Social Dumping: Protection, Prevention, and Best Practice for Carriers

by | Feb 21, 2023

CLAIM DEPOT

T

he European Single Market provides carriers with various opportunities to grow and advance their business internationally. However, the access to this is contingent upon complying with sometimes strict guidelines and regulations. The latest version of the Mobility Package[1] from 2021 is the most recent iteration of such a formal guideline stemming from the European Union.

The most “popular” topic stemming from the Mobility Package are the mandatory rest times or the cabbotage rules. Indeed, the fines can be costly and it is often troublesome to navigate the abundance of rules and method of administration in each country. Luckily, there are methods to counteract the risks presented by fines during regular transports which many transport companies already benefit from[2].

Social Dumping📉

However, the much less known element of the Mobility Package – the anti-social dumping regulations often get underestimated in terms of its regulatory scope and its impact on transport companies operating in the European Single Market. The EU has a longstanding issue with what is known as “social dumping”.[3] This term refers to the practice of companies hiring workers from other countries within the EU in order to cut costs and gain a competitive advantage. Many transport companies employ this strategy not only for its financial benefits, but for the organizational ease of completing recurrent transports for regular clients.

The Posted Workers Directive✒️

The EU responded to this increasing trend through the Posted Workers Directive (2020) in an effort to provide more labor protection and equalize the competitive advantage for companies regardless of their country of registration. The directive extends the requirement for equal pay and working conditions to all workers, regardless of whether they are posted or not. It would also introduce stricter enforcement mechanisms and penalties for companies that violate the rules.[4]

The proposed mobility package has sparked controversy, with some arguing that it goes too far and could harm the free movement of workers within the EU. In particular, companies from the logistics industry have signaled that the new regulations have prompted hostile behavior by the host country’s administrative bodies in attempts to enforce the new rules.

The main issues for transport companies arise due to the Directive’s use of national collective bargain agreements as a benchmark for remuneration along with national social security rules. As such, the necessary compliance with these standards creates a significiant administrative burden on transport companies and puts companies at financial risk.

Solutions and Best Practice🧩

In all European countries, posted workers regulations are enforced by labor inspectors who have the power to investigate complaints and impose penalties on employers who violate these regulations. Employers who are found to be in violation of posted workers regulations may be required to pay back wages to the affected workers, and may also face fines or other penalties.

“Typical” destinations for posted drivers such as Belgium and the Netherlands require employers to register them with the national authorities and present workers with their written rights and obligations apart from providing the workers with the same working conditions and remuneration levels as the local workers. These are also the countries who have a prominent level of enforcement as certain legal battles have progressed to the highest levels of judicial remedy in the respective national Supreme Courts.[5] In doing so, the rules and details for posting workers have been further defined and clarified through jurisprudence which transport companies can use in order to ensure compliance and prevent costs.

The different jurisdictions within the EU of course have various methods of administering this information through digital forms, written declarations and regulatory oversight with some countries like the Netherlands enjoying a fully digital and comprehensive portal for all of this administration.[6] However, every transport company can benefit from the following universal guidelines for compliance in order to protect themselves and prevent costly fines:

1. Check whether your company is actually “posting” workers

Different countries have a multitude of requirements which qualify workers as posted in a host country. These usually include the administrative information of the company itself, its main source of income, and most importantly, the structure of the labor contracts and labor descriptions offerred by the carrier. It is of paramount importance to check this as the conclusion of this check would change the requirements for the company itself with regard to its drivers.

2.Research the national collective bargaining agreement for transport workers

Each country possesses guidelines and regulations for the working conditions and remunerations for workers in the transport industry with differring degrees of detail and scope. If your company is posting workers according to the abovementioned, it would be necessary to comply and match the guidelines from these agreements.

3.Provide information to the national authorities of the host-country

Before employing the labor of posted workers, it is important to communicate the structure of the labor in advance to the national authority, usually the Ministry of Labor/Social Security, through written communication or digital declaration.

The Conclusion🚀

As a general rule, to prevent violations and fines arising from non-compliance, it is crucial to maintain proper documentation and records. This includes keeping detailed records of posted workers’ contracts, pay, and working conditions. It is also important to regularly communicate with the host country to ensure compliance with the posted workers directive. By taking these steps, transport companies can prevent violations and protect the rights of their workers while still maintaining their comparative advantage in the increasingly competitive transport industry.

At Claims Trans, we have already contributed towards efforts for compliance and dispute settlement arising out of accusations brought in front of Bulgarian transport companies operating in the European Single Market. If you’d like to save time and resources dedicated to compliance, as well as to protect your company from costly fines, do not hesitate to contact us so that we can support you in navigating these regulations so that you can allow more time for the growth of your business.

Bibliography:
[1] European Union Mobility Package I, Mobility and Transport. Available at: https://transport.ec.europa.eu/transport-modes/road/mobility-package-i_en (Accessed: February 4, 2023).
[2] International Road Union. Driving and rest time rules –  the EU’s mobility package, IRU. Available at: https://www.irumobilitypackages.org/driving-and-rest-time-rules (Accessed: February 4, 2023).
[3] European parliament. Understanding social dumping in the European Union (no date) Think Tank | European Parliament. Available at: https://www.europarl.europa.eu/thinktank/en/document/EPRS_BRI(2017)599353 (Accessed: February 4, 2023).
[4] Questions and answers on posting of Drivers Under Directive (EU) 2020/1057 Mobility and Transport. Available at: https://transport.ec.europa.eu/transport-modes/road/mobility-package-i/posting-rules/questions-and-answers-posting-drivers-under-directive-eu-20201057_en (Accessed: February 4, 2023).
[5] Emma van Kaemegem (2023) Are foreign employers who post workers to Belgium obliged to proceed with a Dimona obligation: What has the Belgian Supreme Court said (or rather not said)?, Altius. Available at: https://www.altius.com/en/news/are-foreign-employers-who-post-workers-to-belgium-obliged-to-proceed-with-a-dimona-obligation-what-has-the-belgian-supreme-court-said-or-rather-not-said/ (Accessed: February 4, 2023).
[6] Ministerie van Sociale Zaken en Werkgelegenheid (2022) Notifying online, Posted Workers. Ministerie van Sociale Zaken en Werkgelegenheid. Available at: https://english.postedworkers.nl/online-notification-portal (Accessed: February 4, 2023).

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