Europarechtliches Symposion 2012 - …Symposion 2012 Bundesarbeitsgericht Erfurt, 26. - 27. April...

Referat von

Universität Warwick

zum Thema

Prof. Dr. Alan C. Neal

Freizügigkeit für Arbeitnehmer und Unternehmen

Unionsrechtliche Rahmenbedingungenund deren Bewertung

aus der Sicht von „Hochlohnländern“

EuroparechtlichesSymposion 2012

BundesarbeitsgerichtErfurt, 26. - 27. April 2012

Freedom of Movement for Employers and Employees in the European Union:

Some Observations from the Perspective of a High-Wage Economy

Alan C. Neal

INTRODUCTION

If one were seeking an ideal laboratory to scrutinise the interface between “the social

dimension” and “the economic dimension” of the European Union, one need look no

further than at the area of freedom of movement for persons to work or seek work

across the single market which has been in place since 1992.

In conceptual terms, the recognition of the “social” dimension of the European

adventure – pronounced at its zenith in 1989 by the Madrid Summit in terms that:

“The European Council considered that, in the course of the construction of the

single European market, social aspects should be given the same importance as

economic aspects and should accordingly be developed in a balanced fashion.”1 –

stands as the closest which the European Union has come to the ideals enshrined in

the ILO’s 1944 Declaration of Philadelphia, to the effect that “Labour is not a

commodity”.2 Since 1989, however, there is clear evidence that the “economic”

dimension of the EU has steadily usurped that social component – with perhaps the

most stark manifestation of that process to be seen in the content of the “Memoranda

of Agreement” imposed upon the political administrations of Greece, Ireland and

Portugal (and implicit in the exchange of correspondence with Italy during the

Summer of 2011).3

In order to seek out a point of reference against which to set issues arising in the

contemporary European Union picture, it has been instructive to return to some of the

Alan C. Neal is Professor of Law in the University of Warwick and an Employment Judge sitting in

the London (Central) Employment Tribunal, United Kingdom. 1 Madrid Summit, June 1989, Conclusions, at para.1.1.8. 2 Constitution of the ILO, Declaration of Philadelphia, 1944. 3 See Greece: Memorandum of Understanding on Specific Economic Policy Conditionality, May 2,

2010; Ireland: Memorandum of Understanding on Specific Economic Policy Conditionality, November 28, 2010; Portugal: Memorandum of Understanding on Specific Economic Policy Conditionality, 3 May 2011; and the Letter of 5 August 2011, from Mario Draghi (at that time the Governor of the Bank of Italy) and Jean-Claude Trichet (the then President of the European Central Bank) to the Italian Prime Minister, Silvio Berlusconi.

Alan C. Neal – BAG – DRAFT: March 2012

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basic text-books on EU law, and to remind oneself of the approach taken to issues of

“freedom on movement” a quarter of a century or more ago. Perhaps what strikes the

historical observer most sharply is the overwhelming early concentration upon

“workers” in the context of the “free movement of workers” freedom set out at the

heart of the Treaty commitments after 1957. Compared with the contemporary

picture, where substantially greater emphasis is placed upon another of the “four

freedoms” – notably, the right of establishment and the freedom to provide services –

that focus of three decades ago has, to some extent, found itself overtaken by

dramatic changes in the nature and quality of work (not just in Europe), and by the

perceived need to respond to organisational and institutional challenges to

established labour market arrangements – which arguably “broke through” with the

litigation which emerged from the practical consequences of employing trans-national

labour in the building of a high speed railway line in the West of France.4

Clearly, the change in the nature of work – especially since the era of privatisations –

and the ever more widespread use of off-shoring, outsourcing, and a wide variety of

devices designed to lessen the “employee on-cost” component of employing labour,

has had much to do with this change of emphasis. Houwerzijl, writing at a time when

a draft directive on services was at the top of the regulatory agenda, notes that:

“In the early 1960s when the Common Market goal of the EEC was yet to be established, the scope of the four freedoms (of workers, services, establishment and goods) had to be defined. As a broad rule it was stipulated that all workers, where permanently or temporarily moving to another Member State, were covered by the free movement of workers. Although posting and temporary employment in general was not as popular at the end of the 1950s as it is today, it did take place on a small scale. In discussions about the boundaries between the four freedoms in the EEC Treaty, it was recognised that the provision of services actually involved specialised services workers. When they are needed to install a machine or to manage a new plant of a company established in another Member State, they are in fact part of the service and need to cross borders to provide the service. Hence, an exception

4 A dispute, in the context of post-accession Portugal, which eventually resulted in the landmark

judgment of the (then) ECJ in Case C-113/89, Rush Portuguesa Lda v Officational d'immigration (National Immigration Office), [1990] ECR I-1439, holding that: “…an undertaking established in Portugal providing services in the construction and public works sector in another Member State may move with its own work-force which it brings from Portugal for the duration of the works in question. In such a case, the authorities of the Member State in whose territory the works are to be carried out may not impose on the supplier of services conditions relating to the recruitment of manpower in situ or the obtaining of work permits for the Portuguese work-force.” – although the ECJ did comment that: “…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; nor does Community law prohibit Member States from enforcing those rules by appropriate means.” In support of that latter proposition, the Court made reference to its earlier judgment of 3 February 1982 in Joined Cases 62/81 and 63/81 Seco SA and Another v EVI, [1982] ECR 223.


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to the main rule was created for this “very specialised, technical or managerial key personnel”: they could be posted to another Member State under the freedom to provide services.” 5

So, too, has the sheer size of the current EU following successive enlargements

made the issue significantly different from the enterprise under consideration at the

end of the 1950s and throughout the 1960s. As we are reminded by a European

Integration Consortium report published in 2009:

“The free movement of workers was defined as one of the four fundamental freedoms of the then European Economic Community as early as the Rome Treaties of 1957 and was fully implemented by the six founding members of the Community whose joint population numbered 180 million in 1968.”6

By the time the most dramatic enlargement took place in 2004 – with the accession,

in particular, of important countries which had, prior to the fall of the Berlin Wall in

1989, been parts of the socialist countries of Eastern Europe:

“Step by step, free movement of workers [had] been extended to the 15 EU member states and three more countries within the European Economic Area (EEA) with a joint population of 387 million at the outset of the EU’s Eastern enlargement.”7

The arrival of ten further Member States on 1 January 2004 brought the total

population of the EU to 456.4 million, while the subsequent accession of Bulgaria and

Rumania with effect from 1 January 2007 meant that, as of that date, the total

population of the EU of 27 had reached 497 million.

Within that EU population, which, according to the most recent Eurostat data (2010

figures), stood at 502.5 million as of 1 January 2011, the economically active

population (which includes both employed and unemployed persons, but not the

economically inactive, such as pre-school children, school children, students and

pensioners) makes up some 64.2%, which reflects a fall from the 2008 peak of

65.9%. While allowance has to be made for a “grey economy” of undeclared workers

– estimated at some 5% of the total citizenry8 – it is this group to which the free

movement provisions under consideration here are applicable.

5 See M.Houwerzijl, in R.Blanpain (ed), Freedom of Services in the European Union – Labour and

Social Security Law: The Bolkestein Initiative, (2006) 58 Bulletin of Comparative Labour Relations, at p.180-181, citing D.Vignes, “Le droit d’etablissement et les services dans la C.E.E.”, Annuaire Francais de Droit International VII, 1961, pp.668-725.

6 European Integration Consortium, Labour mobility within the EU in the context of enlargement and the functioning of the transitional arrangements, (Nuremberg, 2009), at p.4.

7 Ibid. 8 See infra, by reference to the data presented in “Special Eurobarometer 284”, at p.19.


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We turn, therefore, to consider the content of the free movement provisions

themselves, and the extent to which the mobility rights contained in them have been

exercised to date. In doing so, this presentation does not limit itself narrowly to “free

movement of workers”, but also touches from time to time upon the impact of related

and other “fundamental freedoms” areas. Mention is therefore also made here of

issues arising out of “the posting of workers”, and to the provision of services in the

internal market, along with the right to freedom of establishment.

The justification for taking this approach lies in the functional impact which all of

those aspects of free movement have upon the field of labour law, and the impact

which they carry for the world of work and its regulation. Debates over “false self-

employment”,9 or “employee-like self-employment”, “who is a ‘worker’ for the

purposes of EU law?”, and issues relating to the transferability of collectively-

bargained pay and other arrangements, cannot sensibly be isolated and treated

without regard to a whole range of complementary (and often contradictory or

confusing) areas, including immigration and asylum policies of particular Member

States of the EU,10 the invocation of “national security” rules, efforts to combat

9 A phenomenon which continues to occupy the time of labour ministries throughout the world.

See, for example, recent efforts in the United Kingdom to deal with the perceived problem in the construction industry, particularly in the wake of the consultation document False self-employment in construction: taxation of workers (HM Treasury, HM Revenue and Customs, London, July 2009). From the United Kingdom perspective, little concern is expressed about free movement implications of this phenomenon, but, rather: ““False self-employment occurs where the underlying characteristics of the relationship are employment but the engagement is presented as self-employment. This is primarily driven by the differences in tax and NICs treatment of the self-employed and employed, which are as follows: • employer’s NICs are due on payments to employees, but not on payments to those engaged on a self-employed basis; • the self-employed pay NICs at a lower rate than the employed; and • the self-employed are taxed on the profits of their business and the rules on what they can deduct from the gross income are more generous than those applied to employment income. … As a result of these differences, workers and engagers have a financial incentive to attempt to portray their employment income as income from self-employment in order to reduce their tax and NICs liabilities. However, there are also non-tax pressures which can influence the decision, such as the costs for employers of holiday pay and pension contributions.” [Note: “NICs” refers to the social taxation component known as “National Insurance Contributions”]. Meanwhile, Germany’s continuing struggle with this problem is well known – see, for example, the context provided by B.Ebbinghaus & W.Eichhorst, Employment Regulation and Labor Market Policy in Germany, 1991-2005, (IZA Discussion Paper No.2505, Bonn 2006), especially at p.16. Even Hong Kong has been afflicted by the issue! – see the briefing note produced by Hong Kong’s Legislative Council Panel on Manpower, Measures adopted by Labour Department in handling False Self-Employment (LC Paper No.CB(2)2313/10-11(01). See, for another recent perspective on practice at the interface of “employment”, the approach in T.Kautonen, S.Down, F.Welter, P.Vainio, J.Palmroos, K.Althoff & S.Kolb, “‘Involuntary self-employment’ as a public policy issue: a cross-country European review, (2010) 16(2) International Journal of Entrepreneurial Behaviour & Research 112.

10 For consideration of some of the issues arising in this context, see Alan C. Neal, “Migrant Workers and the United Kingdom Labor Market: Some Trends and Implications of Twenty-First Century International Labor Migration Flows”, (2009) 31(1) Comparative Labor Law & Policy Journal 91.


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“human trafficking”,11 measures intended to combat “the grey economy”,12 and

national-level attempts to “justify” discriminatory practices in relation to certain

aspects of labour market regulation.

Nor can issues arising in the context of free movement of workers be entirely

divorced from rights of free movement as “citizens” of the EU (as is the situation

since the introduction of “citizenship” by the Treaty of Maastricht in 1992),13 from

considerations touching education, as envisaged by TFEU Article 149 (since the

extension of EU competence from the much narrower “vocational training” – now

touched upon by TFEU Article 150), skill sets and recruitment practices, as well as

associated “social security” matters emerging in relation to those who move within

the context of active labour market aspirations and their families and dependents.

Above all, any discussion of matters concerning free movement inevitably provokes

consideration of the differential responses to the enlargement processes of 2004 (to

EU-25) and 2007 (to EU27, including Bulgaria and Rumania). Indeed, those

experiences provide a comparative laboratory between the three Member States –

Ireland and Sweden,14 along with the United Kingdom15 – which opened their borders

11 For consideration of this phenomenon, see, inter alia, E.Wheaton, E.Schauer & T.Galli,

“Economics of Human Trafficking”, (2010) 48(4) International Migration 114. On some of the problems encountered in undertaking empirical research in this specific area, see G.Tyldum, “Limitations in Research on Human Trafficking”, (2010) 48(5) International Migration 2, while a presentation of issues arising in relation to the phenomenon in Germany is provided by M.Neske, “Human Smuggling to and through Germany”, (2006) 44(4) International Migration 121.

12 See, for example, H.Dekker, E.Oranje, P.Renooy, F.Rosing & C.Williams, Joining up the Fight Against Undeclared Work in Europe: Feasibility study on establishing a European platform for co-operation between labour inspectorates, and other relevant monitoring and enforcement bodies, to prevent and fight undeclared work – Final Report (Research Report 1969, carried out by Regioplan Policy Research on behalf of the Commission of the European Communities, Employment, Social Affairs and Equal Opportunities DG, Amsterdam 2010). See also the Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions, Stepping up the fight against undeclared work, COM (2007) 628 final, Brussels 24.10.2007.

13 See Case C-184/99, Rudy Grzelczyk v Centre public d'aide sociale d'Ottignies-Louvain-la-Neuve, [2001] ECR I-06193: “Union citizenship is destined to be the fundamental status of nationals of the Member States, enabling those who find themselves in the same situation to enjoy the same treatment in law irrespective of their nationality, subject to such exceptions as are expressly provided for.”

14 Whose borders had already been opened up by the time of the 21st century accessions. 15 Which operated very limited restrictions, introduced at the last minute in response to domestic

political pressures – providing that accession nationals had to be registered with a so-called "Worker Registration Scheme" (WRS). Consequently, relevant workers have been required to register on the WRS scheme as soon as they start working in the United Kingdom. Applicants have also been required to obtain a new registration certificate for each new job. However, once they have completed twelve months' work with no more than thirty days' break, workers have no longer been required to register on the Worker Registration Scheme. That arrangement, along with those restrictions, was intended to remain in place until at least April 30, 2009. See Alan C. Neal, “Migrant Workers and the United Kingdom Labor Market: Some Trends and Implications of Twenty-First Century International Labor Migration Flows”, (2009) 31(1) Comparative Labor Law & Policy Journal 91, at p.106 and p.110.


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fully to workers from the newly-joined members of the EU, and other countries

(including Germany) which operated the transitional arrangements for limited free

movement rights authorised during a (potential) 7 year period following the date of

accession.

ENLARGEMENTS AND ASSOCIATED RESTRICTIONS ON FREE MOVEMENT OF WORKERS

It has to be borne in mind that, since the inception of the EEC in 1957, there have

been a number of enlargements. In January 1973, Denmark, the Republic of Ireland,

and the United Kingdom became Member States. Then, in January 1981 Greece

joined, to be followed, in January 1986, by Portugal and Spain; after which, in

January 1995, Austria, Finland and Sweden joined what had by then become the

European Union. During the present century, ten further Member States – Cyprus,

the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and

Slovenia – were added in 2004, while the most recent enlargement has seen

Bulgaria and Rumania brought into the current European Union of 27 Member

States.

Historical exercise of the rights of free movement by workers and employers was

considered as remarkably low for much of the early period of development for the

EEC, including in the wake of accession by Denmark, the Republic of Ireland and the

United Kingdom on 1 January 1973. Issues arising out of strongly differential levels of

economic development between Member States, significant differences in wage

levels, and, even, more elusive notions of “shared values” or the like, featured

relatively seldom in the literature on enlargement, and, indeed, it was not until the

first of the “former dictatorships” – Greece – joined the party in 1981, followed, five

years later, by Portugal and Spain, that concerns about such evident economic

differences began to raise their heads more problematically.

Given the novelty by the mid-1980s of Member States displaying markedly different

levels of economic growth, prosperity, and wage levels, a substantial body of

literature developed around the issue of what was then dubbed “social dumping”16 –

and, indeed, it was not long before specific problems were being raised in the context

16 An expression which has in recent years returned to the vocabulary, particularly in the wake of

the judgments of the (then) ECJ in Case C-341/05, Laval; Case C-438/05, International Transport Workers’ Federation and Finnish Seamen’s Union v Viking Line ABP and OÜ Viking Line Eesti; Case C-346/06, Dirk Rüffert, in his capacity as liquidator of the assets of Objekt und Bauregie GmbH & Co. KG v Land Niedersachsen; and Case C-319/06, Commission v Grand Duchy of Luxembourg.


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of post-accession Portugal. Perhaps the most dramatic issue to rear its head in this

period came about in the context of the Rush Portuguesa litigation before the (then)

ECJ, where the potential for exploiting such economic (and particularly wage)

differentials was exposed in relation to Portuguese workers undertaking work in

France.

No particularly restrictive transitional arrangements – at least, in so far as the

freedom of movement for workers and employers was concerned – had been put in

place for any of these enlargements, and this pattern continued with the subsequent

enlargement to an EU of 15, with the accession of Austria, Finland and Sweden on 1

January 1995.17

Evidence evaluated for the European Central Bank in 2006 led to a conclusion that

“labour migration flows following the accession of Greece, Spain and Portugal

suggest that the increase in labour market mobility following enlargement was

limited”.18 Drawing upon research undertaken for the United Kingdom Home Office,19

the ECB authors note that:

“…about 10,000 Greek citizens per year emigrated to the rest of the EU in the ten years following the end of restrictions on outward labour migration (a total increase of 102,000). For Spain, net labour movement was towards the south as the number of Spanish immigrants decreased from around 495,000 in 1986 to 474,000 in 1991 and 470,000 in 1997. From Portugal, about 5,000 Portuguese citizens emigrated to the rest of the EU in each of the six years following accession (the stock increasing from 825,000 in 1986 to 855,000 in 1991). Therefore, in total, emigration from the Southern Member States was found to equate to around 79,000 migrants by the end of their regulated transition period.”

Nor has it been part of the received wisdom that the accession on 1 January 1995 of

Austria, Finland and Sweden – all former EFTA countries with economies regarded

as demonstrating the characteristics of relatively high wages, good levels of

economic development, and stable financial, political and social institutions – gave

17 Norway had also been involved in discussions over potential membership of the EU, but, after a

final decisive referendum, that nation withdrew from the process, and eventually adhered to the separate arrangements provided for by the Treaty on the EEA, which took effect from 1 January 1994. Iceland (for which special arrangements were already in place under EFTA provisions) and Lichtenstein joined Norway in that relationship, while Switzerland – which had also broached the possibility of membership – eventually entered into self-standing arrangements regulating its relationship with the EU and the EEA.

18 See F.Heinz & M.Ward-Warmedinger, Cross-Border Labour Mobility within an Enlarged EU (European Central Bank, Occasional Paper Series No.52, Frankfurt am Main 2006), at p.9.

19 C.Dustmann, M.Casanova, M.Fertig, I.Preston & C.Schmidt, The impact of EU enlargement on migration flows (Home Office Report 25/03, London 2003).


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rise to particularly “distorting” effects in relation to the enlarged European labour

market.

In parenthesis, a word should be devoted to the “quasi-enlargement” of the EEC

which took place at the time of German reunification, in 1990. Without stirring the

discussion as to what might be the appropriate evaluation of that event in political

terms, the fact remains that, overnight, the population of the European “club”

expanded dramatically, and the active labour force – for whom the rights of freedom

of movement were now unlocked – accordingly expanded abruptly.20

The 2006 ECB Report suggests that:21

“The increase in labour mobility following German unification was significant – 1.2 million East Germans had entered the West by 1998 and 1.1 million Germans moved from West to East Germany over this period. In the two years immediately following unification, the flow of migration from East to West Germany was significantly larger than that in the opposite direction. From 1992 onwards, however, the numbers levelled out, and in the medium term net migration was to the West, at an average rate of about 14,000 people per year (or a total of 70,000) since 2000.”

Amongst the features characterising the German experience from 1990, mention

may be made of the advantages where a uniform linguistic region is involved, the

benefits of being able to utilise “national-level” economic management techniques

(rather than the necessity to submit to supra-national norms, which might not deliver

the same sensitivity and nuances to the economic, political and social upheavals

under way), and the advantages of access to relatively well-developed skill levels

(including some of the benefits from the former socialist arrangements in relation to

job and career preparation).22

It has, however, been the most recent 21st century enlargements (to EU25 and,

subsequently, to EU27) which have given rise to vociferous debate over the very

desirability of “free movement”, and the implications of operating an “internal market”

comprising national economies displaying greatly varying levels of economic

20 For consideration of issues arising in the context of the 1990 reunification, see H-W.Sinn, “EU

enlargement, migration and lessons from German Unification”, (2000) 1(3) German Economic Review 299. A specific labour market oriented consideration is provided in B.Hoene, “Labor Market Realities in Eastern Germany”, (1991) 34(4) Challenge 17.

21 F.Heinz & M.Ward-Warmedinger (op.cit.) at p.10, drawing upon work presented in M.Burda, “What kind of shock was it? Regional integration of Eastern Germany after unifications” (Paper presented at the AEA meetings January 2006, Boston).

22 See, for example, some of the material included in T.Boeri, Transition with Labour Supply (IZA Discussion Paper No.257, Bonn 2001). However, for a thoroughgoing critique of the suitability and matching of those skills for the needs of the unified post-1990 Germany, see the recent contribution by N.Fuchs-Schündeln & R.Izem, “Explaining the low labor productivity in East Germany – A spatial analysis”, (2012) 40(1) Journal of Comparative Economics 1.


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development and stability. Furthermore, as if the well-recognised issues of disparate

standards of living, differential wage levels, and sharply contrasting purchasing

powers for citizens in different Member States were not enough, the impact of the

financial crisis of 2008, combined with the deepening recession which had already

been observed at the time of that “crash”, has been dramatic in terms of labour

market stability, employment levels, and the closely associated issue of whether

“freedom of movement” for workers and the “self-employed” (the debate has

concentrated much less upon the perspective of freedom of movement for

employers) is really such a good thing after all.

Concerns for the impact upon the internal balance for national labour markets of the

2004 enlargement to an EU of 25 were already high on political agendas when the

2003 Accession Treaty itself was being drawn up. Those concerns were directly

addressed by “transitional arrangements”, whereby a facility was afforded to the

existing Member States of the EU-15 to restrict, on a temporary basis, access of

workers from eight of the accession states – Cyprus and Malta were not affected by

these transitional arrangements for the free movement of workers. This approach

was subsequently also adopted in relation to the 2005 Accession Treaty providing for

the further enlargement to an EU of 27 with effect from 1 January 2007. Such

restrictions could only be applied to “workers” – but not to “self-employed” persons or

any other category of EU citizens.23 However, even where a choice had been made

to apply restrictive transitional arrangements, a Member State has always been

required to give preference to Bulgarian and Romanian and EU-8 workers over

workers who are nationals of non-EU countries as regards first access to the labour

market – a vivid illustration of the reality that the EU’s internal market offers an area

of free movement for those within the market, but at the same time constitutes a

formidable “fortress Europe” in relation to most of the rest of the world.

23 For an overview of the facility for these transitional arrangements, see, inter alia, Communication

from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions, Report on the Functioning of the Transitional Arrangements set out in the 2003 Accession Treaty (period 1 May 2004–30 April 2006), COM (2006) 48 final, Brussels, 8.2.2006, and Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, The impact of free movement of workers in the context of EU enlargement Report on the first phase (1 January 2007 – 31 December 2008) of the Transitional Arrangements set out in the 2005 Accession Treaty and as requested according to the Transitional Arrangement set out in the 2003 Accession Treaty, COM (2008) 765 final, Brussels 18.11.2008.


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In outline,24 the transitional arrangements contained in both of the 21st century

Accession Treaties (of 2003 and 2005) were broadly the same as regards their

formulation and the mechanisms for their operation. The pattern adopted was that an

overall transitional period extending to a maximum of seven years was provided for,

divided into three phases (the so-called “2-plus-3-plus-2” formula). Thus, for an initial

2-year period (Phase 1), the national law of the other Member States regulated the

access of workers from EU-8 and EU-2.25 Thereafter, Member States could extend

their national measures for a second period of another 3 years (Phase 2).26 In

principle, any transitional restrictions were expected to end with the second phase –

although, where a Member State established “serious disturbances of its labour

market or threat thereof”, it was permitted to continue to apply those Phase 2

measures until the end of the maximum seven year period (Phase 3).27

FREEDOM OF MOVEMENT FOR WORKERS AND EMPLOYERS: THE TREATY PROVISIONS

In presenting a brief outline of the post-2009 Lisbon Treaty provisions, it is relevant to

remind oneself that the subject-matter under discussion here also finds voice in the

Charter of Fundamental Rights of the European Union,28 which was adopted in

2007,29 and which is regarded as having subsequently been granted a status as part

of the acquis communitaire, by virtue of Article 6(1) of the Consolidated Version of

the Treaty on European Union,30 such that:

“The Union recognises the rights, freedoms and principles set out in the Charter of Fundamental Rights of the European Union of 7 December 2000, as adapted at Strasbourg, on 12 December 2007, which shall have the same legal value as the Treaties.”

24 Drawn from COM (2008) 765 final. 25 At the end of that first phase, the Commission had to provide a report to enable the Council to

examine this first phase of the transitional arrangements. See Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions, Report on the Functioning of the Transitional Arrangements set out in the 2003 Accession Treaty (period 1 May 2004–30 April 2006), COM (2006) 48 final, Brussels, 8.2.2006.

26 Notification that a Member States wished to embark upon such Phase 2 arrangements had to be given to the Commission before the end of the first phase – in the absence of which the “default” EC Treaty provisions on the free movement of workers applied.

27 Notification to the Commission was, again, a pre-requisite to invocation of the Phase 3 option. 28 Official Journal 2010/C 83/02, 30.3.2010, p.389. 29 In terms reflecting the predecessor Charter of 2000. 30 Ex Article 6 TEU.


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In particular, Article 15 of the Charter, which carries the rubric “Freedom to choose

an occupation and right to engage in work”, provides, so far as EU citizens are

concerned, that:

“1. Everyone has the right to engage in work and to pursue a freely chosen or accepted occupation.

2. Every citizen of the Union has the freedom to seek employment, to work, to exercise the right of establishment and to provide services in any Member State.”,

while Article 16, which is entitled “Freedom to conduct a business”, declares that:

“The freedom to conduct a business in accordance with Union law and national laws and practices is recognised.”

and Article 45, which carries the heading “Freedom of movement and of residence”,

states that:

“Every citizen of the Union has the right to move and reside freely within the territory of the Member States.”31

“Citizens”

While the primary focus of this presentation is upon free movement provisions for

“workers”, it is also important to bear in mind that, since the introduction (by the

Maastricht Treaty of 1992) of the notion of “citizenship” of the Union, that status

(which TFEU Article 20(1) declares to be “additional to” and not a replacement for

national citizenship) also has a bearing (albeit indirect) upon the functioning of the

EU labour market and the national labour markets of which it is constituted.32

TFEU Article 20(2) states that:

“Citizens of the Union shall enjoy the rights and be subject to the duties provided for in the Treaties. They shall have, inter alia: (a) the right to move and reside freely within the territory of the Member States; …”33

31 It may also be noted, for the sake of completeness, that Article 5, Point 3, of the Charter declares

that “Trafficking in human beings is prohibited.”, while Article 14, Point 1, provides that “Everyone has the right to education and to have access to vocational and continuing training.” In addition, Article 29 states that “Everyone has the right of access to a free placement service.”, while Article 34, Point 2, provides that “Everyone residing and moving legally within the European Union is entitled to social security benefits and social advantages in accordance with Union law and national laws and practices.”

32 TFEU Article 20 (ex Article 17 TEC) provides that: “1. Citizenship of the Union is hereby established. Every person holding the nationality of a Member State shall be a citizen of the Union. Citizenship of the Union shall be additional to and not replace national citizenship.”

33 This is supplemented by TFEU Article 21 (ex Article 18 TEC), which reiterates that: “1. Every citizen of the Union shall have the right to move and reside freely within the territory of the Member States, subject to the limitations and conditions laid down in the Treaties and by the measures adopted to give them effect.”


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so that, since 1992, it has been open to EU citizens to move and reside within any

part of the EU labour market, quite apart from any work-related right which may

follow from exercise of any of the “four freedoms” established since the inception of

the EEC in 1957. This has the effect of enabling EU citizens to be geographically

located in any national labour market, with the potential, if they so wish, to seek to

become members of the active working population within that Member State. No

labour market related enquiry needs to be made into the citizen’s decision to locate,

nor is there any obligation to satisfy any work-related test by way of qualification to

exercise the citizenship free movement right.

At this point, it becomes clear that, unless and until the EU citizen takes steps to

seek to become an active member of the labour market within which he or she has

chosen to move or reside, statistical data about the work-related aspirations of this

part of the EU citizenry is virtually non-existent. However, it may well be that such a

mover or resident will engage in some form of undeclared work, such that, although

perfectly entitled to be located in the particular labour market, nevertheless the

engagement in labour market activity falls outwith any authorisation or right deriving

from TFEU Article 20 citizenship.34

Given that recent survey evidence has suggested that the lower limit of the level of

“undeclared work” across the EU may involve somewhere in the order of 5% of

citizens,35 this potential for non-formal engagement with the active labour market is

34 As has been pointed out in various European Commission and other publications, “the

phenomenon of ‘undeclared work’ is known under a broad variety of different names. Terms such as ‘black work’, ‘informal economy’, ‘shadow economy’, ‘moonlighting’ and many others have been used to describe the phenomenon or parts of it.” While the precise extent of undeclared work constituting the “grey economy” (or whatever term is adopted to describe this segment of the economy) is – for obvious reasons – impossible to state with any confidence, various efforts have been made to investigate its scope and size. See, for example, the European Commission’s “Special Eurobarometer 284”, Undeclared Work in the European Union (Luxembourg 2007), which reports on fieldwork undertaken between 25 May and 30 June 2007, and was commissioned on the basis of a Feasibility Study on a direct survey about undeclared work VC/2005/0276. Final Report. prepared on behalf of the European Commission by TNS Infratest Sozialforschung, Munich, Regioplan Beleidsonderzoek, Amsterdam and The Rockwool Foundation Research Unit, Copenhagen. (December 2006). The Eurobarometer report spells out (in its section 1) some of the methodological and reliability problems associated with research into this phenomenon, and cites earlier work in the area, including F.Schneide & D.Enste, “Shadow economies: Size, causes and consequences”, (2000) XXXVIII(1) Journal of Economic Literature 77; S.Pedersen, The Shadow Economy in Germany, Great Britain and Scandinavia: A measurement based on questionnaire surveys. Rockwool Foundation Research Unit, Study No.10 (Copenhagen 2003); and P.Renooy, S.Ivarsson, O.van der Wusten-Gritsai, & R.Meijer, Undeclared work in an enlarged Union. Final report of the project An Analysis of Undeclared Work: An In-Depth Study of Specific Items (Amsterdam 2004). Perhaps the most problematic area for empirical research involves activities related to “human trafficking”, in relation to which see the already cited G.Tyldum, “Limitations in Research on Human Trafficking”, (2010) 48(5) International Migration 2.

35 See “Special Eurobarometer 284” op.cit), at p.19.


13

by no means insignificant. Indeed, on the basis of seeking to report as undeclared

work “all remunerated activities which are in principle legal but circumvent

declarations to tax authorities or social security institutions”,36 a pilot Eurobarometer

report in 2007 found that:37

“The total share of citizens who say they have done undeclared work – paid either with money or ‘in kind’ – during the past 12 months amounts to 5%. The proportions vary largely between countries. They are highest in Denmark (18%), Latvia (15%) and the Netherlands (13%). Estonian and Swedish citizens also frequently report their involvement in undeclared work (11% and 10% respectively). On the other hand very low rates are reported in all Southern European countries (ranging between 1% for Cyprus and Malta to 4% for Greece). The rates are also low in the United Kingdom (2%) and Germany (3%).”

So far as the regularity of this activity was concerned, the report also found that:

“For a minority of 16% of undeclared workers, the undeclared activity was a singular event carried out only once in the past 12 months. Half of those (50%) who worked undeclared performed their main undeclared activity a few times in the past 12 months. Another third (32%) did it relatively regularly.”

However, when it came to the amount of undeclared activity undertaken, the

Eurobarometer survey data suggested that:

“…for many people undeclared work is only a small side activity: Almost half of the undeclared workers did this work for less than 50 hours during the past 12 months. For a job carried out regularly this means just one hour of work per week, while for a seasonal activity it means hardly more than one full-time week of undeclared work. Another 30% worked between 50 and 200 hours a year, which is roughly equivalent to between one and five weeks work ‘en bloc’ or up to 4 hours on a weekly basis. Overall, a large majority of more than three quarters (77%) of undeclared workers thus can be said to be doing undeclared work as a side activity only – with not more than 5 weeks en bloc per year or a maximum of 4 hours per week if the work was done regularly.”

Furthermore:

“The share of those working between 200 and 500 hours and who thus spend a more substantial share of time on undeclared activities is about 12%. A further

36 Activities that are not legal as such – e.g. smuggling, drug dealing or other criminal activities -

were not intended to be reported. The report acknowledged a variety of “cultural” and “national” attitudes to the phenomenon in the course of observing that “Undeclared work is multi-faceted. It ranges for example from occasional baby-sitting work in the neighbourhood to the construction of entire buildings with professionally organised networks of undeclared workers. Some of these variants of undeclared work are widely accepted within most societies whereas others are less accepted by the general public.” Furthermore, the point was made that, “Undeclared work is not restricted to work carried out for money but also comprises work done in return for a payment in kind. Payment in kind can consist of the barter of goods, an exchange of services on a quid pro quo basis or mutual favours. In most countries, such non-monetary exchanges have to be declared if remuneration is expected by the doer and/or if the value of the exchanged goods or services surpasses a certain threshold. In the survey, both undeclared work paid for with money and undeclared work paid for in kind was to be reported.”

37 “Special Eurobarometer 284”, (op.cit.).


14

11% work more than that. The share of those working undeclared for a similar number of hours to a full-time employee working the whole year (i.e. 1,500 annual hours or more) amounts to only 2%.”

While the indications provided by Eurobarometer are interesting – and, indeed, may

serve to reinforce a number of popularly held a priori assumptions in relation to the

incidence and extent of informal labour market engagements – the point needs to be

emphasised that, for reasons fully recognised by the researchers, the degree of

reliability which can be attributed to any of this data must be infused with a healthy

dose of scepticism. That having been said, however, it is generally accepted that

there is a significant problem throughout the EU associated with “undeclared work”,

and that the existence of that phenomenon has a tangible effect upon the regulation

and supervision of the EU labour market and the national labour markets which

currently account for a formally declared active labour force estimated in 2011 at

228.1 million.

“Workers”

In the context of the current presentation, everything turns upon the transition from

“EU citizen” to “EU citizen-worker”, for, as soon as the citizen embarks upon activity

within the kind of relationship which would result in acquisition of the status “worker”,

the arrangements provided for by the exercise of any of the relevant “four freedoms”

become the operative regulatory provisions. The framework for this derives from

TFEU Article 26,38 sub-paragraph (1) of which is the general provision requiring the

Union to “adopt measures with the aim of establishing or ensuring the functioning of

the internal market, in accordance with the relevant provisions of the Treaties”. To

this end, TFEU Article 26(2) establishes that:

“The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties.”39

The two relevant “freedoms” for present purposes are those relating to persons

(where these have the status of “workers”) and services. 38 Ex Article 14 TEC. 39 The Treaty provisions recognise the reality of “multiple-speed” economies within the composition

of the Member States, and thus endeavour to ensure that a pragmatic approach is taken to achieving a measure of flexibility within the internal market regulatory arrangements. Thus, TFEU Article 27 (ex Article 15 TEC) provides that: “When drawing up its proposals with a view to achieving the objectives set out in Article 26, the Commission shall take into account the extent of the effort that certain economies showing differences in development will have to sustain for the establishment of the internal market and it may propose appropriate provisions”, and goes on to emphasise that: “If these provisions take the form of derogations, they must be of a temporary nature and must cause the least possible disturbance to the functioning of the internal market”.


15

In relation to the freedom of movement for workers, which has been the most

consistently developed area since the inauguration of the EEC in 1957, the

fundamental modern Treaty provision is to be found in TFEU Article 45(1),40 which

declares that:

“Freedom of movement for workers shall be secured within the Union.”

Article 45 (which does not apply to “employment in the public service”),41 goes on, in

its sub-paragraph (2), to establish a “non-discrimination” approach to the right, in

terms that “Such freedom of movement shall entail the abolition of any discrimination

based on nationality between workers of the Member States as regards employment,

remuneration and other conditions of work and employment”. It then provides, in sub-

paragraph (3), for four particular “rights”, which may be enjoyed “subject to limitations

justified on grounds of public policy, public security or public health”. These comprise

the right (a) to accept offers of employment actually made; (b) to move freely within

the territory of Member States for this purpose; (c) to stay in a Member State for the

purpose of employment in accordance with the provisions governing the employment

of nationals of that State laid down by law, regulation or administrative action; and (d)

to remain in the territory of a Member State after having been employed in that State

(subject to conditions embodied in regulations drawn up by the Commission).

The framework established by Article 45 has been “fleshed out” since its original

inception in 1957 by a number of key instruments dealing with ancillary arrangements

for workers exercising their rights to freedom of movement – including provisions for

housing, access to vocational training, and facilities for the families of the free mover

– as well as establishing administrative frameworks for the organisation and

supervision of employment exchange activities, and institutional arrangements for co-

operation between Member States in the context of free movement for workers. At

the centre of these arrangements is Regulation (EEC) No 1612/68 on freedom of

movement for workers within the Community,42 an instrument which was amended by

way of Directive 2004/38/EC on the right of citizens of the Union and their family

members to move and reside freely within the territory of the Member States.43

40 Ex Article 39 TEC. 41 By virtue of Article 45(4). 42 Regulation (EEC) No.1612/68 of the Council of 15 October 1968 on freedom of movement for

workers within the Community [Official Journal L 257, 19/10/1968 p.0002 – 0012; English special edition: Series I Chapter 1968(II) p.0475].

43 Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States amending Regulation (EEC) No.1612/68 and repealing Directives


16

Meanwhile, Regulation (EC) No.883/2004 deals with the associated need to co-

ordinate social security systems as between the participating Member States.44

At the time of writing, all of the “temporary restrictions” associated with the

enlargement rounds (other than the most recent involving Bulgaria and Rumania)

have come to an end – the period for their authorised utilisation having expired on 30

April 2011. However, transitional arrangements remain in place for these two most

recent accession Member States, and are due to continue until 31 December 2013.45

Youth Mobility, Education/Training Arrangements, and Specific Sectoral Initiatives

Within the framework of the Treaty provisions on the freedom of movement, it should

also be noted that a variety of measures and initiatives have been taken under the

“promotional” powers granted by inter alia TFEU Article 47,46 which requires that

“Member States shall, within the framework of a joint programme, encourage the

exchange of young workers”.47 There have also been various initiatives concerned

64/221/EEC, 68/360/EEC, 72/194/EEC, 73/148/EEC, 75/34/EEC, 75/35/EEC, 90/364/EEC, 90/365/EEC and 93/96/EEC (Text with EEA relevance) [Official Journal L 158, 30/04/2004 p.0077 – 0123]. See also the Communication from the Commission to the European Parliament and the Council on guidance for better transposition and application of Directive 2004/38/EC on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States, COM (2009) 313 final, Brussels 2.7.2009.

44 Regulation (EC) No.883/2004 of the European Parliament and of the Council of 29 April 2004 on the co-ordination of social security systems (Text with relevance for the EEA and for Switzerland) [Official Journal L 166, 30/04/2004 p.0001 – 0123].

45 Relevant regulatory measures in this context include Council Regulation (EC) No.1791/2006 of 20 November 2006 adapting certain Regulations and Decisions in the fields of free movement of goods, freedom of movement of persons, company law, competition policy, agriculture (including veterinary and phytosanitary legislation), transport policy, taxation, statistics, energy, environment, cooperation in the fields of justice and home affairs, customs union, external relations, common foreign and security policy and institutions, by reason of the accession of Bulgaria and Romania [Official Journal L 363 , 20/12/2006 p. 0001 – 0080; Official Journal L 352 , 31/12/2008 p. 0629 – 0708] and Council Directive 2006/100/EC of 20 November 2006 adapting certain Directives in the field of freedom of movement of persons, by reason of the accession of Bulgaria and Romania [Official Journal L 363 , 20/12/2006 p. 0141 – 0237; Official Journal L 335 , 13/12/2008 p. 0555 – 0721]. Measures relating to the EEA and Switzerland are also in place, as with Council Decision (2009/392/EC) of 27 November 2008 on the conclusion, on behalf of the European Community and its Member States, of a Protocol to the Agreement between the European Community and its Member States, of the one part, and the Swiss Confederation, of the other, on the free movement of persons regarding the participation, as contracting parties of the Republic of Bulgaria and Romania pursuant to their accession to the European Union [Official Journal L 124, 20/05/2009, p.0051 – 0052] and the Protocol to the Agreement between the European Community and its Member States, of the one part, and the Swiss Confederation, of the other, on the free movement of persons, regarding the participation, as contracting parties of the Republic of Bulgaria and Romania pursuant to their accession to the European Union [Official Journal L 124, 20/05/2009 p.0053 – 0062].

46 Ex Article 41 TEC. 47 Instruments relating to this field of activity include the Recommendation of the European

Parliament and of the Council of 18 December 2006 on transnational mobility within the Community for education and training purposes: European Quality Charter for Mobility (Text with


17

with particular sectors, as well as measures designed to promote the mutual

recognition of professional qualifications and related matters.48

FREEDOM OF ESTABLISHMENT AND TO PROVIDE SERVICES

As the European Commission has pointed out:49

“Defining the personal scope of EU law on free movement of workers and the conditions under which that law applies involves drawing a distinction between migrant workers and other categories of EU citizens (non-active persons and self-employed and posted workers). The free movement of workers gives every citizen the right to move freely to another Member State to work and reside there for that purpose, and protects them from discrimination as regards employment, remuneration and other working conditions in comparison to their colleagues who are nationals of that Member State. Free movement needs to be distinguished from the freedom to provide services, which includes the right of undertakings to perform services in another Member State for which purpose they may send (‘post’) their own workers there temporarily to carry out the necessary work. Posted workers in the context of the provision of services are covered by Directive 96/71/EC, which establishes a ‘hard core’ of clearly defined terms and conditions of work and employment for the minimum protection of workers, including minimum rates of pay, which must be complied with by the service provider in the host Member State.”

The modern picture in relation to the “non-Article 45” aspects of work-related free

movement is now to be drawn primarily from the provisions contained in TFEU

Articles 49 and 56.50 Thus, in relation to freedom of establishment, the second limb of

Article 49 makes it clear that:

“Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of

EEA relevance) [Official Journal L 394, 30/12/2006 p.0005 – 0009] and the Council recommendation of 20 November 2008 on the mobility of young volunteers across the European Union [Official Journal C 319, 13/12/2008 p.0008 – 0010]. For a political commitment to development of such initiatives, see also the Conclusions of the Council and of the Representatives of the Governments of the Member States, meeting within the Council of 21 November 2008 on youth mobility [Official Journal C 320, 16/12/2008, p.0006 – 0009].

48 See, by way of example, Directive 98/5/EC of the European Parliament and of the Council of 16 February 1998 to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained [Official Journal L 077, 14/03/1998, p.0036 – 0043]; Council Resolution of 17 December 1999 on the promotion of the free movement of persons working in the cultural sector [Official Journal C 008, 12/01/2000, p.0003 – 0004]; and Decision No.2241/2004/EC of the European Parliament and of the Council of 15 December 2004 on a single Community framework for the transparency of qualifications and competences (Europass) [Official Journal L 390, 31/12/2004, p.0006 – 0020].

49 Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions, Reaffirming the free movement of workers: rights and major developments, COM (2010) 373 final, Brussels, 13.7.2010. See at p.4.

50 Ex Articles 43 and 49 TEC.


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Article 54, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital.”

The basic right itself is set out in the first limb of the Article, which provides that:

“Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State.”

while further provision is made in TFEU Article 54 for the treatment of “companies or

firms” established within the European Union.51

It is, however, the elision with the detailed provisions in TFEU Articles 56 and 57,52

on the freedom to provide services, which has been at the centre of much attention

for the last two decades – and, indeed, which has provoked much of the controversy

over issues such as “false self-employment”, “social dumping” in relation (particularly)

to labour costs, and the very nature of the balance between social policy

considerations which make up the “social dimension” of the EU and the “economic

dimension” reflected in the “four freedoms” set out in TFEU Article 26(2) for the single

market.

The EU notion of “services” is spelled out by the first limb of Article 57, in terms that:

“Services shall be considered to be ‘services’ within the meaning of the Treaties where they are normally provided for remuneration, in so far as they are not governed by the provisions relating to freedom of movement for goods, capital and persons”,

while the second limb of the Article provides that the notion of services “…shall in

particular include” (a) activities of an industrial character; (b) activities of a

commercial character; (c) activities of craftsmen; and (d) activities of the professions.

The explicit link with the right to freedom of establishment is then made by the third

limb of Article 57, which declares that:

“Without prejudice to the provisions of the Chapter relating to the right of establishment, the person providing a service may, in order to do so, temporarily pursue his activity in the Member State where the service is

51 Article 54 (ex Article 48 TEC) provides that “Companies or firms formed in accordance with the

law of a Member State and having their registered office, central administration or principal place of business within the Union shall, for the purposes of this Chapter, be treated in the same way as natural persons who are nationals of Member States”, and then goes on to clarify that “‘Companies or firms’ means companies or firms constituted under civil or commercial law, including cooperative societies, and other legal persons governed by public or private law, save for those which are non-profit-making.”

52 Ex Articles 49 and 50 TEC.


19

provided, under the same conditions as are imposed by that State on its own nationals.”

In relation to the provision of such services, Article 56, first limb, provides that (apart

from “nationals of a third country who provide services and who are established

within the Union”, in respect of whom the second limb of the Article envisages the

possibility of extension of the basic rights):

“Within the framework of the provisions set out below, restrictions on freedom to provide services within the Union shall be prohibited in respect of nationals of Member States who are established in a Member State other than that of the person for whom the services are intended.”

This whole field of “provision of services” in the internal market – which has been

said to “constitute the engine of economic growth and account for 70% of GDP and

employment in most Member States”53 – has, since the date for implementation of

Directive 2006/123/EC on services in the internal market,54 been the subject of

detailed regulation in respect of the activities spelled out in Article 2(2) of that

Directive.

However, one only needs to consider the highly controversial background to the

enactment of this instrument,55 and to note that the Preamble to the Directive runs to

a staggering 118 paragraphs, to realise that this instrument reflects a plethora of

political compromises, and that no simple framework governing the provision of

services throughout the European Union has been achieved through its enactment.

Indeed, this realisation is brought home even more starkly when regard is had to the

litany of matters, contained in Article 1, to which the Directive is expressly stated not

to apply – leaving the declaration in Article 2(1), to the effect that “This Directive shall

apply to services supplied by providers established in a Member State”, with

something of a hollow ring!

Of particular note to the field of labour law and social policy is the declaration in Point

6 of Article 1(2) that:

“This Directive does not affect labour law, that is any legal or contractual provision concerning employment conditions, working conditions, including health and safety at work and the relationship between employers and workers, which Member States apply in accordance with national law which respects

53 Directive 2006/123/EC, Preamble, para.4. 54 Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on

services in the internal market [Official Journal L 376, 27.12.2006, p.36]. 55 On which, see, in particular, the contributions to R.Blanpain (ed), Freedom of Services in the

European Union – Labour and Social Security law: The Bolkestein Initiative, (58 Bulletin of Comparative Labour Relations, The Hague 2006).


20

Community law. Equally, this Directive does not affect the social security legislation of the Member States.”56

and the following declaration, in Point 7 of the same Article, to the effect that:

“This Directive does not affect the exercise of fundamental rights as recognised in the Member States and by Community law. Nor does it affect the right to negotiate, conclude and enforce collective agreements and to take industrial action in accordance with national law and practices which respect Community law.”

Not only do the provisions of the Articles themselves seek to trace out a tenuous line

of demarcation between “services” which are to be the subject-matter of Directive

2006/123/EC and other matters, but further endeavours to narrow the field of

application can be discerned from the terms of the (remarkably extensive) Preamble

to the instrument. Thus, for example, when looking at the scope of various terms

adopted for the purposes of the services Directive, it is explained that:

“(36) The concept of ‘provider’ should cover any natural person who is a national of a Member State or any legal person engaged in a service activity in a Member State, in exercise either of the freedom of establishment or of the free movement of services. The concept of provider should thus not be limited solely to cross-border service provision within the framework of the free movement of services but should also cover cases in which an operator establishes itself in a Member State in order to develop its service activities there. On the other hand, the concept of a provider should not cover the case of branches in a Member State of companies from third countries because, under Article 48 of the Treaty, the freedom of establishment and free movement of services may benefit only companies constituted in accordance with the laws of a Member State and having their registered office, central administration or principal place of business within the Community.”

Meanwhile, it is pointed out that:

“(65) Freedom of establishment is predicated, in particular, upon the principle of equal treatment, which entails the prohibition not only of any discrimination on grounds of nationality but also of any indirect discrimination based on other grounds but capable of producing the same result. Thus, access to a service activity or the exercise thereof in a Member State, either as a principal or secondary activity, should not be made subject to criteria such as place of establishment, residence, domicile or principal provision of the service activity…”.

However, of particular significance to labour market related activities, it is paragraphs

86 and 87 of the Preamble which catch the eye, declaring that:

56 Although the controversy continues to rage over what is intended by this provision and as to the

precise scope of the Directive’s provisions. This is the case, for example, where so-called “triangular relationships” at work are concerned, given that Article 2(2)(e) of the Directive includes within the scope of its provisions “services of temporary work agencies” – specific regulation of which has been the subject-matter of Directive 2008/104/EC of the European Parliament and of the Council of 19 November 2008 on temporary agency work [Official Journal L 327, 5.12.2008, p.9].


21

“(86) This Directive should not affect terms and conditions of employment which, pursuant to Directive 96/71/ECof the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services (1), apply to workers posted to provide a service in the territory of another Member State. In such cases, Directive 96/71/EC stipulates that providers have to comply with terms and conditions of employment in a listed number of areas applicable in the Member State where the service is provided. These are: maximum work periods and minimum rest periods, minimum paid annual holidays, minimum rates of pay, including overtime rates, the conditions of hiring out of workers, in particular the protection of workers hired out by temporary employment undertakings, health, safety and hygiene at work, protective measures with regard to the terms and conditions of employment of pregnant women or women who have recently given birth and of children and young people and equality of treatment between men and women and other provisions on non-discrimination. This not only concerns terms and conditions of employment which are laid down by law but also those laid down in collective agreements or arbitration awards that are officially declared or de facto universally applicable within the meaning of Directive 96/71/EC. Moreover, this Directive should not prevent Member States from applying terms and conditions of employment on matters other than those listed in Article 3(1) of Directive 96/71/EC on the grounds of public policy.”

and

“(87) Neither should this Directive affect terms and conditions of employment in cases where the worker employed for the provision of a cross-border service is recruited in the Member State where the service is provided. Furthermore, this Directive should not affect the right for the Member State where the service is provided to determine the existence of an employment relationship and the distinction between self-employed persons and employed persons, including ‘false self-employed persons’. In that respect the essential characteristic of an employment relationship within the meaning of Article 39 of the Treaty should be the fact that for a certain period of time a person provides services for and under the direction of another person in return for which he receives remuneration. Any activity which a person performs outside a relationship of subordination must be classified as an activity pursued in a self-employed capacity for the purposes of Articles 43 and 49 of the Treaty.”

The “interface” with the earlier Directive 96/71/EC concerning the posting of workers

in the framework of the provision of services reflects the intense discussions which

had proceeded within the European Parliament over the potential scope of the

services Directive, and further declarations in the Preamble to the 2006 instrument

touch upon a variety of other work-related issues.57

It has already been mentioned that litigation in the context of post-accession

Portuguese workers performing work in France had drawn, in a dramatic fashion,

attention to the potential problems of “social dumping” where services are provided

across borders through the “posting” of workers by an employer located outside the

57 As, for example, with paragraphs 88 (activities reserved to a particular profession) and 90

(contractual relations between a provider and client, as well as between an employer and employee).


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“host country. The resulting judgment of the (then) ECJ in Case C-113/89, Rush

Portuguesa Lda v Office national d' immigration (National Immigration Office) caused

widespread concern, and was a direct trigger for the enactment, shortly afterwards,

of Directive 96/71/EC concerning the posting of workers in the framework of the

provision of services.58 The Preamble to that Directive spells out the appreciation

that:

“(4) Whereas the provision of services may take the form either of performance of work by an undertaking on its account and under its direction, under a contract concluded between that undertaking and the party for whom the services are intended, or of the hiring-out of workers for use by an undertaking in the framework of a public or a private contract”,

and further recognises the context in which that was increasingly taking place, in

terms that:

“(3) Whereas the completion of the internal market offers a dynamic environment for the trans-national 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”.

However, a decade and a half on, and, particularly, in the wake of the heated

controversy surrounding the legislative path of what eventually became Directive

2006/123/EC on services in the internal market, the declaration in Point (6) of the

Preamble to the 1996 instrument – to the effect that “whereas the trans-

nationalisation of the employment relationship raises problems with regard to the

legislation applicable to the employment relationship” – carries a remarkable ring of

naivety and, one might also suggest, misplaced faith in the healing powers of “ever-

increasing harmonisation” through EU social policy!

EXTENT OF THE UTILISATION OF THE RIGHTS TO FREEDOM OF MOVEMENT

Against a background of the Treaty provisions regulating the freedom of movement, it

is of interest to note the extent to which the right of free movement appears, in

practice, to have been utilised during the lifetime of the European Union.

58 Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996,

concerning the posting of workers in the framework of the provision of services [Official Journal L 18, 21.1.97, p.1].


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EU-wide Mobility

Writing in 2007, the European Commission observed that:59

“Worker mobility in the EU remains relatively low, although statistics on mobility flows or on the underlying motivations need improvement. Around 2% of working-age citizens from one of the 27 EU Member States currently live and work in another Member State. By comparison, the respective share of third-country citizens residing in the EU is almost twice as high. There does however appear to have been a gradual increase in mobility over recent years. The number of mobile workers within the EU-15 has increased from about 470,000 persons in 2000 to around 610,000 in 2005 (European Labour Force Survey). In addition, although often not included in national figures, the number of seasonal and cross-border workers (including summer jobs for young people) may be significant and increase further the overall percentage of EU migrant workers.”

Three years later, the European Commission noted that, according to the then latest

(2008) Eurostat data available:60

“…2.3% of EU citizens (11.3 million persons) reside in a Member State other than the state of which they are a citizen, and many more exercise this right at some point in their life. That number has grown by more than 40% since 2001. According to a recent Eurobarometer survey, 10% of persons polled in EU-27 replied that they had lived and worked in another country at some point in the past, while 17% intended to take advantage of free movement in the future.”61

Focusing specifically upon recent EU enlargements (and, in particular, that involving

the ten new Member States who joined in 2004), Baas & Brücker make the point that:

“The EU eastern enlargement is associated with a substantial increase in migration from the new member states. The number of nationals from EU-8 countries residing in EU-15 countries increased from 900,000 in 2004 to 2.4 million in 2010.The net inflow of migrants from the EU-8 amounted to 210,000 people p.a. on average since 2004, with most migrants heading to the UK and Ireland, which opened their labour markets immediately after EU enlargement.”62

That finding is illustrated in Table 1, which also indicates in more detail the cross-

country flows, during the period 2000-2010, from the eight countries subject to the

59 See European Commission, Mobility, an instrument for more and better jobs: The European Job

Mobility Action Plan (2007-2010) – COM (2007) 773 final, at p.3. 60 See Communication from the Commission to the Council, the European Parliament, the

European Economic and Social Committee and the Committee of the Regions, Reaffirming the free movement of workers: rights and major developments, COM (2010) 373 final, Brussels, 13.7.2010, at p.2.

61 It is further noted that “The report does not explicitly cite the percentage increase over the period 2001 to 2008 in the number of EU nationals residing in another Member State, but the increase was about 4 million, which translates into an increase of around 54%”.

62 T.Baas & H.Brücker, “EU Eastern Enlargement: The Benefits from Integration and Free Labour Movement”, (2/2011) CESifo DICE Report 44, at p.47.


24

transitional arrangements under the 2003 Accession Treaty into the Member States

of the former EU-15.

Table 1: Nationals from the EU-8 in the EU-15, 2000 – 2010 63

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

AT 52,786 54,947 57,301 59,622 67,675 75,143 80,706 86,911 94,084 98,317 103,755

BE 9,667 12,102 14,106 16,151 19,524 25,638 32,199 42,918 40,400 40,200 52,900

DK 8,763 9,470 9,664 9,963 10,762 12,770 16,203 21,807 30,033 33,179 36,590

FIN 12,804 13,860 14,712 15,825 16,459 18,266 20,801 23,957 27,464 30,877 35,068

FRA 40,852 48,480 48,984 34,451 48,584 36,783 50,418 43,227 41,573 48,145 64,800

DE 434,593 453,100 466,382 480,690 438,828 481,672 525,078 554,372 567,466 576,432 612,310

GRE 13,832 13,042 14,887 16,413 15,194 19,513 18,357 20,257 35,100 31,100 24,300

IRL 1,182 4,775 15,036 27,229 42,988 93,243 135,800 194,400 215,700 191,800 184,100

ITA 40,433 40,108 41,431 55,593 67,755 79,819 94,215 117,042 128,813 137,306 132,200

LX 1,063 1,100 1,136 1,518 2,164 3,252 3,940 4,561 5,362 6,232 6,666

NL 10,063 11,152 12,147 13,048 17,814 23,155 28,344 36,317 48,131 58,201 65,276

PT 437 492 587 662 842 1,061 1,373 2,477 2,502 2,843 2,800

ESP 16,396 23,672 34,076 42,672 55,735 70,576 103,190 126,971 137,068 139,558 141,465

SWE 23,884 22,868 21,376 21,147 23,257 26,877 33,757 42,312 50,575 57,669 62,440

UK 59,153 67,174 71,035 100,958 161,693 290,730 488,895 656,594 747,100 752,100 864,600

EU-15

725,908 776,341 822,860 895,942 989,274 1,258,498 1,633,277 1,974,123 2,171,371 2,203,958 2,389,271

Indeed, the extent of recent free movement flows illustrates clearly how, compared

with what had long been a situation in which:

“An open labour market allowing people to live and work in the Member State of their choice has been regarded as one of the most attractive and civilised features of the EU. In fact, since its inception in 1957 until the late 1990s, much of the discussion about labour mobility in the EU bemoaned how little movement was actually taking place. Different languages, the lack of mutual recognition of educational qualifications and the persistence of national labour market restrictive practices were usually identified as the main barriers preventing workers moving from one Member State to another. Thus, labour mobility was seen as one of the unfulfilled promises of the EU.”

the terms of the debate over the work-related components of the “four freedoms”

have changed completely, so that:

63 Taken from T.Baas & H.Brücker, at p.47. [NB. Source: Author's calculations based on the

Eurostat Labour Force Survey, British Labour Force Survey and the national population statistics from Austria, Belgium, Denmark, Finland, Germany, Greece, Italy, Luxembourg, Netherlands, Portugal, Spain and Sweden. Note: Labour Force Survey Data for France, UK and Ireland. Belgium and Luxembourg: national population statistics extrapolated with Labour Force Survey data. All other countries: national population statistics. In some countries the 2010 figures are based on extrapolations from previous years.]


25

“Instead of lamenting the low levels of labour migration between the Member States, much of the current talk is about a perceived massive increase in pan-national labour flows inside the EU and the potential negative impact this might have on national social standards and even on national political and communal identities. The enlargement of the EU from 15 to 25 Member States is the main reason why labour mobility is being viewed as much a threat as a promise. Workers from new Member States are seen as generating social tensions when moving to jobs in the ‘old’ Member States…”64

The pre-financial crisis position of the European Commission in the face of this

developing phenomenon can be derived from the material presented in an economic

analysis paper prepared by the Directorate-General for Economic and Financial

Affairs in 2006.65 This voices the conclusion from the then available data that:66

“...projections suggest that from an overall economic perspective, potential east-west net flows of labour following enlargement do not appear to pose any serious threat to jobs and wages in the EU as whole”,

although there is a caveat, to the effect that:

“…assuming that migration streams from the EU-8 could flow along existing immigration networks and geographic distance, there were serious concerns that some countries and regions, in particular Austria and Germany, could face some short-run adjustment problems to cross-border labour flows, including commuting, which were feared to cause labour market disturbances.”

Post-Enlargement Mobility and the United Kingdom

It may still be relatively early days to evaluate fully the impacts of freedom of

movement for workers and employers in the European Union of the 21st century.

Certainly, any suggestion that the functioning of the provisions on freedom of

movement are carrying significant “problems” for the enlarged EU labour market

constitutes a matter of huge political sensitivity within the institutions of an edifice

which is being battered daily by deepening recession, soaring levels of

unemployment, and a loss of public confidence in the political classes which have

delivered a Eurozone in which democratic legitimacy appears to be heading along

the same path as the fabled dodo67 – even in the “cradle of democracy”!

64 J.Donaghey & P.Teague, “The free movement of workers and social Europe: maintaining the

European ideal”, (2006) 37(6) Industrial Relations Journal 652. 65 N.Diez Guardia & K.Pichelmann, Labour Migration Patterns in Europe: Recent Trends, Future

Challenges (European Economy, European Commission Directorate-General for Economic and Financial Affairs, Economic Papers No.256, Brussels 2006).

66 At p.16. 67 Whether the appearance of the dodo (which became extinct towards the end of the 17th century)

in Lewis Carroll's Alice's Adventures in Wonderland makes this a particularly appropriate allusion in the context of contemporary European Union social policy and the plight of the Eurozone may,


26

Nevertheless, in the United Kingdom, which was one of the three Member States to

open its borders largely without transitional restrictions to free movers from the 2004

accession, several studies have been undertaken to ascertain some of the impacts

upon that country’s economy and labour market. These range from an early

submission on general migration issues, drawn up by a cross-section of government

departments and the United Kingdom’s Office for National Statistics (ONS),68 through

work undertaken for the Department of Work and Pensions,69 a report produced by

the European Integration Consortium for the European Commission,70 a report drawn

up by the National Institute of Economic and Social Research on behalf of the

Employment, Social Affairs and Inclusion Directorate General of the European

Commission,71 and a report prepared in mid-2011 by the Friedrich Eburt Stiftung, in

Berlin.72

As has already been indicated, the United Kingdom’s response to the 2004

accession of ten new Member States was, with the exception of the requirement to

register with the “Worker Registration Scheme” (WRS) if they wished to take up

employment for at least one month, to open the national borders to free movement

workers from the EU-8 countries. While trumpeted at the political level as a

demonstration of the “true commitment” of the United Kingdom to the opportunities

opened up by enlargement, it was not long before a different position was being

adopted in relation to workers seeking to exercise rights to freedom of movement in

the context of the accession of Bulgaria and Rumania. In consequence, the

Accession (Immigration and Worker Authorisation) Regulations 2006 (together with

subsequent amending Regulations) imposed restrictions on the access of EU-2

though, perhaps be something best noted but left uncommented upon by an observer from the island Member State to the west of “Wonderland”!

68 See The Economic and Fiscal Impact of Immigration: A Cross-Departmental Submission to the House of Lords Select Committee on Economic Affairs, presented to Parliament by the Secretary of State for the Home Department (Cm 7237, London, October 2007).

69 See J.Portes & S.French, The impact of free movement of workers from central and eastern Europe on the UK labour market: early evidence (Department for Work and Pensions Working Paper No.18, London 2005) and N.Gilpin, M.Henty, S.Lemos, J.Portes & C.Bullen, The impact of free movement of workers from Central and Eastern Europe on the UK labour market (Department for Work and Pensions Working Paper No.29, London 2006).

70 Richard Upward, Country Study: UK (2007), which formed part of the material leading to the Final Report of the European Integration Consortium, Labour mobility within the EU in the context of enlargement and the functioning of the transitional arrangements (Nuremberg 2009).

71 D.Holland, T.Fic, A.Rincon-Aznar, L.Stokes & P.Paluchowski, Labour mobility within the EU – The impact of enlargement and the functioning of the transitional arrangements: Final Report – Country Case Studies (NIESR, London 2011).

72 N.Clark & J.Hardy, Free Movement in the EU: The Case of Great Britain (Friedrich-Ebert-Stiftung, Berlin, May 2011).


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nationals to the United Kingdom's labour market. The effect of these restrictions was

described by the Minister for Immigration in terms that:

"Their effect is to restrict EU-2 nationals' employment to skilled work, which may be subject to a labour market test, for the first 12 months of their employment in the UK. There are also specific quota-based arrangements under which EU-2 nationals may access lower skilled employment in the agricultural and food processing sectors."73

The 2011 report prepared by the National Institute of Economic and Social Research

describes how access for low-skilled workers from the EU-2 accession countries has

been restricted through quota-based schemes, namely the Sector-Based Scheme

(SBS) and the Seasonal Agricultural Workers Scheme (SAWS).74

It is generally acknowledged that the available data does not permit a precise figure

to be placed on the extent of EU-8 or EU-2 migration by workers exercising their

freedom of movement to move to, and work in, the United Kingdom since the most

recent EU enlargements. However, using data from the International Passenger

Survey (IPS), it is estimated that the inflow to the United Kingdom of citizens from the

EU-8 countries as a whole between 2004 and 2009 rose steadily, reaching a peak of

just over 110,000 in 2007, before falling in 2008 and 2009. Meanwhile, as shown in

Table 2, the outflow of migrants increased, with the result that the net inflow was

significantly lower in these years, estimated as standing at around 16,000 in 2009.

Table 2: Gross and net inflows to the United Kingdom of EU-8 citizens, 2004 – 2009 (1,000s) 75

2004 2005 2006 2007 2008 2009

Inflow 53 76 92 112 89 68

Balance + 49 + 61 + 71 + 87 + 20 + 16

73 Quoted in the Forty-eighth Report of Session 2010-12 from the United Kingdom Parliament’s

House of Commons European Scrutiny Committee, “Free movement of workers from Bulgaria and Romania”.

74 See D.Holland et al, op.cit, at p.54: “The SBS allows EU-2 nationals to carry out low-skilled work in the food manufacturing sector, within certain specified occupations. The SBS quota for 2009 was 3,500 workers. The recruitment must be to fill a genuine vacancy which cannot be filled by a resident worker. Applicants must be aged between 18 and 30 years, with SBS permits issued for a maximum of 12 months.”

75 Taken from Table 0.15 in D.Holland et al, op.cit,, which takes as its source the ONS, Long-term International migration Statistics, Table 2.01.


28

Meanwhile, using the same source data, it is estimated that the inflow of citizens from

Bulgaria and Romania between 2007 and 2009 amounted to 14,000 and 20,000

respectively.

Other data from which indications of migrant flows can be estimated include records

of National Insurance Number allocations to adult overseas nationals.76 In addition,

data can be derived from the SBS and the SAWS systems in place to deal with EU-2

migrants since 2007. There is also a good deal of data which can be drawn from the

WRS arrangements in place for the EU-8 post-2004 period, including a picture of the

volume of approved applicants for that scheme in recent years. Table 3 displays the

picture in relation to WRS approvals for EU-8 applicants during the period 2007-

2010.

Table 3: Approved applicants for Worker Registration Scheme, by country 77

2007 2008 2009 2010

Czech Republic 7,510 6,530 4,315 4,185

Estonia 965 945 1,155 1,315

Hungary 8,875 10,890 8,370 9,270

Latvia 6,285 6,980 15,880 18,440

Lithuania 14,270 11,560 15,210 23,900

Poland 150,260 103,115 55,840 52,325

Slovakia 22,450 18,330 8,010 7,170

Slovenia 190 195 140 150

Total 210,805 158,550 108,920 116,760

Once in the United Kingdom, the geographical location of migrant workers is likely to

influence their prospects of employment and levels of pay. The capital, London,

continues to attract the majority of inward movers when they first arrive in the

country, and there is some evidence to suggest that the current economic downturn

76 Any individual looking to work or claim benefits in the UK would require a National Insurance

Number (NINo). The NINo allocations data provide information on registrations by nationality, as well as characteristics such as gender and age.

77 Taken from Table 0.18 in D.Holland et al, op.cit,, which takes as its source the quarterly statistics provide by Home Office Control of Immigration.


29

has increased the concentration of migrants in London.78 It also appears that

migrants from the EU-2 and EU-8 earn lower wages,79 with EU-8 migrants earning

the lowest of any immigrant group,80 as well as being found to be more likely to work

in jobs obtained through temporary employment agencies and, in some cases, to

experience relatively poor working conditions.81

A few matters may be mentioned in relation to the particular position of the United

Kingdom, when it comes to consideration of cross-border flows of workers – whether

from the European Union or anywhere else. Most obviously, the United Kingdom –

unlike most other Member States (and, in particular, Germany and Austria) – does

not have land borders with its neighbours, apart from the Republic of Ireland.82

Furthermore, in common with the Republic of Ireland, the United Kingdom is not

party (except for limited purposes related to information technology within the area of

freedom, security and justice)83 to the Schengen arrangements on the lifting of border

controls84 – even though those arrangements have become a part of the acquis

78 See A.Rincon-Aznar & L.Stokes, Local Geography of International Migration to the UK, Report to

the Department for Communities and Local Government (NIESR, London 2011), and P.Boden & P.Rees, “Using administrative data to improve the estimation of immigration to local areas in England”, (2010) 173(4) Journal of the Royal Statistical Society (Series A – Statistics in Society) 707, cited by D.Holland et al, op.cit at p.70.

79 See N.Pollard, M.Latorre & D.Sriskandarajah, Floodgates or turnstiles: post-EU enlargement migration flows to (and from) the UK (Institute for Public Policy Research, London 2008). It is suggested, for example, that 89% of EU-8 and EU-2 workers earned less than £400 per week in 2007, compared to 57% of UK-born workers.

80 K.Clark & S.Drinkwater, “The labour-market performance of recent migrants”, (2008) 24(3) Oxford Review of Economic Policy 495.

81 See N.Clark & J.Hardy, op.cit. 82 In relation to which a “Common Travel Area” has (apart from suspension during the Second

World War) been in operation since 1923. 83 See Council Decision (2010/779/EU) of 14 December 2010 concerning the request of the United

Kingdom of Great Britain and Northern Ireland to take part in some of the provisions of the Schengen acquis relating to the establishment of a European Agency for the operational management of large-scale IT systems in the area of freedom, security and justice [Official Journal L 333, 17/12/2010, p.0058 – 0059].

84 See, in particular, the Resolution on the functioning and future of Schengen [Official Journal C 115, 14/04/1997, p.0030], and The Schengen acquis - Agreement between the Governments of the States of the Benelux Economic Union, the Federal Republic of Germany and the French Republic on the gradual abolition of checks at their common borders [Official Journal L 239, 22/09/2000, p.0013 – 0018] together with The Schengen acquis - Convention implementing the Schengen Agreement of 14 June 1985 between the Governments of the States of the Benelux Economic Union, the Federal Republic of Germany and the French Republic on the gradual abolition of checks at their common borders [Official Journal L 239, 22/09/2000, p.0019 – 0062]. Most recently, see Regulation (EC) No.562/2006 of the European Parliament and of the Council of 15 March 2006 establishing a Community Code on the rules governing the movement of persons across borders (Schengen Borders Code) [Official Journal L 105, 13/04/2006, p.0001 – 0032] and Regulation (EU) No.265/2010 of the European Parliament and of the Council of 25 March 2010 amending the Convention Implementing the Schengen Agreement and Regulation (EC) No 562/2006 as regards movement of persons with a long-stay visa [Official Journal L 085 , 31/03/2010, p.0001 – 0004].


30

communitaire and have even been extended beyond the EU to include EEA Member

States Iceland and Norway.85 It is also the case – deriving from a colonial past of

which it was said that “the sun never set on the British Empire” – that traditional links

have been maintained with the Commonwealth, and the development of what some

like to describe as “multi-cultural Britain” makes the arrival of migrant workers and

their families far from the “shock” which is experienced in some parts of the

Continent. Much has changed, indeed, since the author of an official report for the

United Kingdom government felt able to opine that:86

“The attitude of the general public in Britain to foreigners – and to a good many other questions – demonstrates conflicting feelings of friendliness and hostility. On the one hand, there is the centuries-old insular tradition of contempt for Dagoes, Frogs, Wops and other lesser breeds without the law, who should be allowed to come here only for brief periods on sufferance, and then go home where they came from and trouble us no more. On the other hand, there is the equally old tradition of welcome and hospitality, founded on a desire to leam from others, to widen our horizons, to enrich our experience and especially to help those who suffer persecution in their own countries.”

Unquestionably, notwithstanding its culinary reputation and the weather regularly

experienced in the British Isles, there are significant “pull” factors which attract inward

migration to the United Kingdom, and which make the significant increases in free

mover arrivals in the wake of the 21st century EU enlargements. The opportunity to

work in an English-speaking environment is attractive for large numbers of migrant

workers, while skill shortages in a variety of economic sectors make the arrival of EU

free movers with good levels of education and vocational training more welcome than

not. Indeed, when surveys into employer attitudes to immigrant workers are taken

85 See the original Resolution on free movement of persons within the Nordic Passport Union, the

European Economic Area and the Schengen countries [Official Journal C 198, 08/07/1996 p.0168]. For detailed consideration of the Nordic free movement arrangements – from which pattern the modern EU provisions on free movement of workers have drawn heavily – see this author’s presentation in Alan C. Neal, “Lessons from the Nordic Countries – 'Basic Building Blocks' for an Enlarged Common European Labour Market", (2004) 20(3) International Journal of Comparative Labour Law and Industrial Relations 339.

86 Sir John Foster, KBE, QC, MP, Enquiry into the Practice and Effects of Scientology (HMSO, London 1971), Chapter 8, para.208. The report went on (at para.209) to observe that: “The policy of successive Home Secretaries has been informed, with few exceptions, by the better tradition of friendliness and hospitality which has been the foundation in turn for our long-established policies of tolerance and asylum. The general principle on which the Home Office has in fact (even if not in theory) acted for a very long time is that foreigners should be free to come and go through our ports or entry as they please, unless there is clear evidence that they are likely to do us some specific harm, such as the commission of crimes, political activity endangering national security, the passing on of contagious diseases, putting our own people out of work, or indigence as the result of which we shall find ourselves forced to support them. In my view, such a policy has been right in the past and is right at the present time; as the world becomes smaller and the mobility of its peoples greater, it becomes more rather than less important that we should encourage rather than restrict the free flow of people and ideas.”


31

into account,87 the picture emerging is remarkably positive. Amongst other things,

employers have reported “a greater work ethic among EU-8 migrants”, finding them

to be reliable, motivated and willing to work longer hours, while, as this author has

commented elsewhere, migration in the wake of EU-enlargement is not a purely

economic phenomenon:88

“Indications are that many migrants come to the United Kingdom to learn English, to start a business, to live in what they regard as a more socially liberal society, or simply to ‘broaden their horizons’. It also appeared that around three-quarters of all A8 and A2 nationals resident in the United Kingdom in 2007 were aged 16-39 years old, and that very few post-enlargement migrants claim state benefits – the official statistics indicating that only 2.4% of those registering for National Insurance numbers between May 2004 and December 2007 claimed benefits. Furthermore, the employment rate among post-enlargement migrants (put at 84%) was found by the study to be among the highest of all immigrant groups, and stood at nine percentage points higher than the U.K.-born average. In addition, A8 and A2 nationals were found to work on average four hours longer per week than U.K.-born workers (46 hours compared with 42 hours).”

All in all, the balance of opinion from the labour market actors in the United Kingdom

comes over as broadly positive to the effects of post-EU enlargement free movement

for workers – something echoed by the European Commission,89 and a situation

which may be said to make all the stranger the decision of the United Kingdom

government to change its stance in relation to EU-2 free movement from Bulgaria

and Romania (and, indeed, to extend its restrictive arrangements until the very end of

the transitional period in 2013).

CHALLENGES FOR THE COURTS AND JUDGES

This presentation of the contemporary framework in relation to freedom of movement

for workers and employers indicates where the regulatory pattern has arrived in the

wake of the two 21st century enlargements to an EU of 27 Member States. It also

serves as a reminder of a variety of underlying problems which have bedevilled EU

social policy-makers throughout the evolution of the European adventure from its

87 See, for example, S.Dench, J.Hurstfield, D.Hill & K.Akroyd, Employers’ use of migrant labour:

Main report (Online Report 04/06, produced by the Institute for Employment Studies for the Research Development and Statistics Directorate, Home Office, London 2006)

88 Alan C. Neal, “Migrant Workers and the United Kingdom Labor Market: Some Trends and Implications of Twenty-First Century International Labor Migration Flows”, (2009) 31(1) Comparative Labor Law & Policy Journal 91, at p.111-112.

89 See, for example, Commission Staff Working Paper, Commission Report to the Council on the Functioning of the Transitional Arrangements on Free Movement of Workers from Bulgaria and Romania, COM (11) 729.


32

original EEC of six (relatively comparable, in terms of economic development and

labour market arrangements) Member States. In what follows, a few comments are

offered about some of the often under-discussed challenges which those problems

pose to courts and judges at various levels within national legal systems.

The “Basic Building Blocks”

The first point to make is that the “four freedoms” set out in the Treaty have been well

entrenched since the inception of the EEC in 1957, and their operation has matured

over more than half a century. In consequence, the “basic interpretative” analyses of

the Treaty provisions on freedom of movement for workers and employers were

worked out relatively early on by the ECJ. This process included, in particular,

clarification of the permissible extent of “limitations justified on grounds of public

policy, public security or public health”, as provided for by TFEU Article 45(3).90 So,

too, have been the implications of the Article 45(4) exclusion of “employment in the

public service” from the operation of the free movement arrangements in this area.

This means, in consequence, that many of the interpretative questions arising out of

the text of the Treaty provisions have been addressed by the CJEU (and its

predecessor, the ECJ) in the course of developing a body of case-law on key

issues.91

Still Searching for “The Worker”

On the other hand, even after half a century of consideration in a variety of contexts,

one key issue remains “alive and kicking” for judges across the EU faced with

matters touching the application of EU law in the social work-related sphere. This is

the vexed question of what is a “worker” for various Treaty purposes.

The United Kingdom situation in relation to this issue reflects a challenge shared by

judges across the European Union, and is worthy of mention in the light of the most

recent pronouncements by the CJEU on the matter, in Case C-393/10, Dermod

Patrick O’Brien v. Ministry of Justice – the judgement in which was handed down on

1 March 2012.

90 Ex Article 39 TEC. 91 For a “taste” of the developed jurisprudence, see the brief overview provided in COM (2010) 373

final, at pp.4-7, and the references to judgments of the ECJ included there.


33

In the course of evaluating the bases upon which courts and tribunals in the United

Kingdom reach conclusions as to whether a particular individual will be granted

“employee” status for the purposes of domestic employment protection law, this

author recently observed that:92

“Having briefly surveyed the established approaches to identifying “who is an employee” for the purposes of allocating employment protection rights and benefits, the superficial picture which emerges is of a traditional “contractual analysis” framework, in which judges are called upon to “flesh out” lacunae in the basic statutory definitions through the development of Common Law case-law, but as regards which the judiciary entertains a marked reluctance to enter “creatively” into fields which are properly to be considered as the area of political and legislative reform or adjustment.

This pessimistic view of the prospects for United Kingdom law in this area to respond sensitivity or adequately to the rapidly changing pressures of “the world of work” in a globalised economy may, however, be in the process of being addressed at the highest level of the judiciary. The impetus for this fresh consideration lies in the way in which certain employment rights have been established at the level of the European Union, and the scope of application to be granted to those “European” rights.”

It was suggested that the basis for re-addressing the domestic United Kingdom

paradigm within which employment protection is or is not extended to particular

groups of persons performing work in the open labour market rests upon provisions

to be found in a series of European Union social policy instruments developed over

the past forty years.93

92 Alan C. Neal, “The Protection of Working Relationships under United Kingdom Law”, in

F.Pennings & C.Bosse (eds), The Protection of Working Relationships: A Comparative Study (The Hague 2011).

93 These are the instruments (primarily Directives) covering matters such as protective rights in the context of transfers of ownership of enterprises (Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of businesses (as revised and amended), collective redundancy regulation (Council Directive 75/129/EEC of 17 February 1975 on the approximation of the laws of the Member States relating to collective redundancies (as subsequently amended), as regards fixed-term or part-time employment (Council Directive 97/81/EC of 15 December 1997 concerning the Framework Agreement on part-time work concluded by UNICE, CEEP and the ETUC, together with Council Directive 1999/70/EC of 28 June 1999 concerning the Framework Agreement on fixed-term work concluded by ETUC, UNICE and CEEP), and, most recently, the position of work performed through the arrangements operated by temporary work agencies (Directive 2008/104/EC of the European Parliament and of the Council of 19 November 2008 on temporary agency work). Generally speaking, those European Union level instruments contain a provision spelling out the scope of application of the measure, and relating this to the range of beneficiaries in each Member State. This formulation has, over time, undergone change. Thus, whereas the English-language version of the 1975 Directive on collective redundancies spoke of “workers”, but without providing any particular definition of the term (Council Directive 75/129/EEC of 17 February 1975 on the approximation of the laws of the Member States relating to collective redundancies. It may be noted that the subsequent amending Directive 92/56/EEC makes mention in its Preamble of “other forms of termination of employment contracts on the initiative of the employer” being equated to “redundancies” – a situation maintained by the current version following enactment of Directive 98/59/EC), the 1977 Directive on transfers of undertakings concerned itself with “employees”, but, again, without providing any particular definition for that


34

The relevance of these developments lies in the background to the most recent

challenge to the established orthodoxy of the Common Law approach to identifying

the recipients of employment protections in the modern United Kingdom labour

market. In particular, the whole issue of whether it is now accepted in United

Kingdom labour law that the “employment relationship” has a special role to play in

determining the scope of protections has been raised by a series of cases brought in

relation to entitlement to judicial pensions,94 by reference to the part-time work

term (Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of businesses. However, by the time of the amending Directive 98/50/EC in 1998, the Preamble to the new Directive was speaking of the necessity “to clarify the concept of ‘employee’ in the light of the case-law of the Court of Justice” – in consequence of which a new Article 2(1)(d) provided that: “’employee’ shall mean any person who, in the Member State concerned, is protected as an employee under national employment law” – a formulation retained in the subsequent amending Directive 2001/23/EC. Interesting, too, Article 2(2) of Directive 98/50/EC provided that “This Directive shall be without prejudice to national law as regards the definition of contract of employment or employment relationship” – notions which then appear, in particular, in Article 4(2)). Meanwhile, the 1980 insolvency Directive provided in Article 2(2) that “This Directive is without prejudice to national law as regards the definition of the terms ‘employee’ …” (Council Directive 80/987/EEC of 20 October 1980 on the approximation of the laws of the Member States relating to the protection of employees in the event of the insolvency of their employer). Thereafter, one finds the judicial pronouncements of the European Court of Justice beginning to have a role in this area, so that, by 1991, one finds provision that “This Directive shall apply to every paid employee having a contract or employment relationship defined by the law in force in a Member State and/or governed by the law in force in a Member State” (See Article 1(1) of Council Directive 91/533/EEC of 14 October 1991 on an employer’s obligation to inform employees of the conditions applicable to the contract or employment relationship. That formulation is then utilised to constitute the definition of “employee” by virtue of Article 2(1) of the Directive), and, by the time of the enactment of Directive 98/50/EC amending the arrangements concerning transfers of undertakings, this recognition finds express form in the Preamble to the Directive. As the European-level legislative process then moved, following the Treaty of Maastricht in 1992, into an era of “social partners” involvement (For consideration of some of the problems arising in this context, see Alan C. Neal, “We Love You Social Dialogue – But Who Exactly Are You?”, in Fondazione Giulio Pastore, La contrattazione collettive europea: Profili giuridici ed economici (FrancoAngeli, Milan 2001) 113), the quality of draftsmanship arguably lost some of its technical sharpness – not just in relation to the issue of defining the beneficiaries of particular rights enacted through this route. By way of example, the Framework Agreement on Parental Leave, given effect through a 1996 Directive (Council Directive 96/34/EC of 3 June 1996 on the framework agreement on parental leave concluded by UNICE, CEEP and the ETUC. Note that this measure did not extend to the United Kingdom, by reason of that Member State’s “opt-out” from the social policy arrangements following the Treaty of Maastricht, but was eventually given coverage to that effect by way of Directive 97/75/EC) states that: “This agreement applies to all workers, men and women, who have an employment contract or employment relationship as defined by the law, collective agreements or practices in force in each Member State”, while the 1997 Framework Agreement on Part-Time Work, given effect by Directive 97/81/EC (Council Directive 97/81/EC of 15 December 1997 concerning the Framework Agreement on part-time work concluded by UNICE, CEEP and the ETUC) similarly provided, in Clause 2(1), that: “This agreement applies to part-time workers who have an employment contract or employment relationship as defined by the law, collective agreement or practice in force in each Member State”. The later 1999 Framework Agreement on Fixed-Term Work, given effect by Directive 1999/70/EC (Council Directive 1999/70/EC of 28 June 1999 concerning the Framework Agreement on fixed-term work concluded by ETUC, UNICE and CEEP), took broadly the same approach as the part-time work Directive, in providing, by way of its Clause 2(1), that: “This agreement applies to fixed-term workers who have an employment contract or employment relationship as defined in law, collective agreements or practice in each Member State”.

94 The United Kingdom gave effect to Directive 97/81/EC (as extended by Directive 98/23/EC) and the Framework Agreement on Part-Time Work by enacting the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (S.I. 2000 No.1551) which came into force on 1


35

Directive 97/81/EC, of which the “lead case” was O’Brien v. Ministry of Justice

(formerly Department for Constitutional Affairs), before the United Kingdom Supreme

Court.95

July 2000. Regulation 1(2) contains definitions, including the familiar provisions that: “contract of employment” means a contract of service or of apprenticeship, whether express or implied, and (if it is express) whether oral or in writing; “worker” means an individual who has entered into or works under or (except where a provision of these Regulations otherwise requires) where the employment has ceased, worked under – (a) a contract of employment; or (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.” However, nowhere in those definitions was there any reference to “employment relationship”. However, by means of Regulation 17, the United Kingdom legislator disapplied the Regulations in relation to part-time judges, providing that: “These Regulations do not apply to any individual in his capacity as the holder of a judicial office if he is remunerated on a daily fee-paid basis”. For comment on this approach, see this author’s observations in European Commission, The Evolution of Labour Law (1992-2003), Volume 2, National Reports (Luxembourg 2005), at p. 506 (footnote 54), where, having pointed out that the description “any individual in his capacity as the holder of a judicial office if he is remunerated on a daily fee-paid basis” appeared to constitute a category never previously identified as subject to particular treatment in United Kingdom law, it was suggested that “This naked move to ‘invent’ a new class of non-protected member of the working citizenry raises interesting questions in the context both of the loose definitions provided in Clause 3 of the Framework Agreement on Part-Time Work whose transformation into legislative form Directive 97/81/EC purports to deliver, and as regards the traditional formula used by the European Court of Justice to delimit the scope of protected workers under EU Law (identification ‘in accordance with national law, collective agreements or practice’ in the Member State) – particularly when one bears in mind the concern of the ECJ in Unger C-75/63, that (speaking of the term ‘worker’ in the context of former Articles 48-51), the relevant Community provisions would be deprived of all effect and the above-mentioned objectives of the Treaty would be frustrated if the meaning of such a term could be unilaterally fixed and modified by national law”.

95 O’Brien v Ministry of Justice, [2010] UKSC 34. The approach adopted by Their Lordships in the O’Brien case was important for a number of reasons, amongst which is the detailed consideration of case-law emanating from the European Court of Justice in relation to the concept of “the worker” for the purposes of domestic application of employment protections introduced at the level of the European Union. Thus, in the course of referring questions to the Luxembourg Court for clarification, the Supreme Court addressed the established approach deriving from the case of Lawrie-Blum v Land Baden-Wurttenberg (Case C-66/85, Lawrie-Blum v Land Baden-Wurttenberg, [1986] ECR 2121. “That concept [‘worker’] must be defined in accordance with objective criteria which distinguish the employment relationship by reference to the rights and duties of the persons concerned. The essential feature of an employment relationship, however, is that for a certain period of time a person performs services for and under the direction of another person in return for which he receives remuneration.” (see at para.17), and, in evaluating the current “state of play” in relation to the European Union concept of “the worker”, gave consideration to a wide range of related recent jurisprudence from the European Court of Justice (including Case C-85/96, Martinez Sala v Freistaat Bayern, [1998] ECR I – 2691; Case C-256/01, Allonby v Accrington and Rossendale College, [2004] ICR 1328; Case C-151/02, Landeshauptstadt Kiel v Jaeger, [2004] ICR 1528; Case C-313/02, Wippel v Peek & Cloppenburg GmbH & Co KG, [2005] ICR 1604; and Case C-307/05, Del Cerro Alonso v Osakidetza (Servicio Vasco de Salud), [2008] ICR 145; as well as observations in the context of Cases C-397-403/01, Pfeiffer v Deutsches Rotes Kreuz, [2005] ICR 1307 and Case C-395/08, Istituto Nazionale della Previdenza Sociale v Bruno & Pettini (unreported). The upshot of this litigation was that the United Kingdom Supreme Court concluded that it was necessary to refer the following questions to the Court of Justice of the European Union: (1) Is it for national law to determine whether or not judges as a whole are “workers who have an employment contract or employment relationship” within the meaning of clause 2.1 of the Framework Agreement, or is there a Community norm by which this matter must be determined? and (2) If judges as a whole are workers who have an employment contract or employment relationship within the meaning of clause 2.1 of the Framework Agreement, is it permissible for national law to discriminate (a) between full-time and part-time judges, or (b) between different kinds of part-time judges in the provision of pensions? However, in coming to the view that those questions needed to be referred to the Luxembourg


36

The eventual ruling of the CJEU in response to the questions referred in O’Brien has

re-affirmed that:96

“there is no single definition of worker in European Union law: it varies according to the area in which the definition is to be applied”.97

So far as the context of Directive 97/81/EC on part time work is concerned, the CJEU

in O’Brien re-visited its earlier approach in C-313/02 Wippel,98 and observed that,

while “a worker comes within the scope of the Framework Agreement on part-time

work when he has a contract of employment or an employment relationship as

defined by the law, collective agreement or practices in force in the Member States”

(para.33), nevertheless “the discretion granted to the Member States by Directive

97/81 in order to define the concepts used in the Framework Agreement on part-time

work is not unlimited” (para.34). Making reference to paragraph 55 of its recent

judgment in Case C-61/11 PPU (in the criminal proceedings against Hassen El Dridi,

alias Karim Soufi),99 the CJEU particularly stressed that “Member States may not

apply rules which are liable to jeopardise the achievement of the objectives pursued

Court, the United Kingdom Supreme Court made a number of observations which suggested that the terminology of the “employment relationship”, and, possibly, the modern approach to considering the scope of individual employment protections in the United Kingdom (at least, where these derive from the level of the European Union – as is the case in a large number of instances) has been placed “centre-stage” for social policy-makers and the judges who have been charged with the task of “fleshing out” the content of what has been identified as less than adequate legislative drafting and detailed guidance on this important issue.

96 The court formally ruled that: “1. European Union law must be interpreted as meaning that it is for the Member States to define the concept of ‘workers who have an employment contract or an employment relationship’ in Clause 2.1 of the Framework Agreement on part-time work concluded on 6 June 1997 which appears in the Annex to Council Directive 97/81/EC of 15 December 1997 concerning the Framework Agreement on part-time work concluded by UNICE, CEEP and the ETUC, as amended by Council Directive 98/23/EC of 7 April 1998, and, in particular, to determine whether judges fall within that concept, subject to the condition that that does not lead to the arbitrary exclusion of that category of persons from the protection offered by Directive 97/81, as amended by Directive 98/23, and that agreement. An exclusion from that protection may be allowed only if the relationship between judges and the Ministry of Justice is, by its nature, substantially different from that between employers and their employees falling, according to national law, under the category of workers.” and “2. The Framework Agreement on part-time work concluded on 6 June 1997 which appears in the Annex to Directive 97/81, as amended by Directive 98/23, must be interpreted as meaning that it precludes, for the purpose of access to the retirement pension scheme, national law from establishing a distinction between full-time judges and part-time judges remunerated on a daily fee-paid basis, unless such a difference in treatment is justified by objective reasons, which is a matter for the referring court to determine.”

97 Paragraph 30: “As the parties in the main proceedings, all the governments having lodged submission and the European Commission acknowledge, there is no single definition of worker in European Union law: it varies according to the area in which the definition is to be applied (Case C-85/96 Martínez Sala [1998] ECR I-2691, paragraph 31, and Case C-256/01 Allonby [2004] ECR I-873, paragraph 63).”

98 C-313/02 Wippel, [2004] ECR I-9483. 99 A case concerned with the operation in Italy of Directive 2008/115/EC of the European

Parliament and of the Council of 16 December 2008 on common standards and procedures in Member States for returning illegally staying third-country nationals [Official Journal 2008 L 348, p.98].


37

by a directive and, therefore, deprive it of its effectiveness” (para.35), and, in

particular, “a Member State cannot remove at will, in violation of the effectiveness of

Directive 97/81, certain categories of persons from the protection offered by that

directive and the Framework Agreement on part-time work” (para.36).

It will now be for the United Kingdom Supreme Court to address the issue of “who is

an employee” in the context of judicial office-holders seeking pension rights by

reference to Directive 97/81/EC on part time work.100 Whether the recent

observations of the CJEU will serve to encourage any change in approach by United

Kingdom judges where the issue of “worker” is considered for the purposes of

ensuring freedom of movement for workers and employers, however, remains

unclear. Undoubtedly, the observations of the CJEU in O’Brien, taken together with

the approach in PPU (in the criminal proceedings against Hassen El Dridi, alias

Karim Soufi), as regards any attempt by a Member State government to apply rules

which are liable to jeopardise the achievement of the objectives pursued by a

directive, are of general application, and not confined to the particular instrument in

issue during the O’Brien litigation.101 However, the “worker” scope of the free

movement arrangements provided for by the Treaty has not been a matter which has

raised its head in many United Kingdom reported cases, and regard must also be

had to an observation by the Luxembourg court in O’Brien reiterating that the

framework agreement with which Directive 97/81/EC deals “does not concern the

free movement of workers”.102

In consequence, for the Common Law judge in the United Kingdom, whether faced

with arguments in relation to part-time workers, free movement rights, or any other

field in which the notion of “worker” raises its head, it may be argued that, since the

CJEU has confirmed in O’Brien that ““there is no single definition of worker in

European Union law: it varies according to the area in which the definition is to be

100 The case will eventually return for consideration by the United Kingdom Supreme Court, which, at

the date of writing, has not yet fixed a date for a hearing. Thereafter, whatever outcome is eventually reached by the Supreme Court will be applied at first instance in relation to what has now become the United Kingdom’s fastest growing “multiple” case before the Employment Tribunals. See, for example, “8,000 judges in line for pensions windfall”, The Times, 2 March 2012.

101 Indeed, they might simply be seen as a modern re-statement of the position already indicated 35 years ago in Case C-75/63, Unger – a case concerned with the operation and effect of the free movement provisions for workers. See supra.

102 See at paragraph 50 of O’Brien, where the court is dealing with the argument that “judges as a whole do not fall within the scope of Directive 97/81 and the Framework Agreement on part-time work because, under Article 51 TFEU the free movement of workers does not apply to activities involving the exercise of public authority”.


38

applied”, little has changed to assist the judge faced with the “worker” issue since this

author suggested that: 103

“Labour law in the United Kingdom currently stands ill-equipped to respond effectively to the swiftly-changing phenomena emerging in a labour market which has changed out of all recognition in the course of a quarter of a century. Unrecognised as a ‘discipline’ in its own right, and without the institution of a true specialist ‘Labour Court’, it struggles to deliver the necessary sensitivity to the industrial relations subject matter with which it is so intimately involved. Notwithstanding a proven ability to assimilate the value systems inherent in the regulatory structure and mechanisms of the European Union, the foundations of labour law at the beginning of the 21st century remain constrained by traditional Common Law concepts – ‘the employee’, ‘equality of bargaining power’, the undesirability of restrictive covenants on grounds of ‘public policy’, inappropriately applied doctrines relating to ‘duress’ and to ‘illegal contracts’, and a whole host of other issues.”

Of the “constraining features” identified there, perhaps the problems surrounding the

identification of “the employee”, and the associated issues touching the scope of

application of modern statutory employment protections in the United Kingdom

remain as those most urgently in need of re-evaluation in the light of modern labour

market conditions. Perhaps the best that can be said is that:104

“While the adoption by the International Labour Organisation in 2006 of its Recommendation concerning the employment relationship,105 may not appear, at first glance, to impact substantially upon the world of the Common Law judge in the United Kingdom, it may just be that its timing, coupled with the questions arising in the European Union context out of the Supreme Court’s reference in O’Brien v Ministry of Justice, will serve to concentrate the minds of those responsible for developing effective labour regulatory policies for those engaged in the world of work in the 21st century to come up with something better than the unsatisfactory state of affairs which has prevailed since the “watershed” which marked the shift towards a dominance for normative statutory provisions as the basis for ensuring “workplace justice” over the past four decades.”

Freedom of Establishment, Services, and the Right to Engage in Industrial Action

No mention of the free movement rights of employers can ignore the storm of

controversy which has accompanied the delivery of judgments by the ECJ in a

quartet of cases: Case C-341/05, Laval; Case C-438/05, International Transport

Workers’ Federation and Finnish Seamen’s Union v Viking Line ABP and OÜ Viking

Line Eesti; Case C-319/06, Commission v Grand Duchy of Luxembourg; and Case

103 European Commission, The Evolution of Labour Law (1992-2003), Volume 2, National Reports

(Luxembourg 2005), at p.520. 104 Alan C. Neal, in F.Pennings & C.Bosse (eds), op. cit. 105 ILO, Employment Relationship Recommendation, 2006 (R198), adopted on 15 June 2006.


39

C-346/06, Dirk Rüffert, in his capacity as liquidator of the assets of Objekt und

Bauregie GmbH & Co. KG v Land Niedersachsen. Those decisions have made

abundantly clear that, when it comes to balancing the “economic” and the “social”

dimensions of the internal market, there is only one winner – and that is not the

cause of protective labour law!

The development of the Luxembourg court’s position, which has involved

consideration of the right of establishment and to provide services, as well as the

operation of Directive 96/71/EC concerning the posting of workers in the framework

of the provision of services, has been consistent – if not attractive to commentators

who look to champion the rights of workers and the maintenance of a high level of

employment protection as part of the “social dimension” of the enlarged European

Union – and has emphasised the role of the court as “the guardian of the treaties”

rather than as a radical institution open to the accusation of “running wild”.

However, from the outset, the debate in relation to the composite litigation was

further complicated by an anticipation in many quarters – especially at the time of the

judgments in Laval and Viking – that the ECJ might be prepared to pronounce upon

the existence/extent of some “right to strike” within the framework of EU regulatory

provisions.106 As if that were not enough, further considerations for “fundamental

human rights”,107 in the context of the 1950 European Convention on Human

Rights,108 have also added to the mix – both at the EU level and at the level of the

individual Member States.109

The fact remains, however, that this episode in the development of the acquis

communitaire provides a pretty unequivocal answer to any experiments undertaken

in the laboratory to which reference was made at the outset of this presentation. As a

general rule, “economic freedoms” will trump “social policy initiatives”. The original

106 See, for example, the observations of the late Brian Bercusson, in B.Bercusson, “The trade union

movement and the European Union: Judgment day”, (2007) 13(3) European Law Journal 279. 107 See T.Novitz, “Labour Rights as Human Rights: Implications for Employers' Free Movement in an

Enlarged European Union”, in Catherine Barnard (ed), (2007) 9 Cambridge Yearbook of European Law 357.

108 Particularly by reference to the scope of the right to freedom of association in Article 11 of that instrument.

109 Indeed, the impact upon important fundaments of the Swedish industrial relations system and its regulatory framework (arising, in particular, out of the judgment in Laval) have given rise to significant concern amongst commentators in that Member State. See, for example, J.Malmberg & T.Sigeman, “Industrial Action and EU Economic Freedoms — The Autonomous Collective Bargaining Model Curtailed by the European Court of Justice”, (2008) 45 Common Market Law Review 1115, and the temperate comments in M.Rönnmar, “Laval returns to Sweden: The Final Judgment of the Swedish Labour Court and Swedish Legislative Reforms (2010), 39(3) Industrial Law Journal 280.


40

“economic” concept of the 1957 European integrationist adventure has been fully

restored. The 1944 Philadelphia Declaration that “Labour is not a commodity” finds

almost no resonance in the contemporary EU trajectory. The declaration in the

Presidency Conclusions to the 1989 Madrid Summit, that “in the course of the

construction of the single European market, social aspects should be given the same

importance as economic aspects and should accordingly be developed in a balanced

fashion”110 now suffers from a fundamental disequilibrium in favour of the “economic

dimension”. All in all, a depressing landscape for those “traditionalists” who might

maintain that the function of labour law is to ensure protection for the worker in the

face of an inequality of bargaining power with the employer. Unless, of course, the

“human rights” cavalry of the Council of Europe can ride to the rescue, whether

directly – as part of an extended acquis established by virtue of Article 6(1) TEU – or

indirectly, through the consequential operation of Article 6(2) and (3). But don’t hold

your breath!

Fears have been voiced that the propensity to “social dumping” is now free to

develop apace – particularly where significant differentials in wages, terms and

conditions of work, and enforcement mechanisms to ensure delivery of employment

protections are perceived to continue as between many of the older established

Member States of the EU and some of the more recent accession countries.111 Of

even greater concern to many – and particularly to the European Trade Union

Confederation112 – is the prospect of what is perceived as “an attack upon trade

unions and collective employee voice”, by reason of the lingering uncertainty about

the availability of economic damages for unlawful action such as that involved in the

Swedish Laval case.113

110 Madrid Summit, June 1989, Conclusions, at para.1.1.8. 111 For a thoughtful consideration of some of the issues in play, see C.Barnard, “Social Dumping or

Dumping Socialism”, (2008) 67 Cambridge Law Journal 262. 112 See, for example, ETUC response to ECJ judgements Viking and Laval, Resolution adopted by

the Executive Committee of the ETUC at its meeting of 4 March in Brussels (EC.179). 113 See, for example, K.Apps, “Damages claims against trade unions after Viking and Laval”, (2009)

34 European Law Review 141, and N.Reich, “Horizontal Liability in EC Law: Hybridization of Remedies for Compensation in Case of Breaches of EC Rights”, (2007) 44 Common Market Law Review 705. The approach of the Swedish Labour Court when the Laval case eventually returned after the ECJ ruling is considered in M.Rönnmar, “Laval returns to Sweden: The Final Judgment of the Swedish Labour Court and Swedish Legislative Reforms, (2010) 39(3) Industrial Law Journal 280. It may be noted, however, that, while the issue of liability in damages remains a matter of conjecture as regards the exercise of freedom of establishment and the freedom to provide services, the position in relation to contraventions touching the freedom of movement of workers has been clarified in Case C-94/07, Raccanelli [2008] ECR I-5939, where liability in damages for violations of EU law has been established for private parties.


41

As one commentator has put it:114

“The Laval and Viking judgments will certainly arouse a lively debate among lawyers and politicians on the “spill-over effects” of the EU free movement rules to traditional social policy objectives and collective action by labour unions of Member States. Both judgments certainly tend to a more “liberal” and less ”social” approach by invoking a certain precedence of free movement rights over the fundamental right to strike, despite the “social rhetoric” of the ECJ”,

and who would disagree? The National Judge as “European Judge” – or more?

It may be argued that issues such as the content of the notion of “the worker” are

familiar matters to national judges dealing with labour law cases, and, even, that

issues arising in relation to the scope of “the right to strike” are familiar fodder for

national judges (whether in specialised “Labour Courts”, or in the general civil courts

of the Member State). Most national labour judges have become painfully familiar

with the operation of EU regulatory provisions as they affect such fields as non-

discrimination, protective rights in the context of transfers of enterprises or collective

economic dismissals, or the protection of the health and safety of the individual at

work. Indeed, even for the Common Law judge and the labour judge in the United

Kingdom, only two decades after Lord Denning expressed the view that:

“Our sovereignty has been take away by the European Court of Justice. Our courts must no longer enforce our national laws. They must enforce community law. No longer is European law an incoming tide flowing up the estuaries of England. It is now like a tidal wave bringing down our sea walls and flowing inland over our fields and houses to the dismay of all”,

a modicum of comfort is felt with the demands of wearing the dual hats of “national”

and “community” judge, in the course of participating in that:

“… special field of judicial co-operation under Article 267 which requires the national court and the Court of Justice, both keeping within their respective jurisdiction, and with the aim of ensuring that community law is applied in a unified manner, to make direct and complementary contributions to the working out of a decision.”115

114 N.Reich, “Free Movement v. Social Rights in an Enlarged Union - the Laval and Viking Cases

before the ECJ”, (2008) 9(2) German Law Journal 125. 115 Case 16/65, Schwarze.


42

Over a period of nearly four decades, United Kingdom judges have learned to

respect and apply the principle of “the supremacy of EU law”,116 have acquired the

ability of their Swiss counterparts purposively to “fill lacunae” in regulatory

provisions,117 and have even shown a willingness to suspend the operation of an Act

of Parliament in the face of the expressed will of “the Mother of Parliaments”!118

However, when it comes to issues touching the freedom of movement of workers and

employers, as well as in relation to the right to freedom of establishment and to

provide services, discomforting issues of justiciability and judicial competence begin

to raise their heads, as the balance between the “economic dimension” of the

European Union and the “social dimension” is fought out by reference to the

regulatory arrangements which have been developed for national labour markets.

While politicians are content to continue the practice of “legal dumping” of ever-

increasing EU-inspired regulatory matters upon national labour courts or tribunals,

and are quick to criticise when judicial decisions on particular matters diverge from

their political judgments as to the appropriate outcomes, little attention tends to be

paid to the functions of the labour judge, or, indeed, to whether the judicial forum for

resolving economic/social tensions is appropriate at all. The “special qualities”

required of the labour judge, identified by the recently-retired President of the Israeli

Labour Court, 119 may not derive from the classical career paths of most judiciary, but

are, by and large, acquired “on the job”.120 Over time, the labour judge may acquire a

familiarity with the actors on the industrial relations stage, some appreciation of the

“dark arts” of “human resource management”, received perceptions of “fairness”, 116 "If the supremacy within the European Community of Community Law over the national law of

member states was not always inherent in the EEC Treaty it was certainly well established in the jurisprudence of the Court of Justice long before the United Kingdom joined the Community. Thus, whatever limitation of its sovereignty Parliament accepted when it enacted the European Communities Act 1972 was entirely voluntary. Under the terms of the 1972 Act it has always been clear that it was the duty of a United Kingdom court, when delivering final judgment, to override any rule of national law found to be in conflict with any directly enforceable rule of Community law.", per Lord Bridge, in Factortame (No 2), [1991] A.C. 603, at 658.

117 See the approach of the House osf Lords in the case of Litster v Forth Dry Dock and Engineering Co Ltd, [1988] UKHL 10, following on from their position adopted in Pickstone v Freemans Plc, [1988] UKHL 2.

118 As was the inclination of the Divisional Court in relation to the Merchant Shipping Act 1988. See the extensive litigation history in the Factortame cases, and, in particular, the relief initially granted in Factortame (No.1).

119 See S.Adler, "The Role of Judges in the Implementation of Social Policies", (2002) 18(4) The International Journal of Comparative Labour Law and Industrial Relations 341 – a paper developed in the light of discussions at the Ninth Meeting of European Labour Court Judges, Geneva, 3-4 December 2001.

120 To quote from a Swedish national report upon which Adler draws, “Judging may very well be described as a lifelong education, and the experiences [of judges] from a long row of cases certainly serves as an education in itself…the most important education is the actual judging”.


43

“reasonableness”, “proportionality”, “justification”, and a host of other notions at play

in the balancing of interests within the world of work.

However, where economic judgments of the kind involved with exercise of the rights

to freedom of movement come into play, are these truly justiciable and appropriate

for judges? Even if they are, is this something for the first instance judge, or does it

raise issues about and challenges for judicial policy-making which are particularly

appropriate to be dealt with at higher (appellate or Supreme Court – or, even,

Constitutional Court) levels?

Even assuming that one accepts the role of the judge in such matters without more,

further questions immediately spring to mind. What evidential considerations should

or can a judge take into account? Where might the burden of proof lie – and is there

any matter in respect of which it might be permissible to take “judicial notice”? For

example, if the government of a Member State is seeking to establish “justification”

for a measure introduced in legislation – as can be seen in the conduct of the

litigation in Case C-393/10, O’Brien – what evidence can or should be required to

establish economic propositions in respect of such matters as the possible differential

impact of a particular measure upon men and women?121

And what of the judicial response to submissions as to the appropriate balance to be

struck between differing interests and/or objectives? For example, in the context of

immigration policy – which might directly affect the operation of the Treaty provisions

on freedom of movement – is it legitimate to sacrifice the protective right of an

individual worker to a macro-economic vision put forward by a national government?

These, and many other, issues arise at a time when fundamental questions remain

as to the level of functional equivalence which is being achieved by different Member

States in their delivery of EU legal obligations, when institutions other than the CJEU

(in particular, the European Central Bank)122 are playing an increasingly influential

role in limiting the scope of “social dimension” protective provisions, and when there

is an increasing propensity to seek the imposition of “one size fits all” approaches to

matters (including in relation to the operation of the labour market) which self-

121 For the potential problems facing the government as litigant in such proceedings, see, for

example, the various views expressed in relation to data produced by the United Kingdom government in the older case of R. v Secretary of State For Employment, Ex Parte Seymour Smith and Another, [2000] UKHL 12.

122 See the role of that institution in relation to the various “Memoranda of Understanding” imposing “conditionality” upon three of the Member States within the Eurozone – referred to supra.


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evidently present themselves in sharply differing ways as between one Member State

of the EU and another.

Not to mention the challenges of applying the extended acquis to take into account

provisions in the Charter of Fundamental Rights of the European Union 2007 in the

aftermath of the revised Article 6(1) of the TEU, the clarification (and possible

unravelling) of Protocol (No.30) on the application of the Charter of Fundamental

Rights of the European Union to Poland and to the United Kingdom, and the infusion

of “human rights” perspectives from the jurisprudence of the European Court of

Human Rights, in the wake of the TEU Article 6(2) accession to the European

Convention for the Protection of Human Rights and Fundamental Freedoms!

Spare a thought, then, for the plight of the judge in resolving this “tangled web”.

Steve Adler, discussing the role of judges in the implementation of social policies,

has commented that:

“…it may be argued that social policy determines a country’s quality of life. Labour Courts have an important role to play in implementing and making social policy. Labour Court judges, therefore, should be aware of the way in which they make social policy. Their judgments should reflect and discuss the value judgments made, and the social policy developed. … In most nations, the Labour Court is the worker’s only forum for enforcing his or her labour rights and, therefore, we must ensure that they can adequately perform their task.”123

The 19th century composer Sir Arthur Sullivan and his librettist partner William

Schwenk Gilbert lamented the fact that:

“When constabulary duty’s to be done, to be done, a policeman’s lot is not a happy one”.124

How much more might that be said to be the case when “judicial duty’s to be done”.

Certainly, though, in undertaking the endeavour, one has learned to expect a rather

more soul-searching and conscientious approach than the same Gilbert and

Sullivan’s judge, who, in summing up his judicial career, success, and general

principles, assures us that:125

Though all my law be fudge, Yet I'll never, never budge, But I'll live and die a Judge!

And a good Judge, too!

123 S.Adler, op.cit., at p.376. 124 W.Gilbert & A.Sullivan, in their 1879 operetta “The Pirates of Penzance”. 125 W.Gilbert & A.Sullivan, “Trial by Jury” (1975).

Europarechtliches Symposion 2012 - …Symposion 2012 Bundesarbeitsgericht Erfurt, 26. - 27. April...

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