Inspection drive to combat undeclared work in construction sector, Italy
A new measure encourages the regularisation of undeclared work by increasing inspection activity, suspending work to companies using irregular work, and issuing administrative and civil sanctions. The legislation aims to regulate the occupational status of workers with regard to pay and social insurance contributions, and to regularise the position of immigrant workers without stay permits but employed on construction sites.
In Italy, the construction industry employs 1,959,500 workers. In 2007, the sector recorded an increase of 47,000 workers and in the past 10 years it has created 440,000 new jobs, out of a national total of 800,000 new jobs.
The presence of numerous companies and the expansion of the sector have attracted workers in search of jobs guaranteeing steady income. Many of these workers are employed on fragmented construction sites with constantly shifting physical and normative boundaries: among those working on such sites are contractors, subcontractors, cooperatives and self-employed workers.
High employment density and the transitory nature of the work have always greatly hampered the activities of the labour inspection service. Italian construction sites, moreover, lack registers listing the workers present on-site, so that irregular labour is frequently used.
Irregularity in the construction industry is linked to the issue of health and safety. The sector ranks highest in the classifications of the National Institute of Statistics (Istituto nazionale di statistica, Istat) for irregular employment, workplace accidents and the employment of immigrant workers. In fact, the latter suffer the most harmful effects of the illegality that is widespread in the construction sector.
Recent legislation focuses on the effects of using irregular labour on workplace safety conditions. A number of studies have highlighted the close correlation between the large-scale use of undeclared work and the high rate of workplace accidents. The innovative feature of the legislation is that it covers the two issues with a single intervention; the essence of the initiative is increased inspection activity to combat irregular work in the construction sector (attività ispettiva di contrasto al lavoro irregolare nel settore edile).
The provisions focus on the individual non-compliant company. Their coverage comprises construction sites and therefore construction companies and other enterprises operating on the construction site. Inspections are carried out by personnel from the Ministry of Labour, Health and Social Policies (Ministero del Lavoro, della Salute e delle Politiche Sociali). The Italian Workers’ Compensation Authority (Istituto Nazionale per l’assicurazione contro gli infortuni sul lavoro, Inail), the National Social Security Institute (Istituto nazionale previdenza sociale, Inps) and inspectors from the health boards report breaches of the provisions. Furthermore, employers and trade unions are urged to reach agreements that prevent the use of undeclared labour.
The legislation aims to regulate the occupational status of workers with regard to pay and social insurance contributions, and to regularise the position of immigrant workers without stay permits but employed on construction sites.
Suspension of work
The inspectors from the Ministry of Labour, Health and Social Policies, and also from Inps and Inail, may suspend work on construction sites if they find that the number of workers not recorded in accounts or other compulsory documentation equals 20% or more of the total regular workforce on the site. Such suspension is also ordered in the case of repeated breaches of the regulations on working hours and daily and weekly rest periods. This is in accordance with Legislative Decree No. 66 of 8 April 2003 and subsequent amendments on working hours. The criterion distinguishing regular labour from undeclared work refers to the total number of the company’s workers employed on the construction site at the time of inspection.
Non-compliance with the regulations and the suspension of work must be reported to the provincial labour directorate, which evaluates the suspension. The suspension can be ended by regularising the workers not recorded in the company’s accounts or other compulsory documentation, and by restoring regular working conditions if breaches have been identified. Administrative and civil sanctions are levied in the case of non-compliance. The employer must then fulfil the obligations imposed by Legislative Decree No. 626/1994 with regard to health protection, training and the provision of safety devices. Non-observance of the work suspension order incurs prosecution with a three-month custodial sentence and a fine of up to €206.
Since 1 October 2006, construction companies have been obliged to issue their employees with a special identity card bearing a photograph and stating the worker’s details and the name of the employer. This obligation can be waived for employers with fewer than 10 workers if they keep a special day-to-day site register, endorsed by the provincial labour directorate, recording the details of the personnel employed on-site. The absence of this register or of the identity cards incurs a fine of between €100 and €500 for each undeclared worker.
Prior communication of hiring
The legislation stipulates that the hiring of a new worker must be communicated on the day before the employment relationship begins, stating the date. Failure to communicate the new hiring incurs the administrative sanctions applicable in the other two cases.
Also applicable is a ‘maxi-fine’ for the employment of undeclared labour: failure to report new recruits incurs an administrative sanction of between €1,500 and €12,000 for each worker, which increases by €150 for each day of effective work. The overall amount of the civil sanctions for the non-payment of contributions and premiums for each worker in the previous period will be a minimum of €3,000, regardless of the duration of employment.
Health and safety
The legislation aims to improve the protection of labour in the presence of subcontracts and to modify the public contract procurement system in order to guarantee the safety of workers. To this end, Law No. 123 of 2007 recommends that the costs relative to workplace safety be stated in calls for contract bids, and that health and safety measures be adapted to changes in construction methods. It also recommends that the amount raised by sanctions be allocated to accident prevention and to improving the work of health board accident prevention departments, as well as to the spread of contractual best practices.
Evaluation and outcome
Achievement of objectives
The report on employment and labour policies shows that important results have been achieved in combating undeclared work. In 2007, inspections increased by 30.7% with respect to 2006. Between 12 August 2006 and 31 December 2007, inspectors visited 37,129 construction sites: 57% of the companies inspected were using irregular practices. A suspension of work was ordered for 3,052 companies: 3,013 of these cases were due to the presence of undeclared workers and 39 cases were repeated breaches of the rules on working hours.
Undeclared labour accounts for 63% of workers regularly employed on construction sites. Work suspension orders were revoked following regularisation for 41% of the orders issued. The sanctions levied amounted to €54.35 million. Data reported by Inps and Inail show an increase in registered employment of 74,654 persons and an increase in social security contributions of €34.74 million (Ministry of Labour, Health and Social Policies, 2008).
Obstacles and problems
The effectiveness of the law depends on the flow of information, whereby reports reach the inspection service before the non-compliant company and the irregular workers have left the construction site. On 2 October 2008, the Ministry of Labour, Health and Social Policies announced – in Note No. 13270 – that the suspension of work in the case of verified irregularity may be deferred until 12.00 on the day following the inspection and that it does not apply to micro-enterprises with one irregular employee.
This provision thus allows the work to continue even though it has been deemed irregular and dangerous by the inspection service. Moreover, the exemption of companies with fewer than 10 employees – even if non-compliant – annuls the deterrent effect of the previous provision, and encourages continuing illegality. The presence of numerous sub-contracting companies of very small size and high labour turnover hampers the work of the inspection service.
The procedures for the voluntary regularisation of undeclared work are not enough to ensure effectiveness, due to the widespread and deeply rooted nature of the problem. The role of the inspection service has been decisive in regularising thousands of workers employed without social security and insurance cover.
Regularisation should result in an increase in enrolments for social security with the Special Construction Workers’ Funds (Casse Edili) and to a general increase in the resources allocated to workers in the sector.
The provision can be transferred to all production contexts characterised by the presence of different types of employment relationships, non-continuous work and the frequent use of undeclared labour. It is particularly appropriate to situations connected with seasonality of work and the presence of a multiplicity of contractors and subcontractors.
Main organisations involved:
- Ministry of Labour, Health and Social Policies (Ministero del Lavoro, della Salute e delle Politiche Sociali)
- National Social Security Institute (Istituto nazionale previdenza sociale, Inps)
- Italian Workers’ Compensation Authority (Istituto Nazionale per l’assicurazione contro gli infortuni sul lavoro, Inail)
- Italian Federation of Wood, Building and Allied Industry Workers (Federazione Italiana Lavoratori Legno Edili e Affini, Fillea Cgil)
- Italian Federation for Construction and Allied Workers (Federazione Italiana Lavoratori Costruzioni e Affini, Filca Cisl)
- National Federation for Building, Allied Industry and Woodworkers (Federazione Nazionale Lavoratori Edili Affini e del Legno, Feneal Uil)
- National Association of Building Contractors (Associazione Nazionale costruttori Edili, ANCE)
Lucifora, C., Economia sommersa e lavoro nero, Bologna, Il Mulino, 2003.
Meldolesi, L., Occupazione ed emersione, Rome, Carocci, 2000.
Ministry of Labour, Health and Social Policies, Rapporto di monitoraggio delle politiche occupazionali e del lavoro, Rome, 2008.
Tania Toffanin, University of Milan