Dispute over pay of Latvian building workers in Sweden

In December 2004, Swedish trade unions launched a boycott of Laval & Partneri, a Latvian construction firm that is carrying out building work at a site near Stockholm, calling for the Latvian workers involved to be paid the same as their Swedish counterparts. The conflict has attracted considerable attention in Latvia, with the government stating that EU free market rules are being breached, and employers' organisations and trade unions becoming involved

A Latvian-based construction firm, Laval & Partneri, recently won a public tender in Sweden through an open competition. The company obtained a contact to build a school building in Vaxholm, not far from Stockholm, and to participate in the construction of housing in Djursholm. The construction work started in late 2004, and 14 Latvian building workers are involved.

On 2 November 2004, the Swedish Building Workers’ Union (Svenska Byggnadsarbetareförbundet, Byggnads) launched a boycott of the Latvian company’s Swedish activities, arguing that the wages of the Latvian builders working there are too low (SE0412101N). Laval & Partneri responded that the workers' employment conditions were already known before the start of work and that the union's protests cannot be grounds for stopping the work. The wages received by the Latvian workers in Sweden are considerably higher than they would receive in Latvia and, in addition to their pay, the workers are provided with free accommodation, three meals a day and transport. A company representative stated that, prior to winning this contract, Laval & Partneri had failed to win 25 construction tenders in Sweden owing to its higher costs.

In response to a demand by Byggnads to conclude a collective agreement for its Swedish operations, Laval & Partneri discussed a pay deal with the union, but this proved unsuccessful (see below). On 6 December 2004, the Latvian enterprise brought a case in a Swedish industrial court, which will probably end up in the European Court of Justice.

Swedish trade union action

The Swedish Building Workers’ Union (Byggnads) is the driving force behind the dispute. In mid-November 2004, following negotiations with Byggnads, Laval & Partneri agreed to increase the Latvian building workers’ wages from SEK 80 to SEK 105 per hour, but the union demanded that the workers be paid what their Swedish counterparts receive - from SEK 130 to SEK 145.

Notwithstanding the company's partial concession on pay, Byggnads launched a campaign against the Latvian firm. In November, the union put up posters to inform the public about the action against Laval & Partneri and then announced that if persuasive measures did not work, a full boycott would be launched on 3 December. On 2 December, Byggnads held a rally outside the parliament building in Stockholm to protest against support for the Latvian enterprise expressed by four Swedish parliamentarians. On 3 December, the union launched its boycott. It organised a protest demonstration by Swedish building workers, who sought to talk to the Latvian workers about their rights, hampering them from entering the building site.

Despite the action by Byggnads, the Latvian company and building workers continued working. The dispute intensified and more participants became involved. In early December 2004, the Swedish Electricians’ Union (Svensk Elektrikerförbundet) gave notice of a boycott of all electric installation work at the construction sites (a legal form of sympathy action under Swedish industrial action rules - SE0302102F). Swedish law provides that electrical installation work may be performed only by tradespeople licensed in Sweden. However, work on the sites did not stop, because the Latvian building workers got on with other jobs.

On 8 December 2004, deliveries of concrete were stopped, but Laval & Partneri managed to find concrete suppliers whose staff are not union members, and the work continued. On 14 December, over 50 Swedish building workers gathered at the gates of the site and tried to stop the Latvian workers from getting to work. The police were called but did not become directly involved.

Due to the actions of Byggnads, Laval & Partneri states that it has has incurred moral and material losses, while the Vaxholm local authority risks not being able to complete the school building on time - it is supposed to open in June 2005.

Latvian government acts

The Latvian government has become involved in the dispute, justifying its intervention on the grounds that EU rules on the free movement of goods and services are being ignored, and barriers are being placed in the way of free competition in the EU internal market. The Ministry of Foreign Affairs stated that Latvia has fulfilled its obligations since joining the EU and that its market is open to all EU Member States in all areas of economic activity, as stipulated by the Treaty establishing the European Community. Latvia expects the same position to be assumed by all other Member States, including Sweden. According to the Ministry, Laval & Partneri's operations in Sweden are lawful, and it has gained considerable experience in the Swedish construction market. The company has won a public competition and is working in line with high-quality standards, the Ministry says.

At the beginning of the dispute, the Latvian government made a request to the Swedish government that Latvian companies and their employees be granted the same rights as Swedish citizens, because this is provided for by the fundamental principles of the European Union.

On 17 November 2004, the Under-Secretary of State at the Latvian Ministry of Foreign Affairs, Andris Teikmanis, met the Swedish ambassador to Latvia, Göran Håkansson, to discuss the problems encountered in Sweden by Laval & Partneri and to ask for an explanation about the situation. He invited the Swedish government to become involved in seeking solutions to the existing situation, so that Latvian companies and their employees have the same rights as do Swedish citizens, so as to eliminate the possibility of outright discrimination on the basis of citizenship, attempts to restrict competition and the free movement of services.

Latvia’s ambassador to Sweden, Artis Bērtulis, has made an official approach to the Invest in Sweden Agency in connection with the dispute.

In early December, an interministerial working group was set up, headed by the Ministry of Foreign Affairs and involving representatives of the Ministries of Economy, Justice and Welfare. After an analysis of the Laval & Partneri conflict, the working group came to the conclusion that the dispute constitutes a breach of EU rules on free movement of services. The Latvian government will thus ask the European Commission to evaluate whether Sweden has infringed the European Community Treaty, and whether it has fully implemented EU Directive 96/71/EC concerning the posting of workers in the framework of the provision of services (SE0306104T). The Minister of Foreign Affairs, Artis Pabriks, expressed his deep regret at the boycott undertaken by Byggnads, arguing that the union's demand that a collective agreement be concluded is at variance with EU principles and values regarding the free movement of services

The Latvian Ministry of Welfare has stated that the Free Trade Union Confederation of Latvia (Latvijas Brīvo Arodbiedrību savienība, LBAS) and the Ministry of Foreign Affairs should inform the National Tripartite Council (Nacionālās trīspusējās sadarbības padome, NTSP) about the circumstances of the matter, while the Latvian Employers’ Confederation (Latvijas Darba Devēju konfederācija, LDDK) should survey its members operating in Sweden to find out if the Laval & Partneri case is the only one of its kind.

Action by the Latvian Construction Contractors Association

Given support from the government, the Latvian Construction Contractors Association (Latvijas Būvnieku asociācija, LBA) threw itself into the task of defending its members. LBA sent a letter to the the Swedish Building Workers’ Union and to Sweden’s ambassador to Latvia, which contained a warning that action would be taken against Swedish construction companies operating in Latvia if the activities of Laval & Partneri in Sweden are hampered. LBA considers that a just resolution to the dispute is a matter of principle.

According to LBA data, several construction firms with 100% or partial Swedish capital are operating in Latvia. Three of these companies are LBA members. For the moment there are no barriers to Swedish construction firms operating in Latvia. In terms of employment conditions, Swedish enterprises need only abide by Latvia's statutory minimum wage, which is very low (LV0408101N). The LBA president, Viktors Puriņš, said that Swedish construction firms operating in Latvia do not pay their workers the same wages as would be paid to equivalent employees in Sweden. As with Laval & Partneri, these firms also employ residents of Latvia, but their wages are considerably lower than the EUR 16 per hour demanded by the Swedish union.

The LBA believes that Byggnads' 'noble aims'- protecting poorly paid Latvian builders - are just a cover for the start of a boycott of Latvian companies, with the objective of stopping building work, delaying completion deadlines and driving Latvian construction firms out of Sweden.

The director of the LDDK employers' confederation, Elīna Egle, believes that the situation must be resolved by the company itself.

Position of Latvian trade unions

The workforce of Laval & Partneri are trade union members and the company has concluded a collective agreement. However, Latvian trade unions did not hasten to become involved in the conflict. At the end of November, Māra Tomsone, the chair of the LBAS-affiliated Trade Union of Construction Workers (Latvijas Celtnieku Arodbiedrība, LCA) said that no decision had been taken on action on the affair, owing to the issues being unclear. In early December, Ms Tomsone was preparing to go to Sweden to clarify all the circumstances and to seek recognition from the Swedish side of the collective agreement between Laval & Partneri and LCA.

The LBAS chair, Pēteris Krīgers, expressed mystification as to why the Swedish unions did not contact their Latvian colleagues prior to taking action. LBAS has sent a letter to the Swedish Confederation of Trade Unions (Landsorganisationen, LO).

Swedish government

According to information in the Latvian media, the Swedish government has taken a waiting position and is not involving itself in the conflict. It is reported in some quarters that in spite of the objections from the Latvian government and the threat by Laval & Partneri to go to court, the Swedish Labour and Industry Ministry has expressed support for the boycott of the Latvian construction firm by the Swedish unions.

The local government where the school is being built by Laval & Partneri has stated that the tender for the school’s construction is lawful, and that it is satisfied with the Latvian company’s work.

Commentary

One of the reasons why Latvia's residents voted to join the EU was the promise of broader opportunities. External economic activities are very important for a small country with an open economy, and so Latvian businesses want fully to utilise the possibilities of the single EU market. However, reality has turned out otherwise - the first attempts to compete on an equal footing in the market of another EU country have met with serious resistance. The problems experienced by Laval & Partneri in Sweden are a valuable lesson for those who had hoped that the new EU Member States would be able to act as freely in the markets of the 'old' Member States as the latter are in the new ones. The contrast between the recent events and the hopes of new opportunities explain the active participation by the Latvian government in seeking to resolve the conflict. The issue of equal rights in the EU is one of principle, and how it is resolved will permit an assessment of whether the vote by the Latvian public in favor of joining the EU was justified.

The Latvian government cannot influence Swedish trade unions, because these are non-governmental organisations. However, the problems experienced by Laval & Partneri in Sweden have received much public attention in Latvia, and the government must state its position. The fact that the conflict has arisen just before general elections in Latvia is arguably prompting the government to show itself in a good light.

The attempts by the Swedish unions to win better wages for the Latvian building workers can be viewed in two ways. On the one hand, the Latvian builders have certainly earned the same amount of payment for their work as their Swedish counterparts. But on the other hand, lower pay is indisputably an advantage for Latvian construction firms in the EU market, and if this is lost the possibility of Latvian firms expanding their activities in other EU Member States will be significantly reduced. (Raita Karnite, Institute of Economics, Latvian Academy of Sciences)

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