How EU rules still allow social dumping through subcontracting

Subcontracting companies recruited up to 174 workers from non-EU countries like Ukraine, Bangladesh, Turkey or the Philippines. Once in Europe, these highly-skilled workers were mercilessly exploited, including through late or non-payment of salaries, bad housing and lack of safety at work. One worker would later testify that he had worked under better conditions in certain Gulf countries.

Unfortunately, a series of recent scandals throughout Europe illustrates these practices are no longer the exception in the European Union. Nor are they merely a problem of illegality.

A new study commissioned by The Left in the European Parliament sets out how even legal forms of subcontracting have become the business model for exploiting workers in the European Union.

Silvia Borelli, professor of labour law at the University of Ferrara, and author of the study, highlights how European rules on subcontracting allow employers to separate power and profits from risk and responsibility, such as wages and working conditions.

Even bona fide subcontracts pose structural problems, weakening workers’ rights and protection in order to comply with conditions imposed by the lead company or the main contractor.

The consequences are often dramatic for workers. The complex webs of tangled contracts allow big companies to conceal their role and evade liability when accusations of exploitation and abuse surface. The work of labour inspectors becomes particularly difficult.

To make matters worse, subcontracting also negatively impacts power relations in the workplace. It fragments the labour force entrenching inequality and precariousness, negatively affecting labour movements and workers’ bargaining power.

Under pressure from trade unions and workers’ mobilisation, some countries have responded with legislative initiatives.

Letterbox loophole

Germany banned subcontracting in parts of the meat industry. Spain banned temporary agency or interim work in high-risk sectors. Italy and Spain, for instance, included “job security clauses” in their public procurement legislation.

However, current EU-law still actively promotes subcontracting, mainly in order to stimulate competition and competitiveness. This, however, goes the detriment of workers’ rights and labour law.

Subcontracting should be the exception not the rule. Therefore, as Borelli study shows, we need a European regulation for decent work in the subcontracting chain.

Aside from banning subcontracting in particularly dangerous services and limiting the length of subcontracting chains, a core aspect of such a regulation would be to hold the lead company jointly and severally liable for the conditions of the employment contracts throughout the chain.

This will allow workers to seek redress if the subcontractor fails for whatever reason to fulfil its obligations. The direct joint and several liability currently established in the 2014 Enforcement Directive for posted workers is limited to one link in the chain only, and therefore relatively easy to circumvent by, for example, inserting a letterbox company.

In order to combat inequality and avoid a race to the bottom on working conditions, to the extent possible, workers of subcontractors should be guaranteed the terms and conditions of employment that would be applicable if they were employed by the lead company or the main contractor.

Additionally, the study is right to call for amendments to the European Commission’s proposal for a Directive on corporate sustainability due diligence to increase transparency, establish liability and involve unions and worker representatives throughout the process.