Documents considered by the Committee on 7 November - European Scrutiny Committee Contents


7 The posting of workers and the right to take collective action

(a)

(33787)

8040/12

COM(12) 131

+ ADDs 1-3

(b)

(33788)

8042/12

COM(12) 130


Draft 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


Draft 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

Legal base(a) Articles 53(1) and 62 TFEU; co-decision; QMV

(b) Article 352 TFEU; unanimity; EP consent

Documents originated(a) and (b) 21 March 2012
Deposited in Parliament(a) and (b) 29 March 2012
DepartmentBusiness, Innovation and Skills
Basis of considerationLetter of 12 September 2012 from the Vice-President of the Commission; and Ministerial letters of 11 and 22 October 2012
Previous Committee ReportsHC 86-i (2012-13), chapter 1 (9 May 2012);

HC 86-v (2012-13), chapter 4 (20 June 2012)

Discussion in Council(a)  No date set

(b)  Not applicable

Committee's assessmentLegally and politically important
Committee's decision(a) Do not clear; further information requested
(b) Clear

Background and previous scrutiny

7.1 In March 2012, the Commission put forward a package of two proposals. The first, a draft Directive, proposed a number of changes to improve the implementation and enforcement of a 1996 Directive establishing a legal framework for businesses to send ("post") workers from their home Member State to another (host) Member State in order to provide a service on a temporary basis. The changes were intended to:

  • help identify "letter-box" companies that use posting as a means of circumventing the application of employment or social security rules;
  • improve access to information on the core terms and conditions of employment (including any minimum wage requirement) applicable to posted workers in the host State;
  • strengthen administrative cooperation and mutual assistance between national authorities responsible for monitoring the application and enforcement of the 1996 Directive; and
  • provide effective mechanisms for workers to lodge complaints and bring proceedings in the host Member State, as well as in their home State and, in the case of construction workers, to recover unpaid wages from their posting employer or the host State contractor by means of joint and several liability.

7.2 The second proposal, a draft Regulation, sought to address concerns arising from Court of Justice rulings (notably in the Viking-Line and Laval cases) which set out the principles to be applied by national courts in determining whether restrictions on the exercise of fundamental economic freedoms guaranteed by the EU Treaties are justified, particularly when those restrictions arise from industrial action to protect the rights of workers. The Court's rulings have polarised opinion because, although the Court recognises the right to strike (and other forms of collective action in defence of workers' rights) as a fundamental right which forms an integral part of the general principles of EU law, that right has, in practice, on the facts of each case, given way to the exercise of economic freedoms.

7.3 The draft Regulation attempted to achieve an equilibrium between the exercise of economic freedoms and the protection of fundamental rights (including the right to take collective action) by stipulating that both had an equal status in EU law. It also:

  • described the principles which apply to reconcile fundamental rights and economic freedoms in the event of a conflict;
  • required any existing extra-judicial mechanisms for the resolution of labour disputes at national level to be made available for labour disputes with a cross-border dimension; and
  • established an early warning mechanism to give notice of a serious risk of disruption to the internal market.

7.4 Our First Report of 9 May 2012 provides a detailed overview of both proposals, as well as the Government's position.

7.5 The Government questioned whether there was a need for further regulatory action at EU level. Commenting on the draft Directive, the Government suggested that the scale of difficulties encountered in applying and enforcing EU rules on posted workers (in the UK, at least) was insufficient to justify further regulation and highlighted, in particular, its concerns regarding the proposed introduction of a system of joint and several liability for the construction sector which would require a change to UK law.

7.6 Turning to the draft Regulation, the Government accepted that it was consistent with the case law of the Court of Justice and accurately described the role of national courts in applying that case law and, as such, would have no further impact on UK law. It also noted that Acas (the Advisory Conciliation and Arbitration Service) was already available, on a voluntary basis, to parties involved in a dispute with a cross-border dimension and that this aspect of the draft Regulation would have minimal impact in the UK. The Government suggested that there was a case for EU action, on subsidiarity grounds, since only a measure which was "European in scope" would be appropriate to clarify the general principles and rules of EU law applicable to forms of collective action which affect the exercise of economic freedoms. However, it did not consider that the draft Regulation was necessary — a prerequisite for EU action based on Article 352 of the Treaty on the Functioning of the European Union (TFEU) — and indicated that other Member States, as well as businesses and trade unions, shared this view.

7.7 By contrast, we thought that the lack of evidence as to the necessity of the draft Regulation went beyond the question of legal base, raising fundamental questions about its compliance with the principle of subsidiarity, and issued a Reasoned Opinion to that effect.[14] As the evidence base for the draft Directive also appeared to be weak, we asked the Government to provide some indication of the magnitude of the problems encountered in applying and enforcing the 1996 Directive and the extent to which the non-payment of wages in the construction sector presented particular difficulties which might require more active regulatory intervention.

7.8 The Government's response, described in our Fifth Report of 20 June 2012, indicated that non-payment of wages to posted workers within the construction sector had not been identified as a significant problem in the UK, and that Member States should retain the flexibility to determine what mechanisms should be available to secure the payment of outstanding wages. The Government offered to provide a summary of responses to its call for evidence on the draft Directive which would help to illuminate the extent of the problem and possible ways to address it.

7.9 Our Report also noted that, for the first time since the Lisbon Treaty entered into force on 1 December 2009, the threshold required under Article 7(2) of Protocol No. 2 on the application of the principles of subsidiarity and proportionality to trigger a formal review of the draft Regulation on collective action (the so-called "yellow card") had been met. Twelve national Parliamentary chambers, together accounting for 19 of the 54 votes allocated to national Parliaments, had issued Reasoned Opinions contesting the compliance of the draft Regulation with the subsidiarity principle, and the Commission had indicated that it would proceed to review the draft Regulation and determine whether to maintain, amend or withdraw it.

The letter of 12 September 2012 from the Vice-President of the Commission

7.10 The Vice-President of the Commission (Maroš Šefèoviè), in a letter addressed to the Speaker of the House, sets out the Commission's response to the issuing of a "yellow card" by national Parliaments on the draft Regulation on collective action:

"The Commission has carefully assessed the arguments put forward by national Parliaments in their reasoned opinions, taking note that the concerns expressed relate in particular to the added value of the draft Regulation, the choice of the legal basis, the EU competence to legislate on this matter, the implications of the general principle included in Article 2 of the draft Regulation and the references to the principle of proportionality in Articles 3(4) and in recital 13 of the draft Regulation, equal access to dispute resolution mechanisms and the alert mechanism. The Commission has not found based on this assessment that the principle of subsidiarity has been breached.

"At the same time, the Commission has taken careful note of the views expressed as well as the current state of play of the discussions on the draft Regulation among relevant stakeholders, in particular the European Parliament and Council. Against this background, the Commission recognises that its proposal is unlikely to gather the necessary political support within the European Parliament and the Council to enable its adoption.

"In view of this, the Commission would hereby like to inform you of its intention to withdraw its proposal for a 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."

The Minister's letter of 11 October 2012

7.11 The Parliamentary Under-Secretary for Employment Relations and Consumer Affairs (Jo Swinson) encloses a summary of responses to the Government's call for evidence on the draft Directive, which includes the results of a roundtable discussion with business organisations and trade unions from the construction sector.[15] The main findings are:

  • broad support for clarifying what constitutes a posting and ensuring that information on applicable working conditions is widely available, but differing views on how to achieve this;
  • a lack of quantitative evidence on the extent of problems associated with the posting of workers in the UK;
  • sharp differences of opinion on the need for stronger control measures and on the practical implications of introducing joint and several liability, with business organisations strongly opposing the latter and trade unions pressing for its extension to the whole chain of contractors; and
  • general dissatisfaction with the evidence and estimates contained in the Commission's Impact Assessment.

The Minister's letter of 22 October 2012

7.12 The letter from the Minister for Europe (Mr David Lidington) responds to the points we raised in our Twelfth Report of 12 September 2012 concerning the Commission's annual report on subisidarity and proportionality for the year 2011.[16] In particular, we asked the Government for its analysis of the Commission's response to the yellow card on the draft Regulation on collective action (the Minister refers to the draft Regulation as the "Monti II" proposal because it stems from recommendations made in a report published in May 2010 by the former Commissioner responsible for the internal market — Professor Mario Monti — on the completion of the EU's Single Market). The Minister states:

"The Commission's formal response to the Presidency on 14 September states that — although it did not agree that the principle of subsidiarity had been breached — it has withdrawn the proposal because there was no prospect of achieving political agreement. This suggests that the `yellow card' in this instance was effective in demonstrating the strength of feeling in national parliaments about this proposal, and this added to concerns raised by several Member States.

"However, it is less certain how effective it was with regard to specific concerns about subsidiarity. Reasoned opinions were sent by 12 national parliaments, giving a total of 19 votes. The reasoned opinions set out a range of views, including arguments that the proposals were unnecessary, that the detail of the proposals would be an infringement of national competence, as well as some expressing dissatisfaction with the proposal itself.

"[....]

"The Government's position, as set out in the Explanatory Memorandum provided to Parliament, was that the proposal did not breach the subsidiarity principle because if the proposed action was to be taken at all then it made sense for it to be at EU level. Nevertheless, the Government was clear from the outset that the Regulation was not necessary and would oppose it on that basis.

"The Government welcomes the first ever use of the yellow card. It is a significant step because it highlights both the importance of the Commission demonstrating due consideration in developing proposals, and of the role of national parliaments in ensuring they do so. However, Monti II does not add up to a clear demonstration of the effectiveness of the yellow card in upholding the principle of subsidiarity because of the wide variety of reasoned opinions issued, and because of the Commission's reasons for withdrawing the proposal."

Conclusion

7.13 We thank the Minister for her letter providing a link to the Summary of responses received on the draft Directive on the enforcement of the 1996 Posting of Workers Directive. The introduction to the Summary says that these responses "have already informed the UK's negotiating position on this proposal and will continue to inform this position as negotiations proceed." As there appear to be sharp differences of opinion on some of the key elements of the draft Directive — notably the provisions on joint and several liability within the construction sector — we would like to hear in more concrete terms how the responses have influenced the Government's negotiating position. We also look forward to receiving progress reports on the negotiations. Meanwhile, the draft Directive remains under scrutiny.

7.14 Turning to the draft Regulation, we note that it has been withdrawn by the Commission and we are therefore content to release it from scrutiny. However, the means by which the Commission has communicated its intention to withdraw the proposal illustrates a broader concern we have with the inadequate response of the Commission to Reasoned Opinions issued by national Parliaments which we intend to pursue separately.




14   The House agreed to issue a Reasoned Opinion following a debate in European Committee C on 21 May 2012. Back

15   A total of 16 responses to the Call for Evidence were received: nine from business organisations, five from organisations representing workers, and two from legal groups. Back

16   See (34095); HC 86-xii (2012-13), chapter 4 (12 September 2012). Back


 
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Prepared 16 November 2012