Member States still getting to grips with the single labour market

The European Platform Tackling Undeclared Work last year documented the case of a Dutch temporary work agency that hired workers of various nationalities to work for a construction company in Belgium. The wages were suspiciously low, and the Belgian Labour Inspectorate believed that EU law guaranteeing such workers minimum rates of pay was being breached. Inspectors monitored and visited the company over several years, but it was only when they collaborated with the Dutch authorities that both were able to gather the necessary evidence and take steps to resolve the situation. A key operation was a joint inspection by the Belgian and Dutch labour inspectorates. ^[1]

Use of free movement for fraud

Free movement of workers is a fundamental right of the European project, and the EU has implemented a raft of laws to protect the labour rights of EU citizens who work across country borders. At the same time, Member States enforce these laws within their own jurisdictions. But somewhere in the interface between a single EU labour market and a national-level application of rules, fraud creeps through. One of the main transgressions is social dumping, where unscrupulous companies undercut local wage rates by hiring temporary workers from Member States with low-wage economies – often through temporary work agencies. Workers are exploited, and law-abiding businesses face unfair competition.

• Publication: Exploring the fraudulent contracting of work in the European Union

The EU has attempted to stamp out fraudulent employment practices through the Posted Workers Directive and the Enforcement Directive, which aim to protect posted workers and stop circumvention of the rules. One of the tasks of the newly established European Labour Authority (ELA), which is expected to be up and running later this year, is to support Member States in detecting and rooting out employment fraud. If the case described at the top of this piece highlights anything, it is that joint cross-border cooperation and inspections are integral to achieving that objective. Had the ELA been established alongside the Maastricht Treaty, Belgian authorities might have been able to act sooner.

Fragmentation in tackling fraud

The current state of affairs suggests that the ELA has a formidable task ahead. Casting an eye across the EU one gets the impression that many Member States are still getting to grips with the realities of a single European labour market. Each follows its own path, and if one were sum up the situation in a single word, one might default to ‘incoherent’ or ‘wanting’.

No legal framework for joint cross-border inspections exists in nine Member States: Croatia, Cyprus, Czechia, Denmark, Finland, Hungary, Italy, Malta and Sweden. Just eight have explicit legislation to underpin cross-border inspections: Austria, Belgium, Denmark, Ireland, Luxembourg, Poland, Portugal and Romania. In each of these countries, this legislation is accompanied by bilateral agreements with other Member States to facilitate inspections. The remaining Member States rely on bilateral agreements alone. Despite it being a union of 28 Member States, however, none has bilateral agreements with all its 27 counterparts. With nine, France has the most. (See the table at the end of this piece for an overview.)

Limited use of inspection

Do labour inspectorates use the powers granted by legislation and agreements to carry out joint inspections? An information-gathering exercise by Eurofound indicates that most have done so, but not all. Poland, for instance, has legislated for inspections and concluded bilateral agreements, but there is no record of any being carried out. In many other countries – such as Austria, Bulgaria, Greece and Ireland – the practice is rare.

But the absence of a legal basis is not always an obstacle. Croatia, Denmark and Sweden, which have neither legislation nor bilateral agreements, have participated in joint inspections, although in the case of Croatia and Sweden, the practice is limited, and Denmark has allowed inspectors from other Member States as observers only.

Eurofound concludes that just 12 Member States have a fully fledged set of measures for joint cross-border inspections, comprising

• a regulatory framework derived from national legislation or bilateral agreements
• some practice of joint cross-border inspections and cooperation
• use in national courts of evidence gathered abroad

These countries are Austria, Belgium, Estonia, France, Ireland, Latvia, Lithuania, Luxembourg, the Netherlands, Portugal, Spain and the United Kingdom.

The system for tackling cross-border exploitation of workers is clearly fragmented, with some Member States better positioned than others. While the ELA has been tasked with supporting national authorities in carrying out inspections, the new agency should not be regarded as a get-out clause for national governments that have dragged their heels on this issue. Those that lack a legal basis need to set one in place, while all could step up action on enforcing the rules that EU policymakers have made much effort to hammer out.

Summary of measures implemented to effect joint cross-border inspections, by Member State

More details on joint cross-border inspections can be found in the working paper below: Joint cross-border labour inspections and evidence gathered in their course .

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