Agreements under threat

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There are 267 different firms employed at Lindsey oil refinery alone. Is European law keeping bosses in line with national agreements on pay and conditions? Robert Jackson reports

There have been plenty of warning signs that the process of European economic integration was likely to create flashpoints unless decisive action was taken to protect workers' interests. As long ago as October 2005, unions involved in the joint National Engineering Construction Committee published a special report entitled "Protecting National Collective Agreements in UK Construction". In this the unions called for a clear commitment from Labour to abide by the terms of the Warwick agreement, in which the government had assured the unions (just prior to the last election) that a relatively new piece of European Union (EU) legislation, the Posted Workers Directive, would not be used to undercut existing pay rates and conditions.

The aim of this report was to ensure that "the UK construction industry is protected from unregulated wage competition" and "to guarantee a platform of fairness for non-UK workers in an environment free from exploitation".

The development of the Posted Workers Directive came about (very slowly, over a 20-year period) due to the increased transnationalisation of labour within the EU and specifically because of what had been happening in the German construction industry in the 1990s, during the boom period after reunification. Then the construction industry workforce in Germany - about 800,000 workers - was split 50:50 between domestic workers and those from other EU member states. This included a very sizeable contingent of about 60,000 British construction workers unable to find work at home because of the last recession (the "Auf Wiedersehen, Pet" generation).

The German construction and building union, IG Bau, began to notice subcontract firms (mainly from Portugal) taking advantage of "freedom of services" provisions within the EU because they could offer labour at an even cheaper price than those from other Central and Eastern European countries, which were bound by law to pay prevailing German wage rates. It took some time until the EU attempted to regulate this situation in 1996 by means of the Posted Workers Directive. It stipulates that workers from EU countries should be employed according to the conditions prevalent in the country where the project is fulfilled, rather than being paid the rates they would have received in their home country.

However, this directive only requires that the minimum terms and conditions of employment set down by national law or "universally applicable" collective agreements be extended to posted workers. In Britain there is no procedure for declaring the universal applicability of collective agreements. The reason for this is that all workers employed in the British engineering construction industry have their pay and conditions determined by a national agreement between the employers and the trade unions called the "large sites" agreement, or the NAECI "Blue Book".

Ironically, this collective agreement was originally established jointly by the major employers in the industry and the trade unions with the express aim of preventing "wildcat", or unofficial, disputes and first came into operation in 1981. Unlike most other national agreements, which tend to set minimum levels of pay for an industry, the NAECI sets actual rates which all firms need to pay to their workers. Under the terms of the current NAECI agreement this is £14 an hour for an advanced craftsman, whereas the national minimum wage is £5.73 an hour.

This agreement has until now acted as an important bulwark against any attempt by one firm to undercut another - it's in the interests of employers as well as the unions that everybody pays the same rate. It would, however, be naive to ignore that subcontractors are going to try to find ways of avoiding paying the full rates and, in the more general construction industry, examples are rife of fly by night operators who pay as little as they can get away with.

Only last month the building industry union, UCATT, won a case preventing a recruitment agency, Jark Recruitment, from paying below the construction industry minimum rate (which is exactly the same as the national minimum wage) on a PFI project at Peterborough Hospital. At another PFI site, in Mansfield, the subcontractor hired by the Swedish firm Skanska was found to have been paying Lithuanian workers less than £100 for working more than 100 hours, an action which UCATT described as "appalling, systematic abuse of vulnerable migrant workers".

Membership of the NAECI includes all of the big name multinational construction firms who carry out construction projects throughout the world and routinely subcontract parts of their work. At Lindsey oil an astonishing 267 separate firms are currently employed on the one site.

Most of these firms will bid for work in other parts of the world, and it is not uncommon nowadays for them to retain their own labour force which is trained up to do the specific type of work. Most workers employed in the British construction industry will at some stage in their working life have worked in another EU member state in this way. Current estimates put the number of British workers "posted" to work elsewhere in Europe at roughly three times the number of workers from other EU member states working in Britain (47,500 to 15,000).

Suspicion and speculation

But although the NAECI has acted as a very effective instrument for maintaining stability for nearly 30 years in this context it is not regarded as a legally enforceable agreement under British law and so is not considered as affected by the Posted Workers Directive. There is even a suspicion that some of the big firms might be tempted to get along without the NAECI. And there is speculation that the government itself might be wondering if it needs to go along with the NAECI terms, especially as it is the overall contractor for the Olympic Games - by far Britain's biggest engineering construction project of the next five years with ever escalating project costs.

The Labour government has repeatedly claimed that its "more flexible" approach to labour market liberalisation has been responsible for producing a sustained period of job growth in Britain. Recent years have seen advocates of a more rapid liberalisation of European labour markets (like Peter Mandelson) pressing for the removal of any remaining barriers to the free movement of both labour and capital.

The upshot is that in the last two or three years there have been a series of attempts by subcontracting firms in other EU states to circumvent the requirements of the Posted Workers Directive. In a series of landmark cases, the European Court of Justice (ECJ) has repeatedly upheld these companies' attempts to undermine the legislation.

The most relevant to the Lindsey oil dispute is what happened in the Laval case, where Latvian construction company Laval was awarded the contract to carry out construction work on a school in Sweden following a public tender process. When Laval "posted" a number of workers from Latvia to work on the site in May 2004, the Swedish building workers' union initiated negotiations with Laval to conclude a collective agreement but Laval refused to sign.

Instead the company signed a collective agreement with its own building sector trade union in Latvia which agreed wages lower than those which would have been required in Sweden. The Swedish union then organised a blockade of the construction site with the support of other unions. But the ECJ held that the blockade unjustifiably restricted Laval's freedom to provide services under Article 49 of the EC Treaty. This effectively nullified any protections under the Posted Workers Directive.

In the Lindsey oil case the workers employed by the Italian subcontractors, IREM, were covered by the terms of the Posted Workers Directive. But the protections it is meant to provide give no guarantee that workers' terms and conditions for the industry will be honoured. It transpired in an Acas report published last month that the Italian workers employed by IREM were in fact being paid the full rates under the "Blue Book", although IREM did appear to be saving on costs by not paying travel and accommodation allowances.

During the Lindsey oil dispute the strike committee adopted some progressive demands that did not get press attention. These included calls for all immigrant labour to be unionised and for trade union assistance for immigrant workers, including interpreters, to promote active integration on site.

Next time any action over this issue is to be taken the anger and frustration that engineering construction workers rightly feel about having longstanding terms and conditions undermined should be taking a pop at the real culprits - Gordon "Bulldog" Brown and Mandelson, not fellow workers.