ILO convention on labour clauses applied to municipal authorities

As of 1 March 2008, an administrative provision implementing International Labour Organization (ILO) Convention No. 94 on labour clauses in public contracts places an obligation on all Norwegian public authorities to include a clause regarding wages and working conditions in their tenders. Up to now, this obligation has only been applicable to the central authorities and not the public sector at municipal level.

Background

Norway transposed the provisions of the International Labour Organization (ILO) Convention No. 94 regarding labour clauses in public contracts into Norwegian law in 2005, through an official circular requiring all central government bodies to include labour clauses in tenders for service provision and construction work. As of 1 March 2008, the same obligations apply to all public bodies, including those at municipal level.

The ILO convention requires countries to ensure that central government contracts in the area of services and construction include clauses guaranteeing that the workers’ wages, working hours and other labour conditions are no less favourable than those stipulated for work of the same character in the respective trade or industry in the district where the work is being carried out. The application of this obligation may, under Article 2 of the convention, be extended to public authorities other than the central authorities.

Provisions of regulation

The decision to extend this obligation constitutes part of the government’s action plan against social dumping, which was issued in the spring of 2006. An amendment to the Public Procurement Act (Lov om offentlige anskaffelser), awarding the government the power to adopt administrative provisions, was passed on 21 December 2007. The ILO administrative provision (Forskrift om lønns- og arbeidsvilkår i offentlige kontrakter (in Norwegian, 14Kb PDF)) entered into force on 1 March 2008.

The provision will replace the 2005 circular and covers all public authorities. The obligation to include labour clauses applies to central authority contracts exceeding NOK 1.05 million (about €133,600 as at 3 March 2008) and to other contracts exceeding NOK 1.65 million (€210,000). These threshold values apply to both service and construction contracts in the public service. In accordance with Section 5 of the administrative provision, the contract should place an obligation on the subcontractor to provide its employees with wages and working conditions that are no less favourable than those laid down in national collective agreements or than the norm in a given geographical area and for equivalent positions. At the very least, the term ‘working conditions’ should include the working time regulations.

The subcontractor is, according to the administrative provision, obliged to provide documentary evidence of compliance with the labour clause, if and when required by the contracting parties. Furthermore, public regulatory authorities will be required to undertake sufficient monitoring and controls to ensure compliance with the labour clause. The number of controls and how these are conducted may vary between sectors and geographical area, for example. Commenting on the new regulations, the Ministry of Government Administration and Reform (Fornyings- og administrasjonsdepartementet), which is responsible for the provision’s implementation, deemed that random checks would be sufficient. Public contracts should also contain adequate sanctions protecting against failure to apply the contract obligations. These could include the withholding of payments under the contract.

Reaction of social partners

Employers have opposed the new provision, partly due to the fact that similar procedures have already been adopted for the construction sector, although not yet enforced, through amendments to the Act on generally applicable collective agreements (Lov om allmenngjøring av tariffavtaler) (NO0705019I). Furthermore, the Confederation of Norwegian Enterprises (Næringslivets Hovedorganisasjon, NHO) argues that the implementation of the ILO convention might be considered in breach of EC law, and has requested that the government awaits the ruling of the European Court of Justice (ECJ) in relation to the Dirk Rüffert case (C-346/06), where similar issues are considered.

In contrast, the Norwegian Confederation of Trade Unions (Landsorganisasjonen i Norge, LO) has long been in favour of implementing the ILO convention into Norwegian law, including in the public sector at municipal level, and has largely welcomed the government’s initiative. Although LO supports most parts of the proposed regulation, it has nevertheless called for increased monitoring and control of compliance with the labour clauses. The confederation is therefore asking the government to consider bestowing the Norwegian Labour Inspection Authority (Arbeidstilsynet) with the power to control whether employees are paid in accordance with the labour clause.

Kristin Alsos, Fafo Institute for Applied Social Science