Posted Work in the European Union

The Political Economy of Free Movement

Jens Arnholtz, Nathan Lillie

• Publisher: Routledge
• Year: 2019
• eBook ISBN: 9780429632259
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Focusing on posting of workers, where workers employed in one country are send to work in another country, this edited volume is at the nexus of industrial relations and European Union studies. The central aim is to understand how the regulatory regime of worker "posting" is driving institutional changes to national industrial relations systems. In the introduction, the editors develop a framework for understanding the relationship of supra-national EU regulation, transnational actors and national industrial relations systems, which we then apply in the empirical chapters. This unique volume brings together scholars from diverse academic fields, all of whom are experts on the topic of "worker posting." The book examines different aspects of the posting debate, including the interactions of actors such as labour inspectorates, trade unions, European legal/political regulators, manpower firms, transnational subcontractors and posted workers.

The main objective of this book is to explore the dynamics of institutional change, by showing how trans- and supra-national dynamics affect European industrial relations systems. This volume will represent the "state of the art" in research on worker posting. It will also contribute to debates on European integration, social dumping, labour market dualization and precariousness and will be of value to those with an interest employment relations, law and regulation.

1 European Integration and the Reconfiguration of National Industrial Relations

Posted Work as a Driver of Institutional Change

Jens Arnholtz and Nathan Lillie

Free movement is at once the EU’s most and least popular achievement, and nothing illustrates this contradiction better than the phenomenon of worker ‘posting’. When an employer sends a worker to another country to work temporarily, that person is said to be posted. Posting of workers occurs every day within the EU, and in many ways, it illustrates the benefits of the European integration project. Professionals can fly across the continent and work without cumbersome visa procedures; frontier workers can easily perform work on the other side of the local border, and transport workers can drive through multiple countries without needing new employment contracts for each one. Posting of workers, in other words, provides an easy and flexible solution for promoting European market integration. However, just as posting illustrates some of the benefits of European integration, it also highlights the tensions and controversies. The removal of administrative requirements for cross-border service trade also allows the development of ‘cheap labour’ business models based on circumventing the receiving country’s national employment regulation and employing workers from low-wage countries on their home country’s conditions. Additionally, problems of tax avoidance and non-payment of social contributions surround posted work because its transnational nature makes enforcement of rules complicated and cumbersome.

For these reasons, posting of workers within the EU has proven highly controversial. From the massive politicisation of Services Directive and the uproar following the ‘Laval quartet’ of European Court of Justice (ECJ) decisions to the open political conflicts surrounding the adoption of the Enforcement Directive and the revision of the Posting of Workers Directive, posting-related EU policy is among the most highly politicised issues in recent European integration. Posting has come to symbolise the tension between east and west, between free trade and social protection, and between employers and workers, and most of all, it has come to symbolise a struggle about what the EU should become. To understand how these workers can cause such political controversies, we need to understand the political economy of posted work and its relation to European integration more broadly. This volume aims to provide such an understanding by showing the links between large-scale socioeconomic differences, complex legal details, and everyday company practices within the EU. We contend that the growth of posted work is both driven by and a driver of institutional change, which occurs mostly through regulatory arbitrage generated by firms’ transnational practices and adaptive responses by actors defending national labour market regulation. These actors, which we refer to as ‘enforcement actors’, are trade unions, government labour and financial inspectors, and in some cases, firms or employer associations.

The existing literature on posting tends to focus on the labour market implications of posting and the legal principles around it. As a result, it has difficulty coming to terms with the varied and multilevel ways in which posting reconfigures industrial relations systems, just as it also misses the dynamic implications of local and national resistance to such pressures. Much of the existing literature seems to have an exaggerated belief in the immediacy and effectiveness of formal rule changes. Looking only at formal rules changes, the diffuse effects of introducing practices from outside are invisible. However, as the chapters in this volume show, institutional changes caused by posting often come from below – from the practices of companies, individuals, unionists, and labour inspectors. These take time to manifest because companies spend time experimenting with different strategies for using the rules, and enforcement actors typically try to offset changes by re-enacting institutions. On the one hand, adaptation by enforcement actors might ensure that pressures for potential change never manifest since the system has stabilised itself without the need for formal rule changes. On the other hand, the interaction between companies and enforcement actors may cause changes in institutional enactment to be drawn out in a manner that makes significant changes almost invisible. Either way, both company strategies and the practices of local enforcement actors are of significant importance for the changes brought about by European integration and EU labour mobility and thus for our understanding of these changes.

We hope that the findings of the volume may stimulate debate about how best to study the interaction between European integration and national institutional change more generally. Debates on European integration often occur without regard for how institutional developments in Member States affect EU politics. Likewise, debates in comparative political economy about institutional change in European countries often ignore the pressures exerted by European integration. Early works on European integration, and particularly the neo-functionalist work of Haas (1958), did indeed emphasise the role of subnational actors, such as firms, who, motivated by new transnational market opportunities, drove forward both political and economic integration. However, gradually, studies of European integration shifted their focus to high-level political bargaining (Moravcsik, 1998). As a supranational political structure was gradually formed, scholars started to study its top-down influence on domestic institutions (Risse et al., 2001). From this perspective, domestic change came about in response to legislative or juridical change from above. More recent studies reintroduce subnational actors through the concept of ‘multilevel governance’, in which actors manoeuvre for political advantage both within and between local, national, and supranational systems (Hooghe and Marks, 2001). While we find the multilevel framework useful for understanding the complexities of the EU as a political system, it too misses the importance of transnational economic transactions. The emphasis is on the political system and formal rule-making rather than on how rules are used in the market. This is true even of industrial relations work such as Marginson and Sisson (2004) and Keune and Marginson (2013), which follow political scientists in emphasising formal institutions and bargaining structures. There is an abstract theoretical recognition of transnational economic transactions as drivers of market integration, which then sets in motion multilevel political responses. However, the empirical focus is primarily on the interplay between these different levels of political responses rather than on the immediate institutional changes caused by companies’ regulatory arbitrage and the way regulatory actors seek to contain the societal damage these changes can bring about.

Consequently, we aim to place more emphasis on companies as drivers of everyday European integration, and this means going out into the field to study how rules are used in everyday practice. This is hard work because it involves investigating the microlevel market actors – firms, shop stewards, workers – as well as national and EU actors, and tracing the links and influences between them. When doing this, we seldom find that the behaviour of micro-actors can be directly deduced from the formal rules or national institutional configurations. Instead, we observe that the rules can be used, abused, and circumvented in many different ways. Indeed, the various ways that posting firms strategize around the use of formal rules is at the heart of our framework. Compliance with labour laws, industrial relations norms, tax rules, and social security regulation is not a given, but a variable, which makes it fruitful to investigate why firms comply or how they manage their non-compliance. Additionally, it raises questions about the effects companies’ rule engagement strategies have on the institutions they engage with, and how rule enforcers adjust their behaviour as a result.

This focus on firms speaks to another academic tradition, namely comparative political economy, where the Varieties of Capitalism (VoC) perspective has long promoted a firm-centred analytical perspective. However, while the VoC approach places the firms at the centre of its formal theory, VoC-inspired studies rarely examine what companies actually do. Company behaviour is often presented as institutionally determined, rather than firms being actors in their own right. Even if this assumption is somewhat justified for firms operating in a single insular institutional context, posting companies are by definition operating in two or more and thus have to arbitrate between the two. By contrast, therefore, we stress the ‘actorness’ of companies and thereby the unruliness (Streeck, 2009) that they potentially bring to any institutional context. At the same time, we offer the same actorness to the enforcement actors that try to constrain company strategies; trade unions, employer associations, and labour inspectorates are not simply institutional background, but also actors that seek to cause or prevent institutional change. Therefore, this book offers detailed empirical studies of practical, everyday strategies that typically fly below the radar of comparative political economy or studies of European integration. We maintain that these everyday practices are not only important in their own right – as reflections of policy outcomes – but are also important drivers of political and legal changes and ultimately of the European integration process.

Briefly stated, we argue that the EU regulatory framework for posted work opens possibilities for regulatory arbitrage on labour standards by firms performing work within a defined regulatory space (i.e., without a need to move production to a different legal jurisdiction). While some scholars might label this as social dumping or fraud, we find these vague, and highly politicised concepts (Bernaciak, 2015) are less suitable for our analysis. Instead, we talk of companies’ regulatory engagement to understand how they use the legal tensions and inconsistencies between national labour regulation and EU regulation to gain competitive advantages. More specifically, we argue that the rules surrounding posting can be used to create a business model based on ‘cheap labour’ because they allow companies to partially escape the regulatory constraints of the country in which they operate. While the initial consequences of this are the creation of zones of exception within the host country’s labour market, the competitive dynamic set in motion by company strategies will gradually cause institutional change. This often takes the form of institutional drift, where new employment practices proliferate although national rules are unchanged, and institutional conversion, where the meaning of the institutional rules are reinterpreted to allow for the new employment practices.

Importantly, while firms are the actors who start the process, by disrupting more or less settled institutional relationships, other actors, such as trade unions, labour inspectors, and potentially also politicians respond. They may try to limit or prevent institutional change and conversion by trying to re-enact institutions, sometimes in creative ways. Nationally, actors may try to re-regulate posting with everything from minor rule adjustments, to the creation of completely new institutions, layered on top of the established institutions. At the supranational level, actors challenge the legal exceptions (by re-legitimising national regulatory sovereignty) or limit their implications (by limiting the use of posting or by limiting the economic benefit of using posting as a business strategy). However, such response strategies, in turn, are met with counter-responses by individual companies, employers’ representatives, and politicians. In sum, everyday posting sets in motion several interlinked processes that have led to highly contentious political struggles at multiple levels. In the rest of this introduction, we elaborate this argument while linking it to previous studies and chapters in the rest of the volume.

1.1 The Socioeconomic Drivers of EU Posting

There can be no doubt that the contemporary debates about intra-EU labour mobility generally – and posting specifically – have their roots in increased socioeconomic differences of the EU. A short history of posting shows how its politicisation correlates with the differences in wage and welfare levels of the sending and receiving countries. Posting arrangements have been used at least since the 1970s to send highly skilled or specialised workers abroad; this use of posting attracted little controversy. With the accession of Spain and Portugal in 1986 came two new member countries with significantly lower wages than the rest of the EU. This was the starting point for contemporary political debate, as the inflow of posted workers from these two countries set off the first round of labour market competition and national re-regulation, resulting in a flurry of precedent-setting ECJ judgements on posted work. Receiving Member States tried to uphold their domestic labour standards, while the Commission and ECJ aimed at securing market access for posting companies. Ultimately, a compromise between these two positions was instituted by the adoption of the 1996 Posting of Workers Directive (henceforth PWD), which accepted mobility on sending country work contracts but allowed host states to apply certain aspects of their labour law to posted workers. Adopted after years of political struggle (Eichhorst, 1998; Streeck, 1998; Evju, 2009), the PWD was a compromise that balanced between different interests and lent itself to very different interpretations, and when it was evaluated in 2003, no one wanted to challenge this compromise by suggesting a revision of the directive.

The accession of the Central and Eastern European countries beginning in 2004 and the resulting unprecedented increase in intra-EU labour mobility (Dølvik and Eldring, 2015) threw posting back into the spotlight. The high levels of unemployment and low-wage levels of the new Member States gave an enormous economic incentive for the new EU citizens to try their luck in the old Member States. While this new labour mobility took many different forms, posting became one of the favoured devices for bringing Eastern European workers to Western Europe. One reason for this was that most Western European countries implemented ‘transition periods’ of restricted labour mobility from new EU Member States. Posting allowed firms and workers to circumvent these transition periods because posted workers move under free movement of services rather than free movement of labour (Dølvik and Eldring, 2008; Wagner and Hassel, 2016).¹ Although the posting status was originally intended for sending abroad workers as part of a pre-established employment relationship, this requirement was not enforced. Transnational work agencies sprang up to serve as recruitment vehicles for western firms seeking cheap labour, and these agencies became important actors in the more precarious segments of the pan-European labour market (Pijpers, 2010). Even after the transition periods expired, such agencies continued to operate because they had become an established part of the market. In this sense, posting became one option among others for employers to engage workers from abroad.

1.2 Competing Legal Principles and the Fundamental Tension of Posted Work

Nonetheless, posting is of extra interest to employers because it allows them to conclude employment contracts in the sending country, meaning they can access alternative frameworks of employment regulation for posted workers. While taking advantage of the lower wage expectations of migrants to pay them less is nothing new, collective agreements, minimum wage laws, and immigration restrictions often constrain the degree to which migrants can be exploited. Posting offers a way around such constrains. To understand this aspect of posting, we have to look beyond the socioeconomic differences that have been the driver of labour mobility more generally and focus on the legal tensions and inconsistencies that companies can use to gain competitive advantage by posting workers. Market making has always been an explicit goal of the EU, based since the 1957 Treaty of Rome on the ‘four freedoms’ of movement of goods, capital, labour, and services. However, the principle for this market making varies between the four freedoms. The free movement of goods, at least since the Cassis de Dijon (Case 120/78) decision, has been governed by a home country and mutual recognition principle. This implies that a company established in one Member State has only to abide by the rules and standards of that state, even if it wants to sell its products in other Member States around the EU. With a few exceptions, the country in which the product is sold should recognise the standards of the company’s home country as equally valid as its own. However, labour mobility was always a sensitive issue, and migrant work, since the inception of the European Economic Community, has been governed by a host country and non-discrimination principle (Baldoni, 2003; Engels, 2006). Under the free movement of labour, the rules and regulations of the country where the work occurs should apply. Furthermore, these national rules should not discriminate against workers from other countries. Consequently, the country in which the work is performed determines how the employment relationship is governed. This is consistent with the principles of territorial sovereignty, which mediate our understanding of human rights and equal treatment u...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• Acknowledgements
• 1 European Integration and the Reconfiguration of National Industrial Relations: Posted Work as a Driver of Institutional Change
• 2 The Benefits of Posting: Facts and Figures on the Use and Impact of Intra-EU Posting
• 3 Shifting Employer Strategies in Light of Institutional Change
• 4 Ambiguous Mobility: Polish Transnational Workers Navigating and Changing the Institutional Landscape of Posting
• 5 A Comparative Analysis of Union Responses to Posted Work in Four European Countries
• 6 Italian Labour Inspectors Facing Posted Workers Phenomena
• 7 Market Integration, Cross-Border Recruitment, and Enforcement of Labour Standards – A Dutch Case
• 8 Posting of Workers: From a Blurred Notion Associated with ‘Cheap Labour’ to a Tool for ‘Fair Labour Mobility’?
• 9 Stepping Stones Over Troubled Waters. Recent Legal Evolutions and the Reform of the Posting of Workers Directive
• 10 Labour Subcontracting in Cross-Border Labour Markets: A Comparison of Rule Evasion in Germany and Japan
• Author Biographies
• Index