The Posted Workers Directive

An analysis of the EC Directive on the posting of workers within the European Union by cross-border service providers, with details of the legislation implementing the Directive in the UK.

"... Community law does not preclude member states from extending their legislation, or collective agreements entered into by both sides of industry, to any person who is employed, even temporarily, within their territory, no matter in which country the employer is established; nor does Community law prohibit member states from enforcing those rules by appropriate means."

(extract from the European Court of Justice's judgment in Rush Portuguesa Lda v Office National d'Immigration [1990] ECR I-1417)

Many employers established in one member state of the European Union provide services in another, and for that purpose second workers there. All such workers should now be entitled to a minimum "hard core" of protective working conditions, which are mandatory in the member state to which they are temporarily posted, if their employer is a main or subcontractor, or a temporary employment business or agency, or if it belongs to the same group that owns the establishment or business to which they are seconded.

That right stems from Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services1, which is commonly abbreviated to the Posted Workers, or Posting of Workers, Directive. We will refer to it in this article simply as "the Directive", and references to article numbers are to articles of the Directive unless the contrary is stated. The deadline for implementing the Directive in every member state, including the United Kingdom, was 16 December 1999.

Aims of the Directive

The Directive's primary purpose is to remove obstacles and uncertainties that may impede the freedom to provide services within the Community, by increasing legal certainty and allowing clearer identification of the terms and conditions of employment of workers who work temporarily in a member state other than that whose law governs their contract of employment or employment relationship: see otherwise the Rome Convention of 19 June 1980 on the law applicable to contractual obligations2, which was given legal force in the UK by the Contracts (Applicable Law) Act 1990.

The Directive also aims to deny service providers that post workers to a member state, whose laws would afford the workers better pay and conditions if they were habitually employed in that state, an unfair competitive advantage over their rivals operating there, and to avoid the risk of the workers being exploited. It does not aim to harmonise the labour laws of the member states, there being no provision or intention to bring working conditions in the different member states into alignment.

Recital (12) of the Directive reproduces, almost word for word, the principle first enunciated by the European Court of Justice in Rush Portuguesa Lda v Office National d'Immigration3 that appears above . Relying on that principle, the Directive requires member states to extend parts of their legislation, and/or of certain collective agreements between the two sides of the construction industry, to posted workers employed by undertakings within its scope.

Scope of the Directive

The Directive applies to "undertakings established in a member state" which, "in the framework of the transnational provision of services" (which presupposes the existence of a public or private contract between them and the recipient of their cross-border services), post "workers" of whatever nationality to work for "a limited period" (presumably, until the services have been provided) in another member state ("the host country") in which they do not normally work (articles 1(1) and 2(1)).

The Directive does not apply to "merchant navy undertakings" as regards "seagoing personnel" (article 1(2)).

The definition of a "worker" is that which applies in the law of the host country (article 2(2)). The word "undertakings" is not defined in the Directive but, having regard to the Directive's legal basis, it would appear to mean "companies or firms constituted under civil or commercial law, including cooperative societies, and other legal persons governed by public or private law, save for those which are non-profit-making". It would then follow that such undertakings are "established in a member state" if they are formed in accordance with that state's law and have their registered office, central administration or principal place of business there: see Article 48 EC (formerly Article 58 of the Treaty of Rome).

The Directive applies to the extent that such undertakings:

  • post workers to the host country on their account and under their direction, under a contract made between them and the intended recipient of the services operating in the host country; or

  • post workers to an establishment or undertaking in the host country that is owned by the same group to which they belong; or

  • are temporary employment undertakings or placement agencies, and hire out workers to a user undertaking established or operating in the host country.

    In each of those three situations, there must be an employment relationship between the posting undertakings and the posted workers for the duration of the secondment (article 1(3)).

    Significantly, the Directive requires that posting undertakings established outside the EU must not receive more favourable treatment than those established in a member state (article 1(4)).

    Material content of the Directive

    Subject to the derogations listed below, article 3(1) of the Directive requires the host country to ensure that undertakings within the Directive's scope guarantee workers whom they post there, from day one of the secondment (however long it lasts and whatever the law applicable to the employment relationship), terms and conditions of employment covering the following:

  • maximum work periods and minimum rest periods;

  • minimum paid annual holidays;

  • minimum rates of pay, including overtime rates but excluding 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, women who have recently given birth, children and young people; and

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

    Thus, for example, a company based in the UK, which seconds workers to Germany to work on a construction project, will have to pay them, for the duration of the secondment, at least the applicable German minimum wage. The company will also have to comply with German working time limits and observe German workplace health and safety standards in relation to the workers, and avoid discriminating against them contrary to German law.

    Minimum rates of pay are as defined by the national law and/or practice of the host country; and "allowances specific to the posting" that are not paid in reimbursement of expenditure actually incurred on account of the posting, such as travelling expenses, board and lodging, are treated as part of the host country's minimum wage (article 3(7)). The other "guaranteed terms and conditions of employment" are as laid down in the host country by law, regulation or administrative provision and/or, insofar as they concern "building work" (see below ), by collective agreements or arbitration awards that must be observed by all undertakings in the geographical area and in the profession or industry concerned.

    In the absence of a system for declaring collective agreements or arbitration awards to be of such universal application (and there is none in the UK), the host country may, if it so decides, base itself on:

  • collective agreements or arbitration awards that are generally applicable to all similar undertakings in the geographical area and in the profession or industry concerned, and/or

  • collective agreements between the most representative employers' and labour organisations at national level which are applied throughout national territory,

    provided that their application to the undertakings within the Directive's scope ensures equality of treatment between those undertakings and the other undertakings in a similar position referred to above on the guaranteed terms and conditions of employment.

    Such equality of treatment will be deemed to exist where national undertakings in a similar position are subject to the same obligations as posting undertakings as regards those terms and conditions in the place in question, or in the sector concerned, and are required to fulfil such obligations with the same effects (article 3(8)).

    The annex to the Directive defines "building work" widely to include all such work relating to the construction, repair, upkeep, alteration or demolition of buildings, and, in particular: excavation; earthmoving; actual building work; assembly and dismantling of prefabricated elements; fitting out or installation; alterations; renovation; repairs; dismantling; demolition; maintenance; upkeep, painting and cleaning work; and improvements.

    Derogations

    The host country may:

  • after consulting employers and labour in accordance with its own traditions and practices, decide that all workers posted to its territory for less than a month, other than those hired out by a temporary employment undertaking or placement agency established in another member state to a user undertaking established or operating in its territory ("temporary workers"), should not receive the minimum rates of pay as defined by its national law and/or practice (its "national minimum wage") (article 3(3));

  • in accordance with its national law and/or practice, exempt all workers posted to its territory for less than a month, other than temporary workers, from such a decision, and from its national minimum wage, by means of collective agreements within the meaning of article 3(8) concerning one or more sectors of activity (article 3(4));

  • exempt all workers posted to its territory for any period, other than temporary workers, from its national minimum wage, and from minimum paid annual holidays laid down by its law, on the ground that the amount of work to be done is "not significant" in terms of criteria that it is required to lay down (article 3(5)); and/or

  • provide that those undertakings within the Directive's scope that employ temporary workers posted to its territory for any period must guarantee them the terms and conditions of employment that apply to temporary workers there (article 3(9)).

    Where initial assembly and/or first installation of goods is an integral part of a contract for the supply of goods, necessary for taking the goods supplied into use and carried out by skilled and/or specialist workers of the supplying undertaking, those workers will not enjoy the host country's national minimum wage, or the minimum paid annual holidays laid down there by law, if the work to be done is not "building work" (see above ) and the secondment is for no more than eight days (article 3(2)).

    In each case, the length of the secondment must be calculated on the basis of a reference period of one year from its commencement, taking account of any previous periods during which the post has been filled by a posted worker (article 3(6)).

    The UK has not so far taken advantage of any of these derogations.

    Enforcement and jurisdiction

    The Directive requires member states to take "appropriate measures" if there is a breach of it, and, in particular, to ensure that "adequate procedures" are available to posted workers and/or their representatives to enforce obligations under it (article 5). In the UK, the available remedies are generally monetary and by way of complaint to an employment tribunal.

    Posted workers may bring legal proceedings in the host country to enforce their right to the guaranteed terms and conditions of employment without affecting any right they may have, under existing international conventions on jurisdiction, to institute proceedings in another state (article 6).

    Implementation and cooperation

    Member states were required to implement the Directive by 16 December 1999 at the latest (article 7). The Directive also requires them:

  • for the purposes of implementing it, and in accordance with their national legislation and/or practice, to designate one or more liaison offices or competent national bodies and to notify the other members states and the European Commission of these (article 4(1) and (4));

  • to take the appropriate measures to make information on the guaranteed terms and conditions of employment generally available (article 4(3)); and

  • to provide for cooperation between the public authorities that, in accordance with their national legislation, are responsible for monitoring the guaranteed terms and conditions of employment (such cooperation to consist of, in particular, replying to reasoned requests from those authorities for information on the transnational hiring-out of workers, including manifest abuses or possible cases of unlawful transnational activities).

    The European Commission and those public authorities are required to cooperate closely so as to examine any difficulties that might arise from member states choosing to apply to both national and foreign undertakings, on a basis of equality of treatment, terms and conditions of employment:

  • on matters other than those referred to in article 3(1) of the Directive "in the case of public policy provisions"; or

  • laid down by collective agreements or arbitration awards within the meaning of article 3(8) but not concerning "building work" (articles 4(2) and 3(10)).

    UK implementation

    The guaranteed terms and conditions of employment are laid down in the UK4 by (following the same order as the list above ):

  • regs. 4-6 and 10-12 of the Working Time Regulations 1998 (see The Working Time Regulations 1998);

  • regs. 13-16 of those same Regulations (see The Working Time Regulations 1998);

  • the National Minimum Wage Act 1998 (see The National Minimum Wage Act 1998) and Regulations made under that Act (see The National Minimum Wage Regulations 1999);

  • the Employment Agencies Act 1973 and Regulations made under that Act;

  • the Health and Safety at Work etc Act 1974 and Regulations made under that Act;

  • regs. 13A-13C of the Management of Health and Safety at Work Regulations 1992, ss.164-166 and 171 of the Social Security Contributions and Benefits Act 1992, Regulations having effect as if made under that Act and ss.55 and 56 of the Employment Rights Act 1996 ("the ERA") (see Maternity rights by Susan Cox, also published by IRS); (as from 15 December 1999) new ss.47C, 71-75 and 99 of the ERA and Parts II and IV of the Maternity and Parental Leave etc Regulations 1999 (see Maternity and Parental Leave ); and a patchwork of legislation regulating the employment of children under the minimum school-leaving age and of adolescents above that age but below 18;

  • s.1 of the Equal Pay Act 1970 ("the EqPA" - see Equal pay 1: legal framework and preliminary issues , Equal pay 2: unequal pay for equal work and Equal pay 3: defences and remedies ); the employment provisions (Part II) of each of the Sex Discrimination Act 1975 ("the SDA"), the practically identical Race Relations Act 1976 ("the RRA" - see Race discrimination 1: direct discrimination, Race discrimination 2: indirect discrimination and victimisation, Race discrimination 3: discrimination in employment and Race discrimination 4: enforcement and remedies) and the Disability Discrimination Act 1995 ("the DDA" - see Disability Discrimination Act 1995); and the Fair Employment and Treatment (Northern Ireland) Order 1998 (see Fair employment law 1: individual rights), which does not extend to Great Britain.

    Most of the Acts of Parliament and Regulations mentioned above have been amended at various times and do not extend to Northern Ireland, but have counterparts that extend to that part of the UK only. The Employment Agencies Act 1973 is to be amended again, as provided in Schedule 7 to the Employment Relations Act 1999, and existing Regulations made under the 1973 Act will be replaced by new Regulations to be made under that Act.

    Most of the legislation mentioned above also already applied to posted workers. However, until 25 October 1999, none of the provisions of the ERA mentioned above (or their predecessors) applied to employment where, under the employee's contract of employment, he or she ordinarily worked outside Great Britain. This exclusion was repealed, as from that date, by ss.32(3) and 44 of, and Schedule 9(9) to, the Employment Relations Act 1999 (see Employment Relations Act 1999: the deluge begins).

    Similarly, none of the non-discrimination legislation mentioned above applied to employees who did their work "wholly or mainly outside Great Britain" (or, as the case may be, Northern Ireland) until 16 December 1999. As from that date, the Equal Opportunities (Employment Legislation) (Territorial Limits) Regulations 19995 extended the application of the relevant provisions of the EqPA, the SDA, the RRA and the DDA to workers who do at least part of their work in Great Britain (even if their work is done mainly elsewhere) by removing the words "or mainly" from s.10(1) of the SDA and s.8(1) of the RRA, and by omitting from s.68(2) of the DDA both the words "or mainly" and the words "even if he does some of his work at such an establishment".

  • A more extended, but less up-to-date, version of this article appeared in issue 1 (autumn 1999) of Immigration ;and International Employment Law (also published by IRS).

    References

    1 OJ L 18, 21.1.97, p.1.

    2 OJ L 266, 9.10.80, p.1.

    3 [1990] ECR I-1417.

    4 For other member states' implementation of the Directive, see "Implementing the posted workers Directive " in issue 311 (December 1999) of "European Industrial Relations Review" (also published by IRS).

    5 SI 1999/3163, available from the Stationery Office, price £1.50.

    The Posted Workers Directive: main points to note

  • The Directive essentially requires that workers temporarily posted by their employer from one member state of the European Union, where the employer is established, to another, where it is providing services, should have at least the same basic terms and conditions of employment as workers who are habitually employed in that other member state.

  • The posted workers' employer, which must guarantee them those terms and conditions of employment, must be a main or subcontractor or a temporary employment business or agency, or else it must belong to the same group that owns the establishment or business to which the workers are seconded.

  • The guaranteed terms and conditions of employment are the host country's applicable statutory minimum wage; maximum hours of work and minimum rest breaks; minimum paid annual holidays; conditions of hiring out temporary workers; minimum standards of health, safety and hygiene at work; protection for working pregnant women, new mothers and young people under the age of 18; and prohibition of discrimination on grounds of sex, and any others, in employment.

  • It follows that the posted workers' employer may vary, suspend or terminate their contracts of employment, and that they are entitled to be represented and consulted, in accordance with the laws of the member state in which the employer is established.

  • Posted workers may, if they wish, enforce their right to the guaranteed terms and conditions of employment by bringing legal proceedings against their employer in the member state to which they are or were posted.

  • Member states had until 16 December 1999 to implement the Directive, and to make information on the guaranteed terms and conditions of employment generally available.