board the vehicle (all engaged in freight transport), 3 spend it in an accommodation provided by an employer (all engaged in passenger transport). Box 9. According to a survey carried out among Polish drivers by the Polish employers' association, 23% (46 out of 200) spend 15 days on the road. 15 % (30 of 200) spend more than 30 days away from home/base and 7% (14 of 200) less than 5 days away from home/base. The Lithuanian trade union estimated that these periods have increased from around 5-10 days to up to 60 days in freight transport and even up to 90 days in passenger transport over the past ten years. Overall, out of the 11 responding trade unions, six stated that periods away from home for international journeys have increased. In France, in 2011 it was reported that half of French drivers spend more than 15 nights a month away from their home with more than 95% reporting that they sleep in their vehicle. There is a difference between EU-15 and EU13 drivers as regards the length of those periods and the place of taking rest. Box 10. TRT (2013) found, based on a survey of 24 drivers that EU-13 drivers in particular stayed away for two to four consecutive weeks before returning to their homes, while EU-15 drivers do not generally stay away from home for more than one to two weeks. The roadside survey carried out in Germany among 1,800 drivers suggests that EU-13 drivers spend at least two weeks away from home. While 72% of all drivers interviewed spend their daily rest periods in/by their vehicle, 43% of EU-13 compared with 11% of EU-15 drivers also spends their weekly rest period in/by their vehicle (Broughton et al, 2015). The ETF survey on non-resident drivers reported that 95% (out of 1000 interviewed drivers) of non-resident drivers spend their rest time on board their vehicles (ETF, 2012). However none of the sources mentioned above specify whether the weekly rest periods taken in the vehicle include regular weekly rest periods or only reduced rest periods. Illicit employment practices The problem is amplified when combined with 'letterbox' companies or illegal cabotage. Drivers are employed under terms and conditions of employment of low-cost 'home' country and carry out their work over long periods of time in high-cost 'host' countries. The drivers' actual wages and social protection conditions do not reflect the living costs, to which they are exposed during long periods of working in other Member States. This incites them to spend all their time in the vehicle to save, in particular on accommodation costs and meals. The legal uncertainty as to the application of PWD to road transport and diverging national administrative requirements linked to the application of the posting rules contributes further to stress drivers. EU-13 drivers providing services in other Member States are exposed to a risk of extensive controls to verify compliance of their employers with national minimum wage law of the host Member State. EU-15 drivers are faced with a threat of losing their jobs due to unfair cost-based competition by operators recruiting low-cost drivers from EU-13. Remuneration based on performance (related to distance travelled or amount of goods carried) is another factor increasing levels of stress. The Driving Time Regulation allows for performance-based remuneration provided that such remuneration does not endanger road safety or does not encourage infringement of the Regulation. This form of pay is widespread across the EU, particularly among drivers from the EU-13 Member States, where the variable proportion of driver pay amounts to 55% on average compared to 21% in the EU-15. This type of payment combined with pressure from the client or the employer creates an incentive to drivers to exceed allowed driving times or shorten rest periods. According to 36% (13 out of 36) of drivers interviewed in the framework of the ex-post evaluation, such payment schemes constitute a major cause of non-compliance with the social rules. Stringent enforcement of the social rules Road transport social legislation is comprehensive and demands a lot from drivers in terms of understanding and properly recording their activities, Accidental incorrect recording can lead to high fines. Stress related to compliance with these requirements is higher among drivers that participate in international operations, since these drivers have to be aware of potentially varying applications or interpretations of the EU legislation across the Member States. The stress due to roadside checks is intensified by the risk that drivers will be held responsible for the actual payment of on-the-spot fines when an infringement is detected at roadside. The ex-post evaluation identified that drivers also perceive the rules as being too inflexible given the sometimes unpredictable nature of the drivers’ work. Rigid enforcement of the rules on driving time, breaks or rest periods make it difficult to comply in case of unforeseen circumstances under which the transport operation is carried out (e.g. traffic, congestion, accidents, severe weather conditions, long waiting times at loading points, etc.). The drivers survey carried out within ex-post evaluation study shows that 15 out of 22 drivers responding (or almost 70%) stated that inflexibility in the rules (e.g. to account for specific traffic conditions) was a cause of non-compliance. Due to exceptional circumstances and inflexibility in the rules drivers may be forced to spend rest periods away from home even if they are only a short distance away, which contributes to stress as well as fatigue. Box 11. For example, a Spanish driver starts his international transport operation in Barcelona, where he lives, to transport goods to Germany and Poland. He plans to take his weekly rest after 5 days of work in Barcelona. But due to unexpected heavy traffic situation in France he only manages to arrive in Perpignan, which is 192 km away from Barcelona. He is obliged to take his regular weekly rest (45 hours) on a parking facility on highway A9 just outside Perpignan, instead of spending it at home with the family. On top of that the French police imposed him a fine of 27.000 € since he took the regular weekly rest in the vehicle, which is not allowed in France.

Drivers engaged in the transport of passengers are also exposed to stressful situations, as compliance with EU rules on driving and rest times might be difficult for tourist tours. Drivers are frequently asked to continue driving to reach destination (e.g. hotel), even when he is required to make a break. If not meeting planned arrival times drivers might fear the risk of dissatisfied customers, which can lead to aggressions, increasing stress and fatigue levels. All the factors taken together affect negatively the driver's working conditions, including health and safety, social protection and remuneration, creating indirect risks to road safety through stress and accumulated fatigue. Several studies (see Box 12 ) provide various figures on fatigue-related accidents. These sources do not, however, confirm whether the fatigue was due to the working, driving and resting times or conditions of employment or they are more linked to external factors such as health problems, drugs, alcohol, unhealthy life-style, sleeping disorders, etc. Box 12. The IRU in its ETAC study (IRU, 2007) cites a proportion of fatigue-related accidents of 6%. In a study conducted in 2011, the Dutch road safety institute found that fatigue was responsible in approximately 23% of accidents where international truck drivers were involved (SWOV, 2011), while Connor et al. (2001) report that fatigue is a contributory factor in a range of 10%-20% of road crashes where professional drivers are involved. Finally, a research conducted by the Swedish Transport Institute VTI found that 19% of bus drivers had over the past decade been involved in an incident due to fatigue and 7% of them had been involved in an accident caused by their own fatigue (Anund et al., 2014). 2.4What are the main legal issues underlying the problems on the ground? The main legislative deficiencies contributing to the problems are: (1)unclear or unsuitable road transport social rules; (2) disparities in interpretation and application of the rules; (3) inconsistent and ineffective enforcement; (4) insufficient administrative cooperation; (5) posting rules unfit for the highly mobile road transport sector; (6) disproportionate national measures for the enforcement of the existing posting rules to road transport. The issues linked to the existing social legislation are described in this section (where not already covered in previous sections) under two headings: unfit rules and inefficient and inconsistent enforcement. Issues related to the PWD are considered in section 2.4.3 The results of the Open Public Consultation confirm that disparities in national interpretations and enforcement are the most important obstacles to the effectiveness of the social rules. 84 % (969 out of 1152 respondents) of the individual stakeholders (drivers and operators) and 70 % (106 out of 152) institutional stakeholders (national authorities, enforcement bodies, industry associations and workers' organisations) expressed this view. In the Open Public Consultation, 66% (753 out of 1148) of individual stakeholders regarded vagueness of the social rules as one of the important obstacles to their effectiveness and 52% (78 out of 148) of the institutional respondents concurred. As regards inadequate or insufficient social rules, 77 % (887 out of 1152) of individual stakeholders and 71% (107 out of 151) of institutional respondents considered it to be an important obstacle. Insufficient administrative cooperation between Member States was considered as a significant obstacle by 63% (93 out of 147) of institutional stakeholders (drivers and operators were not consulted on this specific issue). Inefficient or diverging use of control tools, leading to different results of checks, is a big obstacle according to 74% of individual stakeholders and 65% of institutional stakeholders. As regards application of PWD to road transport, 72% of all respondents regard these rules unclear and/or difficult to apply and enforce. 2.4.1Unclear or unsuitable road transport social rules Issue of weekly rest requirements The Driving Time Regulation clearly states that a driver may choose to spend his daily rest (minimum 9 or 11 hours) and his reduced weekly rest (min. 24 hours) in the vehicle, when away from base, provided that it has suitable sleeping facilities for each driver and the vehicle is stationary. The Regulation is, however, silent with regard to where the regular weekly rest must be taken (min. 45 hours). This leads to diverging interpretations by different Member States. As a result drivers face the legal uncertainty whether or not they can spend the regular weekly rest on board their vehicle, and transport operators face similar problems as regards the organisation of drivers' work. All this leads to unequal treatment of drivers and operators engaged in international road transport operations (see sections 2.3.1.1 and 2.3.1.3) It also creates practical problems of overcrowded parking places and there is evidence that drivers cross borders in order to spend the weekly rest in a country where sleeping in cabins is not (yet) sanctioned. This in turn can have adverse effects on the driver's rest conditions. Two factors amplify the difficulties with the application of the provision on the regular weekly rest. One is exogenous and concerns infrastructure deficiencies, namely the lack of safe and secure parking areas and poor accessibility or quality of resting facilities. This leads to the situation that a driver has often no choice but to spend the regular weekly rest on board the vehicle. Another factor relates to the duration of the weekly rest and its inflexible application in the current EU regulation. The Regulation requires that in any two consecutive weeks, a driver must take two regular weekly rest periods or one regular and one reduced weekly rest. The reduced weekly rest shall be compensated by an equivalent period of rest taken en bloc before the end of the third week following the week in question. The operators and drivers claim that the implementation of this requirement does not take account of exceptional circumstances which drivers face, such as traffic issues (congestion, accidents), weather conditions, long waiting times at loading/unloading points, and which result in delays in transport operations. As a consequence, a driver often cannot reach his destination or a home/base for the regular weekly rest. The European Court of Justice is expected to issue a preliminary ruling following a request of a Belgian Court where the Advocate General suggests that: "Article 8(6) and (8) of Regulation No 561/2006 is to be interpreted as meaning that a driver may not take regular weekly rest periods referred to in Article 8(6) of this Regulation inside the vehicle.” The clarification of the issue of whether taking the regular weekly rest on board the vehicle is allowed, is however not expected to solve the problem of enforceability of such a prohibition and the other relevant issues of lacking adequate accommodation and lacking flexibility in organising weekly rest periods in order to reach home/base. Hence, the provision on regular weekly rest remains difficult to comply with, in particular by international drivers, and difficult to enforce, in particular if proof is required that regular weekly rest has not taken place in the vehicle. Issue of difficulties to comply with requirements on breaks, resting and driving periods The ex-post evaluation shows that for certain types of transport services, due to their inherent features, it is difficult to apply strictly the prescribed thresholds for work and rest. This concerns, in particular: -International passenger transport by coach: there are distinct service needs (related to the demands of passengers) compared to freight transport. Drivers are often pressed to delay their break in order to reach the destination. Also the industry (bus and coach operators) has claimed that the current restrictions concerning the application of the 12-day rule are excessive (e.g. the need for long rest periods before and after a journey; short daily shift times and inflexibility in the distribution of obligatory breaks). -Domestic occasional passenger transport by coach: current rules provide different treatment of those operators and drivers from those engaged in international operations. The 12-day derogation allowing the driver to postpone his regular weekly rest is only applicable to international trips. This means that a driver carry out a trip between South Germany and Berlin will not be subject to the same rule on resting as his colleague who carries out a trip between Strasbourg and Berlin. There is however no difference between those two operations with regard to distance travelled, working time executed and job requirements, hence there is also no reason for differentiating the requirements related to working periods and weekly resting times. -Fuel suppliers and construction site deliveries and heating oil or de-icing products distribution: the weekly rest period provisions are regarded as particularly problematic, because of the seasonal peaks in demand;

-Businesses that typically work all week, such as the catering trade, bakeries, or delivering specific goods e.g. perishable goods, live animals, concrete-mixers, indicate that they find it difficult to comply in particular with regular weekly rest rules; -International drivers engaged in long international transport journeys -due to unforeseen waiting time or traffic obstacles they are not able to reach their scheduled destination or home/base and must therefore stop for a weekly rest elsewhere. The difficulties with compliance due to lack of flexibility expressed by stakeholders are confirmed by data on infringements detected. In the period 2013-2014 the most frequent offences detected concerned the requirements of rest periods (25%) and breaks (23% of all infringements), whilst infringements concerning driving times and records occurred less frequently (16% and 17% respectively). Issue of the scope of the road transport social legislation The Driving and Rest Time Regulation applies to the carriage of goods by vehicles of more than 3,5 tons or of passengers by vehicles carrying more than 9 persons (including a driver). Whilst it specifies clearly the vehicles and the transport operations that fall within the scope of the legislation, it does not clearly identify types of drivers who are obliged to apply Regulation's provisions. The Road Transport Working Time Directive is also not clear as it simply stipulates that it applies to those drivers who are covered by the Driving and Rest Time Regulation. The definition of a "driver" is very general, which creates uncertainty whether all persons who drive the vehicle, regardless of their main professional occupation should therefore be obliged to use a driver's card and record all driving and non-driving activities . Box 13. This is for instance the case of private individuals driving those vehicles, which, due to their type or size, fall within the scope of the legislation; those who are transporting their belongings for private purposes (e.g. persons transporting race cars or horses by vehicles beyond 7,5 t in order to participate in races as part of their hobby). This leads to differences between Member States in the application of EU law. For instance the UK and Spain consider that driving time rules apply also to non-professional drivers, but the UK establishes a category of 'occasional drivers' who are exempt from the provisions. The matter also came up in a recent court case but the ruling concluded that the provisions of Regulation (EC) No 561/2006 apply essentially to professional drivers and not to individuals driving for private purposes, so the scope has not been fully clarified. 2.4.2Inconsistent and ineffective enforcement of the road transport social rules Issue of difficulties with enforcement of the working time rules In contrast to the Driving Time Regulation, there is no explicit legal requirement for Member States to carry out regular controls on compliance with the working time provisions and subsequently to collect and submit to the Commission quantitative information on the enforcement. The lack of quantitative data does not allow for regular monitoring of the working time provisions. A qualitative assessment suggests that the enforcement practices of the Road Transport Working Time Directive vary significantly across Member States and that the level of compliance is low. This further implies that enforcement in general is not effective, which in turn is due to the low priority given to enforcement of the Directive. For the implementation period 2013-2014 only ten Member States provided statistics on offences detected. Box 14. The evaluation study shows that 40% of drivers across the EU work regularly more than the allowed maximum 48 hours per week (with a particularly high result for Germany of 90% ). The survey among enforcers carried out within the study on ex-post evaluation confirmed the problems with controlling compliance with working time rules. Almost half of the enforcers (8 of 18) regarded controls as not being frequent enough. They stated that the main obstacle is the excessive time needed for detecting infringements (14 out of 21 enforcers). This is mainly due to the fact that the average weekly working time is calculated over the long reference period of 4 months (which can even be extended to 6 months) and that the completeness of work records depends on the driver correctly using a switch mechanism in the tachograph to record 'other work' i.e., work other than driving (which is automatically recorded by tachograph). Other factors affecting effective enforcement of working time rules are linked with lack of control capacity (10 out of 19) and language barriers (10 out of 19). Issue of inefficient and inconsistent use of control tools The effectiveness and efficiency of enforcement is also affected by the lack of access to, or poor usage of, information contained in the national risk rating systems which were established in order to better target controls at companies with a higher risk rating. Not all Member States have their risk rating system fully operational and accessible to control officers apparently because of underlying budgetary constraints, national arrangements as regards the enforcement system or data protection issues. 17 Member States out of the 25 States (including Norway and Switzerland) responding to the consultation in the ex-post evaluation study use a risk rating system, while 3 of the remaining 8 States admitted that they do not have their risk rating systems operational. In addition, Member States differ in their definition of the details as regards the functioning and application of their risk rating system, including formulas for calculating the risk rating of a transport undertaking breaching the EU rules on driving and resting times and on use of the tachograph. Only 8 Member States use the formula for calculation of risk rating of the transport undertaking based on or similar to the Commission recommended formula established in 2008. All others established their own methods. As a result the same type and number of infringements may lead to classifying an undertaking in one Member States as a high risk company and hence being more frequently checked, whilst in another Member State a company acting in a similar fashion could be regarded as low risk and therefore not subject to more frequent targeted controls, giving them an advantage. In addition, due to diverging formulas and uses of the Risk Rating Systems, the data on risk rating coming from different Member States is not comparable and subsequently not exchangeable. All this makes the mechanism aimed at improving cost-effectiveness and consistency of enforcement ineffective. Issue of insufficient administrative cooperation A range of administrative cooperation measures set out in the social legislation were designed to address the issue of the low level of exchange of data, experience and intelligence between Member States as well as scarce cooperation in cross-border investigations. However, according to the results of the ex-post evaluation, the framework provided for in the legislation such as concerted checks, setting up an intra-community liaison body or common training sessions, appears not to have been sufficient. The requirement of carrying out a minimum of 6 concerted roadside checks per year is consistently not complied with by around half of Member States . The Member States who cooperate on a regular basis in the field of enforcement, training and exchange of intelligence and good practices are those who also participate in Euro Contrôle Route (ECR) – the network of European Transport Inspection Services or in Confederation of Organisations in Road Transport Enforcement (CORTE). Outside this network the cooperation between Member States is incidental and remains mostly between neighbouring states. Insufficient joint cross-border controls between Member States and insufficient exchange of information between national enforcement authorities lead to inconsistent and ineffective cross-border enforcement.

Regular monitoring of developments in the road transport sector is very difficult due to the lack of regular exchange of information and structured cooperation between Member States on common understanding and application of the EU rules. This often results in the adoption of uncoordinated and unilateral national measures to address competition or social problems. This implies deficiencies in the EU regulatory framework (which leads Member States to feel driven to adopt national measures on the application of the minimum wage to road transport) and/or affects negatively the effectiveness of the EU social rules (e.g. national measures on sanctioning for taking regular weekly rest in the vehicle). The Open Public Consultation shows that 63% (93 of 148) institutional stakeholders consider adopting uncoordinated national measures as an important market obstacle and 55% (80 of 145) consider insufficient cooperation between the national authorities as the factor hampering effectiveness of the social legislation. 2.4.3Application of PWD rules to road transport sector Unfit posting rules for highly mobile road transport sector The PWD applies to businesses in all sectors (except the merchant navy and the self-employed) that post workers temporarily to a Member State other than the one in which the worker habitually works .It does not establish the minimum duration of the temporary work, hence the core set of the terms and conditions of employment of host country apply in principle to foreign transport operators and their employees from the very first moment of their activity in the host State, regardless of the total duration and/or frequency of operations. At first sight, it would appear that the PWD might not be suitable for the road transport sector. Whilst these general rules work well in "typical" posting situations such as construction or the meat industry, where the amount and the duration of work is usually significant, they are less appropriate in long cross-border sub-contracting chains and inherently high mobility of the workforce, such as in the road transport sector. In particular, the obligation to apply the host country minimum rates of pay and the rights to annual paid holidays is difficult to apply in case of drivers engaged in typical international road transport operations. Box 15. Typically, international operations are carried out in several countries (5-6 in one month) often for a very short duration on the territory of one Member State. According to estimations provided by road industry, international transport operation involving several transport services of short individual durations performed on the territory of several countries over a period of around 2 weeks constitute around 40 % of all international freight transport activities. In such cases it is difficult to establish the place where a driver 'habitually' works or the place in which he performs majority of his activities in order to calculate his salary and establish his rights to annual holidays. On the other hand there are obviously cases of road transport operations which clearly meet the current criteria of posting. These concern transport undertakings that perform the substantial part of their transport activities in one or two 'host' Member States in one month (see Box 3 and Box 8 ). In other cases, the application of posting of workers rules creates disproportionate barriers to cross-border provisions of transport services while providing little benefits for the drivers. As regards the administrative requirements provided for in the Posting Enforcement Directive aimed to fight and sanction circumventions, these are also not well adapted to the specificity of the sector. In particular, requirements of pre-notifications of each operation, keeping all work related documents on board the vehicle (employment contract, payslips, time-sheets, proofs of payment of wages, all translated into the languages of 'host' Member States), designating a representative to liaise with national authorities of 'host' Member State and being available for a period of 18 months following the end of the posting are excessively burdensome and disproportionate, in particular in typical international road transport operations carried out for brief periods in many 'host' countries. The Open Public Consultation shows that 70 % of all respondents (765 out of 1106 individual respondents and 97 out of 137 institutional respondents) regard the posting provisions as not adapted to the specificities of the highly mobile road transport sector. This opinion was expressed by more respondents from EU-13 than from EU-15. In the same vein the lack of clarity of application of PWD in transport was regarded a major problem by 91% (282 out of 309) of both institutional and individual EU-13 respondents and by 65% (599 out of 924) of EU-15 respondents. The SME Panel Review brought similar results with 70% (39 out of 56) of respondents regarding the posting provisions not to be fit for the sector. Disproportionate national measures for application of PWD in road transport Overall, Member States have diverging understanding of the applicability of PWD to road transport, where almost all EU-13 Member States consider that PWD should not apply to road transport sector. A few Member States (FR, AT, DE, BG) seem to regard that posting provisions are fully applicable from the first hour of a driver's work in the host State and the others (e.g. IT) consider the application of PWD justified when the activities of foreign operators in the host country represent a sufficient link with that country, in terms of amount or duration of work carried out. In the absence of uniform application of the PWD to the road transport sector and in response to the issues linked to increasing cost-based competition such as illicit business and employment practices, some Member States (Germany, France, Austria, Italy ) introduced in 2015, 2016 and 2017, national measures on the application of their national minimum wages to all foreign operators and drivers carrying out any transport activities on their territories. The side effects of such national measures, in particular regulatory requirements provoked heated reactions from the industry (11 associations of road transport carriers mainly from EU-13) and national authorities (mainly EU-13 Member States ) who sent joint position papers to the Commission denouncing what they saw as protectionist measures leading to fragmentation of transport market in the EU. This in turn triggered a response from seven Member States which sent a joint letter to the Commission urging analysis of the social and safety issues in road transport sector and subsequently established the 'Road Alliance' to combat what they see as social dumping and unfair competition in road transport. These actions show that the EU is essentially divided in two opposing blocs when it comes to some of the key social and competition aspects. These national measures reportedly have resulted in significant regulatory burdens for industry, such as complying with the strict administrative and control requirements imposed by France and Germany, for instance, which must be fulfilled by foreign operators. The key requirements include pre-notification of each and every transport operation intended to be carried out on/to/from the territory of the 'host' Member State, translation of all relevant employment documents into the language of the 'host' State and designating a representative to provide information and documentation to control officers in the 'host' state. These requirements apply equally to all foreign operators from all Member States even those established in countries where minimum rates of pay are higher than in the host State. They do not seem justified in many cases as they are not linked to any benefits for drivers or to ensuring fair competition between hauliers. The view generally held in the EU-13 Member States, both by governments and operators, is that if all Member States were to impose their national minimum wage legislation with different administrative requirements and control measures to foreign operators, this would create excessive administrative barriers restricting unduly the freedom to provide cross-border services and leading to fragmentation of the internal market for road transport. In such a situation, one typical international transport operation involving 6 different Member States would require from the operator the application of 6 different rates of pay in proportion to the time worked on the territory of those different states and the preparation of 6 different sets of documents in national languages of the 'host' countries. Based on estimations provided by haulier organisations from Austria and the Czech Republic, the average additional administrative costs for Austrian and Czech hauliers related with the application of the national minimum wage measures in Germany and France are considerable. Box 16. According to Austrian estimates, the additional administrative costs oscillate (depending on the size of the company and the volume of activities carried out on the territories of 'host' states) between 3,300 € and 4,000 € per company per year for compliance with the German administrative requirements and between 4,000 € and 14,000 € per company per year for the French requirements. These costs do not include costs related to controls which are estimated at the level of 750 €per day of control. Box 17. The Czech estimations show that average additional administrative cost linked to the German requirements is around 148 € per driver per month and 303 € in case of application of the French requirements. Additional one-off costs borne by Czech hauliers includes also software that has to be adapted for calculating working time, pay adjustments, separate work records, etc., meaning additional costs which is estimated to be around 1,100 € per company. Based on the number of Czech weekly shipments to Germany (31,500) and to France (2,100) and it is calculated that average administrative costs borne by Czech hauliers engaged in operations in Germany or in France reach around 64m € per year . Including software costs the total additional costs borne by relevant Czech industry due to the application of the German and French minimum wage administrative

The above estimates shall, however, be considered carefully due to potential bias involved. Additional regulatory costs may also occur in case of non-compliance with these national rules. The German legislation provides for significant penalties of up to 500 000 € if due wages are not paid or if they are paid with a delay; and up to 30 000 € for other lesser breaches such as failure to conform to the various administrative documents required. The French legislation provides for a penalty of 2 000 € per 'posted' worker and 4 000 € in case of recurrence of failure to comply, with maximum sanctions of 500 000 €. This situation risks leading to further distorted competition in the single market by 'penalising' (through additional administrative costs) operators who engage in transport activities on the territories of these countries compared to operators carrying out transport activities in other Member States, which do not impose similar requirements on foreign drivers and operators active on their territories. 2.5How would the problem evolve, all things being equal (baseline scenario) The baseline scenario reflects a likely evolution of the identified problems in case of no EU policy intervention. To assess how these problems may evolve, several assumptions are made, set out in more detail in the following sections: a)Regulatory environment will become more complex and inconsistent due to proliferation of national measures and enforcement practices resulting from unclear or insufficient EU rules; b)Enforcement capacity in Member States will continue decreasing; c)EU measures to combat 'letterbox' companies and illegal cabotage will be adopted via the parallel revision of Regulations on access to the profession and access to haulage market; d)Social Dialogue on the Social Code will result in a Social Partners agreement on at least two topics (which seems possible in view of the current discussions between social partners): (i) conditions at loading/unloading points and (ii) conditions during a rest; e)Wage cost differentials between Member States will further decrease; f)Pending infringements cases will result in: (i) ECJ ruling that a regular weekly rest may not be taken in the vehicle, nevertheless diverging national enforcement practices will persist ; (ii) no immediate repeal or significant changes in the national measures in Germany, France and Austria concerning administrative and control requirements on the application of minimum wage laws to foreign operators in the context of posting of workers; g)Some technological developments, such as: automated driving and truck platooning , remain hypothetical in practice at this stage, therefore only a gradual deployment of 'smart' tachographs is considered in assessing the baseline; h)Transport activity will grow due to GDP growth according to the 2016 EU Reference Scenario. Certain assumptions may appear less certain (e.g.: outcomes of the mentioned earlier infringement cases or results of Social Dialogue) than the others; therefore, possible differences in the baseline scenario are considered in the relevant following sections. As explained in section 2.1.2 on the policy context this initiative is complementary to the ongoing revision of PWD and it will neither affect nor be affected by the final outcome of the revision. However, certain elements of the baseline scenario may evolve differently depending on whether or not the proposed revision of PWD (currently under negotiation) is adopted by the European Parliament and by the Council. These will be described in relevant sections below. 2.5.1Distortions of competition and inadequate working and social conditions It can be expected that due to persisting differences in national interpretations and enforcement, poor administrative cooperation between Member States, proliferation of national uncoordinated measures and also taking account of decreasing enforcement capacities and continuing cost-based competition, the problem of distortions of competition will be aggravated. This will lead to an increase in regulatory costs for hauliers and fragmentation of the internal market. Despite the transport growth projection (2016 EU Reference Scenario) and taking into account the challenge of an aging workforce and a growing shortage of drivers, this will have indirect negative impacts on intra EU trade. However, the magnitude of these impacts cannot be estimated as it is uncertain how big the changes in transport activities will be and how sensitive intra EU trade will be to the fluctuations in transport activity. On the other hand, the assumed adoption of the market measures addressing the issues of 'letterbox' companies and illegal cabotage will contribute to preventing and detecting illicit employment practices and subsequently to reducing, to a certain extent, abuses of the PWD. This will improve the working and social conditions of affected drivers. This expected improvement in compliance will, however, only partially offset the negative impacts on fair competition of the above mentioned risks. Therefore, the market measures on their own cannot effectively solve the broader problem of illicit employment practices and other social challenges contributing to distortions of competition. The results of the pending infringement cases will provide some legal clarity as to the issue of regular weekly rest, but will however not necessarily improve drivers' resting conditions, mainly due to lack of adequate accommodation and poor enforcement of the current weekly rest provisions in the driving time regulation.

It is not expected that the expected ECJ ruling in the cases against Germany, France and Austria on their minimum wage measures will result in consistent application of PWD in road transport. A judgment does not pronounce itself on the appropriate remedies to be adopted to put an end to the infringement. Following the judgment of the Court, the Member States concerned would probably modify their national law in an uncoordinated manner. This would not solve the issue of the national, fragmented approach to this issue. Hence, legal uncertainty will persist as well as abuses of drivers' rights in relation to adequate terms and conditions of employment. It is unlikely that a potential Social Partners' agreement on any of the topics under negotiation will have a significant impact on preventing and reducing distortions of competition. The potential agreement on conditions at loading/unloading points and conditions at rest may be of added value to improving slightly working and social conditions of drivers. The lack of such agreement will have no impact on the evolution of the problem of inadequate working and resting conditions. In line with the assumption that broader deployment of digital technologies, such as automated driving and truck platooning is highly hypothetical, this Impact Assessment does not speculate how these developments will impact working conditions and competition between operators. Overall, it is expected that the distortions of competition will persist and that working and social conditions will remain inadequate leading to exploitation of drivers and fragmentation of the internal market. To substantiate the assumed evolution of the main problems described above it is important to look at how the main problem drivers are likely to evolve. 2.5.1.1Abuses of social, labour and market rules in road transport A gradual penetration of the 'smart' tachographs in line with fleet turnover rates and gradual convergence in enforcement practices thanks to the forthcoming establishment of the EU common curriculum for training of enforcers will lead to a slight gradual decrease of unintentional non-compliance. Also the slowly increasing use of 'smart' enforcement tools by enforcers should render controls more efficient and effective, which should act as an incentive not to breach the rules. However, non-compliance is likely to continue due to cost-based incentives for circumventing the rules, where risks of being detected and fined are lower (in countries with weaker enforcement) than the perceived benefits from non-compliance; practical difficulties to comply with rules that are unfit for road transport operations; proliferation of national measures and disparities in application and implementation of the EU rules; the emergence of increasingly sophisticated techniques of manipulation of tachographs; and insufficient exchange of information between Member States. Although further guidelines on harmonised application of the EU rules may be issued, given their non-binding nature, these efforts can only have limited impact on the harmonisation of the enforcement/interpretation of the rules. Based on the data on number of infringements against the Driving Time Regulation and Tachograph Regulation for years 2007-2014 it is estimated that a number of infringements detected will oscillate at around 1,6 million infringements per year. However, taking account of decreasing enfor