The posting of workers in the European road transport industry: An approach based on the discourses of social and institutional stakeholders

The stance of European social stakeholders regarding existing regulations on the posting of workers

One of the first sources of dispute was existing regulations regarding the posting of workers: whether these regulations were sufficient, whether they should be reformed and, as outlined in the following section, whether they can (or should) be applied to the road transport industry. The stance of the European employers’ associations regarding the regulations in effect until 2018 was one of ‘moderate satisfaction’. While they opposed some elements in the existing regulations (such as the partial joint responsibility in subcontracting chains or the establishment of an open list of requirements for postings which, in their opinion, put companies in a situation of legal uncertainly), in general they regarded the regulations as a reasonable compromise resulting from a great deal of hard work. From their perspective, the regulations that governed the posting of workers until 2018 were well balanced and enabled the defence of worker rights (limiting the activities of letterbox companies, and giving governments ample room to manoeuvre) while permitting the free provision of services by companies. Thus, the employers’ associations saw no justification whatsoever for calls by trade unions and other institutional stakeholders to reopen the debate around the regulations, the possible defects of which had, moreover, been to a large extent resolved thanks to the approval of the new directive in 2014. In their opinion, reforming a set of regulations that had just been implemented, and which had not yet been in place long enough to enable a proper assessment of their utility or possible shortcomings, was both premature and unnecessary. ‘What we are saying is: first give time to assess in more detail [the impact of the existing regulation] and do not change the rules all over again’ (Eurociett).

Thus, the new 2018 Directive was not well received by the principal European employers’ associations. Measures such as ensuring equal pay for workers beyond the minimum wage were denounced as an attack on social stakeholders’ recognized autonomy to negotiate salary scales. Similar negative reactions were triggered by attempts to automatically apply collective agreements erga omnes to all posted workers, to establish a maximum duration of 12 or 18 months for postings (which they consider insufficient in certain sectors) and to apply the Directive to the transport industry, beyond cabotage (BusinessEurope, 2018a). In addition to this specific criticism, employers’ associations also see the new directive as a bad agreement which, in their opinion, is more a reflection of the political interests of certain countries (in which protectionist measures have been imposed as a response to distorted debates about the effect of the posting of workers) than the manifestation of a sincere will to find solutions to the needs of posted workers (BusinessEurope, 2016, 2018b). For European employers’ associations, the posting of workers constitutes a fundamental tool for ensuring business competitiveness, the correct functioning of the single market and, in short, European prosperity. They consider the problems associated with this phenomenon to be limited to certain illegal practices which should be prosecuted. From this perspective, the new directive is not the best solution and, moreover, constitutes a major obstacle for European companies wishing to take advantage of the possibilities offered by posting (which they believe could have the undesired effect of increasing the prevalence of illegal practices).

In the eyes of the main trade union organizations, however, the regulations governing the posting of workers were clearly insufficient for defending worker rights. The 1996 Directive was severely constrained as a result of the restrictive interpretation of its content by the CJEU and the Commission (giving the free provision of services by companies priority over other considerations, turning the list of minimum employment standards for which posted workers should receive equal treatment into a list of maximum standards that cannot be extended by Member States, restricting trade union rights to collective action in the field of worker posting) (Cremers, 2011; Wagner and Lillie, 2014). Dissatisfaction with these constraints was reflected in a series of unilateral initiatives launched by those Member States most concerned about the posting of workers, as well as in the approval of the 2014 Enforcement Directive, which aimed to address some of the shortcomings of the 1996 document (Fotinopulos, 2017).

Despite these steps, however, union representatives were extremely critical of both these and other reform proposals, considering them insufficient and overly ambiguous as regards the principle of equal pay (which was stated but not accompanied by sufficient recognition of the scope of collective agreements). Other problems mentioned included the limiting of the maximum possible duration of the posting (which is well over the mean real duration of postings, and in this sense, does nothing to limit existing abusive practices); the insufficient definition of responsibilities in subcontracting (which should, in their opinion, involve the acknowledgement of the principle of joint responsibility and solidarity along the entire subcontracting chain); and the fight against letterbox companies.

Thus, in clear contrast to the employers’ associations, European trade unions have always argued strongly in favour of reopening the debate on the regulations, particularly as regards the drive to address the most controversial points of the existing legislation. According to union representatives, the aim is not only to improve the current legislation ‘technically’, but also (and above all) to bring about a change of policy within European institutions. The change sought by the unions would restore priority to the interests and rights of workers and would avoid what is currently perceived as their subordination to the economic freedoms demanded by companies. While never actually calling the market economy itself into question, union stakeholders nevertheless demanded more ambitious economic regulation (with the creation of European agencies, mechanisms, indicators and institutions and a return to the lex loci laboris principle). Their aim is to redress the balance within the European project between the defence of the freedom and rights of companies and the defence of the freedom and rights of citizens:

Rather than a social welfare instrument, the Posting of Workers Directive is still considered to be a means of ensuring the free circulation of services… Whenever there is a conflict between economic freedom and social norms it is clear that the Court of Justice prioritizes economic freedom. (ETUC)

From this perspective, in general terms, the principal European trade unions (both East and West) view the revised 2018 Directive in a positive light. The new directive explicitly recognizes the aim to provide legal protection for posted workers, rather than just serving as a mechanism for the transnational provision of services by companies within the single market. This explicit recognition aims to curtail future restrictive interpretations of the regulation by the courts. Similarly, they believe that the new directive (with its proposal to extend the principle of equal pay to posted workers, beyond the minimum wage, and to apply collective agreements erga omnes to all posted workers) constitutes a step forward as regards achieving the principle of ‘equal pay for equal work’, thereby helping to mitigate the negative effects of ‘social dumping’. Obviously, they also expressed dissatisfaction with some of the elements agreed on in the proposed review, but this criticism does not mean they do not view it in a generally positive light, as indeed is the case among the principal European institutions also (ETUC, 2017, 2018).

The discourse regarding the application of the posting regulations to the road transport industry

Our fieldwork also identified a second source of friction, centred around the application of the posting of workers legislation to the transport industry. All stakeholders interviewed acknowledged that this industry is marked by the constant movement of workers (mainly from Eastern Europe), who cross many different national borders during their activity. Nevertheless, as mentioned above, road transport activities (except cabotage) have previously been excluded from the legislative framework governing the posting of workers. This has prompted a series of recurrent clashes between unions and employers’ associations over the definition of the mobility of transport workers and, hence, the possible application of the posting regulations to the industry.

Trade unions have always firmly supported fully applying the posting directives to the whole road transport industry; they consider this a fundamental step in the fight against abusive practices and social dumping, which they see as rife within the sector. The problem, therefore, is not the absence of appropriate legislation (although adjustments may be required), but rather a lack of political will by EU institutions to apply existing regulations to the industry; and to do so, moreover, while respecting what they see as the original spirit of the Directives, namely to protect and safeguard the rights of posted workers in Europe.

According to the trade unions, the law of the country in which the activity takes place should be applied automatically in the transport industry, a move which would involve adjusting pay in line with the countries through which the driver passes and obtaining the relevant permits and posting authorizations. The unions believe that, by definition, all international transport services involve the posting of workers, and as such should be regulated and protected by improved posting legislation. Similarly, workers who provide an international transport service, passing across borders and through different countries, should be paid in accordance with the minimum wage in effect in those countries for the period in which they remain there (regardless of the ultimate destination of the goods transported). This is how the representative of the leading Spanish trade union organization explained it: ‘whenever any posted worker arrives in a country in which workers earn more, they should earn that wage, even if they are just passing through’ (CC. OO).

Unions insist that only by ensuring real equality between the employment and wage standards of Member States will it be possible to prevent the posting of workers within the EU from degenerating into social dumping. Nevertheless, these protection measures must be complemented by other steps, including the establishment of minimum price indices to avoid unfair competition and abuse by shippers; the control and effective application of other relevant European regulations, such as those which govern driving and rest periods; the creation of transnational mechanisms and institutions to regulate the industry (European transport agency, European labour inspectorate); and the creation of solidarity funds to provide economic compensation to workers affected by the fraudulent activities of letterbox companies. In short, a whole set of measures and mechanisms are required to move beyond the mere application and extension of the regulations governing the posting of workers to the transport industry.

For their part, representatives of the employers’ associations adopted a very different outlook, firmly opposing the application of the posting regulations to road transport. To their mind, the regulations were designed and formulated on the basis of the problems facing specific industries (mainly construction), problems which have little or nothing to do with the specificities of a sector such as transport, which is, by its very nature, mobile and transnational. Given that the international road transport industry necessarily involves the movement of the labour force across national borders, applying the regulations governing the posting of workers would mean considering all activities and services provided in the sector as postings, which is exactly what the unions advocate and which the employers’ associations openly oppose. Business organizations are even against the term ‘posting of workers’ being applied legitimately to international transport activities. There are two main reasons for this. First, the strong presence of subcontracting and the informal nature of the industry often make it impossible to establish (as the Directive requires) a formal direct link between the company contracting the service and the company providing it. Second, the employers’ associations believe that in international road transport activities, drivers pass through different countries on a temporary basis only (sometimes spending only hours or days in each), and do not actually provide any service in them. The regulations governing the posting of workers are, according to the employers’ discourse, designed to regulate the posting of workers for much longer periods, with a greater impact, rather than simple situations of transit or short stays in a foreign country, as is the case in the international road transport industry:

I really find it very difficult to accept that the situation [in the road transport industry] would be described as posting. Why? The driver is nowhere posted. I mean, the Posting of Workers Directive was adopted, of course targeting other sectors, like the construction sector, where the people are normally employed for a long period of time, but for our sector it would be really very difficult to apply. (IRU)

The employers nevertheless acknowledged that, alongside this continuous and temporary situation of transit, there is also a recurring phenomenon in the road transport industry of worker movement from East to West, a circumstance which involves large numbers of workers regularly remaining outside their countries of origin for weeks at a time in order to provide transport services in Western Europe. The recognition that this occurs did not, however, trigger a significant change in the discourse of the employers’ representatives, who still insist that these are simple cases of worker movements between the main offices and subsidiaries of a single business group. While the service provided by these workers certainly does involve crossing different countries and borders, the short duration of their stay is the main argument used to deny the idea that what is involved is a case of worker posting (even though many workers remain outside the country in which they reside and in which they are actually employed for several weeks at a time). This view was expressed by the representative of the International Road Transport Union (IRU) as follows:

We know of course that there are movements of drivers…. from the East working in the West, but this is basically mostly not done under the Posting of Workers Directive. It is basically a simple labour contract with the country where they come from, because normally the company would have a subsidiary in that country so they basically exchange drivers on the basis of that. The drivers also do not stay in the country while they work. They return regularly to their country of residence. So, again, we can’t talk about posting here.

The employers’ associations not only consider it inappropriate to apply the posting regulations to the transport industry, they also believe it unfeasible in practical terms. The continuous crossing of borders involved in the industry would force haulers to calculate different salaries, apply different labour regulations and prepare documents in different languages, all for simple daily and/or weekly work activities. This would involve an enormous amount of supervision by Member States and labour authorities, as well as a huge administrative effort from companies themselves, which, in the employers’ opinion, could result in the collapse of the entire industry.

This stance was partially shared by the interviewees representing the European Commission DG Mobility and Transport and the Spanish Labour Inspectorate, although certain important nuances were detected. For both institutional stakeholders, the posting regulations that were in effect until the 2018 reform would have been hard to apply to road transport activities other than the cabotage. Given that the posting of workers was originally defined on the basis of the characteristics prevalent in construction, both the institutional stakeholders coincided in pointing out how hard it would be to find situations of posting in the transport industry that would fully fit the criteria established in the legislation.

Nevertheless, both these interviewees expressed certain opinions that differed significantly from the discourse and stance adopted by the employers’ associations. First, the representatives from the Inspección de Trabajo supported the creation or consolidation of transnational mechanisms for regulating and controlling the posting of workers. These would include the creation of a European inspectorate, the establishment of a European minimum wage, the use of the Internal Market Information System and the creation of European-wide coordinating bodies similar to the Senior Labour Inspectors Committee, for fighting fraud in worker postings. For its part, the DG Mobility and Transport stated would be in favour of revising the existing regulations, in order to take into account the specificities of the industry; this acknowledged the impact of posting on the industry, an impact that could not be properly regulated or counteracted with the regulations in effect prior to 2018. In the words of this interviewee:

[The] Posting of Workers Directive does not take into account specificities of international transport and that is why it is not easy to apply to international transport…. So, for us, the best would be if the posting of workers is revised considering specificities of international transport: the high mobile workers, etc.

Social dumping and the posting of workers in road haulage

The final controversy we analyse here centres around the possible negative consequences of the posting of workers. The road transport industry is highly fragmented, with companies extremely dependent on the customers who demand their services (shippers) (AECOM, 2014). This dependency often means that it is customers who in reality impose the rates and conditions of the transport service, thereby triggering fierce competition between different operators and exerting constant pressure to lower prices (Riesco-Sanz et al., 2018). Faced with this situation, many companies have opted to reduce operating costs. Their strategies can take many forms, including subcontracting certain activities, incorporating new technologies and transport improvements (more modern and fuel-efficient vehicles, computerized transport service and route management, increasing the size and load capacity of the trailers) and the coordinated bulk purchase of large quantities of fuel. Nevertheless, the main means by which companies seek lower operating costs has been by reducing labour costs, which according to existing estimates (AECOM, 2014: 64–68), account for around one-third of all operating overheads and which, unlike the other components (fuel prices, taxes) afford companies much more leeway.

This attempt to increase competitiveness by reducing labour costs underlies the systematic mobilization of labour from European countries with lower wages and weaker employment standards. In 2016, transport firms registered in Eastern European countries were responsible for 61 percent of all international road haulage activity in the EU-28 and Southern European firms for 18 % hence together they accounted for almost 80 percent of all international transport services in the EU (Eurostat, 2016). According to the unions, this mobilization sometimes takes place through the offshoring of a company infrastructure to countries with low labour costs, even though most of the company’s activity remains concentrated in their countries of origin or other countries with high labour costs. At other times, this cheaper workforce is provided directly by letterbox firms. In both the cases, the consequence of these business strategies is the violation of the rights and guarantees of all workers (posted or otherwise) in the industry, through what is known as social dumping. The phenomenon of letterbox companies is not, however, specific to or the sole responsibility of Eastern European countries. In this sense, according to the unions, the fight against these types of companies should not be interpreted in terms of a national confrontation (West against East), in which different labour relations, standards of living and social welfare models (and even conceptions of democracy) clash. Quite the opposite, in fact. What actually underlies this supposed clash or conflict of national interests (in which Western European countries ostensibly seek to defend themselves against the abusive practices of companies from the East) is often nothing more than a process of offshoring and/or subcontracting by Western companies looking to transfer their operations (either wholly or partially) to cheaper countries with fewer guarantees and more compliant labour relations models. In other words, what we have is a conflict between the main capital invested in the transport industry: capital of diverse origin but with the hegemony of Western countries, which exploit the unequal process of European integration in order to enhance their own competitiveness. This is how the European Transport Workers’ Federation (ETF) interviewee put it:

The main players responsible for letterbox companies are not necessarily Eastern companies, but rather Western firms seeking to use this ploy to access cheaper labour… I believe it is a mistake to assume that Eastern European countries are the main source of unfair competition.

Interviewees from the employers’ associations concur in pointing out that subcontracting, posting and company offshoring constitute strategies used by transport firms to meet the highly competitive conditions in the industry. These strategies are geared towards containing or reducing operating costs, particularly labour costs. Here is how the IRU interviewee explained it:

Labour mobility for us it is a major tool how to do the business more effectively and also to lower the cost, because if you look at the cost structure of the companies, I mean, regardless of where you come, whether you come from West from East, it is all the same… The only cost that remains that you can work with, is of course social cost, and that is the driver.

The differences between the two discourses stem mainly from their assessment of the legitimacy of these types of business strategies, as well as their scope and possible harmful effects. Thus, for employers’ associations, offshoring constitutes a legitimate, legal activity in an economy committed to the free provision of services and the free circulation of goods and capital. Thus, in contrast to the trade union discourse, employer representatives dissociate offshoring from social dumping and the phenomenon of letterbox companies, and clearly differentiate between the two types of practices. From their perspective, offshoring and the international posting of workers are legitimate, legal strategies which should be seen as clearly different from other (illegal) practices which (occasionally) occur in the industry:

There are undeclared activities which of course are social dumping in a sense that the company does not pay social security contribution and does not provide the minimum wage, does not respect labour standards and so on, [so it] can gain competitive advantage, which is unfair… But what I do not like to be seen as social dumping is the difference in the cost structure [or] the fact that the wage somewhere is a bit lower than the wage somewhere else. (BusinessEurope)

It is perfectly legal to create a subsidiary in the East and do transport there, or do transport at home. This is a perfectly legal business operation, there is nothing wrong in it. The problem is of course if you set up a letterbox company. (IRU)

Employers’ associations do not, therefore, deny the existence of letterbox companies in the industry, but they do not believe that their presence is structural (intrinsically linked to the functioning and dynamics of the sector). Rather, they are convinced that these are isolated cases (which are constantly and excessively exploited by trade unions for their own purposes). In the employers’ opinion, these practices are inevitable in a sector as large as road transport, in which there will always be operators who are tempted to break the rules by which the majority abide, thereby harming everyone involved. In short, the international posting of workers (and, more generally, the free circulation of goods, capital and labour) is seen in positive terms by the employers interviewed, who believe that it is only in the short term that this type of practice may result in imbalances, tension and harm for European societies. Moreover, in the mid- and long-terms, the posting of workers is seen as vital to guaranteeing the competitiveness of European companies in a globalized economy, as well as, in short, the sustainability of the current level of well-being and development of European societies (including the existing social welfare model). From this perspective, employers believe that it makes no sense to link the posting of workers to those phenomena classed as instances of social dumping, as the trade unions do:

Perhaps, in a very short term, there might be some pressure on some things, but if you look at the longer term, decent working conditions and free movement are completely compatible and are supported by each other, rather than being opposite… The real question we should ask is ‘does posting add to competitiveness of Europe or not?’ Because we do compete at European level, but the competition which will define our quality of life is at global level. (BusinessEurope)