New rules against employing third-country nationals, Malta

About

Country: 
Malta
Sectors: 
All
Target Groups: 
employers/purchasers

In recent years, immigrants from Sub-Saharan Africa have stimulated Malta’s shadow economy. The Maltese government, along with a number of stakeholders, felt the need to introduce legislation aimed at curbing such forms of undeclared work, as it can lead to substandard wages, as well as serious breaches of adherence to health and safety regulations. These regulations ban illegal employment and put obligations on employers, apart from establishing financial sanctions and other measures in cases of conviction. While the social partners agree that this measure is a step in the right direction, reservations were expressed about its effectiveness, mainly in terms of enforcement.

Background

Over the last years, immigrants from Sub-Saharan Africa have stimulated Malta’s shadow economy by being exploited as a cheap and easily disposable type of labour (Debono, 2012). Asylum seekers, individuals holding refugee status, as well as those who have been granted subsidiary protection or temporary humanitarian status, can participate in the formal economy once an employment licence is issued. The requirement for an employment licence (also known as work permit) derives from the Immigration Regulations (2004) which regulate the entry and permanence in Malta of non-Maltese citizens. Currently, the Employment and Training Corporation (ETC), which is Malta’s public employment service, is the entity that processes applications for the issue of employment licences with regards to foreign nationals to be employed in Malta.

On the other hand, illegally staying third-country nationals (TCNs), defined in this legislation as 'a third-country national present in Malta, who does not fulfil, or no longer fulfils, the conditions for stay or residence in Malta' (L.N. 432 of 2011, Sect. 2), cannot work legally. In such circumstances, these individuals, in an effort to survive, will more often than not find themselves working in the informal economy (Farrugia, personal communication, 30 July 2012). For these individuals, who find themselves in a difficult situation, working in the unregulated economy typically can lead to exploitation and abuse. Some employers take advantage of this situation and prefer to engage illegal immigrants, who, due to their desperate situation, would work under any conditions of employment (Deguara, personal communication, 30 July 2012).

It is worth noting that certain sectors are more prone to this problem than others, including the construction sector and the bulky waste and cleaning services sectors. A union representative mentioned a particular case of abuse that occurred in the construction sector. Here a number of illegal immigrants went unpaid for a considerable number of months, after which they were reported to the police and eventually deported, without even being paid for the work carried out (Deguara, personal communication, 30 July 2012). The frequency of such cases of abuse is unknown.

Objectives

Given this scenario, the Maltese government, along with a number of stakeholders, felt the need to introduce legislation which aims at curbing this specific type of undeclared work which can lead to abuse in the form of substandard wages, as well as a serious lack of adherence to health and safety regulations (Farrugia, personal communication, 30 July 2012). To this end, The Minimum Standards on Sanctions and Measures against Employers of Illegally Staying Third-Country Nationals Regulations came into force in November 2011. These regulations transpose the provisions of Directive 2009/52/EC of the European Parliament and of the Council of 18 June 2009 providing for minimum standards on sanctions and measures against employers of illegally staying third-country nationals.

Specific measures

These regulations specify the prohibition of illegal employment, and put obligations on employers, apart from establishing financial sanctions and other measures in cases of conviction. With regards to the latter, a number of penalties are listed including fines up to a maximum of €2,500 [L.N. 432 of 2011 Sect 8 (1)] and costs incurred for the 'return of illegally employed third-country nationals in those cases where return procedures are carried out' [L.N. 432 of 2011 Sect 5 (1)]. Other sanctions include the 'exclusion from entitlement to some or all public benefits, aid or subsidies' [L.N. 432 of 2011 Sect 5 (5a)] and, even more drastically, 'the suspension or cancellation of any licence, permit or other authority to engage in any trade, business or other commercial activity' [L.N. 432 of 2011 Sect 8 (5a)].

It is worth pointing out that a number of aggravating circumstances are referred to in these regulations, including 'particularly exploitative working conditions'. These are defined as working conditions where there is 'a striking disproportion compared with the terms of employment of legally employed workers which, for example, affects workers’ health and safety, and which offends human dignity' (L.N. 432 of 2011 Sect 2).

Actors involved

The legislation was drafted in consultation with the Malta Council of Economic and Social Development (MCESD), an advisory council that issues opinions and recommendations to the Maltese government on matters of economic and social relevance. The council is composed of various bodies, including the government, unions and employers’ organisations.

The Law Compliance Unit within the ETC is in charge of carrying out desk investigations and on-site inspections relating to cases of law infringement, including instances where foreigners are working without the necessary employment licences. When a TCN is found working without a licence, this is reported to the Malta Police Immigration, since such instances constitute a violation of the provisions of the Immigration Act (Cap 217). Since 2009, regular joint inspections between the two entities have been implemented in order to increase effectiveness (ETC, 2010).

Outcome of evaluations: lessons and conclusions

Achievement of objectives

The social partners interviewed, including employer and trade union representatives, welcomed the legislation and agreed that these regulations address the problem of undeclared work and provide a means to curb the abuse of TCNs. In particular, the Union of United Workers (Union Haddiema Maghqudin, UHM) specifically pointed out that the sanctions imposed on employers engaging any illegally staying TCN represents a step in the right direction in terms of an introduction of a criminal penalty for this type of contravention. The UHM representative also emphasised that this legislation encourages employers to adopt preventive measures and controls over their employees, and it is also beneficial in terms of precarious work since it provides a deterrent for any employers seeking to employ illegally-staying TCNs for easy profit. The union holds that these regulations, through the definition of illegal employment, can be regarded as an effective measure in deterring those employers who might be planning on bringing over to Malta any TCNs who do not fulfil the conditions for stay or residence. Moreover, the UHM mentioned that such regulations may aid the reputable employer by reducing unfair competition in the labour market (Grima, personal communication, 13 August 2012).

Notwithstanding the above, the Malta Employers Association (MEA) and the General Workers Union (GWU) did express their doubts as to the effectiveness of this legislation in tangible terms, most notably due to issues of enforcement (or lack thereof), as discussed below.

Obstacles and problems

The major obstacle expressed by the social partners is with enforcement of this legislation. It was pointed out that it is a futile exercise to enact these regulations unless there are serious attempts at large-scale enforcement, most notably in the form of inspections, as laid down in the regulations themselves: 'For the purposes of these regulations, inspections shall be carried out by the competent authorities as may be prescribed by the Minister' (L.N. 432 of 2011 Sect 9). It is through proper enforcement that this legislation can yield positive results (Grima, personal communication, 13 August 2012).

Lessons learned

The UHM indicated that the regulations would probably be more effective if harsher financial sanctions had been introduced. Furthermore, the UHM highlighted that Malta seemingly failed to transpose the articles relating to the complaints lodged by the illegally-staying TCN. The Directive offers a complaints mechanism whereby TCNs in illegal employment may lodge complaints against their employers, directly or through third parties designated by Member States such as trade unions or other associations or a competent authority of the Member State when provided for by national legislation. In Malta's scenario, the measure seems to have been overlooked with the consequence that the right of a TCN to seek assistance from a Union is not established by the legislation itself. It is unfortunate the authorities failed to acknowledge the fact that trade unions could potentially assist in encouraging the TCN to lodge the complaint (Grima, personal communication, 13 August 2012).

The representative of the MEA pointed out that certain companies are in a better position to engage workers illegally without the necessary paperwork, especially in cases concerning sub-contracted work, as well as temporary and short-term contract work. A typical case in point of such work is the urgent clearing and cleaning of an old building, and due to the short-term nature of this type of work, it proves difficult for the employer to find the required workers. The MEA representative proceeded to argue that when there is a demand for this type of work arrangement, one can look at things from two opposing sides; whilst one can focus on the abuse and exploitation of these workers, one can also look at the aspect of convenience for both employer and worker. It was pointed out by the MEA that, as long as the workers are not mistreated but treated in a fair and just manner, this is a case where the system tends to create a situation which is potentially beneficial for both parties. This seems to add proof to the point that as long as there is demand and supply, such illegal activities, in this case undeclared work, will tend to persist (Farrugia, personal communication, 30 July 2012).

Impact indicators

Official statistics are unavailable since the regulations were introduced very recently in November, 2011.

Transferability

Such a measure could potentially be useful in a number of other EU countries, such as Italy and Spain, which, like Malta, have been experiencing a high influx of illegal immigrants throughout the last years.

Contacts

Interviews conducted with:

  • Mr Joseph Farrugia, Director, Malta Employers Association (MEA). Interview conducted on 30 July 2012.
  • Mr Jason Deguara, Section Secretary, General Workers Union (GWU). Interview conducted on 30 July 2012).
  • Dr Andrew Grima, Legal Consultant to the Union Haddiema Maghqudin (UHM). Interview conducted on 13 August 2012.

Commentary

Undoubtedly, this legislation was sorely needed given the scenario described earlier. In all likelihood, the penalties and sanctions listed in the regulations will, to some extent, serve as a deterrent for employing illegally staying third-country nationals, and hence contribute to tackling the issue of undeclared work. Although it is still early to gauge the utility of this legislation in tangible terms, the probability is that introduction of this legislation will assist the entities involved in consolidating their joined-up efforts. Unfortunately, as is often the case, it is a lack of resources that might limit the usefulness of such measures.

Bibliography

Debono, M. (2012), Undeclared work Malta update 2012.

Employment and Training Corporation (2010), Annual report 2009.

Murphy, R. (2012), Closing the European tax gap - A report for group of the progressive alliance of socialists & democrats in the European Parliament.

Schneider, F. (2011), The shadow economy in Europe, 2011.

Legal notices

Subsidiary Legislation 217.14 - Minimum Standards on Sanctions and Measures against Employers of Illegally Staying Third-Country Nationals Regulations (Legal Notice 432 of 2011).

Immigration Regulations, 2004 (Legal Notice 205 of 2004).

Christine Garzia, Centre for Labour Studies, University of Malta

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