Netherlands: Bill passed to stop exploitation of migrant workers

A bill to ensure migrant workers are paid fairly, and to stop unfair competition between businesses, was passed unanimously by the Dutch Senate in June 2015. The bill is targeted at employers who pay migrant workers from other EU countries less than the minimum wage. This problem is common in horticulture, construction and transport.

Background

The bill (Wetsvoorstel aanpak schijnconstructies) was passed in order to deal with increasing numbers of employers who avoid labour legislation and collective agreements when employing workers from other Member States. This situation, according to the memorandum of understanding to the bill, is bad for employees, compliant employers and the government. 

This is because it can lead to workers being underpaid, the substitution of regular jobs for lower-quality employment and, sometimes, exploitation. Compliant employers who pay their workers the going rate face unfair competition, and the government loses a significant amount of income through the non-payment of tax and social premium contributions. It also pays an increased benefits bill for employees who have lost their jobs due to the unfair competition.

The bill was sent to the Dutch parliament on 12 December 2014 by Minister for Social Affairs and Employment Lodewijk Asscher. It was unanimously approved by the Lower House, and by the Senate. It was expected to come into force on 1 July 2015 and will be monitored annually, with an evaluation of its effectiveness in 2018.

The main elements of the bill are:

  • improving the enforceability of the Act on Minimum Wages;
  • disclosing investigations and sanctions by the Labour Inspectorate;
  • extending the system of liability for wages throughout the chain of employers;
  • enforcing collective agreements;
  • improving the exchange of information between the authorities and other relevant actors, including social partners involved in collective bargaining;
  • amending the Act on foreign workers with regard to identity checks.

Improving enforceability of Act on Minimum Wages

According to the Labour Inspectorate, there are increasing numbers of employees being paid less than the statutory minimum wage. The new bill obliges employers to pay wages by Giro, not cash. It also sets out that any deductions for costs, such as housing and travelling, cannot be used to reduce the wage below the level of the statutory minimum wage although separate agreements in writing between employer and employee about such costs remain possible. Pay slips will be more detailed.

The right to be paid the statutory minimum wage will be extended to all employees, abolishing the existing age limit of 65, since an increasing number of employees are in this age category.

Disclosing investigations and sanctions by Labour Inspectorate

The bill obliges the Labour Inspectorate to disclose the results of its company inspections and any sanctions (including fines and orders to stop work) because of non-compliance with regard to the Act on Minimum Wages, the Working Conditions Act, the Act on Working Time, and the Act on Temporary Labour Agencies.

Improving enforcement of collective agreements

The number of breaches of collective agreements has also been rising, especially in sectors with many foreign workers. In some sectors the social partners have created specific control boards to uphold collective agreements (for example, in temporary agencies). However, these boards report many cases of the agreements being broken. In other sectors, there is virtually no control over compliance with agreements.

In the Netherlands, many collective agreements are extended to all firms in a sector. Social partners already have the right to ask for companies to be investigated if there are serious doubts about compliance with a collective agreement. The bill allows social partners to use information already held by the Ministry of Social Affairs and Employment for such a request. Another element of the bill is the ability for social partners to ask the ministry to lengthen the period of an agreement’s extension for a maximum of one year, with the aim of reducing the amount of time when there is no collective agreement.

Improving information exchange

The bill also contains arrangements to improve the exchange of information between the authorities and social partners or the enforcement boards (see above). One example is that the Labour Inspectorate can inform the social partners about any investigation they have made if there are also suspicions that a company has not been complying with the collective agreement.

Extending the liability for paying wages

Under the present system, firms using posted workers are – next to the posting firm itself – liable to pay at least the statutory minimum wage. The bill extends this obligation, and the rights of posted (often foreign) workers, to other firms in the chain. This covers situations where more contractors or sub-contractors are involved. Both the firm that posts the workers and the firm where those workers are posted are liable for payment of the whole wage, not just the statutory minimum wage. When neither of these employers pay, the posted worker has the right to seek payment from other parties who may be higher or lower in the chain.

Commentary

The bill is part of a larger project by the Ministry of Social Affairs and Employment to secure decent working conditions and terms of employment for all workers. Another part of this project is an initiative to tackle the problem of bogus self-employment. The ministry and the Cabinet have also tried to get these issues a more prominent place on the EU agenda.

Although the bill was supported by the social partners and in parliament, there are doubts about its effectiveness, especially since the Labour Inspectorate has been faced with budget cuts.

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