Collective bargaining on subcontracting examined
Outsourcing and subcontracting of activities is a growing phenomenon in Spain, leading to trade union concerns about negative effects on employment conditions. This article reviews the situation, as of 2004, with regard to the treatment of subcontracting in collective bargaining.
Subcontracting and outsourcing are thought to be on the increase in Spain. Some commentators see this as part of a model of business relations and employment that is based on larger companies reducing their own risks and responsibilities. Other techniques used to this end include temporary agency work, various forms of remote and teleworking, satellite offices/centres and flexible working. The main company becomes 'leaner' and is surrounded by a constellation of companies with which it has flexible relations of a purely business character, with little commitment. Observers believe that Spain is a particularly open to the proliferation of this type of business relations, given the nature of its economy, which relies to a comparatively large extent on services auxiliary to production.
From the industrial relations viewpoint, confusion arises about which collective agreement should be applied to the workers in subcontracted/outsourced activities, an issue that is particularly obvious in multi-service activities. By outsourcing some activities, according to some analysts, main companies can choose the collective agreement that is most favourable to them by using a subsidiary or a subcontractor. The spread of subcontracting is, it is claimed, leading to many new agreements that offer less protection to workers because they start from scratch, and to the fragmentation of collective bargaining. Furthermore, the stability provided by an employment contract (open-ended or temporary) may vary according to whether the worker is employed by the main company (which is more stable because of its dominant position) or by a dependent company (operating in a more fragile and volatile market). Through the process of outsourcing, what would formerly have been an internal department of a large company may now be a service company. This small, auxiliary company may be run by a former employee of the internal department, whose situation now involves accepting risks and the possibility of profits, without the protection of an employment contract.
Regulation by collective agreements
The phenomenon of subcontracting/outsourcing has attracted a degree of public concern, though it seems to have been the subject of regulation only in sectors where it has had serious repercussions, such as the construction sector (ES0212205F). According to a recent study from the Trade Union Confederation of Workers’ Commissions (Comisiones Obreras, CC.OO), subcontracting is extremely common in construction, hotels and catering, and industry ('La negociación colectiva en España', Remedios Menéndez, CC.OO 2004).
Trade unions are very interested in monitoring and controlling subcontracting through collective bargaining. The CC.OO research finds that collective agreements relatively often refer to the regulation of subcontracting, but the references are inconsistent and have little practical effect. Such provisions tend to be found in sectoral agreements, at national and provincial level, with few at company level. However, there are a few cases of company agreements that regulate the subject consistently.
In general, in order to avoid a loss of rights due to such decentralisation, collective agreements on the issue place limits on the types of subcontracting that are allowed, establish the employers' responsibilities arising from it and a right to information for trade union representatives, regulate occupational risk prevention and seek to maintain employment as far as possible. A simple reference to the provisions of the Workers' Statute (Estatuto de los Trabajadores) is common, but when the subject is dealt with in more detail, the agreements tend to cover the following points:
- specifying activities that may or may not be subcontracted, as in the case of an agreement at Sony;
- 'defensive' provisions stating that the workforce of the main company may not be reduced through subcontracting.
- clauses that attempt to protect the workers of the subcontracted firms. The regional collective agreement for hotels and catering in the Balearic Islands requires equal employment conditions for workers of the main company and the subcontracted company. This type of clause may be legally problematic because it goes beyond the scope of collective bargaining. Furthermore, the CC.OO report claims that these clauses may involve acceptance of the existence of subcontracting;
- provisions assigning to the main company the principal responsibility for non-wage compensation in the event of death or permanent disability due to accident or occupational illness - this is relatively common in the construction industry. However, it should be noted that safety and health are already the legal responsibility of the main company under the terms of the Occupational Risk Prevention Law (Ley de Prevención de Riesgos Laborales) (ES0301208F). Some agreements go further in construction and petrochemicals, and subjects such as equal protection and health and safety training for workers of subcontractors are dealt with in company agreements such as those at Empresa Petroquímica Española SA and Repsol, which provide greater protection than agreements at a higher level.
- provisions on the transfer of employees' rights and employers' obligations from one company to another ('subrogation'), especially where there is a succession of subcontracted companies. The Workers' Statute guarantees the transfer of employment and social security rights and obligations if there is a transfer of assets from one company to another, and some sectoral agreements extend these provisions to a wider range of in cases. With regard to guarantees of continuity of employment, the rules vary greatly from agreement to agreement. In general, when they exist, such rules refer to jobs that are carried out in the installations of the company that receives the work or service. They also deal with the length of service required (often three months), the minimum period of work, the type of contract, the workplace, the tasks and the occupational category of the jobs that must be maintained. These employees normally have to be taken on by the new subcontractor; and
- in terms of employee participation rights, collective agreements pay little attention to the information rights of trade union representatives, which are largely limited to receiving copies of employment contracts, and or of the workers in subcontractor firms. Even less attention is paid to intervention rights for representatives.
Social partner views
Employers' organisations consider that any limitation on subcontracting other than those laid down by the law restricts the spirit of company freedom that is necessary for business to operate effectively and dynamically.
The trade unions have called for regulation of this phenomenon, placing special emphasis on the construction sector and the correlation between subcontracting and industrial accidents (ES0004282F). However, it appears that their position has not been sufficiently reflected in collective bargaining as a whole.
Subcontracting and the parallel process of partial 'atomisation' of companies, at least in formal terms, is leading to a deterioration of employment conditions and worker representation. Outsourcing fragments workforces, and the workers of smaller companies have more limited rights to representation (for example, trade union section may be set up in companies with 250 workers or more, workers' committees in those with 50 workers or more and workers' delegates in those with six or more - ES0309203T). It also dilutes the responsibility of the main company with regard to the subcontractor companies, which reduces the labour protection of the workers of the latter. In summary, even compared with other negative factors in the labour market (temporary contracts, the erosion of the employment rights attached to open-ended contracts, temporary agency work etc), subcontracting is at present a major cause of the precarious employment and poor working conditions in Spain. (Daniel Albarracín, CIREM Foundation)