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European Court of Justice Judgments

It is good to see you in the Chair, Mr. Martlew, and to see that the Minister is present. I would like to use our last day before the recess to discuss an issue I have raised in the past: the free movement of labour and the impact of that policy on working people in this country as enshrined in the EU, which, as we all know, is dominated by neo-liberal ideas. More specifically, I want to look at the economic and political infrastructures and the political attitudes that allow and promote the free movement of labour without proper safeguards for working people in their respective countries. In particular, I would like to talk about the posted workers directive and four European Court of Justice rulings that give clear precedence to freedom for big business in the EU over fundamental collective and trade union rights. I shall discuss the wider impact that those rulings can have on ordinary working people and will, in effect, argue that the four rulings construct serious obstacles to trade unions in exercising their right to freedom of association, collective bargaining and collective action. As a quick preface, before I talk in some depth about the ECJ cases, I would like to make it crystal clear that my concerns are both for our own workers, who as we have seen are having their already low wages held down by the status quo, and for migrant workers, whose work in this country is often very low paid and is undertaken in what can only be described as disgusting conditions. In short, I do not want any group of workers to be exploited, and I am sure the Minister would agree with me on that. Everyone talks about the posted workers directive, but no one seems to be analysing it. The directive's preamble makes it clear that it was introduced in contemplation of""the transnational provision of services, prompting a growing number of undertakings to post employees abroad temporarily to perform work in the territory of a Member State other than the State in which they are habitually employed"." Effectively, that relates to employers moving workers into other countries. In those circumstances, it recognises that""any such promotion of the transnational provision of services requires a climate of fair competition and measures guaranteeing respect for the rights of workers"." On reading further through the posted workers directive, the tone becomes even more positive. The directive's net effect is to protect workers against what we call social dumping and a race to the bottom, and the requirement that standards should be levelled up rather than levelled down. Unfortunately, the unelected, unaccountable, unreformable European Court of Justice chose to interpret the directive in a different way and, in its view, the PWD provisions had a maximum rather than a minimum standard. So, once again, neo-liberal ideas have permeated the very institutions of the EU. The posted workers directive has become a politically volatile issue following the well-publicised disputes at the Lindsey oil refinery and other such sites. The directive does not necessarily apply to all terms of employment, but it does apply to the area of pay. Any employer posting or, let us get the language straight, sending—as someone would post a letter, they would post a worker—workers to the UK must observe at the very least the national minimum wage, although many of us argue that that falls some way short of a living wage, let alone the established collectively bargained wage that might be applicable in any particular sector of the labour market. It is worth looking at the Lindsey dispute for two reasons: first, we will see more actions of that kind in the future and, secondly, much nonsense was talked about the dispute by many in my own party, who could not face up to the real issues involved and who retreated behind cheap and inaccurate descriptions of the workers being motivated solely by xenophobia. In late January/early February 2009, construction workers walked out in protest at the use of posted workers by the Italian company IREM, which was a subcontractor to a UK company that, in turn, had a broader subcontract to a US company that was the holder of the original primary construction contract. Workers on that site rightly expected that those working there would be paid in accordance with the national agreement for the engineering construction industry. The unions were concerned that although the posted workers were being paid the minimum wage, it was below the terms of the national agreement. That is an important point, and is absolutely central to this issue. Such a situation gave the Italian company an unfair advantage and also undermined the national agreements in place in that workplace. The concern of the union related to hours of work, travel allowances, auditing of wages and the wage levels themselves. We all know that ACAS was brought in and that a muffled silence ensued. There was confusion among all parties. However, it is worth noting that ACAS was unable to establish in fact what rates were being paid to the posted workers. The problem of the PWD arises where there are convoluted clauses that allow varying interpretations of whether collective agreements are declared universally applicable. In the United Kingdom's case, there is no system for declaring that collective agreements are universally applicable. That is something we should be looking at. However, it is an option for member states, such as the United Kingdom, to base themselves either on collective agreements that are generally applicable to all similar undertakings in a geographical area or an industry concerned, or on agreements that have been concluded by the most representative employers' organisations and trade unions at national level. It is therefore clear that nation states can act to protect their work force from that undermining of their terms and conditions. However, the UK Government have not done so. Professor Keith Ewing, an esteemed expert on such matters, recently stated:""The British government has not taken the power in legislation to use collective agreements for this purpose, even where appropriate agreements do exist"." So in reality, in terms we can all understand, the national minimum wage, which, as we know, is itself very difficult to enforce and is well below a living wage rate, remains the only binding reference point for companies posting—sending—workers to Britain. So the protection and support that could ultimately be offered to workers is not being given by the Government. The negative interpretations of the PWD are made even worse by the four European Court of Justice rulings that I have referred to and will now look at. Generally, those rulings sanction social dumping—in other words, temporary or transitory movements of labour whereby employers use workers from one country and send them to another country where labour costs are usually more expensive. Doing so undercuts those costs, thus saving money and increasing profits, but it also undermines collective agreements and prevents trade unions from taking industrial action to protect their members' terms and conditions. Any politician worth his salt would also recognise that such a situation creates a toxic mix of racial tensions, as we have seen in this country. Although unions are restricted, businesses are free to restructure and create a cross-border element, so that they can take advantage of freedom for them to move goods and services, capital and even workers in the EU. I would like to consider the Viking judgment—I am sure you will know about that, Mr. Martlew, but I will go over the facts again. That Finnish company wanted to re-flag its ship and replace its Finnish crew with an Estonian crew, which was, surprisingly, on much lower wages. The Finnish Seamen's Union threatened industrial action in protest at that, so the company went to the European Court of Justice. The court decided that it can review whether industrial action is justifiable and, in that specific case, it determined that industrial action was not proportionate. Of course, that brings serious uncertainty into what view a court might take of the merits or otherwise of industrial action. That ruling is a crushing blow to trade unions, in that it holds that the right of business to the freedom of establishment and the freedom to operate must take priority over the right of trade unions to take industrial action to safeguard the interests of their members. It is an explosive judgment. It has also raised the prospect of employers being able to claim for unlimited damages against a union even where industrial action is legal under its own domestic law. To those who know labour history, that is the European equivalent of the Taff Vale judgment. One week after the Viking case, we got the Laval judgment, which effectively ruled that trade unions could not take industrial action to compel a Latvian company operating in Sweden to observe the terms and conditions of collective agreements in Sweden. Laval involved a Latvian company that posted, or sent, workers into Sweden on Latvian terms and conditions, seriously undercutting Swedish collectively bargained terms and conditions. The Swedish unions responded by taking industrial action that was lawful under Swedish law. Laval claimed, through the ECJ, that the unions' arrangement of a boycott of supplies to the Vaxholm school site restricted their freedom of business. The Court took the view that where the posted workers directive applies, it is unlawful for unions to organise industrial action to agitate for terms and conditions above the legal minimum available in that country. The Ruffert ruling—I hope that I am pronouncing it right, Mr. Martlew; I will take your guidance on that—concerned a public contract for building a prison, which was awarded to a German company and then subcontracted to a Polish company. The tender required that the relevant companies, including any companies that were subcontracted to do the work, should pay the rates in the collective agreements for that region on building and public works contracts. The Polish company was paying a lower rate and was fined for doing so. The posted workers directive states that minimum rates may be set by collective agreements that are either universally applicable, or that apply to the whole sector or region. However, the ECJ found that the collective agreement in this case did not meet either of those criteria, and that the directive therefore prevents public contracts from requiring compliance with collective agreements of that kind. In reaching that judgment, the Court interpreted the directive extremely narrowly and ignored the procurement directive, which allows for social clauses. The Luxembourg case demonstrates another measure that could have only a negative effect on working people. The European Commission took Luxembourg to court for making its own domestic legislation applicable to workers from other member states who were posted there. Nearly 40 per cent. of workers in Luxembourg come from outside the country, but the ECJ ruled in favour of the Commission, and decided that Luxembourg had gone too far in implementing the posted workers directive in relation to requirements for maximum work periods and minimum rest periods. Luxembourg must now change its law to enable the use of foreign workers to undermine the conditions of indigenous workers. People might be forgiven for thinking that those four cases are detached from or peripheral to us in the UK, but they are not. Those decisions send a clear, green, empowering signal to employers to resist any compulsion to comply with any undertakings other than those relating to the base minimum wage. However, as a story about fruit pickers in last week's Independent showed, even compliance with the minimum wage is undercut by large suppliers to the major supermarkets. In essence, this discussion is about the direction of travel and what our Government are prepared to do to protect some of the most vulnerable workers in our labour markets from exploitation and from the systematic low pay that the machinations I have talked about not only allow but positively encourage. It can be only a matter of time before large employers that post EU workers in the UK attempt to undercut and freeze the lowest possible wage it is legal to pay to British and migrant working people. Too much of what comes out of such rulings allow that to happen. The Labour Government, who, to the howls of big business and the Conservative party, gave us the national minimum wage as a means of protecting low-paid workers, must reconsider this issue. The ever-changing, flexible labour markets with which some people are so enamoured leave working people vulnerable to exploitation and low pay, so we have to consider what continuing measures we can and must take to offer protection to the people who need us most—those whom we used to describe as our core vote. We must look at the EU and its myriad legislative mechanisms, and check constantly that they are consistent with our values of social justice and rights for workers—at least, I hope we have those values. I know that the Minister wants to spring into the debate and answer some of the questions I am throwing up, so I shall put some specific questions to him. First, will he make the bold and responsible move of considering an urgent change in domestic law to guarantee that the posted workers directive is implemented to the fullest extent possible in order to require the minimum wage payable by contractors to be higher than the minimum set down under the National Minimum Wage Act 1998? I am told that that could be done easily by requiring posting employers—to use the correct legislative terminology, or bosses who send workers to this country—to comply with wage agreements set by appropriate collective agreements that apply to particular sectors in given geographical areas. The Minister will be aware, because he will have done his research, that I asked the Prime Minister about precisely this point on 4 February 2009, when I asked what measures were being taken to improve the posted workers directive. The Prime Minister said that some work was being done, but I have not been updated about it since; perhaps the Minister can update me. Secondly, does the Minister agree that in relation to the posted workers directive, we should introduce a system of declaring collective agreements as universally applicable? Thirdly, is he supportive of the European TUC's draft social protocol as a way of moving forward on protecting working people? Fourthly, the Minister will be aware that the Government will submit to the International Labour Organisation, by 1 September, their report on ILO conventions 87 and 98. Will they express concern that the ECJ rulings mean that it sees trade unions as regulatory bodies that are equivalent to an arm of state, which is in direct contradiction to the underlying purposes of the freedom of association? Will they also say that the right of trade unions to take industrial action is being subordinated to overriding commercial interests so that the trade unions will always have to be justified as permitted restrictions to those freedoms? What will they say in their report to the ILO about compliance with ILO conventions 87 and 98 by reference to the impact of the four ECJ judgments on the UK? If the Minister is not in a position to respond to those points today, I am sure he will write to me. Let me draw my remarks to a close and allow the Minister to respond. The ECJ decisions come at time that is crucial to the European unification process. We have increased economic integration together with reduced social protection; that is a highly explosive combination. Radical steps have to be taken by those who support the European project. The support of European citizens and workers will be secured only if the fundamental importance of social progress is at the forefront of all policies. Working people want a social Europe, and they will reject a market Europe.