Adecco allegations put focus on public procurement and social dumping

Following claims in February 2011 that it had systematically violated work environment legislation in Norwegian nursing homes, the recruitment agency Adecco has ended all its nursing home operations in the country. The case also prompted debate over the role of temporary worker agencies and similar enterprises, privatisation, the role of the Norwegian Labour Inspection Authority and the need for improved measures to combat social dumping in the municipal sector.

Violations of the Work Environment Act

In February 2011 it was brought to public attention that the largest recruitment company in Norway specialising in temporary agency work, Adecco, had been systematically breaching regulations made under the Working Environment Act (2.09Mb PDF) in its operation of a nursing home in Oslo. The employees affected by the allegations were employed by Adecco Health AS and had reportedly worked many hours beyond the limits established in the legal framework without receiving overtime compensation. It is also claimed that several employees had been accommodated in the basement of the nursing home, which was not approved for such use.

Because the Adecco workers employed at the nursing home were largely of foreign origin, the allegations became part of the debate in Norway on social dumping. Although the disclosures did not affect Adecco’s main service (that is, the provision of temporary agency workers), they nevertheless had a major impact on the reputation of temporary work agencies as a whole.

In the wake of the revelations, similar apparent violations at other nursing homes operated by Adecco were highlighted in the media. It was also claimed that Adecco had been able to evade paying payroll tax on their employees since they had been brought in from Sweden.

The allegations led several municipalities to terminate their contracts with Adecco and it has decided to end all its nursing home operations in Norway. The operation of nursing homes amounted to about 5% of Adecco’s total revenue in Norway in 2010 and around 50% of the total turnover of Adecco Health. Adecco has initiated an external review to identify any further breaches to the legal framework and their cause.

The Norwegian Labour Inspection Authority (Arbeidstilsynet) filed a petition against Adecco Health AS following the disclosures and the case is presently subject to investigation by the Oslo Police District.

New monitoring and control strategy

The Adecco case generated substantial criticism of the Labour Inspection Authority’s monitoring strategy in the health and social sector. Until the Adecco affair, the Authority had only made announced inspections of hospitals and nursing homes (since 2005 it had carried out 1,700 such inspections). In the wake of the Adecco case, it is clear that the Labour Inspection Authority will have to change its strategy. It has also announced that it will undertake an inspection campaign in the temporary agency industry in the near future.

The Minister of Labour, Hanne Bjurstrøm, has signalled her intention to give the Labour Inspection Authority responsibility for monitoring local authorities in their role as employers. She also wants to give the Authority greater control and sanction mechanisms governing employers and municipalities in cases when the law is violated, allowing it to hand out fines and implement measures to stop social dumping.

Joint working group with social partners

The Adecco case was also a topic of discussion at a meeting between the Minister of Labour and the social partner organisations. Central to the discussions were procurement practices in state and local government. At the meeting it was decided to establish a joint working group to consider measures against social dumping in the public sector, with a particular focus on the municipal sector.

The Ministry of Labour, Ministry of Local Government and Regional Development and all the main confederations in working life, including the Norwegian Association of Local and Regional Authorities (KS), will participate in the working group which will conclude its work before the summer of 2011. The working group is mandated to examine the procedures and systems established by public employers to ensure their compliance with wage and working conditions, the responsibilities of subcontractors in this regard and the role of the Labour Inspection Authority.

Commentary

The Adecco case has placed several key issues back on the agenda in Norwegian working life.

The case has generated increased debate on privatisation. Although services such as nursing homes and care for the elderly have largely been run by public sector institutions, municipalities are increasingly allowing private sector companies to play a role in operating these types of services. Opponents of privatisation of public services argue that the Adecco case demonstrates why responsibility for managing health care services should be vested in the municipalities themselves. However, supporters have argued that the Adecco case has shown that there are too few private actors in the health and social care market, and for that reason, there should be a lot more privatisation taking place in this area.

The Adecco case has also generated debate about how employers can ensure that services subject to public tenders are operated in accordance with the existing regulatory framework. Norway has implemented the International Labour Organization (ILO) Convention No. 94 (NO0802049I). This ensures that public tenders in Norway contain clauses that require service providers to offer their own employees the same wages and working conditions as is normal in the industry. This requirement must be incorporated into each contract and each municipality is responsible for ensuring that contractors act in accordance with the clause. In the Adecco case it seems that responsibility for control was not dealt with satisfactorily and the Minister of Labour has subsequently stressed the responsibilities of municipalities in this area. KS has launched a review to find out how big the problem of social dumping is in contracts involving private operators.

Although the Adecco case referred primarily to the operation of a nursing home, it has contributed to the casting of a negative light on the temporary agency industry. Both NHO Service (which organises such recruitment agencies in Norway) and other agencies have complained that the matter has been a burden on the entire industry’s reputation. They fear it is going to be difficult to acquire new contracts and to recruit new employees.

The Norwegian Confederation of Trade Unions (LO) has been critical of the growing use of temporary worker recruitment agencies in Norwegian working life for a long time. In connection with the implementation of the directive on temporary agency work in Norwegian law, LO has called for the introduction of a right of access for its shop stewards to information about wage and working conditions offered by recruitment agency companies that hired employees. In addition, it wants the hiring company to have joint and several liability for the wages and working conditions of the hired worker. In a letter to the Prime Minister, Jens Stoltenberg, LO has also insisted on a tightening of the current certification scheme for agencies and increased funding for the Labour Inspection Authority.

The recent debate has also led the employer side to reinvigorate the issue of introducing a statutory minimum wage in Norway. John Bernander, the CEO of the Confederation of Norwegian Enterprise (NHO), has argued that this:

• might be a solution to preventing social dumping;

• ought to be raised as a topic of discussion in the working group established to examine the public sector as a purchaser of private services.

In the eyes of NHO, the legislator must take responsibility for ensuring that workers without a collective agreement enjoy a safety net through a national minimum wage.

However, this initiative has not gone down well with the employee side. The leader of the Norwegian Union of Municipal and General Employees (Fagforbundet), Jan Davidsen, sees the proposal as an attack on organized labour. He reportedly fears that a national minimum wage will weaken the rationale for unionisation among low-paid workers when their wages are determined elsewhere (that is, in parliament). He also believes that the experience from other countries is that a minimum wage soon becomes the norm and thus is not the solution to the problem of social dumping in Norway.

Among the political parties there is little support for the NHO leader’s proposal. Only the Progress Party (FRP) has given its support to the proposal.

Kristin Alsos, Fafo