Abstract
More topical than ever, the impact of European integration on labour, together with the labour market effects of and regulatory responses to mobility and posting of workers have been the object of heated political debates and citizens’ concerns in the Member States for the past decade or so. A stark and striking example is provided by the recent UK referendum on whether to remain in or leave the EU.
The book under review is the latest (and last) product of the FORMULA project – ‘Free movement, labour market governance and multilevel governance in an Enlarged EU/EAA: a Nordic and comparative perspective’. It is a brilliant piece of work by some of the most knowledgeable and forward-looking European legal academics. Irrespective of the numerous developments that occurred during the project on, among other things, the posting of workers (not least the decisions of the Court of Justice of the European Union (CJEU) in the now famous ‘Laval Quartet’ 1 of cases and the adoption in 2014 of the Enforcement Directive and of the Directive on third-country nationals), they managed to hold course and deliver an accurate interdisciplinary, international and comparative analysis of the development of a multi-layered system of labour market governance in Europe, with a focus on the interplay between legal and institutional changes.
This is a work of reference that will interest both current and future generations of academics and legal practitioners, as well as EU and national legislators and politicians. It provides an in-depth scrutiny of the evolution of the regulation of transnational labour in terms of legislative actions and judicial interventions in the EU, as well as in the Member States. It demonstrates that, on the one hand, there is active contestation of the content of EU and domestic regulation of transnational labour, the mode of operation of such regulation and its acceptable effects (that is, whether Member States will benefit from competition on the basis of low labour costs or whether such regulation will affect a Member State’s mechanisms of self-protection against such competition). On the other hand, it provides evidence of a conflict at the heart of the EU institutions for control over the regulation of transnational labour, which leads the authors to conclude that the content of the so-called ‘European social model’ is still unsettled.
The FORMULA project covered, over a period of six years (2008 to 2014), seven EU Member States (Denmark, Finland, Germany, the Netherlands, Poland, Sweden and the United Kingdom) plus Norway that have been particularly involved in the issue of transnational labour regulation. The authors have ingeniously broken down the complex and controversial tensions between market integration and social regulation of labour into a number of impressive analyses. They start with a clear and historically revealing introduction to the developments and changes in labour migration in the EU/EEA, resulting from successive enlargements, but also the lifting of the Iron Curtain in 1989 and the financial and economic crisis of 2008. All of these changes exacerbated the inevitable strains between, on the one side, the four EU basic freedoms of movement of goods, capital, labour and services and, on the other side, the institutions for regulating work, labour markets and social rights that have been cornerstones of national regimes of governance in Europe, in particular in the national industrial relations systems.
The authors demonstrate the limits of dual-track European integration based on the complementarity between open markets and national (compensatory) labour market governance, including social policies. In particular, they reveal that this multi-level EU system of labour market regulation has been sacrificed to the EU market rules and the supranational rules on free movement. This has been termed ‘negative integration’. The active involvement of the CJEU as key arbitrator in the conflict of rules has further shaped the changes in EU governance of the labour market and industrial relations to the detriment of the principles of subsidiarity and proportionality. With regard to unexpected consequences, this asymmetric, judicially driven EU regime has led, first, to a constrained form of renationalization by which Member States and their respective institutional actors – united or divided – tend to protect their respective and, in some instances, diverging interests and the acquis. Secondly – and partially to be attributed to the new EU governance arrangements – the only tangible trend towards convergence between Member States seems to be the setting of national minimum wages.
Moreover, the authors demonstrate that the voluntary lack of regulation (in particular in the form of transitional arrangements) concerning posting of workers by cross-border service providers (except in Germany and Austria) and the limited EU regulation of transnational service provisions has led employers to hire workers from the accession states through foreign subcontractors (in the form of temporary work agencies, self-employed and subcontractors), but also unregistered temporary migrants. As a result, a substantial proportion of migrant workers came via cross-border services, escaping transitional restrictions on free movement of labour but also all rules protecting free movement of labour, especially in terms of employers’ responsibilities, workers’ rights, wages and social protection. This has dramatically affected the terms of competition and has led to regime shopping. The latter is particularly obvious when one looks at the different categories of transnational labour and the respective EU regulations (Articles 45, 49 and 56 TFEU), 2 as well as the criteria developed by the CJEU to distinguish the different legal regimes to be applied to workers’ mobility.
Interestingly, the case of cross-border movement of temporary agency workers – which seems to fall under both Article 45 TFEU (free movement of workers) and Article 56 TFEU (free movement of services in the form of movement of posted workers) – makes it clear that, in both cases, regime shopping is also (and most probably largely) driven by the difference in labour costs attached to workers’ mobility rather than by protection of the free movement of workers and related rights. The prevalence of free movement of services (excluding workers from protection) over free movement of workers incentivizes competition based not on better performance, which is a fundamental principle of the Treaty, but on worse performance, which is clearly contrary to the Treaty.
Ever increasing mobility, coupled with the priority given to the internal market rather than to social objectives for the protection of posted (migrant) workers, the effects of CJEU decisions in the ‘Laval Quartet’ – that impose state regulation independently of national traditions of industrial relations, in particular in respect of collective bargaining and collective action – hinder the development of a genuine and decent regime of workers’ minimum rights and labour relations in the EU and drastically hamper labour market integration. Further attempts to address the blatant unbalance between free movement of services and free movement of labour, such as the 2014 Enforcement Directive, are shown to be more problematic and less problem-solving, in particular as they rely on overconfidence in cross-border cooperation between the administrative authorities of the Member States, ignoring the need for control measures and sanctions, in particular in the host country. Ultimately, enhanced administrative cooperation might well give the host Member State less access to posting undertakings. The focus on administrative cooperation to the detriment of other enforcement mechanisms at national level characterizes the lack of attention paid to national institutional arrangements that may involve trade unions and civil society. In conjunction with keeping the posting of workers (also in the Enforcement Directive) within the remit of the Treaty’s provisions on free movement of services rather than on free movement of labour, the authors conclude that the emphasis is on market integration rather than on social rights.
This also drives Member States to use existing EU directives, in particular the one on posting of workers, not so much to ensure that posted workers are treated on an equal footing and enjoy their full social rights in the EU, but to protect their national labour markets from wage competition.
The issue of remedies and trade union liability in case of unlawful collective action is one of the central issues of the book, as it has been an unexpected consequence of the Laval case, in which collective action taken by trade unions might, under certain circumstances, violate the freedom of services and the right of establishment. The Swedish labour court in its final judgment of 2009 imposed what the ILO called ‘excessive sanctions that inhibit trade unions’ legitimate right to strike’. On the basis of a thorough analysis of CJEU judgments, the authors first dismiss the existence of a general principle of EU law on the liability of private entities to pay damages for breaches of EU law, the ‘principle’ on which the Swedish Labour Court based its request for a preliminary ruling. Secondly, the authors look for a method for determining when liability of private entities to pay damages for breaches of EU law might be required. They propose elements of answers derived from CJEU case-law and a comparative analysis of a range of Member State regulations, including those of the Nordic countries, Germany, the United Kingdom, the Netherlands, Austria, France, Italian, Spain, Estonia and Slovakia. The review of these different legal regimes lead them to propose that there should be an EU general principle to the effect that unlimited economic liability for damages is not acceptable as a general sanction, let alone for reasons of legal certainty and predictability, and that, by equivalence, EU remedies must not be less favourable in comparison to domestic remedies. Finally, Member States should provide effective methods of preventing such collective actions, in particular in promoting the role of the social partners.
Other important issues are addressed to show that the complicated multi-level framework of public procurement in the EU has undermined social policy and labour rights in the EU/EEA, boomeranging into well-functioning industrial relations systems (such as the CJEU case-law Commission v Germany of 2010 3 showed). In addition, the analysis of the interplay between the EU and Member States on the regulation of third-country nationals in the EU labour market shows how far Member States fear losing control over their national borders and in particular how they fear that third-country nationals might affect their labour markets in terms of unemployment and welfare systems. Interestingly, the authors show that the reluctance of Member States to propose a robust equality principle applicable to all actors on the labour market, including third-country nationals, exacerbates the vulnerability of the latter group to exploitation and increases incentives for employers to opt for workers with the lowest labour costs, thus stepping up regime shopping.
Finally, the authors demonstrate that the collision between the EU’s four freedoms and national social policy has been characterized to an unprecedented extent by the switch of CJEU interpretation from a non-discrimination approach (which, until the ‘Laval Quartet’, made it possible to balance national labour and EU rules on free movement), to a ‘market access’ or ‘restrictions’ approach. As a consequence, non-discriminatory national rules permitting strike action (lawful under the non-discrimination approach) become unlawful under the ‘market access’ approach on the grounds that they hinder businesses’ freedom of establishment or services. According to the authors, the ‘market access’ test has the potential, when combined with the doctrine of the primacy of EU law, to threaten the entire construction of national labour law regimes. The authors propose four ways forward for the CJEU to address its inability to appreciate the domestic industrial relations context of a dispute and to engage in a genuine balancing between the economic and the social dimensions of the EU: a more rigorous approach concerning the scope of EU law; reversing the priorities of rights; engaging in a proper balancing; and modifying the proportionality principle. However, the lack of willingness on the part of the European Commission since 2000 to strengthen the social dimension of the EU, coupled with its response to the crisis – encouraging cuts in national labour standards – show that squaring the circle of economic freedoms and social rights might be ‘mission impossible’, at least in the current context.
In a nutshell, the book – the extent of whose rich analyses could only be hinted at in this review – offers a wide range of analyses and responses and pragmatic (albeit sometimes piecemeal) approaches to the challenges posed by the integration of European markets for labour and services, in particular cross-border labour mobility and posting of workers, with a view to raising awareness of the complex evolution of regime shopping. Alternatives – including national, EU and private international law – are also proposed to strike a better balance between economic freedoms and social rights, in particular in terms of an effective floor of wages and working conditions, in particular the role of the social partners in EU multi-level governance.