Scandal over illegal employment of east European lorry drivers

In January 2002, one of Austria's major road haulage companies was accused of illegally employing drivers from central and eastern Europe. The HTV transport workers' trade union also claimed that about 80% of Austria's road haulage firms pay their lorry drivers illegally low wages, and demanded tougher punishments for such exploitation. The road transport scandal has also raised the issue of 'social dumping' in road haulage within the EU internal market.

On 22 January 2002, German police cracked down on road haulage companies across Europe suspected of illegally employing drivers who are nationals of central and eastern European countries. The police action came after eight months of preliminary inquiries. Police and tax authorities accuse the transport companies concerned of economic crimes and 'trafficking in human beings for purposes of exploitation'. Some 30 lorry drivers were arrested.

The next day, newspaper reports said that at least 1,500 central and eastern European truck drivers were illegally employed in Austria under 'scandalous' conditions.

The road transport concern at the centre of the allegations was Kralowetz, which is based in Austria but apparently owned by United Cargo, which is registered in Luxembourg. On 24 January, one of the group's owners was arrested at Luxembourg's border (if he had stayed in Austria, it would apparently have been impossible to take legal measures against him). According to further investigations, most of the drivers concerned were on the minimum wage and illegal deductions were made from their pay if they had an accident or fuelled at the 'wrong' service station.

On 27 January, about 150 lorry drivers employed by the company gathered in Luxembourg, many with neither money nor food (LU0202104F). Austrian newspapers reported that many of the drivers had not been paid for months. The president of the Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund, ÖGB), Fritz Verzetnitsch, called for stricter laws and an 'intervention force' to be set up to combat illicit work.

Union claims illegal practices are commonplace

According to Georg Eberl, secretary of the Commerce, Transport and Traffic Workers' Union (Gewerkschaft Handel, Transport und Verkehr, HTV), 80% of Austrian road haulage firms violate laws. He said that unsafe conditions and exploitation of foreign nationals are everyday practice, claiming that it is not unusual for drivers not to be paid for overtime hours and for employers to withhold their wages for various reasons. Labour experts at the Lower Austria Chamber of Labour (Arbeiterkammer, AK) added the claim that most Austrian drivers are covered by illegal payment schemes in that their pay is related to the number of kilometres travelled instead of being governed by the provisions of the relevant collective agreements.

However, the employers' representatives in road transport strongly deny widespread incidence of such practices. The executive secretary of the Transport Association (Fachverband Güterbeförderung) of the Austrian Chamber of the Economy (Wirtschaftskammer Österreich, WKÖ), Christian Bauer, vehemently rejected the general denunciation of road haulage firms by the unions and stated: 'If it were true that 80% of the firms broke the laws, thousands of Austrian transport companies would be criminal. The problem of illegal employment should be tackled by changing the legal framework of the freight business rather than imposing further sanctions.' Mr Bauer referred to the example of the Austrian motor-vehicle tax, which he said is six times higher than the EU minimum standard rate and should therefore be reduced.

Overall, trade unions claim that there are at least two central problems impeding efforts to combat illegal employment in Austria. The first problem refers to the prevailing lack of coordination between the responsible public authorities - such as the Health Insurance Offices (Gebietskrankenkassen), social security bodies and the Labour Inspectorate (Arbeitsinspektorat): 'One authority does not know what the others do,' argued Mr Eberl of HTV. Second, the unions criticise current labour legislation for not providing any measures to combat effectively illicit employment of either Austrian or foreign nationals.

Current labour legislation and illicit work

In Austria, the expression 'illicit work' (also referred to as 'undeclared employment') is used to describe:

1. the employment of workers who, illegally, are not declared to the statutory social insurance scheme as being in that employment ('Schwarzarbeiter');

2. business activities which firms do not enter in their accounts, thereby defrauding the tax authorities; and

3. paid work carried out without a formal business-operating licence (referred to colloquially as 'Pfusch'), where it extends beyond what could roughly be described as 'mutual assistance provided in a spirit of neighbourliness'.

In addition, employment of non-Austrians in breach of the Foreign Persons Employment Act (Ausländerbeschäftigungsgesetz, AuslBG) is illegal. For instance, non-EU citizens require both a residence permit and a labour market permit if they want to work in Austria.

In contrast to German law, the Austrian criminal code (Strafgesetzbuch) does not consider illicit work a crime. At present, 'social fraud' (non-payment of social contributions and/or taxes), for instance, can be punished only by administrative fines. This, it is alleged, might lead to a situation whereby the road haulage companies involved save an estimated EUR 16,715 of social contributions per illegally employed driver annually, while the breach of social security regulations leads to an administrative fine of only about EUR 728 per employee.

Under prevailing conditions, existing regulations are completely 'toothless', unions hold. They urged the coalition government of the Austrian People's Party (Österreichische Volkspartei, ÖVP) and the populist Freedom Party (Freiheitliche Partei Österreichs, FPÖ) to propose a law devised to curb illicit work effectively. The enactment of draft legislation on this issue has been awaited for more than three years. In October 1998, the former coalition government of the Social Democratic Party (Sozialdemokratische Partei Österreichs, SPÖ) and the ÖVP drafted legislation that included a proposed new Law on Illicit Work (Schwarzarbeitsgesetz, SchwAG) (AT9810106F). One of the aims was to act against illegal work and the illegal employment of cross-border commuters. At that time, WKÖ opposed the focus on control and sanctions and the lack of any attempt to reduce economic incentives for illegal work. The initiative was ultimately dropped due to a veto by the ÖVP.

New government proposal to combat illegal employment

The current road haulage scandal has led to an increasing awareness among most of the political actors concerning the problem of illicit work in Austria as well as across the EU single market.

On 31 January 2002, the Interior Minister, Ernst Strasser, who is a member of the ÖVP, submitted a reform package covering measures to prevent the recurrence of a similar scandal. It provides for higher fines for exploitation of workers, better control of their employment and of lorry traffic, as well as improved coordination among EU countries. However, at present it remains highly unclear whether the proposed regulations will cover the suspected illegal employment of foreign drivers involved in the recent transport scandal.

Legal loopholes in national and EU law

Newspapers quoted an official of the WKÖ who claimed that almost all the big freight companies in Austria take advantage of legal loopholes resulting from insufficient coordination of national and EU law. Luxembourg, for example, allows road-haulage subsidiaries to employ foreign drivers in EU Member States, as long as they do not enter Luxembourg's national labour market. This means that foreign drivers obtain a work permit in Luxembourg and deliver goods throughout Europe without holding a residence permit in any EU Member State. This has become possible due to the completion of the EU single market, which provides for the free movement of labour and capital and hence for business establishments and workers freely to choose their location of activity within the European Union.

The Austrian social partners agree on the necessity to close the legal loopholes through harmonised labour and social legislation within the EU. In road haulage, they see a growing need to establish a European-level collective agreement setting a minimum floor for wages and working conditions.

In addition, both organised labour and the employers' associations call for an EU-wide 'driver's card', which is capable of recording data relating to the driver's activity for a period of at least one year (speed, distance, rest periods and dates), as a precondition for improving the working conditions of the drivers (as laid down in Council Regulation (EC) No. 2135/98 on recording equipment in road transport).

Commentary

The recent road haulage scandal in Austria has raised two critical issues. First, it has stressed the need for effective political and administrative measures to tackle the problem of illicit work by foreign as well as Austrian nationals. Second, the scandal has once again exemplified the European dimension of labour relations, particularly in the transport sector where the fierce price competition in the single market seems to drift into illegality. Many observers presume that the scandal is only 'the tip of the iceberg', and they estimate that billions of EUR in European taxes and social insurance payments are being evaded annually.

Moreover, in the years to come, enlargement of the European Union to the east will present an important challenge to industrial relations in the road transport sector. In particular, the influx of workers from beyond the current boundaries of the EU will, it is claimed, undermine existing sector-wide collective agreements in Austria and other EU Member States. This threat has created an interest among employers in some form of European-level agreement aimed at preventing 'social dumping'- downward pressure on wages and labour conditions in Austria. It remains to be seen if the European social partners will respond to this problem. (Susanne Pernicka, University of Vienna)