The Implications of Viking and Laval for regulatory competition and national labour law

1. The Implications of Viking and Laval for regulatory competition and national labour law Aristea Koukiadaki LCCGE seminar, Birkbeck College, 10 December 2010

2. Introduction: issues at stake • The Laval quartet as an instance of regulatory competition: Viking, Laval, Rüffert and COM v Luxembourg • Implications for the EU regulatory model, i.e. reflexive harmonisation v regulatory competition • Implications for the national systems of labour market regulation in the areas of industrial action, collective standard-setting and social clauses in public procurement

3. The origins of the EU social model • Ohlin and Spaak reports: rejection of legally driven-harmonisation of labour laws • Presumption that the improvement of labour standards would occur spontaneously through the operation of the common market • Supranational removal of barriers to the movement of goods and resources coupled with national social policy regulation • Exclusion of EU legislative competence in a number of fields (pay, association, strike and lock-outs)

4. The evolution of the EU social model • Adoption of labour law directives (in specified areas) as establishing a ‘floor of rights’ (Deakin and Wilkinson, 1994) • EU recognition of the benefits of dynamic labour standards, as determined in autonomous systems of collective bargaining (e.g. Sweden and Denmark) • Open Method of Coordination: as an example of reflexive harmonisation • Reflexive harmonisation: supports divergence and mutual learning between systems, use of procedural norms instead of pre-emption (Deakin, 2008)

5. The EU social model before the Laval quartet: specific issues (1) • Use of the non-discriminatory approach by the ECJ as the underlying test for the compatibility of national rules with free movement (Barnard, 2008) • ECJ awarded states some discretion in terms of imposition of labour standards on posted workers: ‘Community law does not preclude Member States from extending their legislation, or collective labour agreements entered into by both sides of industry, to any person who is employed, even temporarily, within their territory, no matter in which country the employer is established’ (Rush Portuguesa, para 18) • But posted workers do not have access to the labour market of the host state’ (Rush Portuguesa, para 15)

6. The EU social model before the Laval quartet: specific issues (2) • Posted Workers Directive (PWD) (96/71/EC): lays down the degree of protection for posted workers on work and employment conditions that are to be determined by statutory or administrative rules and/or (in the construction sector) by collective agreements extended erga omnes or by arbitration awards • Adoption by the ECJ of the ‘market access’ approach: asks whether the national rule hinders the ability of the outside actor to gain access to the market or to exercise freedom of movement (Barnard, 2008)

7. The decisions in the Laval quartet: Viking (C-348/05) • Viking route between Helsinki and Tallinn (crew were members of the Finnish trade union); decision to reflag the Rosella by registering it in Estonia and entering into a collective agreement with an Estonian union (for lower wages); ITF circular requesting to abstain from negotiations • ECJ decision: recognition of the right to take collective action; but its exercise may be subject to restrictions; collective action by a trade union is subject to article 49 TFEU (‘horizontal direct effect’); use of proportionality test with regard to trade union rights

8. The decisions in the Laval quartet: Laval (C-341/05) • Construction contract in Vaxholm (Sweden) won by a Swedish subsidiary of Laval; use of Latvian posted workers; breakdown of negotiations between Laval and the Swedish unions; blockage of the site and solidarity action from other unions • Although protected by Swedish national law (i) industrial action by Swedish unions, (ii) designed to compel a Latvian contractor to pay Swedish rates determined by a Swedish collective agreement to his Latvian workers employed on Swedish building sites, (iii) was precluded by the TFEU (article 56) and the PWD (article 3). • PWD interpretation: switch from a minimum to a maximum directive

9. The decisions in the Laval quartet: Rüffert (C 346/06) • A Polish subcontractor (i) cannot be required by the law of Lower Saxony, (ii) to pay his workers posted from Poland, (iii) the terms of a collective agreement in force at a site where the work was being carried out • German law requirement to comply with local collective agreements as an unjustifiable restriction on the freedom to provide services and the PWD • Meanwhile, the BVerfG had held that an equivalent provision in a Berlin law was constitutional, without considering the EU issues

10. The decisions in the Laval quartet: COM v Luxembourg (C-319-06) • Luxembourg acted in breach of the Treaty (article 56) and the PWD on a number of grounds by requiring posting employers to comply with standards beyond those laid down in the Directive (including a procedure for the automatic indexation of wages) • Limits on the scope of article 3(10) of the PWD which permits measures beyond the minimum set our in the Directive ‘in the case of public policy provisions’

11. It’s free movement, stupid! The impact of the Laval quartet at national level • Court striking a balance between EU freedoms and fundamental rights by way of a restriction of the latter: EU as a ‘communist market economy’ (Supiot, 2008) • Potential for destabilisation of national systems, especially of those relying on collective autonomy of the social partners (Malmberg and Sigman, 2008); potential for social tensions between different groups of workers • But Member States can respond by adjusting national laws to avoid Court rulings (Barnard and Deakin, 2010) • National responses influenced by the complementarity between institutions and the balance of interests between the main parties (Menz, 2005)

12. Industrial action and collective standard-setting (1) • Balance of interests in the Nordic states: contrast between significant consensus achieved in Denmark and opportunity for national changes in Sweden • Denmark: amendment of the Posting of Workers Act in 2009; trade unions may use industrial action against foreign providers in order to conclude collective agreements that regulate pay for posted workers provided certain conditions are met • Sweden: adoption of Lex Laval in 2010; trade unions may take industrial action against foreign providers provided certain conditions are met (including an ‘evidential requirement’); court decision on trade union liability for industrial action

13. Industrial action and collective standard-setting (2) • Luxembourg: 2010 amendment of the specific issues of the Posted Workers law that were criticised by the ECJ but maintenance of the overall national social policy • Germany: recognition of the right to strike but different interpretation of the proportionality principle; no amendment of the Posted Workers Act but possibility of erosion of the protection offered by the freedom of association (Bücker, 2010) • UK: Viking as a useful point of reference for trade unions; perceived ‘chilling effect’ of the decisions on industrial action; increased litigation by employers and unions; collective disputes involving posted workers (e.g. Lindsey Oil refinery)

14. Labour clauses in public procurement • Germany: no action at federal level; initial suspension of state provisions; adoption later of an opposite trend towards the incorporation of social criteria in public procurement in order to promote fair competition; case law illustrating a critical appreciation of the Rüffert case • The Nordic countries: ratification of ILO Convention no 94 by Denmark and Norway; no movement towards amending the legislation • UK: denouncement of ILO Convention no 94 in 1982; issues arising out of the Living Wage Campaign

15. The race to court as race to the bottom? • Impact of case law: deepening of the EU integration process (Barnard and Deakin, 2010) • European Commission’s stance moving from ‘no action’ to a search for solution (perhaps a directive on enforcement) • Division of opinion between the EU social partners and the Member States • European Court of Human Rights: recent case law affirming the right to bargain collectively (Demir and Baykara) and the right to strike (Enerji Yapi-Yol Sen)

16. Further research • Four-country qualitative study on the socio-legal implications of the ECJ case law • Countries: two host states (UK and Sweden) and two home states (Latvia, Poland and/or Portugal) • Objective: to assess the impact of the case law on collective standards and industrial action in the host states and the possibilities for change in the home states, paying particular attention to developments leading to a ‘race to the top’ or ‘bottom’ of the national protection systems and to relate this back to the notion of the European social model