The crisis and national labour law reforms – a mapping exercise

Labour law reforms in various European Member States at a time of crisis are the subject of a recent ETUI Working Paper on ‘The crisis and national labour law reforms: a mapping exercise’ (Clauwaert and Schömann, 2012). This Working Paper critically examines the large-scale deregulation of labour law that is currently taking place in European Member States, either triggered by the crisis or introduced using the financial and economic crisis as justification, and its negative side effects on fundamental social rights and workers’ protection. In some cases, the lack of democratic foundations underlying the reforms is a major cause for concern.

Evidence shows that, since the end of 2008, public authorities and national legislators have taken a range of measures to boost labour market flexibility, including amendments to national labour law. In some cases, structural reforms have been required of or indeed forced upon certain Member States by the so-called ‘troika’ of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF). In Greece, in Ireland and in Portugal, the reforms were ‘agreed upon’ between this troika and the respective governments in Memorandums of Understanding (for the case of Greece, see Achtsioglou, in this issue). In addition, the European Union together with the IMF has undertaken ‘missions’ to European Member States in economic difficulties (e.g. Romania, Latvia).

Of even greater concern for the trade union movement is the fact that the EU, as party to the Memorandums of Understanding signed with Greece, Ireland and Portugal, and also as party to additional financial programmes supporting European Member States, is putting so much pressure on the Member States to reform their labour law and social protection, using the vague wording of the Treaty to support such reforms (in particular Article 122(2) TFEU). Interestingly, the European Commission has not had recourse to labour law and fundamental social rights to ascertain the maintenance of minimum social standards; neither has it resorted to hard law mechanisms, although it has the legislative competence to do so under the Treaty. Furthermore, the European Commission has not yet reacted to measures violating fundamental rights of the kind guaranteed in the Treaty and in the Charter of Fundamental Rights, whereas Council of Europe Social Charter monitoring bodies, such as the European Committee of Social Rights (ECSR), have condemned recent labour law in Greece (ETUC, 2012). ¹

On the contrary, the European Union is tending to follow its longstanding trend of calling for labour market ‘flexibilization’ (and labour law deregulation), as stated in a Communication in 2010: ‘flexicurity policies are the best instrument to modernise labour markets: they must be revisited and adapted to the post-crisis context, in order to accelerate the pace of reform, reduce labour market segmentation, support gender equality and make transitions pay’ (European Commission, 2010: 2). In line with this statement, current labour law reforms implemented in many Member States are justified by the argument that making labour markets more flexible is one of the best responses to the crisis.

Four main trends/areas of reform can be identified across Europe. First, regarding working time (arrangements), a very large majority of Member States have in recent years adopted legislative changes concerning working hours. This has mainly led to the possibility of increasing overall working time and/or the amount of overtime allowed and, in some cases, lowering the level of compensation.

Secondly, nearly all Member States have reformed their rules regarding atypical employment contracts, mainly fixed-term and part-time work contracts. Another aspect in this regard is also that in several countries new categories of atypical contracts are being created offering less protection than under ‘normal’ employment contracts and often targeted at groups like young and older workers whose situation in the labour market is already vulnerable.

Thirdly, a vast majority of Member States have introduced or are foreseeing amendments to their rules on dismissal – whether individual or collective – mainly aimed at redefining the criteria and easing conditions which allow for dismissal (more rapid procedures, fewer obligations with regard to social policy, court referral restrictions, and trade unions).

And fourthly, and almost certainly detrimental to the world of labour in the long term, several countries introduced fundamental changes to industrial relations structures and processes whereby the clear policy and/or ambition is to decentralize collective bargaining, shifting from national/sectoral level to company level. In addition, the measures allow lower-level bargaining outcomes to deviate unfavourably from the protection provided by higher-level collective agreements or even statutory legislation. Another trend is the adoption of measures reviewing representativeness criteria for social partners and extending what used to be trade union prerogatives to other bodies of workers’ representation (often at company level). There are also examples of countries – for example Hungary and Romania – abolishing or at least diminishing the role of certain (tripartite) social dialogue institutions, with the government withdrawing from such bodies.

The ETUI mapping exercise also shows the lack of respect in some countries for democratic and participatory foundations and procedures in passing the reforms, altering the hierarchy of social norms. In Estonia, Hungary and Slovakia, for example, recourse to ‘emergency procedures’ by national legislators allowed the bypassing of agreements on ‘anti-crisis’ measures agreed upon by social partners and / or prepared by national government with the consultation of social partners. In Greece and Portugal the national authorities had no option but to implement the Memorandum of Understanding imposed by the troika to obtain access to the so-called ‘financial rescue umbrella’. This took place without any genuine consultation of the national or European Parliament. This, together with the reduction of the role of social partners in drafting social legislation, in particular that relating to the decentralization of collective bargaining and the new criteria applying to trade union representation, represents a change to the procedures governing social legislation, and thus a step towards the dismantling of the democratic path of passing legislation.

National reforms are deregulating already flexible labour law regulations and in most cases represent a step backwards in terms of workers’ protection. A recurrent feature of these labour law reforms and flexibilization is the explosive growth of inequalities and insecurity in most of the countries concerned (Laulom et al., 2012: 5). Setting this alongside measures affecting social security, such as pension reforms or public sector reforms, reduction of jobseekers’ benefits and salary cuts, it is clear that the European concept of ‘quality employment’ and the international concept of ‘decent work’ are being called into question. National labour law reforms in Europe would no longer seem to live up to these concepts and this is leading to the undermining of the European social model.

These labour law reforms tend to adjust labour regulations in the Member States designed to combat precarious employment, labour market segmentation and labour law rigidity, taking for granted that these have a negative impact on productivity and employment. However, it has not been proven that such reforms – in particular the decentralization of collective bargaining – will have the expected effect on growth and employability. Furthermore, the assumption that labour law reforms in Europe are necessary in order to exit from the financial and economic crisis can be questioned, as it is difficult to distinguish whether labour law reforms are a response to the economic crisis or merely accompany the crisis, with no certainty as to any causal link between them (Valdés Dal Rés, 2011). Indeed, at present the reforms seem to be giving rise to increased precariousness but no more employment.

There is thus clear evidence of a ‘deconstruction’ of labour law under the guise of the economic crisis. Close examination of European Commission and Council country-specific recommendations for 2012 and the national reform programmes on which they are based shows that many intrusive reforms are still to be expected. For instance no fewer than 16 out of the 27 Member States have received recommendations from the European Commission to take steps to reform, in consultation with social partners and in accordance with national practices, the system of wage bargaining (and wage indexation) ‘to ensure that wage growth better reflects developments in labour productivity and competitiveness’ while several others have been asked to review their legislation ‘to increase the attractiveness and availability of more flexible forms of working arrangements’ (European Commission and Council, 2012).

It is thus of utmost importance that this ‘austerity translated into the law’ (Costa, 2012) continues to be monitored and that the trade union movement is assisted in analysing the measures adopted in relation to the fundamental (social) rights the Member States concerned have committed themselves to under international and European norms. It would appear to be time for a ‘fundamental social rights counter voice’ to be heard alongside or even above the deregulatory ‘Commission/ECB/IMF speak’.