Documents considered by the Committee on 25 April 2018 Contents

1European Labour Authority

Committee’s assessment

Politically important

Committee’s decision

Not cleared from scrutiny; further information requested

Document details

Proposal for a Regulation establishing a European Labour Authority

Legal base

Articles 46, 48, 53(1), 62 and 91(1) TFEU; ordinary legislative procedure; QMV

Department

Business, Energy and Industrial Strategy

Document Number

(39563), 7203/18 + ADDs 1–3, COM(18) 131

Summary and Committee’s conclusions

1.1Against a backdrop of increased levels of worker mobility within the EU, the European Commission has taken note of concerns about the potential negative impact of free movement of workers where existing EU rules to avoid ‘social dumping’—for example in relation to tackling undeclared work, posted workers and coordination of unemployment benefits—are not adequately enforced. As part of the new ‘European Pillar of Social Rights’,1 the European Commission has now proposed the creation of a new European Labour Authority (ELA) that would reinforce “effective cooperation between national authorities and for concerted administrative action to manage the increasingly European labour market”.

1.2Despite its name, the Authority would have no regulatory or enforcement powers (either vis-à-vis Member State governments or individual businesses). Instead, it would play a supporting and coordinating role by:

1.3The ELA would have running costs estimated to run to 52 million euros (£45 million)2 annually once fully operational,3 with 140 staff split almost evenly between fulltime officials and experts seconded by Member States.

1.4The Minister of State for Small Business, Consumers and Corporate Responsibility (Andrew Griffiths) submitted an Explanatory Memorandum on the proposal to establish the ELA on 5 April 2018.4 The Memorandum outlines the Government’s view that—despite Brexit—the UK is likely to have a working relationship with the ELA as foreseen for the remaining Member States during the post-Brexit transitional period, when EU law will continue to apply. It adds that Regulation as drafted “does not impose new obligations on Member States, individuals or employers nor does it impinge on national decision making, legislation, enforcement activities which remain in the competence of Member States”. It will, however, place a few “minor obligations” on the Government, for example if an enforcement authority5 declines to participate in a joint inspection with authorities from other Member States (in which case it must provide the ELA with written reasons for its refusal). During the transitional period, the UK will not have any institutional representation at EU-level, meaning in this instance the Government will not have a seat or vote on the Management Board of the Authority, which will set its budget and appoint its Executive Director.

1.5After the UK’s exit from the Single Market, the Minister adds, “our role and relationship [with the Authority] in the long term will depend on the arrangements agreed with the UK and the EU for the future economic partnership”. A regulatory checklist prepared by his Department on the proposal also identified a number of benefits from continued UK participation in the Authority’s work after Brexit, including access to analytical work on “patterns of mobility”, mutual learning opportunities, use of conciliation facilities in the case of disputes, and technical support.6 He notes that this would require a financial contribution by the Government, which presents an “opportunity-cost to the UK contributing to the ELA budget, in terms of greater participation and opportunity to influence”.

1.6We thank the Minister for his Explanatory Memorandum, and note that the European Labour Authority as proposed would not impact on the substance or enforcement of employment legislation in the UK. As the ELA is due to become operational in 2019, we agree that the new body is likely to have a role working with the relevant UK authorities while we remain in the Single Market, albeit without any formal say over its functioning via the Council or the Authority’s own Management Board, with any subsequent relationship between the Government and the Authority dependent on “the arrangements agreed with the UK and the EU for the future economic partnership”.

1.7We note the potential benefits of continued cooperation with the Authority after Brexit identified by the Minister. We also consider that the proposal to establish the European Labour Authority is politically important for two reasons:

1.8With respect to the latter point, we note that the Commission proposal would restrict formal cooperation agreements between the Authority and non-EU Member States to “countries to which the relevant Union law on labour mobility and social security coordination applies”. As we have discussed extensively in a recent series of Reports on proposed amendments to the Social Security Coordination Regulation,7 the Government’s long-term intentions with respect to EU-UK labour mobility and the coordination of social security with the EU after the UK’s exit from the Single Market—which includes matters such as provision of healthcare to UK pensioners in France and Spain—is not clear.

1.9Overall, it is therefore likely that any continued participation by the Government with the European Labour Authority after the exit from the Single Market, to obtain the benefits listed by the Minister, is likely to be a function of the broader negotiations on labour mobility and social security coordination, rather than a priority in its own right. We note again in this respect that the Social Security Coordination Regulation has only been extended to non-EU countries which accept full freedom of movement rights for their own citizens to the EU and vice versa (Norway, Switzerland, Iceland and Liechtenstein).

1.10Therefore, while the ELA proposal itself would have relatively little impact on the UK, we consider it politically important in the context of the uncertainty about the UK’s future relationship with the Single Market and the free movement of workers. Accordingly, we retain the proposed Regulation under scrutiny and ask the Minister to keep us updated on progress in the legislative negotiations within the Council and the European Parliament.

Full details of the documents

Proposal for a Regulation establishing a European Labour Authority: (39563), 7203/18 + ADDs 1–3, COM(18) 131.

Background

1.11In November 2017, the EU institutions—with the UK Government’s support—adopted the ‘European Pillar of Social Rights’.8 It summarises employment and social rights already available to workers by virtue of EU law, and also sets a wider range of social policy objectives for the coming years (some of which involve new EU Directives, such as the recent European Commission proposals on parental and carers’ leave9 and the rights of workers with non-standard employment contracts).10

1.12The social implications of free movement of labour within the Single Market have been another area of particular political attention. Cross-border labour mobility within the EU has increased significantly in recent years: in 2017, 17 million citizens lived or worked in a Member State other than that of their nationality, almost double compared to a decade ago. Postings of workers, where they retain contractually employed in one Member State but carry out their work in another, have increased by nearly 70 per cent since 2010 and reached 2.3 million in 2016 (although the number of posted workers in the UK, estimated at just over 50,000 in 2015, is almost negligible compared to the working population).11 The EU already has an extensive body of legislation to ensure that social and employment rights in one Member State are not undercut by businesses using workers from another Member State, such as the Posted Workers Directive,12 the Social Security Coordination Regulation13 and the Free Movement Directive.14

1.13However, the Commission has expressed concerns that these rules are not always effectively enforced. In particular, it believes mobile workers are more vulnerable to being denied their employment rights, and the complexity of EU rules can mean businesses operate “in an uncertain or unclear business environment and unequal playing field”. The Commission identified the following challenges in enforcing effective labour market mobility rules:

1.14There is thus, in the Commission’s view, a need for “effective cooperation between national authorities and for concerted administrative action to manage the increasingly European labour market”. Against this backdrop, European Commission President Jean-Claude Juncker announced in September 2017 that the Commission was preparing the legal basis for a new ‘European Labour Authority’ to ensure that EU rules on labour mobility are enforced in a “fair, simple, and effective way” as required by the European Pillar of Social Rights.15

The Commission proposal

1.15The Commission published its legislative proposal for the establishment of the European Labour Authority (ELA) in March 2018. The Authority will have no independent investigative or enforcement powers vis-à-vis businesses, or be able to direct Member State Governments to take or refrain from specific actions. Instead, it would play a supporting and coordinating role by:

1.16In addition, the Authority will replace the various existing technical advisory bodies that already exist at EU-level to promote fair labour mobility, including the European Coordination Office of EURES,16 the Technical Committee on the Free Movement of Workers,17 the European Platform on tackling undeclared work18 and the Committee of Experts on Posting of Workers.19

1.17The ELA would have running costs estimated to run to 52 million (£45 million) annually once fully operational,20 with 140 staff split almost evenly between fulltime officials and experts seconded by Member States. It would be overseen by a Management Board, on which the Member States and the European Commission will be represented. Among other things, the Board will establish the Authority’s annual budget and appoint its Executive Director. The seat of the Authority is yet to be decided by common accord between the EU’s national governments. It may be allocated to one of the newer EU Member States, following the decision to relocate both the European Banking Authority and the European Medicines Agency from London to France and the Netherlands respectively after the UK’s exit from the EU.

Support for social security coordination

1.18In addition to performing the tasks described above, the ELA would also take over certain functions of the Administrative Commission for the Coordination of Social Security Systems. Under Regulation 883/2004, EU Member States coordinate among themselves who is responsible for the payment of social security benefits for people, including workers, who move within the EU. Such citizens are, in principle, entitled to use the local benefits system on the same basis as nationals of their host Member State, including unemployment benefit, state pensions, and access to long-term healthcare. The Committee has published a number of Reports in the past year on proposed amendments to the Regulation, which would affect access to the UK benefits system for EU nationals and vice versa.

1.19The Administrative Commission brings together Member State representatives to discuss the interpretation of the Regulation, fulfil certain technical regulatory tasks, and resolve any disputes. The European Labour Authority would take over the operational, non-regulatory functions of the Commission,21 namely:

1.20As the draft Withdrawal Agreement on the UK’s exit from the EU would preserve these rights for UK and EU nationals who have exercised their freedom of movement before the UK leaves the Single Market for their lifetime, meaning the Government will retain an interest in the work of the Commission and any social security-related work by the ELA despite Brexit.

Implications of Brexit

1.21The plan is for the European Labour Authority to become operational during 2019, depending on agreement on its establishment by the European Parliament and a qualified majority of EU Member States. As such, it is expected to work with the relevant UK public authorities during the post-Brexit transitional period (see below). After the UK leaves the Single Market, the nature of any working relationship with the ELA would depend on negotiations with the EU about the wider economic partnership and in particular any continued free movement of labour between the UK and the European Economic Area. The Commission proposal restricts formal cooperation agreements between the ELA and non-EU Member States to “countries to which the relevant Union law on labour mobility and social security coordination applies”.

1.22As we have discussed extensively in a recent series of Reports on proposed amendments to the Social Security Coordination Regulation,22 the Government’s long-term intentions with respect to EU-UK labour mobility and the coordination of social security with the EU after the UK’s exit from the Single Market—which includes matters such as provision of healthcare to UK pensioners in France and Spain—is not clear. Any continued engagement with the European Labour Authority is likely to be a function of those broader negotiations, rather than a priority in its own right. We note in this respect that the Social Security Coordination Regulation has only been extended to non-EU countries which accept full freedom of movement rights for their own citizens to the EU and vice versa (Norway, Switzerland, Iceland and Liechtenstein).

The Government’s view

1.23The Minister of State for Small Business, Consumers and Corporate Responsibility (Andrew Griffiths) submitted an Explanatory Memorandum on the proposal to establish the ELA on 5 April 2018.23 The Memorandum outlines the Government’s view that “it is important that the ELA respects Member State competence”, and that the Authority should “respect the competence of national labour enforcement agencies and complement their work, particularly on cross border mobility, employment and social security matters”, adding that the Regulation as drafted “does not impose new obligations on Member States, individuals or employers nor does it impinge on national decision making, legislation, enforcement activities which remain in the competence of Member States”.

1.24The Minister explains that, given the nature of the proposal, the Regulation “will not have any impact on UK law” except to place a few “minor obligations” on the Government, for example if an enforcement authority declines to participate in a joint inspection with authorities from other Member States (in which case it must provide the ELA with written reasons for its refusal). The Government does express a concern over the security risks of sharing of social security data by the ELA in the case of cross-border disputes over which Member State is responsible for the payment of benefits to a specific worker.

1.25As the ELA is due to become operational in 2019, the Minister notes that the ELA is likely to have a role working with these public authorities while the UK remains in the Single Market, which is expected to be the case until at least the end of 2020 under the terms of the post-Brexit transitional arrangement. During this period, the ELA would cooperate with the various agencies that undertake enforcement of specific pieces of UK employment legislation, including:

1.26The Minister concludes that there are “possibly some costs to the UK government and enforcement agencies through increased administrative work in participating with the ELA, and possibly some costs in ELA related cross border joint inspections”. However, he says these “are likely to be low” as the UK, while still in the Single Market,
“could determine whether the benefits from participation outweigh the costs and how much to engage with the ELA”.

1.27After the UK’s exit from the Single Market, he states, “our role and relationship [with the Authority] in the long term will depend on the arrangements agreed with the UK and the EU for the future economic partnership”. A regulatory checklist prepared by his Department on the proposal also identified a number of benefits from continued UK participation in the Authority’s work after Brexit, including access to analytical work on “patterns of mobility”, mutual learning opportunities, use of conciliation facilities in the case of disputes, and technical support.25 He notes that this would require a financial contribution by the Government, which would present an “opportunity-cost to the UK contributing to the ELA budget, in terms of greater participation and opportunity to influence”.

Previous Committee Reports

None, this is a new proposal.


1 See our Report of 29 November 2017 for more information on the Pillar of Social Rights and the Government’s position on it.

2 €1 = £0.88415 or £1 = €1.13103 as at 28 February.

3 The total ‘start-up’ costs under the remainder of the 2014–2020 Multiannual Financial Framework are expected to be approximately 33 million euros (£28 million). These would be met partially through redeployment from existing activities currently implemented under the EU Programme for Employment and Social Innovation (EaSI).

4 Explanatory Memorandum submitted by the Department for Business, Energy & Industrial Strategy (5 April 2018).

5 In the UK, this would be the National Minimum Wage enforcement team at HM Revenue and Customs; the Employment Agency Standards Inspectorate (EAS) in England, Scotland and Wales and the Employment Inspectorate (EIA) in Northern Ireland; and the Gangmasters and Labour Abuse Authority.

6 Regulatory checklist submitted by the Department for Business, Energy & Industrial Strategy (5 April 2018).

7 See for example our latest Report on social security coordination of 10 January 2018.

8 See our Report of 29 November 2017 on the Pillar of Social Rights and the Government’s position on it.

9 See our Report of 31 January 2018 for more information on the proposed Parental and Carers’ Leave Directive.

10 The Committee discussed the substance of the draft Employment Rights Directive in more detail in our Report of 31 January 2018.

11 See our Report of 22 November 2017 on amendments to the Posted Workers Directive.

12 These Posted Workers Directive requires a minimum set of host country employment rules to apply to posted workers (who are still employed by the sending company and therefore in principle subject to the law of their home Member State). A proposal to amend the Directive has been provisionally agreed (see our Report of 22 November 2017).

13 Regulation 883/2004. See also our Report of 18 January 2018 for more information on the coordination on social security within the EU.

14 Directive 2004/31/EC on free movement.

15 Jean-Claude Juncker, “State of the Union” speech (13 September 2017).

16 EURES (the European Employment Services) provides information on labour mobility to workers, jobseekers and businesses in the European Economic Area and Switzerland. It includes job placement schemes run by national governments, like the Department for Work and Pensions’ ‘Universal Jobmatch’ scheme.

17 The Technical Committee, which is composed of six members for each Member State, assists the European Commission in the examination of the application of EU law on free movement of workers.

18 The European Platform tackling undeclared work aims to enhance cooperation between EU countries in fighting undeclared work (UDW).

19 The Posted Workers Committee consists of EU-level trade unions and employers’ organisations, as well as Government representatives of the Member States of the EEA. It provides support to Member States in “identifying and exchanging experience and good practice, promote the exchange of relevant information, examine any questions and difficulties which might arise in the practical application of the posting of workers legislation, as well as its enforcement in practice”.

20 The total ‘start-up’ costs under the remainder of the 2014–2020 Multiannual Financial Framework are expected to be approximately 33 million (£x). These would be met partially through redeployment from existing activities currently implemented under the EU Programme for Employment and Social Innovation (EaSI).

21 Regulation 883/2004 confers a number of regulatory tasks on the Administrative Commission, for example drawing up the most up-to-date list of long-term care benefits, in cash and in kind, available in all EU Member States to which the social security coordination rules apply to avoid overlap of the provision of benefits.

22 See for example our latest Report on social security coordination of 10 January 2018.

23 Explanatory Memorandum submitted by the Department for Business, Energy & Industrial Strategy (5 April 2018).

24 These obligations are contained in the Employment Agencies Act 1973 and its supporting regulations, as well as the Employment (Miscellaneous Provisions) (Northern Ireland) Order 1981 and the Conduct of Employment Agencies and Employment Business Regulations (Northern Ireland) 2005.

25 Regulatory checklist submitted by the Department for Business, Energy & Industrial Strategy (5 April 2018).




Published: 1 May 2018