EFTA Court rules on employment conditions of posted workers

In January 2012, the Court of Justice of the European Free Trade Association States (EFTA) gave its advisory opinion on the legality of extending Norway’s collective agreement to foreign workers in the shipyard and offshore yard industry. The court advised that foreign service providers could not be obliged to give compensation for travel, meals and lodging in accordance with the posted workers directive. Unions fear that foreign workers’ working conditions will suffer.

Background

Nine shipyards, supported by the Confederation of Norwegian Enterprise (NHO), took legal action against the Norwegian state on the grounds that the decision to extend the collective agreement for shipyards and offshore yards was in breach of Norway’s obligations under the European Economic Area agreement (EEA agreement). The government won the first round, but the ruling was then taken to appeal (NO1003019I) and an advisory opinion in the matter was requested from the Court of Justice of the European Free Trade Association States (EFTA Court). The court was asked to consider the extent to which some of the provisions made generally applicable were in breach of the EU Directive on posted workers and the EEA agreement.

Court ruling

The EFTA Court made its advisory opinion in Case E-2/11 known in January 2012.

On the issue of the legality of awarding posted workers better protection on working time than that provided by legislation in the host country, the EFTA Court said it was not illegal for the state to impose regulations by extending working time and compensation provisions in collective agreements, and so place restrictions on employers requiring them to provide posted workers with better wages and working conditions than had been established through the legal framework. Such a practice assumes, however, that it is applicable to all enterprises in the relevant geographical area and/or within that industry. The court did not give its opinion on whether the Norwegian system for making collective agreements generally applicable meets the EU directives requirements in relation to all measures (Article 3 No. 8). This issue was left to the national courts to decide.

The provisions generally applicable in the shipyard and offshore yard industry also included compensation for work involving overnight stays away from home. In its advisory opinion, the EFTA Court said a national court had to consider whether this type of compensation forms part of the national definition of minimum wage under the posting of workers directive. Such an obligation on the employer, the court argued, places a restriction on the freedom to provide services. Therefore, the national court must consider the extent to which such a restriction may be justified by overriding reasons of public interest.

The third issue considered by the EFTA Court was the legality of demanding expenses for travel, meals and lodging in connection with overnight stays away from home. The court concluded that compensating such expenses do not form part of the list of conditions to be met by foreign service providers (Article 3 No. 1), and that such a demand or arrangement may only be justified on grounds of public order or interest, under Article 3 No. 10 of the directive. This concept, however, is subject to strict interpretation, and the court argued that the documentation presented failed to meet these conditions.

Reactions among social partners

The opinion of the EFTA Court was met with disappointment from Norwegian unions. The Norwegian Confederation of Trade Unions (LO) accepted defeat on the question of compensation for travel, meals and lodging, but believed the demand for overnight compensation may be upheld on appeal. The Norwegian United Federation of Trade Unions (Fellesforbundet), which is party to the collective agreement under consideration, said it feared that the advisory opinion of the EFTA Court might lead to a distortion of competition by allowing foreign service providers to pay below the standard minimum wage by deducting expenses obtained in connection with travel, food and lodging.

The employers’ parties, for instance the Confederation of Norwegian Enterprise (NHO) and its affiliate the Federation of Norwegian Industries (NI), welcomed EFTA’s opinion, and saw it as a victory on several counts. Unlike the unions, the employers also believe that the appeal court will also rule against demands for overnight compensation.

Commentary

The appeal was expected to be considered in March 2012. The Norwegian system for making collective agreements generally applicable is, unlike other European systems, motivated by a wish to ensure that foreign workers have the same wages and working conditions as Norwegian nationals. A decision rendering some of the provisions of an extended collective agreement illegal will therefore have consequences for subsequent decisions to make collective agreements generally binding. Trade unions have previously voiced their concerns about foreign service providers evading minimum standards by deducting travel, meals and lodging expenses. If the appellate court follows the advice given by the EFTA court, Norwegian unions will have to seek other means to prevent what they see as substandard wage and working condition practices among foreign service providers.

Kristin Alsos, Fafo

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