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Text of the speech by Stefan Schwarz, president of the Labour Mobility Initiative Association

Text of the speech by Stefan Schwarz, president of the Labour Mobility Initiative Association

 

Madam Commissioner,
Honourable Ministers,
Madam MP,
Your Magnificence,
Ladies and Gentlemen,

 

We met today to talk about important issues for the European Union and for our country, which at the same time are delicate and evoke high emotions. These issues seem to be obvious, because they are guaranteed in the Treaty on the Functioning of the European Union. In this Treaty, they are even described as “fundamental”. These are also issues that seem to be relatively simple.

Namely, we will talk today about the situation in which a service provider from one Member State receives an order for its services from a company in another Member State and wants to perform this service. To achieve this, its employees must be posted to the place where the service is to be performed.

Can it do so? Theoretically, yes. What rules are to be observed? The problems begin here.

 

In 1992, the European Community has set itself a goal of creating a single market. It was to allow (among other things) the free movement of services. Not as a matter of policy, but because it creates greater opportunities. For all citizens of the European Union. It also increases the global competitiveness of the European economy, which in turn helps to increase the number of jobs.

Today, the internal market has formally existed for 23 years. During this time, the European Union has ceased to be the most powerful economy in the world.

And what is the situation with the economic freedom which interests us? For example, last year the European Parliament, following the arguments for the need to fight against “social dumping” and “unfair competition” came close to reducing the posting of workers to a single posting. But it is a necessary tool for transnational provision of services.

During these 23 years, what has failed?

One reason may be that a simple and practical mechanism underlying the posting of workers turned out to be susceptible to abuse. This primarily consists in the fact that a company from a country with high labour costs could open a “letter-box company” in a country with low labour costs just to hire its employees there, and then post them back.

To prevent such situations, an increasing number of further conditions, exceptions, and all sorts of “buts” began to be added to this mechanism. Currently, a company may post a worker, provided that…, an employee can be posted unless…, the client may use the services of companies from other Member States, but…and so on. And on…

As a result, the law governing the posting of workers has become so complicated and full of paradoxes that it has ceased to be understandable for all of us, including the posted workers themselves, their employers, but also officials of the institutions tasked to guard compliance with this law. And even the courts that adjudicate on these matters.

And so, inspection institutions in some Member States began making use of this complicated law, in places which were unhappy about the presence of foreign service companies in their markets. They learned how to use the gaps and inconsistencies in the rules to carry out discriminatory inspections.

 

Last year, the largest Polish opinion-forming daily newspaper published a large article about the methods used by the French labour inspectorate. The journalist was urged to write the article by Hania Stypułkowska-Goutierre, president of the Polish Chamber of Commerce in Paris, who is present here today. We, as an association, helped to collect materials. Let me quote some excerpts from this article.

This is an account made a president of a Polish employment agency: “I was lured to the police station by deceit. I heard that I was arrested for a full day. My French customers were asked whether I threatened them with weapons.”

“On the construction sites, where we work, labour inspectors and safety inspectors look for anything that might give them a reason to impose a huge fine and prohibit work, which is equivalent [for us] to [contractual] penalties for failure to perform the contract and the need to remove all employees to Poland.”

Another case described in this article concerns a Polish construction company awarded a contract for the construction of three social housing estates. These contracts are funded with public money, so first, the company has to undergo a rigorous procedure, provide all the proof of no arrears in taxes and contributions, declare the turnover from previous years, etc.:

“Five months before the end of the work, in the spring of 2013, each of the sites was raided within three weeks.

 Armed gendarmes arrived in several cars. First, they look for our cars and surround them in case we wanted to escape. The rest of them combs the site. They are looking for Polish workers. My employees are found. They do not ask for any documents, just pack them into the wagon and [take them] to the police station. We are treated like criminals.”

Account of one of the posted workers (college graduate, engineer): “Everyone was seated in a separate room and interrogated separately. A civilian employee circled back and forth and check whether the testimonies match. They wanted to hear us complain about our company, that we do not get paid, that there are arrears. […] They said that if the Polish company deceives us, France will take care of us. That we should not be afraid. But we felt like criminals.”

“The gendarme informs […] workers that participating in illegal work is punishable by up to three years in prison. But if they cooperate, the penalty will be mild or none. The purpose of this interrogation is to force someone to declare that they work for 300-400 euro a month, live in tragic conditions and are forced to work 12 hours [a day]. “

“Meanwhile, workers […] earned an average of 1,900 euro per month and testified that they were satisfied with their work.”

 

For some of you these stories may seem startling. For some – unbelievable. For those who have ever provided services in that Member State – they sound familiar. Unfortunately, this kind of discriminatory inspections happen too often. I personally know of cases where the inspector did not ask for any documents throughout the entire inspection, including, in particular, the A1 forms. He also did everything not to request the company to be inspected by the Polish labour inspectorate, or the Polish social security authority. He also falsified the workers’ testimonies. This allowed him to keep his doubts as to the legality of the company. And these make it possible to notify the prosecutor’s office, of course, always with a request to arrest the owner or President. This also gives the opportunity to scare the client who will allegedly suffer severe responsibility for complicity in illegal work if he does not cooperate.

What must be remembered is that as a result of discriminatory inspections, clients often suspend payments, which can cause problems with liquidity to the foreign subcontractors. And this in turn creates a risk of problems with the timely payment of salaries to workers, initiating a typical mechanism of self-fulfilling prophecy.

 

In my view, these cases are an argument for the fact that the issue of posting of workers is not due to a conflict of values, but it is a simple brutal fight for the market in which foreign service providers and their employees are the victim.

I wish to stress that effective checks of whether companies posting workers respect the rules are necessary, even for the purpose of eliminating the so-called “cowboy companies” from the market – which is how, during last year’s Congress, Sjoerd Feenstra from the European Commission aptly described the companies that base their activity on the advantage they gain due to a high-risk appetite and functioning on the edge of the law, or totally outside it.

 

We must realise, however, that discriminatory inspections have a completely opposite effect to that intended by the Enforcement Directive.

First, they ruin the trust of honest companies in law and order.

Second, they equate the risk of running a business by companies adhering to the rules to those that do not adhere to these rules. It should be noted that “cowboy companies” have much lower costs and are much more flexible.

Third, discriminatory inspections are directed at honest companies, because they are the easiest to find – among other things because they themselves inform the labour inspectorates about their activities through mandatory notifications.

 

It seems that as long as there are regulations that facilitate the provision of services across the borders of Member States, giving a competitive edge to service companies from other countries, populist politicians and lobbyists will be exploiting this fact. They will take advantage of xenophobia and fear of foreigners who come over and take away jobs.

If we tell the service companies who post workers to follow the rules demanded by some social partners, namely requiring paying the posted worker not only the minimum wage rate applicable in the host country, but also to cover the cost of food, accommodation and transport, and to pay allowances under the law of the sending State, for example, due for work outside the permanent place of residence, then the free movement of services will exist only in theory.

Will we be able then to say that finally the rights of posted workers and the rules of fair competition are duly guaranteed?

We all agree that the posted worker, as the weaker party to the contract, should receive special protection. For this purpose, the basic Directive 96/71 introduced a rule that requires ensuring that posted workers have at least the minimum conditions of employment.

Enforcement Directive 2014/64 will introduce additional tools and resources to enforce compliance with these minimum conditions and, in the case of a breach, to impose fines and penalties.

Up to this point, it seems that the system should function without problems.

Problems and contradictions appear only in the practical application of this law. It is sometimes said that companies do not follow the rules. But what are the rules?

It’s hard to follow them, if it is still not quite clear what “the minimum rate of pay” is within the meaning of the basic Directive 96/71.

And does anyone of you know which law is more favourable to the worker in a situation where, for example, the French labour laws provide for 7 hours of work a day, and the Polish laws specify 8 hours, but the French law provides for a smaller allowance for overtime than the Polish law?

And if there is a collective agreement in the construction industry, which is designed so that local companies can work around it, but foreign ones cannot, must it be regarded as universally binding?

Here’s the last but most important example. In a joint statement recorded in the Enforcement Directive 2014/67, the European Parliament, the Commission and the Council agreed that there is no prohibition on replacing a posted worker with another worker, particularly for services that are provided seasonally, cyclically or repetitively. In contrast, the so-called practical guide issued by the Administrative Commission, which is intended to help pension authorities in the application of the law, says that such a prohibition exists. Is it possible that each area of ​​the law governing the posting of workers understands the same expression differently?

And even if we accept that the posting is to be one-time only, and each subsequent results in the necessity of insuring the posted worker in the host country, what objectives would such a rule be designed to implement? In particular, from the point of view of the interests of the internal market and the worker who is removed from his social insurance system just because he is not the first to go to the given place to work? The provisions on the coordination of social insurance systems cannot be divorced from reality. They also serve to make the freedom of providing services realistic.

Also, in regard to the rights of the worker, the criteria which are required to be met to obtain a certificate of the applicable legislation (the so-called portable form A1) are so complex and difficult to verify that, for example, the Polish pension authority needs sometimes a few weeks for their thorough verification each time. How does this protect a posted worker, who by this time cannot benefit from free medical care in the place of work?

I could cite many such paradoxes and unanswered questions.

 

Ladies and Gentlemen, in my opinion:

Fair competition cannot be understood in such a way that if great capital sweeps a small family business from the market in an unequal fight, this is called a natural market mechanism, but if a Polish service company receives an order for its services from a customer from another Member State, this is evidence of unfair competition that harms the European economy.

Protection of workers’ rights cannot be understood in such a way that the rights of the posted worker will be best guaranteed when he stays in his country and his employer goes bankrupt, although there is demand for his services in another Member State (often just several kilometres away). After all, the law is there to protect the worker and the employer, not the local markets.

The freedom to provide services cannot be understood in such a way that, quoting: “it requires the elimination of all forms of discrimination against service providers established in other Member States and any restrictions that might impede or make their business less attractive”, unless …. and here comes a long list of exceptions and limitations that actually allow to block this freedom.

 

I complained a little, but I would not want to end my address in this way.

So I decided to finish my address be presenting my wishes to the European Union, understood as a community of us all.

I will use the opportunity of the 75th anniversary of the Schuman Declaration, which will take place in several days. And so…

Dear European Union, may you make wise and thoughtful decisions based on real and credible arguments, and not tempting slogans presenting the reality from only one perspective.

May you guard fundamental values. They always point in the right direction. May you resist the temptation of attaching all these exceptions, conditions and limitations to them. Barriers within the internal market lead to a decline in competitiveness of the EU economy.

Do not allow for discrimination. European law should not protect local markets but posted workers and their employers. These often are small family businesses that have no chance in the face of discriminatory inspections.

May you not create a law that is so difficult and full of paradoxes that no one understands it, not to mention using it in daily practice. Good law should eliminate unfair companies from the market, but equally it should protect the honest ones.

Do not forget that the need to combat fraud in the area of mobility must not lead to restrictions of fundamental freedoms guaranteed by the Treaty.

 

Poland can give Europe more than the ideas of solidarity.

Polish service companies are competitive, because Poles work faster and better in certain occupations. They are qualified and multitalented. Services strengthen industry. European companies need to have access to good services. Specialisation within a single market is beneficial for industry. Germany has cars, Switzerland has banks, but can Poland have services?

 

One of the deputies to the European Parliament once told me that in fact you can sometimes get the impression that in Brussels at the stage of legislative work, there is a struggle of interest groups, devoted of ideas, in which the strongest group wins. Fortunately, in practice, at the end of negotiations, the national interests are always conquered by the common European wisdom. I keep my fingers firmly crossed that it will remain so!

Thank you very much.

 

Cracow, 23 April 2015