EurWORK European Observatory of Working Life

Controversy over German minimum wage for international truck drivers – Q2 2015

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The German national statutory minimum wage for international truck drivers has caused considerable controversy. Some Member States fear it will damage the competitiveness of companies sending drivers to destinations via Germany. However, it is important to find a balance between promoting the free movement of goods and ensuring appropriate protection for workers.

UPDATE 16 JUNE 2016: Owing to the consequences of France and Germany’s application of minimum wage legislation to the road transport sector, the European Commission has decided to take legal action against the two countries. The Commission considers that this systematic application of minimum wage legislation disproportionately restricts the free movement of goods and the freedom to provide services. French and German authorities have two months to respond to the Commission’s arguments. For more information, see the European Commission press release.

(Article, originally published in July 2015, continues below.)

Introduction

International road transport is an important economic sector involving complex cross-border operations. Road transport accounts for 72% of all inland transport activity. In 2012, the national and international road haulage sector in the EU28 comprised 562,113 companies, employing just under 2.4 million workers.

A comprehensive body of European regulations governs the sector, aiming to balance market integration and the protection of employees. While current regulations are deemed to be adequate, there are issues around weak implementation and weak enforcement in Member States

The sector has changed considerably over the past 10 years, following market integration and the increased competition that this has caused. Firstly, the main operators are now from eastern Europe; furthermore, commentators argue that growing competition has led employers to increasingly subcontract across borders and to take advantage of lower wages in other countries to reduce labour costs and boost competitiveness.

The issue of how to regulate the pay of drivers working in the international road transport sector in a way that balances the promotion free movement and market integration with the appropriate protection of workers’ rights is a very complex one. A range of problems for those trying to ensure fair competition and fair treatment for workers have been created by that fact that drivers operate across Europe but originate from different countries. Pay norms, in particular, differ widely, as do working conditions in general.

A focus of controversy in the last few months has been the German government’s introduction of a national minimum wage for all employees working in Germany, regardless of where their employer may be. This includes international road haulage drivers transiting Germany. Of key importance here is the application of the Posting of Workers Directive (96/71/EC), which establishes a core of terms and conditions for employment to ensure protection of workers posted from one EU Member State to another, within the framework of the transnational provision of services. The Directive aims to ensure that posted workers are covered in the host country in relation to minimum standards for working time, minimum pay, holidays, and health and safety. There is a general debate as to how far this Directive should apply to drivers in the international road transport sector who are moving through or working for a limited time in different European countries.

Also relevant here is the so-called Rome I Regulation (Regulation EC 593/2008), which sets out which law should be used to interpret employment contracts agreed by parties in different countries. Article 8 of the Regulation states that, in the case of individual employment contracts, the applicable law may be determined on the basis of the freedom of choice principle, provided that the level of protection granted to the employee remains the same as that guaranteed by the applicable law in the absence of choice. In the latter case, the law governing the contract will be that of the country where, or from where, the employee carries out their tasks. If this cannot be determined, the applicable law will be that of the country where the place of business is located. However, if the contract is more closely related to another country, that country’s law will apply. As with the Posting of Workers Directive, there is a debate about whether the law of their home country should apply to international road haulage drivers.

This article, jointly written by Eurofound’s correspondents, examines the implications of the new German national minimum wage for those working in the road haulage sector across Europe, focusing on the Czech Republic, France and Poland.

Background

On 1 January 2015, a new statutory minimum wage of €8.50 per hour came into force in Germany, as set out in the Minimum Wage Act. The Act covers all employees working in Germany, including posted workers and workers employed by foreign companies that provide transport and logistics services in Germany or cross Germany to reach another destination. Under the Act, foreign companies operating in sectors covered by the Act against Irregular Work (Schwarzarbeitsbekämpfungsgesetz) have to fulfil particular documentation and notification obligations and send these documents to the German customs authorities if they want to provide services in Germany or travel through German territory. Penalties for non-compliance can be as high as €30,000, or as high as €500,000 if the Minimum Wage Act is breached.

Prior to this, the road transport sector was not covered by a sectoral minimum wage but by collective agreements concluded with regional employer organisations or single employers. There are no figures specifically on the collective bargaining coverage of truck drivers, but according to a 2014 report by the Federal Office of Freight Transport (Bundesamt für Güterverkehr), many SMEs that employ truck drivers are not members of an employer organisation (in German, 723 KB PDF).  There has been much debate about truck drivers’ pay and working conditions (in German). In July 2013, the main German sectoral trade union covering the transport sector, the United Services Union (Ver.di), and the Federal Association of Road Haulage, Logistics and Disposal (BGL) concluded a pact calling for a statutory minimum wage for drivers  (in German) of €8.50 and opposing the EU’s policy of liberalising cross-border road transport without harmonising national regulations.

Main controversy

Controversy focuses on how the new German minimum wage legislation will affect both foreign companies operating in Germany and posted and mobile workers. In particular, the Czech and Polish governments and employer organisations have complained about the new Act and documentation rules, saying they will damage competitiveness.

In the Czech Republic and Poland, the statutory national minimum wage is considerably lower than Germany's, although this difference is partly compensated for by a number of non-wage benefits and additional allowances, such as daily subsistence allowances. The 2015 minimum wage in Poland is PLN 1,750 per month (around €430) or PLN 10 per hour (around €2.50). Even though Polish international drivers are normally paid above the minimum wage, their wages are still not as high as Germany's minimum wage. To comply with the new German legislation, some Czech and Polish companies would have to more than double the wages of employees who drive in Germany. Collective bargaining in the Czech Republic over pay, where it exists, is carried out predominantly at company level. In Poland, very few employees are covered by a collective agreement; those that are tend to be covered by a company-level agreement.

Institutional and jurisdictional steps

On 21 January 2015, the European Commission opened a so-called ‘structured dialogue’ on the case for assessing whether the German regulations comply with European law. On 31 January, as a result of meetings with the Czech, Polish and other governments and pressure from the Commission, the German government temporarily suspended the documentation obligations and the minimum wage for international truck drivers travelling through Germany. The suspension was to last until the Commission decided whether the German regulations were compatible with European law. The suspension, however, does not apply to the right to operate transport services within a particular territory (cabotage) or to cross-border transport involving stops for loading or unloading operations in Germany. The Polish Minister of Labour expressed his satisfaction with the decision of the German government, but made clear the Polish government's belief that both cabotage and cross-border transport should be also covered by the suspension. The Polish position was supported by Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Ireland, Lithuania, Portugal, Romania, Slovakia, Slovenia and Spain. In March, representatives of transport companies from the Czech Republic, HungaryLithuania, Poland and Romania demonstrated against the application of the minimum wage at the European Parliament in Brussels and handed a petition to the parliament’s Transport and Tourism Committee.

The Commission sent a Letter of Notice to the German government on May 19, a first step in launching an infringement case on the application of the German Minimum Wage Act to the international transport sector. Although the Commission supports the introduction of the German minimum wage, it finds that the German national measures are not fully compatible with aspects of EU law that cover freedom to provide services, the free movement of goods, the Posting of Workers Directive and the principle of proportionality. The German Federal Ministry of Labour and Social Affairs had two months to respond to the arguments put forward by the Commission in the letter and to decide on what it will do. 

In June, the German Constitutional Court (Verfassungsgericht Karlsruhe) ruled against Austrian, Hungarian and Polish logistics companies that had jointly filed a constitutional complaint against the changes (in German).

Debate at EU level

Members of the European Parliament (MEPs) have tabled many questions on this issue. They also organised a debate with the Commissioner responsible for transport, Violeta Bulc, during the plenary session on 25 March 2015. 

On 28 May 2015, a few days after the Commission wrote to the German authorities, the Commissioner responsible for employment and social issues, Marianne Thyssen, presented her priorities for 2015 to MEPs as part of the structured dialogue between the European Parliament and the European Commission. In responding to a question about the German minimum wage and the possible revision of the Posting of Workers Directive, she said that Commission’s priority was:

to facilitate workers’ mobility and at the same time fight abusive practices. Member States are taking measures but the Commission is reminding them also of certain obligations. We do not prevent Member States from passing their own social rules, but this must be done within a framework. We must prevent it from having negative effects on the functioning of the internal market … A minimum wage in the transport sector is possible for cross-border services, such as cabotage, but not transit!

The EU-level social partners have also been reacting to this issue. On the employer side, the International Road Transport Union (IRU) has called for an immediate moratorium on the enforcement of the German minimum wage. It also questioned the legal basis of the minimum wage (for instance, whether the Posting of Workers Directive applies) and argued that the regulatory burden of the minimum wage was very high, as the administrative procedures were not yet fully established.

However, in January 2015, the European Transport Workers’ Federation (ETF) welcomed the German national minimum wage, describing it as a solution to social fraud in road transport (in German). In May, the ETF criticised the Commission’s decision to open infringement proceedings against Germany.

Reactions across Europe

German trade unions in favour 

There have been strong responses to the Minimum Wage Act from social partners around Europe. In Germany, on 20 May, the Confederation of German Trade Unions (DGB) stated that it strongly rejects the European Commission’s view (in German). According to the trade unions, the Commission is violating the principle of a social Europe by allowing differentials in the minimum wage in the transport market. Ver.di, particularly, rejects any exceptions to the Minimum Wage Act (in German) on the grounds that the implementation and ‘enforcement of minimum social standards are indispensable for workers, employers and fair working conditions in the cross-border transport sector’. The trade unions are concerned that these exceptions could be applied to other sectors.

German employers divided

German employer organisations are split on the issue. The BGL supports the minimum wage legislation and warns against unfair competition and social dumping in the transport sector. According to the BGL, there has been cut-throat competition in the international transport sector that abuses the EU principle of freedom of services. Companies increasingly deploy low-wage drivers from central and eastern European countries for longer to avoid hiring drivers in other EU countries with higher wages and social standards. It argues that these practices are not in line with fair competition.

However, the German Logistics Association (DLSV), a member of the IRU, supports the Commission's infringement procedure. It says it has repeatedly stressed the need for freedom in the provision of services and that the Minimum Wage Act places unrealistic administrative burdens on German companies and their foreign subcontractors. It adds that cross-border logistics chains are standard in the German logistics market, and that the documentation and remuneration obligations do not correspond to business operations and are not applicable. The DLSV particularly opposes the principle of German contractors having liability for their foreign subcontractors.

Polish employers oppose the Act

Polish employers support the Commission’s actions, saying that the Act violates the principle of freedom of services. Polish commentators note that the introduction of the German minimum wage highlights the significant difference in pay levels between between newer and older Member States. Polish employers stress that Poland specialises in high-quality international transport services that employ around one million workers nationally. Poland’s main employers’ organisation, the Lewiatan Confederation, states that the growth of the international transport sector in Poland has resulted in fierce competition, driving profit margins down to an average of 2%. It is estimated that a significant increase in drivers’ wages and an obligation to prepare documentation in German would increase total costs by 9% and put many transport companies out of business, particularly SMEs.

The Lewiatan Confederation also states that the German legislation does not take into account the payment structures of Polish drivers. While their basic wages are low, their daily subsistence allowance brings total income up to a level that is high in comparison with average wages in the transport sector and exceeds the German minimum wage.

All employer organisations in Poland say that the Act violates the EU principle that companies in all Member States should be free to provide services in Europe. They argue that regulations covering posted workers do not apply to international transport, whether transit, cabotage or cross-border transport services.

Polish unions welcome German minimum wage

All three Polish representative trade unions – the Independent and Self-Governing Trade Union ‘Solidarity’ (NSZZ 'Solidarność'), the All-Poland Alliance of Trade Unions (OPZZ) and the Trade Unions Forum (FZZ) – have welcomed the German Minimum Wage Act. They perceive it as a step towards a European minimum wage and an instrument accelerating the process of pay convergence in Europe. The trade unions have also stressed that this will help to shift the Polish economy from a model based on low labour costs towards one based on innovation and higher productivity. On 22 January 2015, all three representative trade unions wrote a joint letter of support to the German Minister of Labour, Andrea Nahles (in Polish).

Nevertheless,  both Polish social partners are dissatisfied with the Polish government’s stance. Employers believe its actions are insufficient and too slow; unions say the government has not consulted them, adding that, in their view, the German government is more concerned about the social conditions of Polish employees than the Polish government.

Czech social partners reject the Act

In the Czech Republic, the social partners are united in their opposition to the German Minimum Wage Act. At present, Czech employers have decided not to change the wages of their employees pending the Commission’s final decision. The Association of Road Transport Operators (ČESMAD Bohemia) insists that Germany should not interfere in the legislative framework of another country. Czech transport companies welcome the temporary suspension of the changes for transit traffic but argue it should also be suspended for journeys that involve loading or unloading in Germany, since a considerable number of companies are dependent on transport to and from Germany.

The Czech Trade Union of Transport (OSD) also rejects the application of the Act to Czech transport workers. OSD President Luboš Pomajbík said there was tough competition in the sector, with approximately 13,000 employers and many thousands more self-employed workers who depress the price of services in the sector. Although trade unions would welcome higher wages for employees in the sector, they do not expect the German measures to have a positive effect on Czech employees. Czech trade unions feel the minimum wage will not protect foreign workers in German territory but will instead discriminate against foreign providers of transport services in Germany, particularly those that give workers regular employment contracts.

The only point of dissent between the social partners in the Czech Republic concerns the daily subsistence allowance paid to drivers working abroad. Employers suggest reducing the allowances to compensate for the German minimum wage increase; unions reject this proposal as unworkable.

French government supports minimum wage for foreign drivers

France has been following this debate closely. A national minimum wage has been in place in France for a long time, and it is interesting to see how the French authorities have handled this issue and to examine their approach to balancing the free movement of goods and market integration with the protection of workers.

The French government has announced its willingness to apply the minimum wage to foreign drivers working in France. Indeed, it has secured the adoption of an amendment to the Macron Law, currently going through parliament, that states that ‘any driver performing cabotage operations in connection with international transportation’ should benefit ‘from the social rules and minimum wage in force in France’. Alain Vidalies, the French Minister of State for Transport, Marine Affairs and Fisheries, said on 17 February 2015: ‘The aim is to combat social dumping, as practised by foreign companies and French companies, which employ "social optimisation" by creating subsidiaries in other countries.’

French legislation on posting workers already covers the whole economy, including the transport sector. Any EU carriers that send drivers to France must submit a preliminary secondment declaration and comply with the sectoral minimum wage for the road transport sector, extended by law to all employers operating in France.

At the moment, carriers based outside France and planning cabotage operations longer than eight days have to send a 'preliminary specific secondment declaration' to the work inspectorate of the place of origin of the first cabotage operation. All carriers based outside France whose employees carry out cabotage operations in France have to comply with French legislation on posted workers.

In future, however, foreign carriers will have to provide a new certificate, the detail of which will be set by decree. Foreign hauliers who employ drivers in France without providing the necessary certificate will be penalised for illegal working. Responsibility for compliance with French social regulations lies with the French customer, who will be considered to be the foreign haulier's contractor and so must comply with three articles of the Labour Code:

Reactions of the French social partners

The French National Federation of Road Hauliers (FNTR) says it was not consulted about the amendment to the Macron Law. It is not opposed to the aim of the amendment but says the rules on posted workers cannot be applied to transport activities. FNTR would like the employment and social protection of mobile workers to be regulated at EU level rather than each Member State being left to find its own partial solutions.

The Organisation of European Road Transport Companies (OTRE), which represents smaller companies, has welcomed the amendment, as have trade unions such as the General Confederation of Labour (CGT) and the French Democratic Confederation of Labour (CFDT), believing that it will increase fairness and help combat social dumping (in French).

Conclusions

The creation of a minimum wage applicable to all workers has been a long-term aim of the German trade unions. Now that the German government has introduced a statutory minimum wage, the key challenges will be its implementation across industries, especially in sectors with an international dimension. The nature of the international road transport sector makes it an interesting field for study, as the debate rests on issues such as the implementation of the Posting of Workers Directive and the impact of the German minimum wage on mobile workers.

The next few months will be crucial for the development of this issue. The German government must decide how to act on the European Commission's infringement notice and to consider whether to suspend its legislation for all foreign drivers working on German soil or find some other solution.

 

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