TABLE OF CONTENTS

1........... Introduction.................................................................................................................... 7

1.1........ What is posting of workers in the context of the provision of services?............................. 7

1.2........ The legal framework for the Posting of Workers.............................................................. 8

1.2.1..... Primary law.................................................................................................................... 8

1.2.2..... Secondary law................................................................................................................ 9

1.3........ Developments since the adoption of the Directive in 1996.............................................. 10

2........... Gathering information and consulting stakeholders.......................................................... 11

2.1........ Gathering information.................................................................................................... 11

2.1.1..... Studies......................................................................................................................... 11

2.1.2..... Expert Committee on the Posting of Workers (ECPW)................................................. 12

2.2........ Consultation................................................................................................................. 13

2.2.1..... Public consultations – Positions of stakeholders............................................................. 13

2.2.2..... General context – the Single Market Act....................................................................... 16

2.2.3..... Inter-Service Steering Group (ISSG)............................................................................ 16

2.2.4..... Impact Assessment Board (IAB).................................................................................. 17

3........... Problem definition......................................................................................................... 17

3.1........ The phenomenon of posting.......................................................................................... 17

3.1.1..... Extent of the phenomenon............................................................................................. 17

3.1.2..... Flows of postings.......................................................................................................... 18

3.1.3..... Sector-specific breakdown........................................................................................... 19

3.1.4..... Relevant factors for posting........................................................................................... 19

3.1.5..... Effects of posting.......................................................................................................... 20

3.1.5.1.. Economic and social effects.......................................................................................... 20

3.1.5.2.. Effects on actors and characterisation of patterns across Member States........................ 22

3.2........ The problems to be addressed...................................................................................... 27

3.2.1..... Problems related to the implementation, monitoring and enforcement of the applicable working conditions of posted workers, including the protection of worker's rights........................................................ 28

3.2.1.1.. Problem 1a: Deficiencies with respect to information for employers and posted workers. 28

3.2.1.2.. Problem 1b: Deficiencies in control, monitoring and enforcement action.......................... 29

3.2.1.3.. Problem 1c: Unnecessary administrative requirements and control measures imposed on service providers 30

3.2.1.4.. Problem 1d: Deficiencies with regard to administrative cooperation................................ 31

3.2.1.5.. Problem 1e: Posted workers are not adequately protected in disputes concerning individual employment conditions.................................................................................................................................... 32

3.2.2..... Abuse of the posted workers status in order to evade or circumvent legislation............... 34

3.2.2.1.. Problem 2a: Posting is no longer of a temporary nature or has a rotational character....... 34

3.2.2.2.. Problem 2b: The employer has no genuine link with the sending Member State............... 36

3.2.3..... Problems related to the unclear or controversial interpretation of the terms and conditions of employment of the Directive....................................................................................................................... 37

3.2.3.1.. Problem 3a: The scope and level of the terms and conditions of employment.................. 37

3.2.3.2.. Problem 3b: Unclear level of protection with regard to the notion of 'minimum rates of pay' 39

3.2.4..... Problem 4: Tensions between the freedom to provide services/establishment and national industrial relation systems.................................................................................................................................... 40

3.3........ Does the EU have the right to act?................................................................................ 43

4........... Objectives.................................................................................................................... 43

4.1........ General objectives........................................................................................................ 43

4.2........ Specific and operational objectives................................................................................ 43

4.2.1..... Better protecting the rights of posted workers................................................................ 43

4.2.2..... Facilitating cross-border provision of services and improving climate of fair competition.. 44

4.2.3..... Improving legal certainty as regards the balance between social rights and economic freedoms, in particular in the context of the posting of workers.................................................................................. 44

4.3........ Are these objectives consistent with other EU policies?.................................................. 45

5........... Policy options............................................................................................................... 47

5.1........ Overview of the policy options...................................................................................... 47

5.1.1..... Options and sub-options related to problems 1, 2 and 3................................................ 47

5.1.2..... Options related to problem 4........................................................................................ 47

5.1.3..... Packages of options...................................................................................................... 48

5.2........ Description of the policy options................................................................................... 48

5.2.1..... Option 1: Baseline related to the posting of workers (problems 1, 2 and 3).................... 48

5.2.2..... Option 2: Non-regulatory intervention re problems 1, 2 and 3........................................ 50

5.2.2.1.. Sub-option 2a (monitoring and enforcement)................................................................. 50

5.2.2.2.. Sub-option 2b (abuses)................................................................................................ 50

5.2.2.3.. Sub-option 2c (terms and conditions of employment)..................................................... 50

5.2.3..... Option 3: Regulatory intervention re problems 1, 2 and 3............................................... 51

5.2.3.1.. Sub-option 3a (monitoring and enforcement)................................................................. 51

5.2.3.2.. Sub-option 3b (abuses)................................................................................................ 52

5.2.3.3.. Sub-option 3c (terms and conditions of employment)..................................................... 53

5.2.4..... Option 4: Repealing the Directive.................................................................................. 54

5.2.5..... Option 5: Baseline related to the tensions between the freedom to provide services/ establishment and national industrial relation systems (problem 4)........................................................................... 54

5.2.6..... Option 6: Non-regulatory intervention re problem 4....................................................... 55

5.2.7..... Option 7: Regulatory intervention re problem 4.............................................................. 56

6........... Analysis of the impact of the policy options.................................................................... 56

6.1........ Overview..................................................................................................................... 56

6.2........ Option 1: Baseline posting of workers........................................................................... 57

6.2.1..... Economic Impact.......................................................................................................... 57

6.2.2..... Social impact................................................................................................................ 57

6.2.3..... Positions of stakeholders............................................................................................... 57

6.3........ Package A (Regulatory measures to deal with problem 1, combined with non-regulatory measures to deal with problems 2 and 3)........................................................................................................ 58

6.3.1..... Economic Impact.......................................................................................................... 58

6.3.2..... Social impact................................................................................................................ 60

6.3.3..... Positions of stakeholders............................................................................................... 61

6.4........ Package B (Regulatory measures to deal with problems 1 and 2, combined with non-regulatory measures to deal with problem 3)............................................................................................................ 62

6.4.1..... Economic Impact.......................................................................................................... 62

6.4.2..... Social impact................................................................................................................ 62

6.4.3..... Positions of stakeholders............................................................................................... 63

6.5........ Package C (Regulatory measures to deal with problems 1 and 3, combined with non-regulatory measures to deal with problem 2)............................................................................................................ 63

6.5.1..... Economic Impact.......................................................................................................... 63

6.5.2..... Social impact................................................................................................................ 64

6.5.3..... Positions of stakeholders............................................................................................... 65

6.6........ Package D (Regulatory measures to deal with problems 1, 2 and 3)............................... 65

6.7........ Option 5: Baseline tensions between the freedom to provide services/establishment and national industrial relation systems (problem 4)..................................................................................................... 65

6.7.1..... Economic Impact.......................................................................................................... 65

6.7.2..... Social impact................................................................................................................ 65

6.8........ Option 6: Non-legislative intervention............................................................................ 66

6.8.1..... Economic Impact.......................................................................................................... 66

6.8.2..... Social impact................................................................................................................ 66

6.8.3..... Positions of stakeholders............................................................................................... 66

6.9........ Option 7: Legislative intervention................................................................................... 66

6.9.1..... Economic Impact.......................................................................................................... 66

6.9.2..... Social impact................................................................................................................ 67

6.9.3..... Positions of stakeholders............................................................................................... 67

7........... Comparison of the options............................................................................................ 67

7.1........ Effectiveness with regard to the specific objectives......................................................... 67

7.1.1..... Option 1....................................................................................................................... 67

7.1.2..... Package A................................................................................................................... 68

7.1.3..... Package B.................................................................................................................... 68

7.1.4..... Package C................................................................................................................... 68

7.1.5..... Package D................................................................................................................... 69

7.1.6..... Option 5....................................................................................................................... 69

7.1.7..... Option 6....................................................................................................................... 70

7.1.8..... Option 7....................................................................................................................... 70

7.2........ Efficiency (cost-effectiveness) with regard to the specific objectives............................... 70

7.2.1..... Option 1....................................................................................................................... 70

7.2.2..... Package A................................................................................................................... 70

7.2.3..... Package B.................................................................................................................... 71

7.2.4..... Package C................................................................................................................... 71

7.2.5..... Package D................................................................................................................... 72

7.2.6..... Option 5....................................................................................................................... 72

7.2.7..... Option 6....................................................................................................................... 72

7.2.8..... Option 7....................................................................................................................... 72

7.3........ Coherence with the general objectives........................................................................... 73

7.4........ Overview table:............................................................................................................ 73

8........... The preferred option..................................................................................................... 74

8.1........ Combination of package B and option 7........................................................................ 74

8.2........ Legal form.................................................................................................................... 74

8.2.1..... Legal form of package B............................................................................................... 74

8.2.1.1.. Regulation.................................................................................................................... 74

8.2.1.2.. Amending the existing Directive..................................................................................... 75

8.2.1.3.. A separate new enforcement Directive.......................................................................... 75

8.2.2..... Legal form of option 7.................................................................................................. 75

9........... Monitoring and evaluation............................................................................................. 76

9.1........ Monitoring.................................................................................................................... 76

9.2........ Evaluation..................................................................................................................... 77

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT Revision of the legislative framework on the posting of workers in the context of provision of services

Accompanying the document

Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the enforcement of Directive 96/71/EC concerning the posting of workers in the framework of the provision of services (Text with EEA relevance) and Proposal for a COUNCIL REGULATION on the exercise of the right to take collective action within the context of the freedom of establishment and the freedom to provide services (Text with EEA relevance)

1. Introduction

1.1. What is posting of workers in the context of the provision of services?

The free movement of workers is a fundamental principle of the European Union enshrined in the Treaty. The freedom to provide services includes the right of a service provider established in a Member State to temporarily post its workers to another Member State in order to provide a service. There are three different posting situations for the purpose of the Directive 96/71/EC[1] (hereafter: 'the Directive') defined in Article 1:

(1) Contracting/Subcontracting: Undertakings "post workers to the territory of another Member State on their account and under their direction, under a contract concluded between the undertaking making the posting and the party for whom the services are intended, operating in that Member State, provided there is an employment relationship between the undertaking making the posting and the worker during the period of posting."

Example: An undertaking established in Portugal specializing in construction works, enters into a subcontract with a French undertaking for the carrying out of works for the construction of a railway line in the west of France. For that purpose it brings its employees from Portugal.

(2) Intra-corporate transfers: Undertakings "post workers to an establishment or to an undertaking owned by the group in the territory of [another] Member State, provided there is an employment relationship between the undertaking making the posting and the worker during the period of posting."

Example: A bank established in Austria sends an employee from the headquarters to its branch in Slovenia for one year.

(3) Assignment of temporary agency workers: Undertakings, "being a temporary employment undertaking or placement agency, hire out a worker to a user undertaking established or operating in the territory of [another] Member State, provided there is an employment relationship between the temporary employment undertaking or placement agency and the worker during the period of posting."

Example: A temporary work agency established in Luxembourg hires out workers to a company in France.

1.2. The legal framework for the Posting of Workers

1.2.1. Primary law

The EU establishes an internal market which is based on a highly competitive social market economy, aiming at full employment and social progress (Article 3(3) TEU).

The Treaty establishes the right for companies to provide their services in other Member States. It provides that 'restrictions on the freedom to provide services in the Union shall be prohibited in respect of nationals of Member States who are established in a Member State other than that of the person to whom the services are intended' (Article 56 TFEU). The freedom to provide services may be limited only by rules which are justified by overriding reasons of general interest, provided that these apply without distinction, and insofar as that interest is not already protected by the rules to which the service provider is subject in the Member State in which he is established.

The Treaty attributes to the Union shared competences to promote employment, improved living and working conditions, proper social protection, and the development of human resources with a view to lasting high employment and the combating of exclusion. The Union recognises and promotes the role of the social partners at its level, taking into account the diversity of national systems. It facilitates dialogue between the social partners, respecting their autonomy. (Articles 151 and 152 TFEU)

The Charter of Fundamental Rights of the EU has become legally binding with the Lisbon Treaty. When preparing EU legislation, implications on a number of fundamental rights have to be taken into consideration: in particular protection of personal data (Article 8), the freedom to choose an occupation and right to engage in work (Article 15), the freedom to conduct a business (Article 16), non-discrimination (Article 21), workers' right to information and consultation within the undertaking (Article 27), the right of collective bargaining and action (Article 28), protection in the event of unjustified dismissal (Article 30), fair and just working conditions (Article 31), family and professional life (Article 33), the right to an effective remedy and to a fair trial (Article 47). There is no obligation under the Charter for the EU legislator to provide for the conditions of exercise of a right. According to its Article 51(2), the Charter does not extend the field of application of Union law beyond the powers of the Union or establish any new power or task for the Union, or modify powers and tasks as defined in the Treaties.

EU legislation must comply with the Charter and Member States, when implementing Union law, must also respect the Charter[2]. According to Article 52(1) of the Charter, any limitation on the exercise of the rights and freedoms recognised by this Charter must be provided for by law and respect the essence of those rights and freedoms. Such limitations should respect the principle of proportionality and may be made only if they are necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others.

1.2.2. Secondary law

The Directive facilitates the cross-border provision of services while ensuring an adequate level of protection of workers’ rights. It is based on an internal market legal basis (Article 53(1) and 62 TFEU). The Directive defines the core of mandatory working conditions which have to be respected by companies in the host country. This facilitates the cross-border provision of services considerably as the service provider does not have to know and apply the entire body of employment rules of the host country. At the same time, the directive provides for a significant level of protection of posted workers and avoids that working conditions in the host country are undermined as an effect of competition.

The Directive aims at promoting the necessary climate of fair competition between all service providers in the Internal Market by seeking to lay the conditions for a level playing field, as well as legal certainty for service providers, service recipients, and workers posted within the context of the provision of services.

The 'hard core' of terms and conditions of work and employment, as defined in Article 3.1 of the Directive, includes:

· maximum work periods and minimum rest periods;

· minimum paid annual holidays;

· the minimum rates of pay, including overtime rates; this point does not apply to supplementary occupational retirement pension schemes;

· the conditions of hiring-out of workers, in particular the supply of workers by temporary employment undertakings;

· health, safety and hygiene at work;

· protective measures with regard to the terms and conditions of employment of pregnant women or women who have recently given birth, of children and of young people;

· equality of treatment between men and women and other provisions on non-discrimination.

As far as these terms and conditions of employment are laid down by law, regulation or administrative provision, Member States must apply them to workers posted to their territory[3]. Member States must equally apply them to posted workers if they are laid down by collective agreements or arbitration awards which have been declared universally applicable within the meaning of Article 3(8), insofar as they concern the activities referred to in the Annex of the Directive (building work). Member States may apply terms and conditions of employment laid down by such collective agreements or arbitration awards with regard to other activities than building work (Article 3(10) second indent) and on matters other than those referred to in Article 3(1) in the case of public policy provisions (Article 3(10) first indent) in accordance with primary law.

While the Directive does not apply directly to undertakings established in third countries, according to Article 1(4) Member States must not provide undertakings established in a third country with a more advantageous competitive position in comparison to undertakings established in a Member State, in particular with regard to working conditions and wage costs. Consequently, this implies that the Directive indirectly sets the minimum level of protection for these workers, and at least the nucleus of mandatory rules needs to be applied.

Moreover, the Directive includes in Articles 4, 5 and 6 provisions on information, administrative cooperation, enforcement and jurisdiction.

The concept of posted workers is also known in the field of coordination of social security systems. The applicable legal framework in this field is provided by Regulation (EC) No 883/2004 and Regulation (EC) No 987/2009, adopted on the basis of Article 48 TFEU.

1.3. Developments since the adoption of the Directive in 1996

The Commission evaluated the implementation and application of the Directive and adopted a report in 2003.[4] This report identified several problems of deficient or incorrect implementation and application of the Directive in specific Member States.

Furthermore, the Commission adopted in 2006[5] several guidelines aimed at clarifying the extent to which certain national control measures could be justified and proportionate in view of prevailing Union law as interpreted in the Court’s jurisprudence. In a second Communication in 2007[6] the Commission, after having carried out an inquiry, concluded that some Member States carried out forms of control that were not justified or proportionate and that the quality of administrative cooperation and access to information as provided by Member States was often insufficient.

In 2008, the Commission adopted a Recommendation[7] calling on Member States to take urgent action to improve the situation of posted workers through better cooperation between national administrations, for more effective exchange of information between Member States and better access to information and exchange of best practice. It also established in 2008 an Expert Committee on Posting of Workers, composed by Member States and social partners, with the aim of discussing and clarifying problems of implementation of the Directive.

Starting at the end of 2007, the judgments of the European Court of Justice in the Viking-Line, Laval, Rüffert and Commission vs Luxembourg cases[8] (a summary of the judgments is provided in Annex 10) triggered an intense debate among EU Institutions, academics and social partners which focused on two major issues:

Firstly, how to set the right balance between the exercise of the right to take collective action by trade unions, including the right to strike, and the economic freedoms enshrined in the TFEU, in particular the freedom of establishment and the freedom to provide services. Secondly, how to interpret some key provisions in the Directive concerning the posting of workers in the framework of the provision of services, such as the concept of public policy, the material scope of the terms and conditions of employment governed by the Directive and the nature of mandatory rules, in particular the minimum wage.

At the presentation of his political priorities before the European Parliament on 15 September 2009, President Barroso recognised the need to address the concerns and issues raised by several stakeholders during such debate and announced a legislative initiative to resolve the problems of implementation and interpretation of the posting of workers Directive.

The report that Prof. Monti submitted on 9th May 2010 on the relaunching of the Single market[9] addressed such concerns. He recognized that the controversy fuelled by the rulings "has the potential to alienate from the Single Market and the EU a segment of public opinion, workers' movements and trade unions, which has been over time a key supporter of economic integration". He further added that "the Court's cases have exposed the fault lines that run between the single market and the social dimension at national level".

2. Gathering information and consulting stakeholders

2.1. Gathering information

2.1.1. Studies

Since 2009, the Commission launched four ex-post evaluation studies:

· Study on the economic and social effects associated with the phenomenon of posting of workers in the European Union[10]

· Study on the legal aspects of the posting of workers in the framework of the provision of services in the European Union (covering 12 Member States)[11]

· Complementary study on the legal aspects of the posting of workers in the framework of the provision of services in the European Union (covering 15 Member States)[12]

· Study on the protection of workers' rights in subcontracting processes in the European Union[13]

In order to prepare the Impact Assessment an ex-ante evaluation study has been carried out by an external consultant in 2011:

· Preparatory study for an Impact Assessment concerning the possible revision of the legislative framework on the posting of workers in the context of the provision of services[14]

Following two calls for proposals in 2009 and 2010[15] the Commission financed several pilot projects concerning the working and living conditions of posted workers. One of the projects is the study Information provided on the posting of workers[16] which assessed in particular the information provided via Internet on the applicable working conditions to posted workers of seven Member States. Further projects concern the transport sector, the agricultural sector and the bilateral administrative cooperation between labour inspectorates. These latter projects are currently ongoing.

Furthermore, the Impact Assessment builds on information gathered on previous occasions such as the implementation report of 2003, the Communications of 2006 and 2007, as well as the Recommendation of 2008.

2.1.2. Expert Committee on the Posting of Workers (ECPW)

The main thrust of the work of the ECPW has been the discussion of several provisions of the Directive, in particular the concept of minimum rates of pay as well as the notion of 'public policy provisions' in Article 3(10) of the Directive (see below section 3.2.3). The ECPW is currently finalising several detailed notes on these issues.

A sub-group of the ECPW assessed the possibilities to facilitate the exchange of information between the responsible national authorities by electronic means. As a result of this work and related Council Conclusions of 7 March 2011[17] a pilot project on electronic information exchange using a separate and specific application of the Internal Market Information System (IMI) in the area of posting of workers started on 16 May 2011. Its aim is to test an IMI module used for the implementation of the administrative cooperation provisions of the Directive. The Commission will report to the Council on the results of the use of the module at the latest within one year after the launching of the pilot project.

The ongoing pilot project of IMI indicates that working cooperation between national administrations is needed in order to obtain data on the ownership or representation of the posting company as well as on the activity of posted workers (lawfulness and duration of the activity, record of hours worked or of wages paid for work, employment contracts). First statistics as well as user feedback of the pilot project are provided in Annex 4.

2.2. Consultation

2.2.1. Public consultations – Positions of stakeholders

On 27 October 2010, the Commission issued a Communication "Towards a Single Market Act"[18] putting forward for debate 50 proposals to re-launch the single market, including the following two proposals:

· Proposal 29: "Pursuant to its new strategy for the effective implementation of the Charter of Fundamental Rights by the European Union, the Commission will ensure that the rights guaranteed in the Charter, including the right to take collective action, are taken into account. The Commission will first of all conduct an in-depth analysis of the social impact of all proposed legislation concerning the single market."

· Proposal 30: "In 2011, the Commission will adopt a legislative proposal aimed at improving the implementation of the Posting of Workers Directive, which is likely to include or be supplemented by a clarification of the exercise of fundamental social rights within the context of the economic freedoms of the single market."

These two proposals were amongst those which received the largest number of suggestions and comments from respondents (particularly unions, citizens and civil society organizations). The main cross-industry European social partners replied to this consultation in line with the positions held during the debate triggered by the Court rulings.[19] The replies are summarised in Annex 9.

According to ETUC the Court rulings may have as a consequence that industrial actions launched in situations where cross-border aspects are involved are screened and judged by EU or national tribunals as contrary to fundamental economic freedoms, and therefore illegal. ETUC perceives therefore the rulings in question as establishing a jurisprudence that gives primacy to internal market objectives.

They propose to thoroughly amend the legislation in two key aspects:

1. To revise the Posting of Workers Directive (Directive 96/71/EC) by including a reference to the principle of 'equal pay for equal work' and allowing the host Member State to apply more favourable conditions (in particular beyond the minimum rates of pay) or to extend the applicable conditions beyond the nucleus of terms and conditions of employment that is established in Article 3(1) of the Directive;

2. To introduce a "social progress clause/Monti clause" in the legislation or a 'Social Progress Protocol' in the Treaty with the aim of giving priority to fundamental social rights over economic freedoms.

In response to the consultation on the re-launch of the Single Market, ETUC and several trade unions explicitly welcomed the intention to clarify the exercise of fundamental social rights within the context of the economic freedoms of the single market, but considered insufficient the measures envisaged to review the legal framework on posting of workers.

BUSINESSEUROPE (BE) and employers' organizations have welcomed the Court rulings which they consider as an important contribution to the clarification of the legislation and the consolidation of the Single Market. They support the Commission's approach for better implementation and enforcement of the existing Directive, and recognize that several aspects can be improved by legislative action. Furthermore, BE indicated that the exclusion of the right to strike from EU's competence should not be touched.

The Council has not expressed so far any formal position during the debate triggered off by the rulings. Apart from Luxembourg in 2008, no Member State has explicitly demanded the reopening of the Directive. An informal debate took place in 2010 in the Council Working Group under Belgian Presidency. On this and other occasions, government representatives have expressed a negative view about a revision of the Directive. Furthermore, individual Member States directly or indirectly affected by the rulings amended their legislation - Denmark, Sweden, Luxembourg, Germany (several Länder) in order to comply with the rulings. Several Member States (FI, FR, DE, SE, PT, PL, LT, IE, AT) support the Commission's approach on the Directive, except UK (against any new legislation); UK, CZ and LT were also against proposal 29. Debates about the issues raised by the implementation of the Directive have also taken place in the European Parliament which has adopted several resolutions[20]. In a resolution dealing specifically with posting of workers that was adopted in 2008[21], after intense internal debate, the EP called on the Commission to continue examining the implementation, correct application and enforcement of the Directive and suggested that this 'should not exclude a partial revision of the Directive' after assessing in depth the problems with its implementation, and propose modifications, if appropriate. In its resolution on the Single Market Act from April 2011, the EP welcomed the announcement made by the Commission to adopt rules improving the implementation, application and enforcement of the Directive, but did not express a call for a revision of the Directive 96/71.

The European Economic and Social Committee adopted in 2010 an Opinion on the "Social Dimension of the Single Market"[22] asking for more effective implementation of the Directive and expressing support for a Commission initiative which clarifies the legal obligations for national authorities, business and workers, including a partial revision of the Directive. The opinion further encourages the Commission to exempt the right to strike from the internal market and to explore the idea of a "European Social Interpol", supporting the activities of labour inspectorates of the various Member States.

The Commission organised a Conference on fundamental social rights and the posting of workers in the framework of the provision of services on 27/28 June 2011 in Brussels gathering key stakeholders (Member States, social partners at EU and national level, EU institutions and international organisations as well as academics and researchers). On this occasion stakeholders and key political actors had an additional opportunity to express their views on Commission ideas regarding the possible content of the legislative initiatives announced in the Single Market Act: a so-called 'Monti II Regulation' and an Enforcement Directive (see sections 5 and 8).

At the Conference, BE was open-minded with regard to the so-called 'Monti II Regulation' provided that it helps removing unjustified obstacles to the freedom to provide services. It puts emphasis on the need for alternative ways of dispute resolution in order to avoid strikes, and on the respect of the exclusion of the right to strike from EU's competence (Article 153 (5) TFEU); the application of the concept of proportionality in the case of strikes should be left to the national level in full respect of the diversity of the industrial relation systems in Europe. With regard to the posting of workers BE asked for legislative action to focus on administrative cooperation between the responsible national authorities, and proposed to address the existing deficiencies in a Regulation based on Article 197 TFEU (see below sections 3.2.1.4 and 8.2.1.1).

At the Conference, ETUC supported to the idea of a 'Monti II Regulation' and welcomed the initiative to propose an enforcement Directive which would help to define more clearly the scope of the Directive so as to ensure the temporary nature of posting and prevent abuses of the use by letter box companies. Such an enforcement Directive should allow Member States and social partners to use effective monitoring instruments and introduce joint and several liability mechanisms. Without prejudice to the 'Monti II Regulation', the enforcement Directive should also contain provisions ensuring the respect of the fundamental right to collective bargaining and collective action. For ETUC its preferred option was a comprehensive revision of the Directive (described below as package D including in particular sub-option 3c) and a Social Progress Protocol.[23]

2.2.2. General context – the Single Market Act

The Single Market Act of 13 April 2011 includes among the 12 'levers to boost growth and strengthen confidence' under the social cohesion chapter 'legislation aimed at improving and reinforcing the transposition, implementation and enforcement in practice of the Posting of Workers Directive, which will include measures to prevent and sanction any abuse and circumvention of the applicable rules, together with legislation aimed at clarifying the exercise of freedom of establishment and the freedom to provide services alongside fundamental social rights'.[24]

On 30 May 2011 the Competitiveness Council adopted its priorities for re-launching the Single Market[25], considering "that proper implementation and enforcement of the Posting of Workers Directive can contribute to a better protection of posted workers’ rights and ensure more clarity regarding the rights and obligations of service providing businesses as well as national authorities and can help to prevent circumvention of the applicable rules". It also stated "that more clarity in the exercise of the freedom of establishment and the freedom to provide services alongside fundamental social rights is necessary".

2.2.3. Inter-Service Steering Group (ISSG)

An ISSG composed of SG, SJ, MARKT, ENTR, ECFIN, JUST, HOME, MOVE and EMPL met four times between November 2010 and 29 September 2011. The ISSG was consulted on the terms of reference, the inception, the interim and the draft final report of the external Impact Assessment Study. In the final meeting the ISSG was consulted on the first draft of this Impact Assessment.

2.2.4. Impact Assessment Board (IAB)

The IAB examined this Impact Assessment and issued an opinion on 11 November 2011. The recommendations for improvement have been taken into consideration. The main problems have been better explained, supported with further anecdotal evidence and stakeholder's views have been included (section 3). The problem related to the 'tensions between the freedom to provide services and of establishment and national industrial relation systems' (problem 4) is now presented separately (section 3.2.4) and further respective policy options have been included (section 5.2.5, 5.2.6 and 5.2.7). The intervention logic has been strengthened by designing packages of sub-options which address the full set of problem drivers and correspond to the specific and operational objectives (section 4 and5). On that basis the assessment of the impacts and proportionality of the policy options (including packages of sub-options) has been improved, particularly with respect to compliance costs and impact on SMEs (section 6). Monitoring indicators and more concrete evaluation arrangements have been identified (section 9).

The IAB issued a second opinion on the revised Impact Assessment on 21 December 2011. As far as justified, the recommendations for improvement have been taken into account. The evidence base has been further strengthened. The analysis of costs resulting form the policy options has been improved. A new Annex on the distribution of costs and benefits across Member States has been included. The alert mechanism and the necessity and proportionality of EU action with regard to the problem of tensions between national industrial relation systems and the right to strike have been better explained. The intervention logic of corresponding problem drivers, objectives and policy options has been illustrated in a chart. It has been better explained to what extent the objectives are not only specific, achievable and realistic but also measurable and time-dependent. A new Annex on competitiveness proofing has been added. The possible general impacts on consumers have been removed from the text. Further stakeholder's views have been added in the Impact Assessment and the executive summary.

3. Problem definition

3.1. The phenomenon of posting

3.1.1. Extent of the phenomenon

The analysis of posting as an economic and social phenomenon, as distinct from anecdotal evidence, is hampered by poor quality data. There are no standardised data at EU level. At national level, sources of data exist in a limited number of countries (e.g. SOKA-BAU data in Germany, declarations collected by the French Labour Inspectorate, LIMOSA in Belgium or RUT in Denmark). However, these sources respond to different aims and contain data which are not directly comparable.[26]

The only available data source at EU-level is based on the systematic data collection of E101 certificates (2005-2009) in the field of social security, carried out by DG EMPL in cooperation with national authorities[27]. However, this data base has several limitations. It measures the number of postings, not the number of posted persons (the same person can be posted several times). Furthermore, the E101 social security form is not issued to all posted workers, either because it is not required (postings of over 12 months are not considered for social security purposes) or because some companies do not apply for E101 forms when workers are posted, especially in the cases of very short-term postings.

With these caveats, it can be estimated that around one million workers are posted each year by their employers from one Member State to another. Table 1 in Annex 1 shows the number of postings from every EU-27 or EFTA country to another EU-27 or EFTA country as well as the number of postings received by each country of the EU-27 or EFTA from another EU-27 or EFTA country[28].

In relation to labour mobility within the EU, the number of postings represented 18.5% of non-national EU-27 citizens in the labour force in 2007. However, posting concerns only a small share of the total active population (0.4% of the active population of EU-15 sending countries and 0.7% of the active population of EU-12 sending countries). Therefore, it can be concluded that, while posting is a significant phenomenon in terms of labour mobility, especially in some countries and sectors, it remains a relatively small observable phenomenon in the EU labour market. [29]

Over time, a trend analysis is made difficult by the increasing size of the country coverage of the data set. However, this seems to have been stabilised after 2007, which allows the conclusion that posting tends to vary strongly with the economic cycle. Figure 1 in Annex 1 suggests that the number of postings has declined in 2008 in line with economic activity but has recovered in 2009.

3.1.2. Flows of postings

Regarding flows of posted workers different groups of countries can be distinguished: some Member states seem to be 'specialised' in sending (PL, SI, SK, HU, EE, PT, LU), some in receiving (CY, MT, EL, SE, FI, NL, BE, DK, IT, AT, IE, ES ) and others seem to be equally sending and receiving countries and therefore ‘not specialised’ (DE, FR, UK, BG, CZ, LT, LV, RO) (see Table 6 in Annex 1).

The available data regarding the absolute numbers of postings in 2008 and 2009 suggest that the main sending countries are Poland, France, Germany, Luxembourg, Belgium and Portugal (in declining order). The most important receiving countries are Germany, France, Belgium, the Netherlands, Spain and Italy. (See Figure 1.2 in Annex 1)

In relative terms, postings represent a very small part of the employment in the private sector (except in LU). However, for some countries such as Poland, Slovakia, Slovenia, Estonia, Portugal, France and Hungary, as sending countries, and Belgium, Netherlands and Malta, as receiving countries, the phenomenon has a certain relevance in terms of employment (between 1.5% and 4%). Information regarding the duration of postings is only available for Belgium (construction) and France based on national data. In the construction sector in Belgium posting seems to be mainly used for short term projects. The average sending duration per project is 65 days (decrease from 140 since 2002) whereas the average receiving duration is 23 days (decrease from 32 since 2007). These data are collected with regard to concrete work projects, and not to the duration of time a posted worker spends in Belgium or abroad. The estimated average duration of postings to France was 44 days in 2008 varying significantly from sector to sector (e.g. construction: 34 days; HORECA: 99 days).[30]

3.1.3. Sector-specific breakdown

The available data suggest that on average in 2009, around 55% of posted workers were sent to the industrial sector (NACE C to F). Most important among these sectors is the construction sector which represented 24% of overall postings. The service sector (NACE G to P) represented on average 44% of postings of which the most important is financial and business activities (NACE J and K) (16%) as well as transport, storage and communication (NACE I) (7%) (see Table 7 in Annex 1). Agriculture represented only 0.7% on average.

It should be highlighted that in the construction sector there is a strong presence of SMEs in posting, mainly as subcontractors in sometimes extended subcontracting chains.[31] As a consequence, in a sending perspective, the benefits of posting may be enjoyed especially by SMEs.

3.1.4. Relevant factors for posting

The findings of two studies[32] which assessed the relevant factors/drivers for posting, based on country by country data (2007-2009) (see Annex 1, Tables 2-4) suggest that the following factors can be considered as the most relevant:

· Geographical proximity seems to be the most relevant factor able to explain the distribution of flows of posting (the direction and the extent of the phenomenon), as it is also associated to business and historical links;

· Labour costs for receiving countries;

· Labour and skill shortages as well as specialisation: in particular for posting from high labour cost countries to other Member States;

· Unemployment rate for sending countries (in particular in low labour cost countries);

· Level of market integration (however less relevant).

3.1.5. Effects of posting

3.1.5.1. Economic and social effects

Despite its small size as compared to the overall workforce, the posting of workers plays an important role in the cross-border provision of services, in particular sectors. The possibility to provide services internationally represents an opportunity for business expansion across Europe, particularly for SMEs. Posting provides business and job opportunities, and is a source of additional income in sending countries; it contributes to the improvement of competitiveness and efficiency in receiving countries.

Posting has implications for the labour markets of both sending and receiving countries. It offers job opportunities in sending countries and fills skill and labour shortages in the receiving countries. Therefore, posting contributes to a more efficient allocation of labour across boundaries. However, it can have ‘displacement’ effects in the receiving labour markets, whereby local workers are substituted by posted ones. The strength of this effect will depend on the existence of an oversupply of labour in particular sectors and professions. At the same time, it should be underlined that, since employment creation in the EU relies heavily on the development of an integrated market for services, posting may effectively contribute to support job creation.

In labour-intensive sectors, such as construction, low-labour cost countries tend to hold a comparative advantage which can be problematic for SMEs in receiving high labour countries. Small firms in the construction industry, but also in the temporary employment sector, complain that foreign undertakings often exert a strong competitive pressure only by virtue of using posted workers with lower wages and social security contributions[33]. Whereas SMEs tend to feel more directly the cost pressure from competition with foreign service providers, large firms in receiving countries are advantaged by their use of posted workers since they can reduce costs and fill up labour and skill gaps.

Wage differentials between local and posted workers seem to be quite substantive. In France, a report delivered by the French Senate in 2006 estimated wage differences between foreign posted workers and French workers to be around 50%. In Denmark, a study of the construction sector indicated that, in the mid-2000s, workers from Eastern European countries were paid on average 25-28% less than Danish building workers. A similar difference has been estimated for Germany by comparing the minimum wage levels with the actual wage levels in the construction sector. The average hourly gross salary in the building sector – EUR 17,11 (Federal Statistical Office) – is in fact 32% higher than the minimum wage for skilled workers and as much as 56% for the minimum wage of unskilled workers in West Germany.[34] The actual pay differences can be even higher, as suggested by the reports about common infringements of minimum wage rules in the German construction industry.[35]

Actual differences in wages between local and posted workers depend on national systems of setting minimum rates of pay. While some Member States only set one general minimum wage, other Member States apply several levels of minimum wages according to skill and/or occupation of the worker. In the latter case wage differences between posted and local workers tend to be less significant. Where no minimum wage is set by law or universally applicable collective agreement this favours a 'race to the bottom' of wages. The meat processing sector in Germany is a prominent example in this respect.

In high unemployment sending countries, posting may contribute to reduce joblessness although to a limited extent. As the applicable minimum wage in host countries is often higher than the wages normally paid in low wage sending countries, posting creates additional income in such countries and may, in certain cases contribute with learning new skills.

Conflicts with local workers and trade unions have arisen in the past. Some cases attracted strong public attention (e.g. Laval, Lindsey, ‘Struik Foods’ or Flamanville). There does not seem to be a single origin for such conflicts. In some cases, it is the difference in treatment between posted and local workers which is at stake; in other cases, it is the abusive practices by employers operating at the margins of the law; conflicts can also be due to more or less justified fears of job displacement. Some cases also exposed the risk of protectionism and xenophobia.[36]

Findings in the literature and anecdotal evidence from case studies suggest that minimum employment and working conditions set by law in the host Member State are not respected in a number of cases, particularly with regard to wages, working hours and health and safety regulations. Disproportionate wage deductions for poor housing facilities have been reported. Given the total number of posting operations per year (close to 1 million) such situations as described in the literature have little statistical significance. However, they illustrate the most frequent problems of abuse and breach of posted worker's rights, more prevalent with low skilled workers and in labour intensive sectors.

Example 1 – construction sector: The European Migrant Worker Union (EMWU) has information on 39 cases on its website concerning more than 900 posted workers from Rumania and Poland in the construction sector in Germany which have not been paid according to German minimum wage provisions (2005-2011). EMWU supported these workers in order to enforce their wage claims against their employers or the main contractor. EMWU enforced about 1.5 million Euro mainly against the main contractor in judicial proceedings or by settlement out of Court. The cases represent only a small part of the cases dealt with by the EMWU. According to the case handler for Rumanian posted workers, there have been cases concerning approximately 4.000 to 5.000 posted workers since 2007. None of these workers have been paid the German minimum wage. (See Annex 8)

Example 2 – road haulage sector: In France, several cases have been reported of the establishment of ‘fake’ foreign subsidiaries or transnational contractual relationships with the sole aim to provide ‘low-cost’ labour. Such practices recently acquired prominence in the public debate due to media reports on the activities of the Norbert Dentressangle group. In one case a French transport operator set up a subsidiary in Poland which recruited one hundred drivers to perform road haulage in France. The usual schedule of Polish drivers included six weeks of work in France and one week of rest in Poland. The Polish drivers were working six days per week and, during their stay in France, they stayed in flats provided by the French company. The vehicles were owned by the French mother company; the Polish subsidiary rented the trucks from the mother company and then it rented them back while providing the posted drivers. The French courts established that a proper but disguised employment relationship existed between the French company and the Polish drivers, as the former organised and directed in detail the work of the latter. A similar case involved another French company which established a subsidiary in Slovakia. Slovak drivers were actually working for up to 15 weeks in France and were part of the mother company workforce. In particular, the French company entrusted the Slovak subsidiary to carry out its own transport contracts, while the foreign firm did not have any independent activity in Slovakia and all of its trailers were provided by the mother company. Again the foreign subsidiary did not show any independent entrepreneurial activity and was established with the only purpose to provide drivers at a lower cost to the French mother company. In other cases, the provision of drivers for on-going operations in France is organised through agencies. (See Annex 3)

Example 3 – temporary agency work: The construction of a nuclear site in Flamanville involved Polish workers posted from a Cypriot subsidiary of an Irish temporary work agency specialised in construction engineering and related trades. The workers were found to have wages around half of those of French workers. The company was also accused of covering 38 undeclared accidents out of the 112 declared accidents. The investigation of the case by the French authorities is currently on-going. (See Annex 3)

Example 4 – meat processing industry: Trade union reports about this industry in Germany point to a situation where a significant part of direct employment has been replaced by a variable combination of subcontractor posted workers, temporary agency posted workers, and self-employed foreign subcontractors. In practice, abattoirs and meat processing plants employ directly a minority of the overall workforce while the majority of workers on site are part of the transnational provision of services. Long working hours, increased workload, deteriorating working conditions, including growing MSDs, are reported as emerging features of the sector in Germany. Wages of posted workers are much lower than for domestic workers (allegedly down to EUR 3 per hour).As a result Germany has become a low-wage location in the meat processing industry. Competitors in neighbouring countries such as France and Belgium complain about unfair competition from German-located firms.[37] The use of posted workers in order to reduce labour and social costs seems also to be common in French slaughterhouses, including illegal practices such as deductions for housing and travel costs from the minimum wage by agencies involved.[38]

3.1.5.2. Effects on actors and characterisation of patterns across Member States

The findings of an impact assessment study[39] suggest that posting has the following effects on the actors involved:

Actors || Benefits || Costs

MS sending || Business opportunities and job creation (through market integration) Upgrading of skills and know-how Higher income (in low wage countries) || Costs of monitoring and enforcement related to the PWD, especially coordination with receiving MSs Upward wage pressures; occasional shortage of skills

MS receiving || Competitiveness (through productive efficiency induced by reduction in labour costs) Allocative efficiency related to reduction of labour and skill shortages || Conflicts between different groups of workers Institutional and legal disputes Costs of monitoring and enforcement related to the PWD Risk of unfair competition related to abuse and distortions

Firm sending || Business development; international contacts Entry foreign markets || Organisational, administrative, and compliance costs related to posting

Firm receiving || Competitiveness (through productive efficiency induced by reduction in labour costs) Upgrading of skills and know-how (through improved skill and specialisation matching) || Organisational, administrative, and compliance costs related to posting Conflicts with local workers and trade unions

Workers receiving || Job creation (through economic growth and competitiveness) || Potential job displacement Potential downward wage pressures Social dumping related to abuse and distortions

Workers sending || Employment Upward employment and working conditions Upgrading of skills and know-how || Mobility costs (monetary and non-monetary) Exploitation related to abuse and distortions

Trade unions sending || Spill-over on trade union membership and practices || No significant costs

Trade union receiving || Extension to posted workers of union representation || Weakening of trade union role in setting employment conditions

The findings of the same study suggest that the following patterns can be discerned across Member States:

· Specialised receiving countries with relatively low labour costs (MT, CY, EL): Posting generally concerns skilled workers to fill supply shortages.

· Specialised receiving countries with high labour costs (FI, NL, SE, BE, DK, IT, AT, IE, ES): Posting is typically used in labour intensive and low skilled sectors. Reduced labour costs can increase competitiveness of utilising firms. However, this puts pressure on local labour markets and working conditions in particular in high unemployment regions. Compared to other phenomena such as migration and undeclared work, however, impact seems to be limited. Local conflicts may arise and posting may acquire a negative public image often associated to undeclared work.

· Specialised sending countries with low labour costs (PL, PT, HU, EE, SI, SK): Postings usually concern unskilled or medium skilled workers. Posting has positive effects on local employment, business development and local wages. In general posting does not seem to be a source of conflict in these countries, however, if posted workers are exploited abroad by unscrupulous employers this throws a bad public image on posting.

· Due to its size and geographical specificity Luxembourg is a highly specialised sending country: Mainly skilled workers are posted in the financial or business services sector with positive effects on employment and business development.

· Non-specialised countries with high labour costs (FR, DE, UK): These countries have a broad labour market and large in- and outflows of posting. From a sending perspective impacts are close to Luxembourg. From a receiving perspective impacts are close to specialised receiving countries with high labour costs.

· Non-specialised countries with low labour costs (BG, CZ, LT, LV, RO): From a sending perspective impacts are similar to specialised sending countries with low labour costs; from a receiving perspective impacts are similar to specialised receiving countries with low labour costs.

Specialisation || Labour costs || Examples || Most relevant drivers || Most relevant sectors || Main social and economic impacts || Legal and administrative problems || Main social and economic issues

Specialised receiving || Low || CY, MT, GR || Skill and labour shortage || Bank Finance Transport Construction || Positive on job matching Economic integration || Weak monitoring and enforcement || Integration and development of the single market of services

Specialised receiving || High || SE, FI, NL, BE, DK, IT, AT, IE, ES || Reduction in labour cost Labour shortage || Construction HORECA Food processing Transport Health Social work Cleaning || Positive on job matching Economic integration Higher competitiveness Higher productivity (advantages for consumers) Potential downward pressure on wages and salaries Potential job displacement || Ambiguities in the definition of posting Ambiguities in the definition of conditions applicable to posted workers Protectionist extension of national legislation Administrative barriers Weak monitoring and enforcement || Integration and development of the single market of services Employment and labour market Industrial relations Protection of workers’ rights

Specialised sending || Low || PL, SI, SK, HU, EE, PT || Economic integration Business opportunit. Job opportunit. || Construction HORECA Food process Transport Health Social work Cleaning || Positive effects on employment, Economic integration Business development Potential upward pressure on wages and salaries || Weak monitoring and enforcement || Integration and development of the single market of services Protection of workers’ rights

Specialised sending || High || LU || Economic integration Job opportunit. || Banking Finance Business services || Positive effects on employment Economic integration Business development || Protectionist extension of national legislation Administrative barriers Weak monitoring and enforcement || Integration and development of the single market of services

Specialisation || Labour costs || Examples || Most relevant drivers || Most relevant sectors || Main social and economic impacts || Legal and administrative problems || Main economic and social issues

Unspecialised || High || DE, FR, UK || Receiving Reduction in labour cost || Construction HORECA Food processing Transport Health Social work Cleaning || Higher competitiveness Higher productivity (advantages for consumers) Potential downward pressure on wages and salaries Potential job displacement || Ambiguities in the definition of posting Ambiguities in the definition of conditions applicable to posted workers Protectionist extension of national legislation Administrative barriers Weak monitoring and enforcement || Integration and development of the single market of services Employment and labour market Industrial relations Protection of workers’ rights

Sending Economic integration || Manufacturing Banking Finance Business services || Positive effects on employment, economic integration, business development || || Integration and development of the single market of services

Unspecialised || Low || BG, CZ, LT, LV, RO || Receiving Skill shortage || Banking Finance Business services || Positive job matching Economic integration || || Integration and development of the single market of services

Sending Economic integration Job opportunit. || Construction HORECA Food process. Transport Health Social work Cleaning || Positive effects on employment, Economic integration Business development Potential upward pressure on wages and salaries || Weak monitoring and enforcement || Integration and development of the single market of services Protection of workers’ rights

3.2. The problems to be addressed

The problems are grouped under four headings:

· Problems related to the implementation, monitoring and enforcement of the applicable working conditions, including the protection of posted worker's rights

· Problems related to the abuse of the posted workers status in order to evade or circumvent legislation

· Problems related to the controversial or unclear interpretation of the terms and conditions of employment of the Directive

· Tensions between the freedom to provide services/establishment and national industrial relation systems

The problems grouped under the 1st heading share a common main driver: Articles 4 and 5 of the Directive are formulated in a rather general manner and do not state precisely enough Member States' obligations with respect to the implementation, monitoring and enforcement of the Directive. With regard to some aspects (national control measures and the mechanisms to protect worker's rights) the respective provisions are missing in the Directive or they are not sufficient (Article 6).

The main driver of the problems grouped under the 2nd heading is the lack of legal clarity with regard to the notion of posting, in particular the two key aspects of temporariness and the existence of a genuine link of the employer with the sending Member State. There are no indicative criteria in order to enable the responsible authorities in the Member States to identify real posting situations and distinguish them from other situations (self-employment, migration). As a result frequent cases of abuse of the posted workers status occur, with the aim of evading or circumventing legislation. Legal clarity is therefore a precondition for effective monitoring and enforcement activities.

Problems under 3 are related to the interpretation of Article 3 of the Directive. With regard to problem 3a the case law of the ECJ has clarified a number of important aspects of Article 3, but this interpretation is not shared by stakeholders. With regard to problem 3b the notion of minimum rates of pay is still not clear. Respective jurisprudence did not bring sufficient clarity.

Problem 4 concerns the exercise of the right to strike in the context of the freedom to provide services and of establishment. Therefore this problem is linked to the Directive but goes beyond The ECJ tried to bring clarity to this problem, in two cases, dealing respectively with the freedom to provide services and the freedom of establishment - Laval and Viking.

3.2.1. Problems related to the implementation, monitoring and enforcement of the applicable working conditions of posted workers, including the protection of worker's rights

3.2.1.1. Problem 1a: Deficiencies with respect to information for employers and posted workers

Article 4 (3) of the Directive obliges Member States to take the appropriate measures to make the information on the terms and conditions of employment in the host State generally available. Despite this obligation, information concerning the applicable working conditions in the host Member State is often difficult to obtain, uneven, and of insufficient quality. However, this information is crucial for service providers in order to guarantee the minimum working conditions and for posted workers in order to claim their rights.

Previous attempts to solve this problem by non-legislative means have not reached their objectives. The issue has been addressed by interpretative guidelines in 2006. The monitoring exercise in 2007 showed that there were a number of deficiencies in this respect. The respective Communication provided further clarifications for Member States.[40] Recent studies analysing the situation in 2010 and 2011 confirmed that deficiencies still exist.[41]

The driver of this problem is composed of the following elements:

· Provisions of the Directive are rather general and not detailed enough.

· Information is in particular missing concerning working conditions set by collective agreements. Responsible authorities often focus on working conditions laid down by law or regulation. As far as collective agreements are concerned, social partners are involved at national level. Their role in this respect is however not specified in the Directive.

· Insufficient quality of information: A number of Member States provide only general information with regard to minimum working conditions which is not focused on posted workers. Websites in all seven Member States analysed , with the exception of Germany, merely enumerate the rules applicable by virtue of the transposition of the Directive in the host Member State.[42]

· Untargeted dissemination of information: A detailed analysis of websites in seven Member States showed that information is split over 14 websites. Moreover, not all posted workers have access to the internet. Therefore, information on paper (leaflets) and awareness raising campaigns remain necessary. Less than half of the Member States provide information on paper and awareness raising campaigns have only been reported from Belgium, the Netherlands and Germany.[43]

· Information in the sending country: Only part of the Member States as well as trade unions target information on workers/service providers in the country of origin (LU, BE, NL, SE, DE, RO, CY) with regard to their own nationals. Information of posted workers about their rights should be provided as early as possible.

· Inaccessible language: Information is not always provided in a language understood by the service provider and/or worker. Information is mostly available in the language(s) of the host Member State and English.

SMEs are in particular affected by this problem since they have little capacity to investigate the applicable working and employment conditions in the host Member State themselves. Both ETUC and employers' organizations agree that the improvement of information on posting would facilitate the implementation of the legal rules.

3.2.1.2. Problem 1b: Deficiencies in control, monitoring and enforcement action

According to Article 5 of the Directive, Member States have to ensure compliance with the provisions of the Directive by taking appropriate measures, in particular to ensure adequate procedures for enforcement of the core working conditions under the Directive. The 'how' of monitoring and enforcement of the rights conveyed in the Directive is left to the national level.

Previous attempts to solve this problem by non-legislative means have not reached their objectives. The issue has been addressed by interpretative guidelines in 2006. The monitoring exercise in 2007 showed that there were a number of deficiencies in this respect. The respective Communication provided further clarifications for Member States.[44] Recent studies analysing the situation in 2010 and 2011 confirmed that deficiencies continue to exist.[45]

The driver of this problem is composed of the following elements:

· the provisions of the Directive are not detailed enough;

· the involvement of multiple authorities without appropriate coordination or the absence of responsible authorities in some Member States;

· the unclear role of social partners in this respect;

· relying on private law enforcement only;

· low frequency of controls;

· monitoring activities are often not focused on the specific legal and factual situation of posted workers;

· absence of notification systems in a number of Member Stats and therefore a lack of reliable data about the presence of posted workers;

· absence of sufficiently dissuasive administrative and/or penal sanctions;

· lack of cross-border enforcement of sanctions due to missing legal framework at the EU level;

· the application of the terms and conditions of employment in certain sectors in the host Member State is alleged to be difficult (e.g. cabotage activities). There are no specific provisions tackling these difficulties;

· difficulties in identifying bogus self-employment.

These deficiencies in control, monitoring and enforcement action cause a serious risk that minimum working conditions in the host state are not respected, in particular with respect to wages, working time and health and safety conditions. They may also facilitate anti-competitive behaviour. Such gaps are compounded by the short-term nature of much of the posting taking place, which makes the task of controlling authorities more difficult. The existence of these deficiencies is supported by anecdotal evidence (see the examples from the construction, road haulage, temporary work agency, and meat processing sectors in section 3.1.5.1).

ETUC recognizes the importance of these deficiencies and considers action on EU level necessary in order to allow Member States and social partners to use effective monitoring and enforcement mechanisms.[46] BUSINESSEUROPE also considers action in this domain necessary in order to ensure a climate of fair competition between national and foreign companies. However, the main responsibility for such mechanisms would belong to Member States in accordance with their national judicial and administrative practices.

Example 5 – lack of cross-border enforcement: The Spanish labour inspectorate imposes a fine on a German service provider for violation of the Spanish health and safety at work regulation. It is not possible for the Spanish authorities to enforce the fine against the service provider that returned to Germany. Framework Decision 2005/214/JHA[47] is not applicable since the Spanish fine cannot be appealed to a penal Court. There is no other legislative framework which would allow for the cross-border enforcement of such a fine.[48]

3.2.1.3. Problem 1c: Unnecessary administrative requirements and control measures imposed on service providers

Member States should comply with the obligation inscribed in Article 5 of the Directive in line with prevailing EU law, in particular the freedom to provide services as interpreted by the Court of Justice. The guidelines adopted by the Commission in 2006 tried to introduce clarity, by non-binding means, with regard to the compatibility of administrative requirements and control measures imposed by host State authorities on service providers.

The monitoring exercise in 2007 showed that several Member States impose administrative requirements and control measures on service providers which are incompatible with prevailing EU law.[49] Examples are the obligations to have a representative established on the territory of the host Member State; to obtain a prior authorisation in the host Member State; or to obtain a work permit for posted workers who are nationals of third countries.

The driver of this problem is composed of the following elements:

· insufficiently detailed and precise provisions in EU secondary law in respect of administrative requirements and control measures which are in conformity with prevailing EU law;

· lack of knowledge, or insufficient awareness, of EU law protecting the rights of cross-border service providers;

· excessive reliance on national control measures instead of administrative cooperation, considered as too cumbersome and/or unreliable;

· absence of uniform documents on EU level regarding information duties.[50]

Previous attempts to solve this problem by non-legislative means have not reached their objectives. The current situation still leads to different obligations for service providers in different Member States. A level playing field is not sufficiently achieved. Service providers face unnecessary administrative burden in some Member States due to the use of disproportionate national control measures.

SMEs are especially affected by types of administrative controls that create excessively onerous obligations for foreign undertakings and may discourage the posting of workers abroad.

ETUC considers certain national control measures and respective administrative requirements indispensable to effectively monitor and enforce the working conditions applicable to posted workers.

3.2.1.4. Problem 1d: Deficiencies with regard to administrative cooperation

Article 4(1) and (2) of the Directive imposes obligations as regards cooperation between national administrations, and makes it the responsibility of Member States to create the necessary conditions for such cooperation. The proper functioning of administrative cooperation among Member States is an essential instrument for compliance control; its virtual absence referred to in COM(2007) 304 undermines the operation of the Directive and may at least partly explain other problems like disproportionate national control measures.

Previous attempts to solve this problem by non-legislative means have not reached their objectives. The issue has been addressed by interpretative guidelines in 2006. The monitoring exercise in 2007 found justified concerns regarding insufficient administrative cooperation[51] and the Legal Studies in 2011 still confirmed 'serious shortcomings' in this respect.[52]

The driver of this problem is composed of the following elements:

· the provisions of the Directive are not detailed enough;

· the lack of mutual trust and understanding between the very different national actors involved;

· insufficient resources committed by some national authorities to administrative cooperation[53];

Another important driver of the problem is the absence of an effective cooperation tool, in particular regarding the information exchange through electronic means. Following the Recommendation of 2008[54] and the work of the Expert Committee on Posting of Workers (ECPW) a pilot project for the use of a separate and specific application of the Internal Market Information System (IMI) was launched in May 2011. However, the Directive does neither provide for the use of IMI nor for the rules on the exchange of information (e.g. deadlines for replies). For further details on IMI see Annex 4.

According to BUSINESSEUROPE and ETUC insufficient administrative cooperation is an important problem which needs to be addressed at EU level.

3.2.1.5. Problem 1e: Posted workers are not adequately protected in disputes concerning individual employment conditions

Article 6 of the Directive contains a jurisdiction clause allowing the posted worker to enforce his rights granted by the Directive in the host state. However, anecdotal evidence indicates that posted workers are not adequately protected in disputes concerning individual employment conditions (see examples 1-4 in section 3.1.5.1 and Annexes 3 and 8).

A number of drivers contribute to this problem:

· Since no further detailed provisions are included in the Directive, the jurisdiction clause alone does not enable posted workers to enforce their rights in practice when disputes about individual employment conditions arise during the posting.[55]

· There is no specific complaint mechanism regarding the non-respect of working conditions for posted workers.[56] There is no legal obligation for service providers and/or recipients to inform posted workers about the existing (non-targeted) complaint mechanisms.[57]

· Posting of workers in the context of subcontracting causes particular problems. Violations of minimum working conditions established by the Directive have been reported in cases where e.g. the posting subcontractor has defaulted on its contractual obligations.[58]

· The fear of losing their jobs and their vulnerable situation during the posting prevents posted workers from acting against their employers and enforcing their rights. This structural obstacle resulting from the economic imbalance between the employer and the employee can only be challenged by the involvement of third parties who also have an interest in enforcing the application of minimum working conditions, in particular trade unions. In many Member States such third parties do not have an independent right to bring cases before the Courts.[59]

· Absence of mechanisms that allow posted workers to recover excessive costs for accommodation.

· Many posted workers do not see the host Member State public authorities as their natural allies because they feel that these authorities are more interested in protecting their labour market than in helping workers from abroad.

As a result there is a lack of enforcement of posted workers’ rights stemming from the Directive. This may contribute to deteriorate working conditions particularly among the most vulnerable categories of workers, and may lead to unfair competition.

Anecdotal evidence supports these findings. In particular the analysis of the information provided by EMWU (Annex 8) suggests that the right of third parties to intervene in Court proceedings is important to enforce posted workers rights and that the role of trade unions and joint bodies of social partners is crucial in this respect. In all cases presented on the EMWU website subcontractors have been involved. Almost all wage claims have been enforced against the main contractor. In the few cases in which enforcement against subcontractors was successful the main contractor was involved in the negotiations. A system of joint and several liability seems to be an effective and appropriate tool in order to enable posted workers to enforce their rights in the host Member State. Regarding the magnitude of the problem the introduction of such a tool would be proportionate.

Example 6 – enforcement of minimum wage against the main contractor: 120 Romanian workers were employed by a Rumanian subcontractor on a construction site in Germany. The subcontractor ran out of money and stopped paying his workers who subsequently reported that they were asked by their employer to work for less than the German minimum wage. Some of the same workers indicated that they encountered the same situation three times in the last twelve months. With the help of EMWU the workers reached an agreement with the main contractor who paid around 173.000 Euro for wages in arrears.

ETUC agrees that the Directive is not precise enough as to the judicial and extra-judicial means allowing posted workers to defend their rights, and considers joint and several liability indispensable to deal with the specific problems arising in the context of subcontracting chains. BUSINESSEUROPE opposes a system of joint and several liability.[60]

3.2.2. Abuse of the posted workers status in order to evade or circumvent legislation

In many situations, the difference in labour costs (including social security contributions) caused by the different status of migrant and posted workers is sufficiently important to encourage less scrupulous employers to use the posted workers status improperly with the only purpose to evade the law and reduce costs.

Posted workers and migrant workers are in a different situation and are governed by a different legal regime in the EU. Posted workers are temporarily present in another Member State in the context of the provision of services whereby their respective employer provides services therein. Posted workers as such do not seek access to the labour market in the host Member State and are supposed to return to the sending Member State once the service has been provided.

In contrast, migrant workers move on their own to another Member State for the purpose of finding or carrying out work there. They have full access to the labour market in this country. The right to live and work there derives from the free movement of workers granted in Article 45 TFEU.[61] Therefore, the situation of these two categories of workers is different. The Court of Justice stated this fact on several occasions.[62]

Migrant workers enjoy full equal treatment with nationals, with regard to working conditions and social security, in the Member State in which they are employed. Posted workers are normally working in the sending country and enjoy full equal treatment with nationals while hey work there. During their posting they are protected by the mandatory hard core provisions fixed by Article 3 of the Directive, in line with the law or the universally applicable collective agreements of the host country, as far as they are more favourable to the worker than the provisions of the sending country. They remain covered by social security provisions in the sending country (provided the duration of posting does not exceed two years).

3.2.2.1. Problem 2a: Posting is no longer of a temporary nature or has a rotational character

In order to justify the difference in treatment between posted workers (core protection) and migrant workers (equal treatment) the posting has to be of temporary nature. If the duration of the posting is excessive the presumption behind the difference in legal status between these two categories of workers is no longer valid. The same situation occurs if the same or different employees are repeatedly recruited by an undertaking with the purpose of being posted to another Member State for carrying out the same job (rotational postings).

The problem is mainly driven by the absence of criteria which would enable Member States authorities to determine if a posting is of temporary nature.

The Directive defines the posted worker as a worker who, for a limited period of time carries out his work in the territory of a Member State other than the State in which he normally works. There is no indication as to the temporary nature of the posting.[63] The Directive neither provides for a fixed time limit[64] nor other criteria to determine the temporary character of the stay in the host State[65]. There is no reference either to the possibility of repeated posting for the same job.

The Rome I Regulation[66] which would be applicable if the Directive did not apply does not clarify the notion 'temporary' either It only states that work carried out in another country should be regarded as temporary if the employee is expected to resume working in the country of origin after having carried out his tasks abroad.

According to the case law of the Court the temporary nature of the activity of the person providing the service in the host Member State has to be determined in the light not only of the duration of the service but also of its regularity, periodical nature or continuity. An activity carried out on a permanent basis, or at least without foreseeable limit to its duration, does not fall within the freedom to provide services.[67]

In contrast, social security rules (Regulation 883/2004) set a limit of two years, which if exceeded obliges the employee to be covered by the social security regime of the host country. They also exclude the possibility of repeated postings for the same job.

ETUC is in favour of a strict time limit for posting. BUSINESSEUROPE opposes such a time limit considering that the specific circumstances of each case may determine the need for longer posting periods.

Example 7 – rotational posting: An Irish temporary work agency posted 93 Polish workers with Irish E101 certificates, stating that they were covered by Irish social security law, to work on a big infrastructure project in Sweden. The certificates indicated that the workers had been living in Ireland two months before the posting. However, it was discovered that 45 of them have earlier been posted from Poland to Sweden to work for the same Swedish company. 38 of them had moved to Ireland during the same period in which they had been working in Sweden and had been posted from Poland. The 93 workers were residing at six addresses in Ireland – 46 of them at one single address, which was not an apartment block. Swedish authorities called into question the certificates before the Irish authorities. In the meantime the same workers received new E101 certificates from Cyprus.[68]

Example 8 – replacement of permanently employed workers by 'posted' workers: A Belgium food-processing undertaking dismissed its workers and concluded a service contract with a Dutch ‘posting agency’, which posted a considerable number of German-Polish workers to the Belgium undertaking. They were paid on average 10 Euros less than the company’s dismissed Belgium workers before. Trade unions called for strike because of the dismissal.[69]

3.2.2.2. Problem 2b: The employer has no genuine link with the sending Member State

The Directive provides that the posting undertaking has to be ‘established’ in a Member State. This requires the existence of a genuine link between the undertaking and the sending Member State. However, the Directive does not set the criteria in order to determine if there is a genuine link.

The social security legislation applying to posting is more explicit, as it establishes criteria that allow a more precise definition of posting: an undertaking must ordinarily carry out substantial activities in the territory of the Member State in which it is established in order to be authorised to post its workers to another Member State.[70]

In order to evade or circumvent employment or social security legislation, unscrupulous employers may direct their posting operations exclusively towards the market of another Member State without having in fact any relevant economic activity in the country where they are formally registered.

The use of 'letter-box' companies is particularly problematic in this respect. These companies are opened in the sending country only for the purpose of evading social security and labour legislation of often one specific host Member State. Sometimes workers already reside in the host Member State before they are recruited. The worker might actually be made to work under the direct supervision of the user undertaking, thus creating a situation of bogus subcontracting or illicit provision of manpower. The absence of genuine activities in the country of origin may be combined with repeated postings, in which the ‘posted’ worker is working in a specific Member State on an (almost) permanent basis. This is a problem that is jointly recognized by the European Social Partners.[71]

The temporary work agency sector seems to be particularly susceptible to such abusive practices. This is confirmed by the two legal studies. A significant number of cases of abuse of the posting rules was found.[72] However, the Directive does not contain any provision to prevent or sanction such abuses.

ETUC and BUSINESSEUROPE agree that the phenomenon of letter-box companies needs to be tackled.

Example 9 – letter-box companies: A company has its office which basically consists of a letterbox in Ireland and its registered office in Cyprus. The company has neither economic activity in Ireland nor in Cyprus. Workers are recruited in Poland and receive an Irish employment contract. They work on a construction site in France and receive their orders from the foreman of another company working on the construction site as well. After having terminated the work on the construction site they move on to other sites in France. Afterwards the employment contract is terminated and the workers return to Poland.

Example 10 – no connection with sending country, case of 'les sexeurs de poussins': Seven Chinese nationals holding a German visa as 'independent' chicken sexers were sent by a German company to a related French company. The company claimed that this would have been an intra-company posting. Work was directed and housing was organised by the French company. The work was carried out at the site of a second French company. There was no proof of any payment of wages. Social security contributions were neither paid in France nor in Germany.[73]

3.2.3. Problems related to the unclear or controversial interpretation of the terms and conditions of employment of the Directive

3.2.3.1. Problem 3a: The scope and level of the terms and conditions of employment

The 'hard core' of mandatory terms and conditions of employment (Article 3) as well as the legal instruments in which these are laid down represent the heart of the political compromise struck at the time of the adoption of the Directive. The case law of the CJEU in Laval, Rueffert and Commission vs Luxembourg[74] clarified a number of important questions regarding the interpretation of certain key provisions of Article 3, in particular Article 3(1), 3(7), 3(8) and 3(10) (for further detail on the case law see Annex 10). The case law has contributed to improve legal certainty for service providers and Member States. However, the diversity of industrial relations systems across the EU still poses problems in implementing the rules set by the Directive and continues to feed divergent views between social partners and sometimes Member States themselves.

The driver of this problem is composed of the following elements:

· While in countries where minimum wages are set by law or by universally applicable collective agreements, their application to posted workers is straightforward, in countries where no such tools exist, an uncertain situation is created for undertakings and workers;

· The authorities of the countries deprived of statutory or conventional minimum wages have not, by the time of the transposition of the Directive, recognized the full scale of the consequences of the absence of provisions regarding posted workers' wages, or were eager to maintain their traditional industrial relations systems unaffected by the application of the Directive[75].

Furthermore, the Court’s interpretation of Article 3(7) in Rueffert as well as Article 3(8) raises questions with regard to the compatibility of ILO Convention No. 94 concerning the use of social clauses in public procurement with prevailing EU law. ILO Convention No. 94 is classified as an up-to-date Convention by the responsible ILO bodies.[76] In 2008, the Commission called upon its Member States to ratify and implement the ILO up-to-date Conventions (COM(2008)412 final). However, if the incompatibility of the Convention with EU law was established Member States might be required to denounce the Convention in order to comply with EU law.[77]

As stated above (see section on stakeholders’ positions) part of stakeholders welcomed the clarifications brought by the Court's jurisprudence: parts of European Parliament, in particular EPP, BUSINESSEUROPE and several Member States. Especially trade unions in high-wage receiving countries,