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Denmark joins the Eastern European countries on social dumping issue

The European Commission proposed a revision of a directive to fight social dumping, but Denmark and 10 Eastern European countries have raised concerns.

By Sebastian Dall and Charlotte MacKay

The Danish union 3F is currently investigating a social dumping case against the Italian construction firm GFC working on the light-rail in Aarhus. Photo: Sebastian Dall
The Danish union 3F is currently investigating a social dumping case against the Italian construction firm GFC working on the light-rail in Aarhus. Photo: Sebastian Dall

Shortly after the European Commission, on 8 March, proposed a revision of the directive on cross-border workers, the national parliament of Denmark and 10 Eastern European countries showed concerns towards the “equal pay for equal work at the same place” warrant, arguing that is was national competence.

Jens Arnholtz a researcher in migration of workers says that Denmark has an entirely different reason for showing apprehension toward the revision than the Eastern European countries. The current directive states that the term ‘minimum wage’ is defined by national traditions and practices. The European Commission has since deleted that paragraph, which means that cases of minimum wages will be done in the European Court of Justice.

“The European Court of justice has ruled cases before in favor of companies which would not be the way a Danish court would view it,” Arnholtz says.

As the only Western European country raising concerns towards the revision, Ole Christensen, a Danish, social democratic member of the European Parliament were often has asked why.

“It has been a challenge to explain why Denmark is against equal pay for equal work, but I have close contact to the spokesmen and I believe it will be there in the final draft,” Ole Christensen says.

On 20 July the Commission responded to the concerns saying that the revision would not breach the national competence on pay but only ensure fair competition between Member States; the Commission has gone forward with the proposal.


Social dumping divides europe

The European Union has tried to minimize wage differences between posted and local workers since 1996, but European parliaments are differing greatly on social equality.

By: Charlotte MacKay and Sebastian Dall

In 2014 there were approximately 1.9 million European workers posted throughout the 28 EU member states, and between 2010 and 2014 the number of postings increased by about 45 percent, according to an EU Commission report.

Today, Eastern and Western European countries are clashing over a proposed revision of the posted workers directive which argues for “same pay for the same work at the same place.”

For years European companies have been using employees from other countries with lower salaries to reduce the cost of labor, but the idea of having ‘equal pay for equal work,’ as the EU Commission has put it, does not sit unanimously among the 28 member states. The posting of workers is part of a fundamental right of the EU to move labor across borders and therefore a proposal to revise the current directive has caused a turbulent discussion.

The Revision

A posted worker is an employee who has been sent by a company to another country to work on a temporary basis. Current European legislation expects these employees to be paid at least the minimum wage of the host country, but explains that workers do not have to be paid the same as local employees. This exploitation of workers has been coined social dumping.

In 1996 the European Commission established the first directive on posting workers which laid a foundation for the free labor movement of people. Currently, the directive stipulates that it is the responsibility of the Member States to lay down the rules that govern posted temporary workers.

The revision of the Posted Workers Directive that was introduced on 8 March this year is pushing to prevent social dumping by demanding a general principle of equal treatment for posted workers. Instead of using the “term minimum wage” the European Commission wants to use the term “payment” to ensure the same remuneration for working overtime and other bonuses.

“Europe is the cause of the social dumping and Europe needs to be the place for the solution,” says Esther Lynch, the Confederal Secretary of the European Trade Union Confederation. “I think it is really important that this Commission moves forward even though a number of member states have raised some concerns about it.”

More specifically, the new directive will include:

  • A broader set of remuneration rules;
  • An equated salary to local workers if posting is longer than 24 months; and
  • Equal rights for domestic and cross-border temporary work agencies.

“I think there is a real will in this parliament to try to make this revision work to benefit the workers,” says Jean Lambert, member of the European Parliament’s committee on employment and social affairs for the Greens.

Directive rejected

Shortly after the revision was presented, 11 national parliaments raised concerns toward the proposal; 10 being from Eastern Europe and the eleventh from Denmark.

Jens Arnholtz, a researcher on migration of workers, argues that Eastern European countries are against the revision because they see the low salaries as a market advantage. If equal pay for equal work was a reality for Eastern European workers, they would not be able to go to the Western part of Europe to work because they often compete on only price.

Although posted workers earn about 50 percent less than the locals in some areas and sectors, according to the European Commission, the money they earn while working abroad is still a more reasonable income than the even lower wages they earn in their home country. With that being said, Eastern Europe still does not agree with the equal pay warrant because they feel it is a matter of national competence and not the EU’s responsibility.

On the contrary, Lynch argues that workers from Eastern Europe are not competing on pay and that they are just as skilled, motivated and dedicated as workers who are from Western Europe.

In addition, Lambert contends that the debate should not be about East and West. “This is about how you prevent the exploitation of workers; this is about how you prevent bad employers not playing by the rules,” says Lambert “For us, this is important.”

Neglected social rights

In November 2004 the Swedish Building Workers Union blocked the way of 35 Latvian posted workers in the town of Vaxholm. For months the Union demanded that the Riga-based company ‘Laval un Partneri Ltd.’ sign a collective agreement reassuring higher salaries for the Latvian workers who were being paid less than the Swedish workers.

Laval un Partneri Ltd filed a case against the Swedish union for hindering the workers to do their job or as it was called: “breaching the freedom to provide services.” The European Court of Justice ruled in favor of the free market demanding the Swedish Building Workers Union and the Electricians Union, who joined the blockade out of sympathy, to pay the Latvian firm 260,000 euros as compensation.

In some countries in the EU, such as Denmark and Sweden, there is no minimum-wage system because of strong unions demanding collective agreements. For this reason, these agreements often set low standards with bonuses for overtime and pensions, as seen in the Laval-case.

During the same period as the Laval-case, the European Court of Justice ruled two other cases of social dumping in favor of the firms Viking and Rüffert, making it more difficult for the unions to legally combat social dumping by collective bargains and strikes.

Since these cases, the European Commission has tried to fight what a recent report by Guillaume Balas from the committee on employment and social affairs called an “asymmetry between economic freedoms and social rights.” In the report the French social democrat says that social rights have been neglected and calls for “a system that ensures predominance for social rights over economic freedoms.”

Altruistic or self-concerned?

The European Commission often refers to social dumping in terms of unfair competition, which raises the question of whether the revision is a way to stop the exploitation of workers or a ploy for the Western European countries to be able to compete with cheap labor from Eastern Europe. Ole Christensen a member of the European Parliament for the Social Democrats says that both parameters are important.

“It is to help everyone. We need a fair competition no matter if you are Romanian, Polish or Danish without keeping people out of the different countries,” he says.

Jean-Claude Juncker has many times said that “social dumping has no place in the European Union” and “the same work at the same place should be remunerated in the same manner.”He even mentioned it in his State of Union Speech in 2015.

“We have to step up the work for a fair and truly pan-European labor market. Fairness in this context means promoting and safeguarding the free movement of citizens as a fundamental right of our Union, while avoiding cases of abuses and risks of social dumping.”