4. Working Group Discussion Reports: Session 1 · 7th ANNUAL LEGAL SEMINAR EUROPEAN LABOUR LAW NETWORK WORKING GROUP DISCUSSIONS With regard to portage salarial, it is often uncertain

7th ANNUAL LEGAL SEMINAR EUROPEAN LABOUR LAW NETWORK

WORKING GROUP DISCUSSIONS

4. Working Group Discussion Reports: Session 1

4.1 Discussion questions

Working Group on “Non-standard employment: What can the EU do? ‘’

Friday 28 November: 09.45 - 11.15 hrs.

Questions to be discussed:

1. Where EU/national labour law does not apply to new employment forms:

a) Is this non-inclusion, in your view, a circumvention of EU/national labour law ?

b) should/could the scope of the EU directives/national labour law be amended to include

them?

c) should new EU-level regulation be adopted in relation to these new employment forms?

2. Where EU/national labour law does apply to new employment forms:

a) are labour protection rules hampering the functioning of these new employment forms,

and:

b) if so, should this be addressed?

4.2 Working Group Discussion Reports

4.2.1 Working group 1 chaired by Prof. Francis Kessler

The non-inclusion of new forms of employment at EU / national level does not necessarily lead to

circumvention of law because different new forms of employment are already covered by national

legal regulations (e.g. employee sharing via agency work or job sharing via part-time work). In

Sweden, for example, the balance of protection of employees who work under new forms of

employment is similar to that of employees with standard employment contracts. Moreover,

temporary agency work will become increasingly attractive. This is also strongly supported by

employers. Nevertheless, there are of course ways to circumvent various labour protection

measures in practice. With regard to temporary agency work in particular, employers attempt to

circumvent employment protection legislation by hiring self-employed persons via sub-contracts

or service contracts (the Netherlands).



With regard to portage salarial, it is often uncertain whether an employment relationship does in

fact exist or not. This scheme also raises the question whether the Agency Work Directive applies

(Italy). It is important to ensure that social security contributions are being paid. This would

require a ‘second generation’ of directives which cover new forms of employment. Moreover,

many people are forced to work as freelancers or as self-employed persons without benefiting

from social security or employment security. One possible solution to this problem could be the

definition of economic dependence of a worker at EU-level. Perform work within the scope of

economic dependence should entail social security protection and employment protection

(Austria). By applying such a definition, (EU) legislation could prevent the circumvention of social

security protection.

Nevertheless, the lack of EU definitions in this field is a problematic. In the Netherlands, for

instance, no definition of either self-employment or of the status of an employee exists, though it

is very useful to have such definitions in practice. It would also be very beneficial to provide self-

employed persons with employment protection because an increasing number of people are

becoming self-employed due to the liberalised market without benefiting from any security. One

option could be to restrict access of unskilled workers to liberalised professions.

Participants from Poland, Portugal, Macedonia and the Netherlands agreed that there is a lack of

definitions of forms of employment at EU level and that additionally a directive covering atypical

employment would be very useful. In Portugal, many claims regarding the status of the individual

as an employee or self-employed person are brought before the courts. Employers are very

creative and legislation must therefore be flexible as well to adapt to new developments (the

Netherlands). But they are not. For the last ten years, the Swedish legislator has been trying to

include on-call work into legislation. Workers who are hired for irregular situations may be

considered profitable short-term "solutions" and employers often depend on such solutions due

to economic fluctuations. Nevertheless, no legislation exists.

Another suggestion of a participant from the Netherlands is to let the tax authorities determine

the status of the worker, i.e. whether s/he is self-employed or not. The participant from Ireland

strongly agreed with this suggestion. Ireland promotes the freedom of contract. With regard to

zero-hours contracts, the employer or employee should explain the reasons for concluding such a

contract, i.e. it must be justified to offer such a form of employment. The ECJ has held that zero-

hours contracts are in line with EU legislation, but in most countries such as Austria, Spain or

Germany, this form of employment is against the law.



In Poland, telework is very common, but it is very difficult to enforce safety and health regulations

for this form of employment because it is nearly impossible for the employer to control the

employee`s work flow from a distance. It is therefore much easier to hire self-employed persons

or other freelancers because health and safety legislation is not applicable to them.

Participants from Italy and Slovenia agreed that it is crucial to regulate both standard employment

contracts as well as atypical forms of employment. One of the EU’s objectives is to fight

unemployment. Employment does not only entail working under a regular employment contract,

but also working under atypical or new forms of employment. We should therefore adopt

regulations at EU level that cover all persons engaged in the labour market. Another suggestion is

to analyse all forms of employment at EU level and to prohibit certain precarious forms of

employment (Portugal).

The participant from Slovenia underlined that every person engaged in the labour market counts,

and that every person should be part of a national social insurance scheme.

Moreover, social dialogues within each sectoral branch could be useful. Collective agreements or

guidelines could be one option for dealing with new forms of employment, but it is uncertain

whether the objectives would actually be met. Nevertheless, amendments in the field of telework

were urged by the social partners and social dialogue played a very important role in this respect.

Sectoral dialogues could definitely be one option for arriving at a viable solution on new forms of

employment.

4.2.2 Working group 2 chaired by Prof. Leszek Mitrus

Introductory remarks

The general agreement was that traditional forms of employment should not be discounted, since

they still constitute the major legal framework for dependant work and represent the

overwhelming majority of the labour force, despite the development of new forms of

employment. In addition, there was widespread agreement that major differences with regard to

new forms of employment exist between the Member States. The members of the working group

also acknowledged that much more can be done at national level than at European level in terms

of regulating new forms of employment.

1. a. It was generally agreed that neither EU nor national labour law is directly violated where

those rules do not apply to new employment forms. It should be noted that new forms of



employment can be regulated by civil law. However, the EU Charter of Fundamental Rights should

be mentioned in this regard. The Charter refers to “workers”, and it would therefore be

appropriate to introduce a minimum floor of labour rights. Such a step might be considered a

means to grant a basic level of protection to all persons who perform dependant work.

1. b. There is no need to amend EU Directives to include new forms of employment. Directives are

not necessarily the most appropriate channel to deal with new forms of employment (see also

point 1c below). At the same time, there could be room for broad interpretation by the ECJ. The

Court could decide, for example, that certain elements of protection apply to new forms of

employment as well. At Member State level, there is a broad margin of discretion for national

authorities who are free to enact appropriate rules and extend protection. Considerably

discrepancies exist between states. Some countries have legal frameworks on new forms of

employment, while others do not have any experience with such forms of employment at all.

Therefore, a mutual learning process and a sharing of experiences might be desirable.

1. c. There is no room for new EU directive(s) on new forms of employment. First of all, there is no

clear legislative competence for the EU to enact such legal acts. In addition, the EU cannot

regulate pay, although this factor is undoubtedly a crucial element of protection. During the

discussion, it was concurred that there might be room for negotiations by social partners at

European level. Sectoral dialogue could be an option, for example. The open method of

coordination could be considered as well. However, it was generally agreed that much more can

be done at national level.

2. a. There is a risk that labour law provisions might hamper the functioning of new forms of

employment. Although every worker should be entitled to a certain level of protection (see also

question 2b below), new forms of employment should not be overregulated. Levels of protection

that are too high may definitely be an obstacle, as they might “extinguish” these emerging forms

of employment. We should be reminded that new forms of employment often drive innovation

and are voluntarily chosen by the respective individual(s). There is room for action by national

authorities—the German regulation on on-call contracts was mentioned as an example.

2. b. The question of new forms of employment is not only the employer’s responsibility, it should

also be addressed as a matter of social policy, especially in the context of flexicurity and the fight

against social exclusion. The following issues, inter alia, could be regulated: education and long-life

learning, health and safety at work, and health care. After all, the status of a

worker/employee/self-employed person to a large extent determines his/her social rights, e.g.



with regard to his/her retirement pension. The question whether new types of contracts should be

discussed and introduced could also be considered.

The observance of existing rules should be subject to strict control by state authorities (e.g. by the

labour inspectorate) to prevent labour law violations (e.g. by false self-employment). In case of

violations of labour legislation, the parties’ intention should be taken into account.

Collective protection has been traditionally deemed a crucial component of the European Social

Model. Therefore, the collective dimension should be considered as well. “New types of workers”

usually do not enjoy collective protection, for example, zero-hours workers are not unionised at

all. It might be desirable to modify the traditional approach and to “give them a voice”.

4.2.3 Working group 3 chaired by Dr. Lorna Mifsud Cachia

1. a. The expert from Cyprus noted that a certain fluidity and complexity in the relationship

between a worker/employee and an entrepreneur/employer does not mean that there is no

contract of employment. It was argued by a number of participants that non-inclusion is not

necessarily a circumvention of EU/national labour law, even though these atypical forms of

contract have clearly for the most part developed because of the circumstances prevailing in the

labour market. Most participants agreed, however, that the new forms of employment are forms

of avoidance of employer obligations. Furthermore, it was argued that “shape-shifting” of

companies (crowdsourcing, temping agencies, shady employment agreements and relationships)

is also a way of using legal personality to “immunise” employers from legal obligations. In some

cases, however, including Malta, it was clear that directors of such companies become personally

liable for violations of labour law.

A direct reply to the question is that in some cases, non-inclusion could represent a circumvention

of EU/national labour law. It was also argued that the fluidity of atypical contracts could very well

be a result of the fact that they are too fluid to fall within the ambit of stringent and strict laws. At

any rate, however, it might very well be that such contracts have been conceived to fall outside

the ambit of EU law.

1. b. The (nearly) unanimous reply here is that it is not absolutely possible to do so. For example,

what information is an employer going to give to employees hired on a crowd-sourcing basis?

Some situations simply cannot be determined easily. Indeed, it is not easy to include all different

forms of employment in all different legislations. Insofar as applicable, it might be desirable, but

this objective could be seriously undermined due to certain limitations posed by the realities of



such contracts. Another factor to consider is that the higher the degree of regulation, the more

advanced the attempts of evasion. Furthermore, there is really no consent on the extent of

employment protection.

1. c. The prevailing reply was “no” for a number of reasons. The national expert from Italy, for

example, made it clear that not all forms of atypical contracts exist in Italy; Malta and other

participants (Portugal, Slovenia and others) also stated that they had not encountered all forms of

atypical employment in their countries. Hence, how can there be any regulation on something that

does not exist in the EU as a whole. Furthermore, a regulation at EU level could actually minimise

the level of protection that already exists in some Member States. This is highly undesirable,

because some Member States implement regulations in a manner they deem fit. In other words, a

system may already be in place in a Member State which might be prejudiced by an EU level

regulation.

Furthermore, both more empirical and more juridical studies are necessary as to whether the

umbrella term “atypical contracts” applies in a sufficient number of Member States to warrant an

EU-level regulation. Moreover, a given concept may be interpreted differently in one Member

State than in another, and since not all forms of atypical contracts are found in all Member States,

this is quite logical.

2. a. The representative from the UK stated that if labour protection rules hampered the

functioning of these new employment forms, this would actually be at least supportable. Judging

from what was said by those who contributed to the discussion, consensus was reached insofar as

question 2. a) was based on a wrong assumption. If EU/national labour law does apply to new

forms of employment, this would be the result of legislation (and debate) and a possible

obstruction of the new forms of employment is (only) intended. Against this background, the

representative from Austria reported on a court ruling of the Austrian Supreme Court in which

zero hours contracts and on-call work were deemed void. In other words, it may very well be that

legislation aims to hamper the functioning of such contracts because they contribute to the

erosion of employment rights gained over the last one hundred years. Complaints were made that

there are no sufficient data to allow for a sound evaluation. Indeed, some countries (such as

Austria) banned some forms of atypical contracts entirely. Other states (such as Malta) have no

regulation and primarily apply the Employment Status National Standard Order.

2. b. The same replies given for 2 (a) were given to this question. The issue is not whether this

should be addressed, but rather whether these new forms of employment are involuntarily being



hampered by labour law. It was, however, argued that we should not forget that some Member

States are experiencing some of the highest levels of unemployment since World War II and this

issue should therefore only be addressed if it does not impede the creation of employment.

Needless to say, however, a delicate balance should be struck between the creation of

employment (as well as jobs of this nature) and the protection of worker rights and, multo magis,

the non-erosion of worker rights due to these forms of employment.

Conclusion

Additional research needs to be carried out on whether these new employment contracts merely

seek to erode workers’ rights or whether they exist because they are a clear and unequivocal reply

to the demands of the present and prevailing labour market.

4.2.4 Working group 4 chaired by Prof. Wilfried Rauws

1.a. It was generally agreed that the non-inclusion, as of yet, of new employment forms into EU or

national law is not a circumvention of EU/national labour law, because a lack of specific

regulations for new forms of employment is simply a consequence of the new situation we find

ourselves in. Moreover, the EU acknowledges the principle of freedom of contract. Some asserted

the opposite, saying that the non-inclusion is indeed a circumvention.

In several Member States (Austria), a differentiation is made between social security and labour

law. Labour law mostly applies to workers/employees only, not to freelancers, self-employed

persons, entrepreneurs, etc. (i.e., to atypical forms of employment). However, both

workers/employees and atypical workers/employees are covered by social security legislation and

they have to pay social security contributions. This differentiation could perhaps be the right

flexicurity approach to deal with these new forms of employment in the new labour market. In

some other countries, workers involved with new forms of employment are protected by the

health and safety regulations.

One specific challenge with regard to new forms of employment was emphasised: not only is the

regulation of such forms of employment difficult, but inspections to determine whether

regulations are being complied with (Cyprus on zero hours contracts and Finland on maximum

working time of posted workers) are particularly difficult.

1.b. It was mentioned that national labour laws are often not flexible enough to include all new

forms of employment. Moreover, the question is whether all of these forms should be dealt with

in the same way or whether a different approach should be taken towards each new form of



employment. It was also purported to first determine whether the EU directives already apply to

these new forms of employment. The Working Time Directive, for example, applies to an

autonomous definition of “worker”, i.e. the new forms might very well already be covered by the

Directive. This would perhaps be a reasonable approach as regards the applicability of other

directives as well.

Furthermore, the issue of opportunity of regulation was discussed. Some participants support the

regulation of new forms of employment as soon as possible to eliminate employers’ possible

incentive to abuse the existing regulations, while others favour of waiting to see how these new

forms of employment will develop and to obtain a clear view of how they could fit into the existing

labour law framework.

Crowd source employment raises the question of who is the most important employer. Zero-hour

contracts (ZHC) know issues of legal subordination and of minimum working hours. In some

countries, zero-hours contracts are not allowed, because the law obliges the employer to lay down

in the employment contract the weekly working time.

1.c. On the question whether the new forms of employment should be regulated at EU level, the

opinions were divided. Some Member States purported that EU level regulation is not necessary

when a new form of employment poses a problem in a given Member State. The issue of zero

hours contracts, for example, is very topical in the UK, whereas in Austria and Germany, this form

of employment does not exist because the employer is required to provide the employee with a

fixed number of working hours. A participant from the UK proposed to not try and fit new forms of

employment and issues related thereto into the existing legal framework, but rather to use the

realities as a starting point and try to regulate these new forms from there.

Some delegates also mentioned that employers’ interests should also be borne in mind. They have

to apply many different (and often difficult) regulations, with high fines as sanctions. However, the

high levels of abuse of new forms of employment by employers in some Member States suggest

that employers have no problem interpreting the framework of regulations.

In conclusion, if EU level regulation were to be deemed advisable, it would be good to regulate the

issues in separate legislation for each new form of employment (e.g. crowd sourcing: the most

important issue is to identify the employer; zero hours contracts: the most important issue is to

identify the number of hours worked), according to the features of each form. More EU legislation

seems improbable at this moment.



2.a. b. New forms of employment should be divided into employment forms that are beneficial for

the employee and forms that are not. The beneficial forms need to be promoted, not hampered,

while the non-beneficial forms should be regulated in order to protect the employees. French

regulation of employee job sharing is specifically tailored to that particular form of employment

and is efficient. On the other hand, in Belgium and Austria a law applies that covers but is not

specifically tailored to that form of employment and consequently hampers the development of

this form of employment. In Hungary, a brand new labour code was adopted to regulate new

forms of atypical employment, but due to Hungary’s financial and social circumstances, this

regulation could be unfavourable for employees. Many employees are forced to resort to new

forms of employment and do not have the chance to transition into traditional contracts of

employment.



5. Working Group Discussion Reports: Session 2

5.1 Discussion questions

Working Group on “Civil Law Contracts” Friday 28 November: 12.15 - 13.15 hrs.

Questions to be discussed: 1. Does national/EU labour law apply fully or partially to civil law contracts?

2. Should national/EU labour law apply fully or partially to civil law contracts?

3. Should the applicability of labour law regulations be determined on the basis of the reality of

the agreement?

4. Which factors would have to be decisive (dependence/reciprocity/etc) regarding the

applicability of labour law regulations?

5. How are courts dealing with this issue in your country?

5.2 Working Group Discussion Reports

5.2.1 Working group 1 chaired by Prof. Francis Kessler

In most countries, civil law contracts are regulated by the Civil Code. They are obviously meant to

be employment contracts, which would actually provide the employee with more security. In

Poland and Portugal, for example, civil law contracts are very common and they are often used to

circumvent labour law and employment security measures. A clear definition of both types of

contract (civil law contracts as well as employment contracts) at EU level could possibly lead to

more clarification and a prohibition of certain types of contracts because too much flexibilisation

in the field of labour law could lead to undermined labour rights and social security.

In Ireland and the UK, the first question with regard to civil law contracts often determines the

status of the individual as an employee or self-employed person. The second question determines

the jurisdiction of the courts. There is in fact no common labour court in Ireland, but it would be

easier to decide in favour of an employment contract rather than of a civil law contract. An

agreement could be concluded by collective agreement, which would regulate further details on

certain status. In Sweden and France, for instance, collective agreements for freelancers



(journalists) exist and regulate their status and fees. Discussions in the Netherlands on this issue

are ongoing.

In Germany, such “dependent freelancers” are often classified as employee-like persons

(arbeitnehmerähnliche Personen). They do not have supervisors but work in a dependent

relationship. The definition of employee-like persons is enshrined in section 12 a TVG

(Tarifvertragsgesetz). Section 12 a TVG demonstrates that economic dependence can be

transformed into an operational definition. Moreover, a distinction is made between civil law

contracts (Dienstverträge, section 611 of the Civil Code) and contracts for services (Werkverträge,

section 631 of the Civil Code) which are concluded for the performance of a specific task. Some

time ago, a large hotel company for instance wanted to hire housekeepers on the basis of service

contracts, claiming that employment contracts could not be concluded because housekeepers

would be working independently and results-oriented (cleaning each room). This example

demonstrates the abuse of such type of contracts. Moreover, service contracts are also in use in

cases of (cross-border) outsourcing.

The participant of the Netherlands identified a problem related to the Posting of Workers

Directive and the definition of the status of a worker, namely that the definition of the host

country applies to the posted workers. Such workers can, for instance, be self-employed according

to Polish law, but are classified as employees in their host country. An industry-specific solution

might therefore be the right way to resolving this issue.

The participant from Italy stated that the presumption of a status of employee applied to all

workers could be a very useful tool. This type of presumption was established in 2012 in Italy and

has proven successful, particularly as regards disguised employment relationships, bogus self-

employment and undeclared work. The participant from Portugal asserted that this form of

presumption is very useful and helps courts decide certain cases.

Guidelines that are developed and published by the European Commission could also help clarify

and modify national problems in this field. The participant from Macedonia suggested publishing

an international catalogue of criteria to clarify the status of workers. Another option could be to

issue a presumption of the status of employment at EU level (Portugal).

In France, it is the other way around. As a self-employed person, the individual has to prove that

he/she actually falls under the definition of the status of an employee, hence no presumption of

employment as in the case of Spain or Italy exists.



5.2.2 Working group 2 chaired by Prof. Leszek Mitrus

Introductory remarks

While the “old” EU Member States often face the problem of bogus self-employment, Central

European states contend with disguised civil law relationships. The bottom line is that labour law

violations should be retained. The binary system is characteristic of the Central European states,

i.e. no additional categories between regular employment contracts and civil law contracts exist in

principle. This is one of the reasons for the deep segmentation of the labour market. Some of the

questions that will need to be considered in the near future are whether a new type of contract

for the performance of work is necessary and how to effectively deal with civil law contracts.

1. EU law does not generally apply to civil law contracts. National authorities are free to introduce

individual measures on the status of persons performing work. Major discrepancies exist between

the Member States. One example is the German regulation on “employee-like persons”. In Poland,

home workers enjoy some limited labour rights. In addition, the draft of the new Labour Code of

2006 introduced certain rights for civil law contractors who perform work on a permanent basis

for a specific “employer”. However, this draft has not yet taken effect.

Major discrepancies on the status of employees vs self-employed persons could emerge, since

demarcations could be blurred. It might also be disputable who should determine the status of the

respective individual. This prerogative could be assigned to the tax or social security authorities,

for example.

2. Though there seems to be no good reason to extend the scope of directives, the idea of a

common floor of rights could be considered (see report of the first discussion). National

authorities are free to introduce rules on civil law contractors. This might involve constitutional

issues as well, for example, whether civil law contractors should enjoy the right to minimum pay.

There might also be some room for manoeuvre with regard to granting basic social protection to

all workers. In addition, a more balanced approach to the social security and taxation system

might be necessary. In other words, not only labour and employment law are at stake.

In some countries, there might be an urgent need to regulate the status of civil law contractors or

of atypical workers, in others, this might not be considered a priority at all. It could also be argued

that amendments should be gradually introduced with a long-term perspective. Not only statutory

law is relevant in this respect, collective labour agreements at plant or sectoral level can also

regulate the status of civil law contractors to a certain extent.



In Poland, there is currently a heated debate on whether to extend the right to establish a trade

union to all workers. Currently, only employees are entitled to this right. The current legal status

has recently been criticised by the International Labour Organization.

It should also be mentioned that legal regulations are not the only means available to deal with

this problem. Public opinion or mass media can also pressure employers to improve working

conditions or raise wages.

3. The answer to this question should definitely be affirmative. It is not the description and name

of the contract that should prevail. The realities of the agreement, especially its application in

practice, should be a decisive factor of any evaluation. The parties’ intentions need to be taken

into account as well. In addition, the loyalty of a worker should be rewarded. Economic growth

should be compatible with the level of worker protection and could consequently be enhanced,

which is usually not the case.

4. There are plenty of criteria that are crucial for determining the nature of a contract. It seems

that the key elements for the applicability of labour law include dependence (either personal or

economic), subordination, and personal performance of the work. Another factor that ought to be

taken into account is whether the work is carried out regularly. Legal definitions and case law may

vary between the countries.

5. When a worker initiates legal proceedings, the court will deal with the case, i.e. the judiciary’s

involvement depends upon the initiative of the worker. Discrepancies exist between the Member

States. It seems, however, that workers are not very keen to lodge claims against their employer,

unless a major dispute erupts between the parties (e.g. with regard to unlawful dismissal) or if an

accident happens at work. In addition, it seems that the involvement of the labour inspectorate

could be an important factor with regard to observance of labour law. For example, the labour

inspectorate could check civil law contracts with regard to bogus self-employment and impose

fines. It is, of course, debatable whether such checks would be effective. Effective inspections

should not entail an unreasonable burden and should not be regarded by employers as an affront.

In addition, not only the letter but also the spirit of the law needs to be considered. Cross-border

administrative cooperation should also be realised through the labour inspectorates.



5.2.3 Working group 3 chaired by Dr. Lorna Mifsud Cachia

1. In Poland, rules on health and safety apply to civil law contracts (question 1). The same is true in

Portugal where regulations to prevent discrimination also apply to these contracts. In this

Member State, an escape towards concluding civil law contracts is evident. The regulations

contained in a new act on bogus self-employment are difficult to implement due to high

unemployment.

Two experts took stock of the Posting of Workers Directive. In terms of scope, the participant from

the European Parliament explained that it does not cover self-employment. The representative

from Hungary referred to the lack of a European definition of self-employment, which is why there

is reluctance in Hungary to include the term into national law.

The expert from Hungary stated that the Posting of Workers Directive has been implemented in

Hungary, but that no European definition of self-employment exists. The Cypriot participant

asserted that there is a clear problem with jurisdiction in Cyprus due to the difference between

civil law contracts and employment law contracts, whilst in Slovenia, all economically dependent

individuals are covered by law, irrespective of whether they are working under a civil law contract

or an employment contract. In France, a clear distinction is made between self-employed and

employed persons, but it could very well be that a self-employed relationship is declared an

employment relationship. The moderator also asked whether the law could legally replace the

consent between the parties to enter into a civil law contract with a relationship imposed by law.

It was agreed that as long as some basic rights (which need to be defined) were safeguarded,

there should not be an issue here.

2. The same ideas in reply to question (1) were reiterated. However, it was very clear that the

issues of consent, context, and actual facts of the relationship should be taken into account.

Indeed, the parties had to have the liberty to enter into whatever contact they deem fit but if

certain minimum criteria are present (to be decided on a case-by-case basis), then national/EU

labour law should apply only in these circumstances.

3. With regard to question 5, the vast majority of participants confirmed that the agreement

represents the basis for determining the applicability of labour law regulations (“substance over

form”). This was the prevailing opinion. Although an employee’s consent may be of major

importance, it was agreed that it is often ineffective (invalid) due to dependency, as the

representative from the Netherlands pointed out. The expert from Slovenia reported on the



national Labour Act which includes elements of the term “employee”. It intends to give no option

for parties to choose once these elements are met. In Romania, according to the country

representative, the Labour Code has been modified to fight undeclared work; now, no one can be

employed without a respective contract (document), which causes problems in terms of proving

the actual status of an employee before the courts.

Not just one single factor would have to be decisive as regards the application of labour law

provisions (question 4). It appears to be generally accepted that dependence is a crucial criterion,

though it is necessary to examine a whole range of factors (“the full relationship” as the

participant from Cyprus called it). One speaker challenged the value of the working group

questions, provoking reflection on whether it might be more useful to try to define the term

“employer” (instead of “employee”). Iceland again looks at substance rather than form. A case-by-

case basis seems to be the prevalent modus operandi of courts that deal with this issue (question

5). Several speakers noted the need to think about the reasons why these new forms of

employment are being used. There was no opposition to the assessment that more work needs to

be done to accurately describe these new forms prior to a decision on whether or not more

regulation is appropriate. Indeed, however, dependency seemed to be an underlying factor in

determining whether an employment relationship exists.

5.2.4 Working group 4 chaired by Prof. Wilfried Rauws

1. In most countries, a dual system exists, i.e. there are two different forms of contracts:

employment contracts based on the Labour Code (for employees), and civil law contracts based on

the Civil Code (for other types of work, such as work in a self-employed capacity etc.) (Austria,

Hungary, Poland, Finland, Greece, Bulgaria, Portugal). In this dual system, labour law only applies

to employment contracts, not to civil law contracts, with the common exceptions of health and

safety regulations, anti-discrimination regulations, etc.

In Belgium, social security regulations apply to all forms of work (e.g. to economically independent

persons, self-employed persons), i.e. not only to labour contracts.

In Greece, legislation (since 1990) allows economically independent persons to bargain

collectively, but no such collective agreements have been concluded to date. In Poland, self-

employed persons are not allowed to organise themselves in trade unions. The government knows

that this rule violates ILO convention 87 and that it needs to be changed.



In Austria, a third form of contract exists for ‘employee-like persons’; according to the regulations,

the employer needs to pay social security contributions and the employee-like person enjoys

rights in terms of non-discrimination and health and safety.

2. In all countries represented in the working group, some parts of labour law apply to civil law

contracts. This mostly comprises regulations on non-discrimination, health and safety, etc.

An issue that was raised here is the definition of what constitutes a self-employed person or an

economically dependent person (to determine whether they really fall within the “civil law

contract” category). In Portugal, when 80% of the individual’s work is performed for one

entrepreneur, the individual is considered economically dependent. This is a rebuttable legal

presumption. In Hungary, this amount is 100 %. In Greece, when a person earns money through

(personal) work for one employer and works for that employer for at least nine months, he/she is

considered economically dependent. This is a rebuttable legal presumption.

One very important aspect of this question is the enforceability of the qualification as an

employment contract. In some countries, only the courts can issue such a judgement (Ireland,

Bulgaria, Poland), in others, labour inspectorates can inspect the work places and can hand the

case over to the public prosecutor (Portugal).

In Poland, an additional issue is raised: because self-employed persons are not allowed to organise

themselves in trade unions, even if the trade union argues that a person is a bogus self-employed

person and is actually an employee, trade unions are also not allowed to represent them in court.

3. In all countries, freedom of contract exists. However, in most countries (Finland), the court

actually examines the facts; these prevail. Belgium acknowledges the primacy of written contracts,

but the courts can change the qualification of the contract if they deem that the facts are pointing

in the other direction. In Ireland, the employee can go to court and has the burden of proof that

the qualification of his/her contract is not correct.

The problem that many countries face in the current economic climate is that even though

persons actually have the right to an employment contract, they defend their status as self-

employed persons in court because they do not want to lose out on the work (“better this job than

no job at all”).

4. Both factors would have to be decisive, they should be complementary criteria. The criterion of

“economic dependence” is not detailed enough. One possibility is “directly under the control of an

employer”.



5. In some countries, courts regularly requalify civil law contracts into employment contracts. In

Austria, there is an automatic conversion of ‘economically dependent persons’ civil law contracts

into employment contracts based on case law. Employers then have to pay social security

contributions going back up to 5 years (in other countries, 3 or 10 years).

In yet other countries, there is a movement in the opposite direction: there are fewer cases of

economically dependent persons being qualified as employees (Belgium and Greece). In Greece, it

is the State itself that makes extensive use of civil law contracts.



6. Discussion with the audience and the Social Partners

6.1 Discussion with the audience

6.1.1 Plenary discussion after Prof. Deakin`s keynote speech

During the Thursday afternoon session, a plenary discussion took place after Prof. Simon Deakin’s

keynote speech on New Forms of Employment: Implications for EU Law – The Law as it Stands.

The first issue discussed during this session was whether the proposition of extending the EU’s

regulatory mechanisms would result in the dilution of the quality of workers’ protection. The

United Kingdom can be regarded as both a winner and a loser in this respect. When the UK

adjusted the balance using criteria based more on the business model than on the social/welfare

state, the long-term consequences of this choice were not yet known. The basic question here

should be whether the concept of the employment contract is narrow or wide. If we loosen the

test of subordination and replace it by economic dependence, then self-employed persons who

are dependent could be protected. It was argued that it is not possible to extend every labour law

right to so-called autonomous workers. If an employee loses his/her stable job, then he/she is

compensated. If an employee does not have a stable job, then he/she is not protected. In France,

the test of subordination applied by the Cour de Cassation is stringent. There have been cases of

musicians, artists, etc. that were contrary to the freedom of movement rule.

The discussion continued with the argument that if protection were extended, incentives to

circumvent regulations would be eliminated. This argument was criticised as having a one-sided

dimension. We should also take into consideration the collective voice mechanisms for workers. In

the U.S.A., where there is no collective voice, the Californian courts have modulated the standard

employment relationship. There are empirical studies in Silicon Valley that indicate that weaker

laws lead to less patenting and fewer start-ups.

The discussion went on with the issue of holiday entitlements and sickness pay for zero hours

contract workers. Zero hours contract work is not a legally recognised form of work in the UK.

Therefore, these entitlements do not yet have a specific status. If an individual is recognised as a

worker, then he/she is entitled to paid leave. If an individual is recognised as an employee, then

he/she is entitled to statutory sick pay. The question that arises at this point is how working time is

calculated to determine the qualifying period for entitlements. It would be difficult to prove



entitlement to these rights. That is, each worker has to find out on his/her own whether he/she is

entitled to these rights. The courts also play a role in determining these parameters.

As regards the question whether zero hours contracts create new jobs, it was asserted that the

social security law in the UK applies a strict conditionality test for unemployment compensation.

People are encouraged to conclude zero hours contracts due to the tax credits provided. This is a

policy measure which subsidises this kind of work. The consequence of this policy is income

inequality due to the zero hours contract.

The development of new financial mechanisms was touched upon. These financial mechanisms

are a mix of hard and soft law. The question posed was whether these mechanisms lack

competence and political sensitivity in labour law matters. Adopting a new directive was not

considered realistic. Soft law can achieve a great deal in labour law. The Employment Strategy

involves a lot of learning. There is evidence from Sweden that the Open Method of Coordination is

working. Countries that use civil law contracts are quite sceptical about soft law, which in practice

could prove to be very useful. It was argued that the EMU had a negative impact on social rights.

However, there is a gap here that labour lawyers could explore: we cannot expect incentives and

innovations to require social rights. The economisation of labour law opens new opportunities. We

are advised to defend social rights against economic interests. Trade-offs in economic terms

should show complementarities with labour law and fiscal and financial stability.

6.1.2 Plenary discussion after Ms. Toumieux `s keynote speech

A speaker from Germany stated that too much credit is being attributed to the directive. He added

that the problems linked to new forms of employment have to be resolved by appropriate means;

the respective directive, which he referred to as a “Cinderella directive”, is a ‘thing of the past’.

The keynote speaker replied that the directive is without prejudice to the national rules which

implement it and also provides for specific tools – such as the obligation to inform about normal

working hours – which can also be applied to these forms of employment; in her view, zero hours

contracts are practically incompatible with this obligation.

A European Commission representative asserted that the directive is indeed significant. He said

that it contributes to the transparency of the labour market and may also provide greater clarity

on issues as diverse as professional training, leave and health insurance. The keynote speaker

promoted a concurrent approach: In addition to the directive’s provisions, the member states’

statutory regulations on working time ought to be applied.



The other keynote speaker, who had made his speech earlier that day, noted that the dependence

on the scope of working hours is problematic. Moreover, there is no special statute on on-call

work. Thus, the directive could be useful. What appears to be a problem could actually be an

advantage: In his view, the politically ‘non-contagious’ character of the directive also suggests that

it could eventually turn out to be a successful tool in dealing with new forms of employment.

Another speaker suggested that lawmakers believed the directive would not make much of a

difference. According to the speaker, it reflects a different era. It is impossible to predict the

impact of the elements stipulated in Article 2 of the directive in the context of new forms of

employment. One purported deficit is the paradigm of the standard employment relationship

whereas the development of a new frame of reference is probably necessary for these new

employment forms.

In France, as stated by a representative of that Member State, the standard employment

relationship is still the most widespread form of employment (with 87% of employees having a

contract of employment of indefinite duration). Thus, the real problem likely lies outside the EU.

The speaker brought up Mexico, where informal work amounts to 60%. A global framework was

put forward to better understand the actual scope of the problem.

An expert from Germany raised the issue of informal, casual work. He expressed his concerns

about the lack of access to social security as this implies work that is not registered (or taxed). He

also mentioned China as an example of nations in which the formalisation of work is on the rise.

Social stability and cohesion become policy-related issues, though there is a major gap between

formal law and practical aspects. He concluded that it would be paradoxical if the industrialised

world abandons its labour standards while some developing countries attempt to emulate them.

Referring to a study of the ILO and GIZ, which was published in June 2014, a representative from

Germany asserted that it is very difficult to achieve the formalisation of informal work.

With reference to that point, a speaker from South Africa stated that attempts to formalise the

informal sector, especially in his country, are virtually useless.

An expert from the ILO claimed that legislation should make it easier to gain access to social

security. Tax burdens should be reduced. He emphasised that these (social and fiscal) instruments

are important supplements to the labour law implications discussed earlier.



6.2 Discussion with the Social Partners

During the Friday afternoon session, a discussion with social partners took place.

Ms. Christiane Benner took the floor and described her role at the Industrial Union of

Metalworkers (IG Metall) in Germany, saying that she is pleased to be part of this trade union and

to speak about EU legislation. 2.3 million trade union members are part of the IG Metall, among

which 2000 are IT experts and 30% are female. New forms of employment lead to new

employment strategies and new forms of legislation. The question is whether this is for the benefit

or the detriment of the workers. 22% of the workers are employed in atypical relationships. One-

third of all female employees work in atypical relationships. One tenth of all male employees are

employed in atypical work. The new forms of employment threaten trade unions’ planning of

potentials. Young people do not see any security in their future. Some people work for less than

EUR 8.5 per hour. Trade unions are particularly interested in the following issues: i) posted

workers, ii) crowdsourcing, and iii) self-employment.

With regard to posted workers, there is currently a conflict regarding collective agreements in the

metal industry. If a worker works in an atypical employment relationship for 24 months, he/she

becomes entitled to a typical work relationship. Works councils are demanding equal pay. The

working conditions should be more attractive for employers. For the 70,000 posted workers, an

individualised approach is important. With equal pay good work is performed.

As far as the service industry is concerned (e.g. engineers), one out of three service workers work

below the collective tariffs. In the steel industry, work is outsourced with works councils’ approval.

Competitiveness would grow if work is performed by the internal employees of a company.

With regard to mini jobs, the Minister of Labour has created a central information point. This

information point is not very successful.

The minimum wage in Germany will start to apply as of 1 January 2015. Some people work for less

than EUR 6.5 per hour. This is a blind spot for the union, which is trying to change this. No political

consensus exists on this issue. As of 2016, salaries should be further regulated.

A new working relationship needs to be established. After 18 months of work, posted workers may

find themselves in a new employment relationship. In Germany, the situation is not easy and

cannot be separated by political intention.

Crowdsourcing is a particularly contentious issue for IGM, together with the posting of workers

and industrial contracts. Crowdsourcing occurs because these situations cannot be modified due



to existing collective agreements. With the new digitalisation and with globalisation, it is quite

easy to reach labour forces. Commitment and support would promote regular employment. Self-

employment will grow while regular employment will decline. The existing crowdsourcing

platforms violate all norms. Work utilised by crowds should be investigated. Research efforts in

the employer-employee relationship are difficult to understand when internet is involved.

The mobile working regulation is new. Mobile working time should be recorded as working time.

Support regulations are necessary. We cannot solve the problem of outsourcing on our own.

Certain opportunities in these types of working conditions (independence, larger group of

workers) are creating a new collective intelligence. There are several risks that ought to be

mentioned at this point. There is a risk of losing full-time employment, the risk of fragmented

areas, the risk that labour rights may be neglected (within these platforms). There are also health

and safety risks. In addition, the tenderers assume no responsibilities. Finally, there is a risk of

discrepancy.

Social security measures, self-employment and crowdsourcing should be discussed. In conclusion,

employers are increasingly snubbing their responsibilities. Who would pay the actual price for

people who work like this? The companies are not assuming responsibility in this matter. There

are many challenges, risks and opportunities linked to the new forms of employment. The new

form of industrialisation has grown in importance.

The proposition is to create fair crowd labour. One way to achieve this is by contacting the

German platforms and helping self-employed workers. Good labour conditions should be

established even in the digital world.

Mr. Guillaume Cairou took the floor. In his speech, the President of the European Umbrella

Companies Federation (FEPS) focused on the system of umbrella companies, often referring to the

situation in France and thus shedding light on how the problem of fixed-term contracts in

particular is addressed in practice. He began the discussion by asking two questions: How can we

create more employment (in France)? How can we improve our economies?

First, some figures of the French labour market with an emphasis on umbrella company structures

were reported: There are 900 umbrella companies in France which, according to him, provide for a

fairly attractive, dynamic option. Contractors can be categorised as lying between self-employed

persons and wage earners. 55% of these so-called autonomous workers are women. In other

words, they are freelancers who have opted for social (security) status similar to that of regular



employees. 35% of these workers make use of umbrella companies to enter into a more

sustainable working relationship that lasts more than 3 years. 39% set up their own companies

later. 12%, however, cannot find a long-term job.

The modus operandi was then explained to the audience. There are three parties: The contractor

(“travailleur porté”), the client company where the assignment is carried out, and the umbrella

company. The company liaising between the client and the contractor is responsible for the entire

administration (e.g. invoicing, finding customers, etc.).

It is a system that allows workers to accomplish their tasks independently and has the potential of

creating up to 600,000 jobs on the French market. Workers need to fulfil two requirements: They

must have some technical as well as some commercial skills. Umbrella companies function as

service platforms, helping small firms that lack the resources to create their own HR and do not

have accountants, etc., to hire people. They basically are matchmakers. Another advantage of this

structure is that it makes it easier for people, especially youths and retirees, to reconcile their

personal and professional life.


LIST OF DELEGATES

7. List of Delegates

José ABRANTES, Member ELLN, Nova University of Lisbon, Portugal

Edoardo ALES, Member ELLN, University of Cassino and Southern Lazio, Italy

Andris ALKSNIS, Employers Confederation of Latvia, Latvia

Diego ÁLVAREZ ALONSO, Member ELLN, University of Oviedo, Spain

Geneviève AMAND, Ministry of Labour, Employment and vocational training, France

Luísa ANDIAS GONÇALVES, Nova University Lisbon, Portugal

Helga AUNE, Member ELLN, PwC, Norway

Māris BADOVSKIS, Ministry of Social Affairs and Employment, Latvia

Kadriye BAKIRCI, Hacettepe University, Turkey

Effrosyni BAKIRTZI, Staff member ELLN, Goethe University Frankfurt, Germany

Kostis BAKOPOLOUS, Athens Law School, Greece

Zoltán BANKÓ, University of Pécs, Hungary

Barend BARENTSEN, Member ELLN, Leiden University, The Netherlands

Catherine BARNARD, Member ELLN, University of Cambridge, United Kingdom

Christiane BENNER, Industrial Union of Metalworkers Germany, Germany

Gyyula BERKE, University of Pécs, Hungary

Isabella BILETTA, Eurofound, Ireland

Martin BLOMSMA, Ministry of Social Affairs and Employment, The Netherlands

Elín BLÖNDAL, Member ELLN, University of Iceland, Iceland

Magdalene BOBER, BUSINESSEUROPE, Belgium

Ildiko BODGÁL, Ministry for National Economy, Employment and Intl Organisations, Hungary

Gerrard C. BOOT, Institute for Public Law and Social Law, The Netherlands

Silvia BORELLI, University of Ferrara / CGIL, Italy

Inês BRAGA, Nova University Lisbon, Portugal

Christina BREIT, Confederation of German Employers’ Associations BDA, Germany

Douglas BRODIE, Stirling University, United Kingdom

Marjolijn BULK, FNV (ETUC), The Netherlands

Ewa CAIRNS-SZKATUŁA, Wolters Kluwer Law & Business, The Netherlands

Guillaume CAIROU, European Umbrella Companies Federation (FEPS), France

Ramona Elena CALIN, The National Council of SME (CNIPMMR), Romania

George CAMILLERI, Department of Industrial and Employment Relations, Malta


LIST OF DELEGATES

Rita CANAS DA SILVA, Member ELLN, Nova University of Lisbon, Portugal

Catarina CARVALHO, Catholic University of Portugal, Portugal

Sotiroula CHARALAMBOUS, Pancyprian Federation of Labour, Cyprus

Lakis N. CHRISTODOULOU, Christodoulou Law Office, Cyprus

Stefan CLAUWAERT, European Trade Union Institute (ETUI), Belgium

Sérgio COIMBRA HENRIQUES, Raposo Subtil e Associados, Portugal

Barry COLFER, University of Cambridge, United Kingdom

Deolinda CORREIA, Portuguese Permanent Representation to the EU, Belgium

Elena CRASTA, General Workers’ Union, Belgium

Abigail CRITIEN, General Workers’ Union, Malta

Judit CZUGLERNE IVANY, National Federation of Workers’ Councils, Hungary

Tomas DAVULIS, Member ELLN, Vilnius University, Lithuania

Julien DE BEYS, European Commission, Belgium

Michel DE GOLS, FPS Employment, Labour and Social Dialogue, Belgium

Valerio DE STEFANO, International Labour Organisation, Switzerland

Simon DEAKIN, University of Cambridge, United Kingdom

Christina DELIYIANNI DIMITRAKOU, Aristotle University of Thessaloniki, Greece

Raluca DIMITRIU, Member ELLN, Academy of Economic Studies, Romania

Theodora DITCHEVA, Main Labour Inspectorate, Bulgaria

Michael DOHERTY, Maynooth University NUIM, Ireland

Lill EGELAND, Member ELLN, Simonsen Vogt Wiig, Norway

Helle ELLEHÖJ, Ministry of Employment, Sweden

Matleena ENGBLOM, Member ELLN, Attorneys JB Eversheds, Finland

Julia ENZELSBERGER, Federation of Austrian Industries, Austria

Yvonne ERKENS, Leiden University, The Netherlands

Jacob FALSNER, University of Copenhagen, Denmark

Sjoerd FEENSTRA, European Commission, Belgium

Dagmar FELDGEN, Portuguese Permanent Representation to the EU, Germany

Colin FENWICK, International Labour Organization, Switzerland

Isilda FERNANDES, Ministry of Solidarity, Employment and Social Security, Portugal

Ana FERREIRA REIS, Portuguese Permanent Representation to the EU, Belgium

Olivera FIŠEKOVIĆ, Ministry of Labour and Pension System, Croatia


LIST OF DELEGATES

Chantal FOULON, French Business Confederation MEDEF, France

Mark FREEDLAND, University of Oxford, United Kingdom

Michael FREYTAG, Eurociett, Belgium

Jean-Pierre GABRIEL, General Confedartion of Labour (C.G.T.), France

Sacha GARBEN, European Commission, Belgium

Sanne GELDOF, Staff member ELLN, Leiden University, The Netherlands

Elena GERASIMOVA, Higher School of Economics - Center for Social and Labour Rights, Russia

Roland GERLACH, Gerlach, Austria

Rolf GLEISSNER, Austrian Federal Economic Chamber, Austria

Ivana GRGUREV, Member ELLN, University of Zagreb, Croatia

Erna GUðMUNDSDÓTTIR, Association of Academics (BHM), Iceland

Muriel GUIN, European Commission, Belgium

Tamás GYULAVÁRI, Pázmány Péter Catholic University, Hungary

Pirrko-Liis HARKMAA, LAWIN Attorney at Law, Estonia

Guus HEERMA VAN VOSS, Assisting Coordinator ELLN, Leiden University, The Netherlands

Johannes HEUSCHMID, Hugo Sinzheimer Institute for Labour Law, Germany

Johannes HÖLLER, Staff member ELLN, Goethe University Frankfurt, Germany

Veronique HOSSON, General Confedartion of Labour (C.G.T.), France

Mijke HOUWERZIJL, Tilburg University, The Netherlands

Petr HURKA, Member ELLN, Charles University, Czech Republic

Andreas INGHAMMAR, Lund University, Sweden

Marina IOANNOU, Ministry of Labour and Social Insurance, Cyprus

Christos A. IOANNOU, The Greek Ombudsman, Greece

Senad JAŠAREVIĆ, University of Novi Sad, Serbia

Danuta JAZŁOWIECKA, European Parliament, Belgium

Todor KALAMATIEV, University "Ss. Cyril and Methodius", Macedonia

Pavlos KALOSINATOS, Cyprus Labour Institute, Cyprus

Iwona KASPRZYK-SOWA, European Parliament, Belgium

Ørnulf KASTET, The Confederation of Vocational Unions, Norway

Marina KASUNIC PERIS, Ministry of Labour and Pension System, Croatia

John KELLY, National Employment Rights Authority, Ireland

Ádám KÉRI, Democratic League of Independent Trade Unions LIGA, Hungary


LIST OF DELEGATES

Anthony KERR, Member ELLN, UCD Sutherland School of Law, Ireland

Francis KESSLER, Member ELLN, University Paris 1, France

György KISS, Member ELLN, University of Pécs, Hungary

Thomas KLEBE, Hugo Sinzheimer Institute for Labour Law, Germany

Magdalena KLIMCZAK-NOWACKA, Ministry of Labour and Social Policy, Poland

Polonca KONČAR, Member ELLN, University of Ljubljana, Slovenia

Jens KRISTIANSEN, Member ELLN, Universtiy of Copenhagen, Denmark

Daniela KRÖMER, CMS Reich-Rohrwig Hainz Lawyers, Austria

Miriam KULLMANN, Leiden University, The Netherlands

Anna KWIATKIEWICZ, Confederation Lewiatan, Belgium

Anu-Tuija LEHTO, Central Organisation of Finnish Trade Unions, Finland

Jan Marco LEIMEISTER, University of St. Gallen and Kassel University, Germany

Robert LISICKI, Ministry of Labour and Social Policy, Poland

Mariagrazia LOMBARDI, Ministry of Labour and Social Policy, Italy

Maria Britta LOSKAMP, Federal Ministry of Labour and Social Affairs, Germany

Doris LUTZ, Chamber of Labour, Austria

Nikita LUYTOV, Lomonosov Moscow State University, Russia

Esther LYNCH, Irish Congress of Trade Unions, Ireland

Mariella MAGNANI, University of Pavia, Italy

Jonas MALMBERG, Swedish Labour Court, Sweden

Irene MANDL, Eurofound, Ireland

Christine MARBURGER, Staff member ELLN, Goethe University Frankfurt, Germany

Holger MENK, ZESAR Lawyer, Germany

Serghei MESAROŞ, Ministry of Labour, Family, Social Protection and Elderly, Romania

Reile MEYERS, Staff member ELLN, Leiden University, The Netherlands

Lorna MIFSUD CACHIA, Member ELLN, Dingli & Dingli Law Firm, Malta

Maria MINCHEVA, Bulgarian Industrial Association BIA, Bulgaria

Wayne MITCHELL, Department for Business, Innovation and Skills, United Kingdom

Leszek MITRUS, Member ELLN, Jagiellonian University, Poland

Annemarie MUNTZ, Randstad Holding / Eurociett, The Netherlands

Mona NÆSS, Ministry of Labour, Norway

Youliana NAOUMOVA, Djingov, Gouginski, Kyutchukov and Velichkov Law firm, Bulgaria


LIST OF DELEGATES

Alan C. NEAL, University of Warwick, United Kingdom

Ragnhild NORDAAS, Ministry of Labour, Norway

Magnús NORðDAHL, The Icelandic Confederation of Labour (ASÍ), Iceland

Natasa NOVAKOVIC, Croation Employers Association, Croatia

Pauline O’HARE, IBEC - For Irish Business, Ireland

Siobhan O'CARROLL, Department of Jobs, Enterprise and Innovation, Ireland

Jaana PAANETOJA, University of Lapland, Finland

Barbara PALLI, University of Lorraine, France

Frederico PANCALDI, European Commission, Belgium

Konstantin PAPADIMITRIOU, Member ELLN, University of Athens, Greece

Andrea PARDINI, European Central Bank, Germany

Kurt PÄRLI, Zuerich University of Applied Sciences, Switzerland

Susanne PIFFL-PAVELEC, Federal Ministry of Labour and Social Affairs, Austria

Ewa PODGÓRSKA-RAKIEL, The National Commission NSZZ Solidarność, Poland

Peter POGACAR, Ministry of Labour, Family and Social Affairs, Slovenia

Wolfgang PORTMANN, Member ELLN, University of Zurich, Switzerland

Zeljko POTOCNJAK, University of Zagreb, Croatia

Jean-Luc PUTZ, Member ELLN, Luxembourg District Court, Luxemburg

Kaspars RĀCENĀJS, Confederation of Free Trade Unions of Latvia, Latvia

Natasa RANDLOVÁ, Randl Partners, Czech Republic

Wilfried RAUWS, Member ELLN, Free University of Brussels, Belgium

Robert REBHAHN, Member ELLN, University of Vienna, Austria

Johannes REINHARD, Staff member ELLN, Goethe University Frankfurt, Germany

Katja RIHAR BAJUK, Ministry of Employment and Social Security, Slovenia

Martin RISAK, Member ELLN, University of Vienna, Austria

Aleksandar RISTOVSKI, University "Ss. Cyril and Methodius", Macedonia

Stefania ROSSI, Confindustria, Italy

Linda RUDOLPH GREISEN, The Confederation of Danish Employers, Denmark

Jan RUMMEL, Staff member ELLN,Goethe University Frankfurt, Germany

Mauri SAARINEN, Lawyers MAURI SAARINEN KY, Finland

Lene SAKARIASSEN, PwC Legal Services, Norway

Jorma SALONEN, Labour Court, Finland


LIST OF DELEGATES

Maria Pilar SANZ VICENTE, Labour Inspectorate, Spain

Laura SCHÄFER, Staff member ELLN, Goethe University Frankfurt, Germany

Bettina SCHALLER, Adecco Group, Switzerland

Isabell SCHÖMANN, European Trade Union Institute, Belgium

Robert SCHRONK, Member ELLN, Comenius University, Slovakia

Iacopo SENATORI, Marco Biagi Foundation, Italy

Vesna SIMOVIĆ-ZVICER, University of Montenegro, Montenegro

Dorothé SMITS, Greenberg Traurig, The Netherlands

Elina SOOMETS, Labour Inspectorate, Estonia

Krassimira SREDKOVA, Member ELLN, Sofia University “St. Kliment Ochridski”, Bulgaria

Silje STADHEIM ALMESTRAND, Confederation of Norwegian Enterprises (NHO), Norway

Hrafnhildur STEFÁNSDÓTTIR, The Confederation of Icelandic Employers (SA), Iceland

Lukas STRAUB, Staff member ELLN, Goethe University Frankfurt, Germany

Unnur SVERRISDÓTTIR, Directorate of Labour, Iceland

Gaabriel TAVITS, Member ELLN, University of Tartu, Estonia

Beryl TER HAAR, University of Amsterdam, The Netherlands

Luka TIČAR, University of Ljubljana, Slovenia

Claire TOUMIEUX, Allen & Overy LLP, France

Nicos TRIMIKLINIOTIS, Member ELLN, University of Nicosia, Cyprus

Riika-Maria TURKIA, Permanent Representation of Finland to the EU, Belgium

Borbala VADASZ, Confederation of Hungarian Employers and Industrialists, Hungary

Ana Isabel VALENTE, Ministry of Solidarity, Employment and Social Security, Portugal

Stefan VAN ECK, University of Pretoria, South Africa

Albena VELICOVA-STOYANOVA, Sofia University „St. Kliment Ohridski”, Bulgaria

Bernd WAAS, Coordinator ELLN, Goethe University Frankfurt, Germany

Krzysztof WALCZAK, Orłowski - Patulski - Walczak LLC, Poland

Wiebke WARNECK, ETUC European Trade Union Confederation, Austria

Manfred WEISS, Goethe University Frankfurt, Germany

Silvia WENZEL, Staff member ELLN, Goethe University Frankfurt, Germany

Monica WIRTZ, VNO-NCW (AWVN), The Netherlands

Agniezka WOLOSZYN, Ministry of Labour and Social Policy, Poland

7h ANNUAL LEGAL SEMINAR EUROPEAN LABOUR LAW NETWORK

ANNEX – KEYNOTE PAPERS

8. Annex

8.1 Keynote Papers

8.1.1 Keynote Paper by Prof. Simon Deakin

New forms of employment: Implications for EU-law – The law as

it stands

Prof. Simon Deakin, Cambridge

I. Introduction

Since 2008 there has been an increase in forms of working which demonstrate a very high degree

of flexibility of hiring and employment conditions, in addition to those associated with non-

standard work per se. Some of these, such as on-call work of the kind associated with ‘zero hours

contracts’, appear to expose workers to a high degree of insecurity and precariousness, with few

compensating benefits. Others, such as labour pool arrangements found in several member

states, may provide new types of risk sharing for workers, beyond the traditional model of the

employment contract. This paper will consider the relationship between these new employment

forms and the labour law and tax-benefit systems. A preliminary note on terminology may be

helpful: in this paper, the terms ‘standard employment’, ‘non-standard employment’ and

‘precarious work’ will be used because they refer to extant features of labour market and legal

practice and not in order to denote any normative argument for a particular form of work over

another.

II. Policy considerations

Since the 1990s the EU has followed a dual policy of encouraging diversity in employment

contracting, while seeking to regulate forms of work, sometimes called atypical or non-standard,

which in the past have provided inferior protections to workers by comparison to the so-called

standard employment relationship (SER) of full-time, regular work. This approach is exemplified

by the three Directives on non-standing working arrangements, on part-time work, fixed-term

employment and temporary employment agency work. These Directives encouraged member

states to liberalise the rules around the uses of non-standard work, removing regulatory barriers

to their use, while also providing some protections to workers employed via these forms by

enacting a right to equality of treatment with workers employed under an SER.

The dual approach of liberalisation/protection makes a number of assumptions about the

relationship between different forms of work. It presupposes, firstly, that alternatives to the SER



are valid and legitimate. This is justified on the basis that some workers and employers may prefer

the flexibility associated with non-standard forms. Secondly, the policy presupposes that the SER is

itself a valid form and merits some protection. This is somewhat paradoxical: in recognising a right

to equal treatment the directives implicitly set up the SER as the norm, or benchmark, against

which other forms are to be compared.

Perhaps this is just being realistic. Although the SER became the focal point of labour law

protections for reasons which are largely historical and at least partly contingent, and even if it is

eroding to some extent, it is not about to disappear. If regulation is to work is needs to be

premised on a realistic view of how labour markets work, and the SER remains a core part of this.

However, it needs to be recognised that the liberalisation/protection strategy, even in the very

process of encouraging and legitimating flexibility in labour contracting, could also be entrenching

the SER in a way that perpetuates dualism between different employment forms.

Dualism is a possibility because the current approach, while providing, in principle, a right to equal

treatment which uses the SER as a benchmark, nevertheless falls short of providing full equality.

Thus it may be hard, for example, for a part-time worker to find a valid comparator engaged on

full-time work. National laws implementing the Directive tend to protect the right to transition

from full-time work to part-time work but not to return to full-time work (this the case in UK law,

for example). The possible exclusion of zero hours contract workers from the Part-Time Work

Directive is a potential problem, discussed in the Wippel case (see Deakin and Morris, 2012: para.

3.58). Similarly, a fixed-term contract worker may be entitled to parity of terms and conditions

with a permanent co-worker, but is not entitled, under more than a narrow range of

circumstances, to transition to an indeterminate duration contract of employment. An agency

worker has the right to parity of treatment with a comparable permanent and regular worker of

the user enterprise, but only in relation to certain basic contract terms. Then there are the

numerous exemptions which were inserted into each of these directives and which can nullify

much of their effect for particular workers, such as the exclusion from the right of equal treatment

for workers with regular and continuous contracts of employment with their agencies. For

detailed analysis of the case law under each of the Directives, see Deakin and Morris, 2012: paras.

3.52, 3.53 and 3.58.

For these various reasons, the prevailing approach can be summed up in the following terms: (i)

the SER continues to be a valid employment form and, for many purposes, the focal point for the

way protective labour law rules are framed; and (ii) non-standard forms work are legitimate but

are still relatively under-protected by comparison to the SER; (iii) a degree of dualism in the

treatment of different employment forms is unavoidable as part of the move to a more flexible

labour market.

It may be helpful to take a step back and consider whether the liberalisation/protection approach

is working. The following points seem relevant.

There is a case for retaining and supporting the SER for at least some categories of work (Rubery,

2014). The SER model enables employers to offer secure employment to workers whose skills and

loyalty are needed for the success of the enterprise in contexts such as high-performance



workplaces. Empirical studies show a correlation between the protections associated with the SER

and innovation and productivity at firm level (Acharya, Bhagdi-Whaji and Subramanian, 2014;

Kleinknecht, van Schaik and Zhou, 2014). From this perspective, weakening the SER in the name of

flexibility is not a risk-free policy option.

Although the extent of the SER is diminishing as the numbers employed on non-standard forms of

work are rising, we are also seeing a growing emphasis on transitions between non-standard work

and the SER (Schmid, 2010). Thus the issue for policy is increasingly how to facilitate individuals’

access to the SER at certain points in the life cycle and then to more flexible forms of work at other

points, and to avoid transitions being penalised by the loss of seniority rights and occupational

benefits (Rogowski, 2014).

Non-standard forms of work may offer flexibility to both employers and workers, and may be

welcomed as such. Employers offering core workers a variant of the SER in order to win their trust

and cooperation may then have resort to less protected employment forms for other job

categories in order to compensate for the fixed costs associated with the core workforce. In this

way, dualism or segmentation of work within the firm can become a conscious strategy for some

employers. For workers, life choices and work-life balance issues may make non-standard work

desirable at certain points, for example in order to allow paid employment to be arranged around

domestic work or participation in education. However, arrangements which are privately rational

for the contracting parties may impose costs for society at large. Social costs associated with the

proliferation of precarious work may include:

· underinvestment in training for workers outside the core (Burchell and Oliver, 2014);

· increased fiscal costs, as tax credits and subsidies are provided by the state to make up for

insecurity of wages and income on the part of precarious workers (Adams and Deakin,

2014);

· reduced social mobility, as precarious jobs become ‘traps’ as opposed to ‘bridges’ into

secure work (Cahuc and Kramarz, 2004; Gash, 2008);

· physical and psychological health costs associated with insecurity and precariousness

(Burchell and Oliver, 2014);

· growing inequality associated with all of the above (Standing, 2011).

III. Specific issues posed by new forms of working: the case of ZHCs

The analysis can serve as a starting point for the discussion of how the EU should respond to the

new employment forms identified in the Eurofound report (Eurofound, 2014). These new forms,

which include zero hours contracts (ZHCs), mini-jobs and labour pool arrangements, throw up

challenges which are in many ways distinct from those which apply to part-time, fixed-term and

agency work more generally. Thus ZHCs and mini jobs, while sharing some characteristics of more

familiar types of non-standard work, are so highly irregular and precarious that they pose new

problems of regulation, which are not well captured by the model contained in the existing EU

directives on part-time work and fixed-term employment. Similarly, labour pool arrangements are



creating distinct forms of multi-party contracting, coupled with novel enterprise structures, which

are only partially addressed by the Temporary Agency Work Directive. More generally, the policy

concerns identified above – underinvestment in training, fiscalisation, reduced social mobility and

growing inequality – are intensified when we come to consider the implications of the new

employment forms. This issue will be examined through a case study of the British ZHC

phenomenon (the following analysis draws on Adams and Deakin, 2014).

The nature and effect of ZHCs

The phenomenon of zero hours contracting has become the focus of considerable public attention

in the UK in the last year, but is not entirely new, having first been identified in empirical studies

and tracked by official labour market statistics in the 1990s. A ZHC is essentially a contract or

arrangement under which an employer agrees to pay for work done but makes no commitment to

provide a set number of hours of work per day, week or month. This type of arrangement has

recently become more widespread in the UK labour market although it only accounts for a small

overall proportion, between 2% and 3%, of those in paid work. Research suggests that ZHC work is

associated with lower than average pay and with a high degree of precariousness. The Labour

Force Survey indicates that between a fifth and a quarter of ZHC workers are looking for other

employment, compared to 7% of employees with regular hours. This effect remains after

controlling for age, qualifications and industrial sector, suggesting that greater job insecurity is

related to zero hours work in general, and is not simply a pre-existing feature of areas of the

labour market where ZHCs are widespread. Only 9% of ZHC workers are union members,

compared to 23% of those in regular employment (ONS, 2014).

ZHCs are not all short term. According to LFS data from 2012, 44% had lasted for two years or

more, and 25% for five years or more. Two thirds of people employed on ZHCs report that they

have a permanent job. Although this may not accurately state the legal position (see below), it

does indicate that many ZHCs involve continuing relationships, even if the work and income are

intermittent.

However, even when they have a relatively long duration, ZHCs are insecure. ZHCs do not

generally offer full-time work: average working hours for ZHCs are 24 per week compared to 34

for all employees (CIPD, 2013). According to various surveys, somewhere between 25% and 40%

of ZHC workers say that they want to work more hours (Brinkley, 2013; CIPD, 2013). 75% of ZHC

workers report that their hours vary each week, compared to 40% of all employees (Brinkley,

2013). In a survey of businesses carried out by the CIPD, 20% of firms reported penalising ZHC

workers for not accepting work, 30% expected staff on ZHCs to be available for work despite not

offering them guaranteed hours in return, and 40% did not have policies or procedures in place for

giving ZHC workers notice of work being cancelled or rearranged (CIPD, 2013). In a survey of 450

ZHC workers carried out by the CIPD, 17% of respondents reported that they were sometimes

penalised for turning work down, and 3% said that they were always penalised. 50% said that

work could be cancelled without notice or that they could find out at the start of the shift that

there was no work available for them. Empirical studies suggest that ZHC working, in common

with other forms of precarious work, is linked to a high prevalence of workplace stress and anxiety

(Burchell and Wood, 2014).



There is a significant overlap between ZHC workers and vulnerable groups in the labour market.

ZHC workers are more likely to be below the age of 24 (37%, compared to 12% overall) and slightly

more than half of the ZHC workforce are women (53%). In workplaces where there are ZHCs,

there is a greater likelihood that non-UK nationals will be employed (48% as opposed to 25%

nationally) (Resolution Foundation, 2013).

The main reason employers use ZHCs, cited by two thirds of respondents in the CIPD study, is

dealing with peaks and troughs of demand (CIPD, 2013). ZHCs are not, however, confined to

smaller firms with a limited capital base or to firms with reduced profit margins. The use of ZHCs

to cut costs is a conscious strategy of large and often highly profitable private sector enterprises.

In the ONS business survey (ONS, 2013, over 45% of organisations employing over 250 workers

reported using ZHCs, but only just over 12% of those employing under 20 workers did so. In the

CIPD employer survey, 45% reported using ZHCs as part of a long-term strategy (CIPD, 2013).

Prominent users of ZHCs in 2014 include many listed companies and multinational enterprises

(Adams and Deakin, 2014).

Legal problems with ZHCs: employment protection rights

In UK labour law, as in other countries, the existence of a contract of employment is the gateway

to most employment protection rights (Deakin and Morris, 2012: ch. 3). There can be contract of

employment without mutuality of obligation, meaning that the employer must do more than pay

for work done: there must be an agreement to make work available over time in return for the

employee’s agreement to be available for work. Some employment rights, such as the minimum

wage and working time protections, apply both to employees and to ‘workers’ who lack mutuality

in this specific sense but who contract to supply their personal work and labour to another in

return for remuneration, and cannot be regarded as independent entrepreneurs (see generally

Deakin and Morris, 2012: ch. 3).

Part of the problem with ZHCs is precisely that mutuality of obligation is lacking: the employer only

agrees to pay for work done, not to make work available. The effect, in legal terms, is that the

individual has no contractual nexus with the employer in between assignments. This does not

necessarily prevent them acquiring employment rights. While employed under the direction of

the employer, a ZHC worker may well be an ‘employee’ and will almost certainly be a ‘worker’.

However, because of the intermittent nature of work under a ZHC, it will be almost impossible for

an individual to acquire sufficient continuity of employment to qualify for significant employment

rights, including unfair dismissal and redundancy protection which require two years of service.

Even the basic right to written information on terms and conditions of employment, which

requires continuous service of one month and is meaningless in practice if the employee is not in

work for two continuous months, is no available to many ZHC workers because of the rule that

once continuity of employment is broken, accrued service is lost (see Adams and Deakin, 2014).

The rules on continuity of employment date back to the 1960s when most employment was

regular and stable and even part-time work was exceptional. They were last amended in the 1990s

to remove provisions which discriminated against part-time workers (and were thereby indirectly

discriminatory on the grounds of sex). Amending them now to remove their negative impact on



intermittent work is straightforward from a legal-technical point of view (Adams and Deakin,

2014). Their retention is an indication that policy makers essentially see no problem in employers

being able to create pools of labour which are available to them on demand but which attracts few

or no fixed costs.

It is unclear from empirical studies how many ZHC workers are actually excluded from

employment protection rights. According to the CIPD survey, 64% of employers regard their ZHC

workers as ‘employees’, 19% think they are ‘workers’, 3% think they are self-employed, and 14%

do not know. However, as we have seen in chapter 3, classifying a ZHC worker as an ‘employee’

may not tell us much. A ZHC may give rise to employment status in one of two ways, under a ‘spot’

contract or an ‘umbrella contract’. The CIPD data do not tell us whether employers regard their

ZHCs as giving rise to umbrella contracts.

More generally, it is clear from the CIPD survey that there is considerable confusion over the legal

status of ZHC workers and over their legal entitlements. Only 59% of employers reported that

their ZHC staff were entitled to annual leave, yet it is only the self-employed who are not also

‘workers’ who are excluded from this protection. 50% of employers thought that their ZHC

workers had the right not to be unfairly dismissed; it is not clear how far this reflects a belief that

ZHC workers would typically have the requisite continuity of employment. In the CIPD’s employee

survey, 46% of respondents thought they had the right to paid leave (which is part of working time

protection), and 20% thought they had the right not to be unfairly dismissed.

LFS data suggest that only 10% of ZHC workers have a formal contractual prohibition on seeking

work elsewhere while their contract is in force, while one in eight have a restriction of some kind.

Thus the problem of ‘exclusivity clauses’ affects a small minority of ZHC workers (LFS, 2014). Even

so it is doubtful whether such clauses can be enforced under the common law of employment. If

there is an umbrella contract, an exclusivity clause would be valid for the duration of the contract,

but could only be enforced by injunction if the employer were prepared to pay the worker a salary

throughout the period in question (Deakin and Morris, 2012: ch. 4). Thus while draft legislation

has recently been prepared with a view to regulating exclusivity clauses (cl. 139 of the Small

Business, Enterprise and Employment Bill 2014), it will not make much difference to the state of

the law as it stands.

The role of the tax-benefit system in promoting ZHCs

A major factor in the recent growth of precarious forms of work, including ZHCs, is the removal of

the floor to terms and conditions of employment which was previously supplied by the social

security system. In the early twentieth century, national insurance legislation put in place the

principle that an unemployed person could not be penalised for refusing work at wages and terms

and conditions below those applying in their previous job or, failing that, below the levels set by

collective bargaining or ‘generally recognised by… good employers’ in the district or area in

question. This ceased to be the case in the late 1980s and over time conditionality tests in social

security have become stricter. Regulations introduced by the Coalition government in 2011, and

confirmed by legislation in 2013 following a legal challenge, make it possible for jobseekers to be

required to work without pay under certain circumstances. The consequences of disqualification



from jobseeker’s allowance have also been made more severe, and can include loss of all social

security benefits for a certain period.

The second major change to social security law in the 1980s was the introduction of tax credits

designed to supplement low pay. Tax credits are a form of in-work benefit provided by the state

via the fiscal system. They are designed to support households on low incomes, in particular

families with children where one or both parents are in low-paid employment.

The tax credit system currently interacts with conditionality in the operation of unemployment

benefits to create conditions for the casualisation of terms and conditions of employment. Since

the onset of the recession in 2008, the number of disqualifications for ‘voluntary’ unemployment

has increased rapidly against the background of claims that jobcentre staff are regularly given

targets for the imposition of penalties on jobseekers (Winter, 2013; Couling, 2013). There is no

statutory rule preventing an unemployed person being disqualified from jobseeker’s allowance for

refusing to accept an offer of work in the form of a ZHC, or for resigning from one.

Disqualification is more likely depending on the nature of the applicant’s previous employment

and the precise terms of the ZHC being offered. Freedom of information (‘FOI’) requests made

during 2014 have revealed instances of jobseekers being denied benefits for resigning from ZHCs

on the grounds of their failure to provide regular work or income (FOI requests, 2014).

Thus the rise in ZHCs is at least partly due to the operation of the tax-benefit system. When

conditionality rules promote transitions from unemployment into intermittent work and tax

credits subsidise flexible hours working at low rates of pay, the law is actively creating the

conditions for precariousness.

IV. Possible solutions to precariousness and dualism in labour markets

The experience of other EU systems suggests that the problems of precariousness and dualism

associated with ZHCs can be addressed. There is no straightforward equivalent of the ZHC in other

European systems, but it is closely related to a widely acknowledged category sometimes referred

to as ‘on-call’ contracts. These contracts are recognised in a majority of EU countries. The effect

of creating a distinct legal category for on-call work is that the employer must conform to certain

minimum standards in return for accessing this particularly flexible employment form, and may

have to provide a specific justification for doing so, in terms of the needs of the enterprise or

organisation. Failure to do so can lead to one of a number of legal consequences: in employment

law, the contract might be deemed to be a ‘standard’ one, conferring the normal protections on

the worker, including the right to a guaranteed weekly wage, while in fiscal law the employer

would have to pay social security contributions and related employment taxes as if work and

income were continuous.

In many countries, the extreme flexibility of the ZHC form is not recognised; to take advantage of

the ‘on-call’ category, the employer must offer some guarantee of income during periods in

between hirings. In Italy, legislation governing on-call work (lavoro intermittente) was introduced

in 2003. Under this law, any use of on-call work must be justified by reference to production

peaks and organisational needs; it may not be relied on to supply the enterprise’s general needs.

The contract requires the worker to be available to be engaged by the employer for a pre-



established period of time. Thus, like the ZHC, the contract requires availability, without

guaranteeing work. However, in contrast to the ZHC, the employer may make use of the worker

for only a limited number of days during this period. The employer must notify the worker that

their services are needed at least one working day in advance, and the contract must stipulate a

monthly allowance to be paid to the worker during the period when they are on standby, whether

or not work is provided. The employer must notify the labour office each time the worker is called

on.

In Ireland and Switzerland, forms similar to the ZHC have recently emerged, but as Italy, they are

regulated in a way which provides some income security to the worker. In Ireland, employees are

entitled to be paid at a minimum of 25% of the normal wage for any contract hours during which

they are required to be available for work, up to a maximum of 15 hours per week. This creates a

right to a minimum weekly income which assists financial planning. In Switzerland, an employee is

compensated in full for on-call time spent at the workplace, and on a part-wage basis for on-call

time at home.

In the Netherlands, on-call work was largely unregulated until the passage of the Flexibility and

Security Act (FSA) in 1999. The FSA introduced a minimum wage guarantee for on-call workers

employed for less than 15 hours per week, under which they are entitled to at least 3 hours’ pay

for each work call. After three months of paid work consisting of 20 hours or more of work per

month, an employment contract is implied, under which the worker is guaranteed to receive at

least the number of hours they had worked over the previous 3 month period. The aim of the law,

in addition to the protection of the worker, was to stop the employer using the on-call contract as

a veil for what should be standard employment. During the initial three-month period, the

employer’s needs and those of the worker can be explored and regularized, but, unlike the British

ZHC, the worker does not bear all the risk of fluctuations in demand.

In the Netherlands, on-call workers do not consistently report lower satisfaction with their

contracts than standard contract workers. Although on-call workers report lower satisfaction on

job security and wage equality, they place greater weight than standard workers on working time

flexibility and job content (De Graaf-Zijl, 2012). By contrast, 27% of ZHC workers in Britain report

dissatisfaction with their contractual arrangements. There is evidence to suggest that the

minimum wage guarantee for on-call workers in the Netherlands is not regularly enforced, but

that the presumption of a regular contract helps to reduce the uncertainty associated with flexible

work (Knegt et al., 2007). Another factor in the relative success of the Dutch experiment of

combining flexibility with security is that the Netherlands retains an employment-based social

insurance system which is coupled with universal income support, in stark contrast to the UK

position (Van Oorschot, 2006).

ZHCs are not recognized as such in Germany, but the recent experience of the ‘mini-job’ reform of

the early 2000s carries lessons for what might happen in the near future with the UK’s universal

credit system. The mini-job reform was intended to provide work incentives for individuals with

supposedly low earning potential, and to encourage more flexible hiring policies by employers

(Caliendro and Wrohlich, 2010). The law worked through a fiscal subsidy, by providing for reduced



social security contributions where individuals earned less than a lower threshold (400 euros per

month in previous years, 450 euros per month since 01 January 2013).

Some accounts argue that, in terms of their stated goals, the Hartz IV reforms were a failure

(Steiner and Wrohlich, 2005; Bosch and Weinkopf, 2008). They did not increase the work

incentives of the unemployed; the main adjustments to labour supply decisions were made by

those already in employment, who adjusted their hours downwards to meet the weekly earning

thresholds, and by the increased take up of second jobs by existing earners, mostly single men. A

major problem with the reforms was the failure to specify a minimum hours threshold for access

to the subsidy on social security contributions. In the absence of a statutory minimum wage, this

created perverse incentives, for example for the splitting of full-time jobs into a number of mini-

jobs. Often workers were worse off overall, as they were working longer hours to achieve the

same level of pay. The reforms created a group of highly vulnerable workers whose waged income

barely matched the level of social security benefits.

More generally, classifying on-call work as a new employment form runs the risk of creating new

complexities in the operation of employment law. Alternative regulatory mechanisms, such as

collective bargaining, may provide a more flexible means of controlling employers’ use of

precarious work. The use of on-call and other flexible forms of work is subject to regulation

through collective bargaining or codetermination-type mechanisms in several European countries,

and in some countries, such as Sweden, the equivalents of ZHCs may only be used after

authorisation through a collective agreement.

V. Conclusions

The rise of very precarious forms of work cannot be separated from the policy context and from

the preexisting legal framework. Labour and social security law have inherited a model of

employment, the SER, which provides functions as a coordination and risk-diffusion device, even

as it tends to perpetuate forms of segmentation and dualism. The answer to this conundrum

almost certainly lies in experimentation around a number of options: regulating on-call work

through provisions for a minimum guaranteed quantum of work or, failing that, an income

guarantee; avoiding undue fiscalisation of the employment relationship by maintaining the floor of

rights set by minimum wages and collective bargaining while treating different employment forms

in an equivalent way for tax purposes; and providing a role for collective bargaining and social

dialogue in controlling the use of precarious work. The diversity of national approaches on these

issues suggests that rather than seeking to regulate through a new directive, open coordination

approaches such as those associated with the European semester process and the emergence of

metrics associated with the social dimension of EMU, coupled with transnational social dialogue,

may be the right way forward for the EU.

October 2014



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8.1.2 Keynote Paper by Ms. Claire Toumieux

Implications of Council Directive 91/533/EEC for new forms of employment

Ms. Claire Toumieux, Allen & Overy LLP, France

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 was adopted to ensure that

employees within the European Union are provided with a written statement of the essential

conditions of their employment relationship within a short period of starting employment or

whenever those conditions are modified.

It built on Article 9 of the Community Charter of the Fundamental Social Rights of Workers which

provides that ‘the conditions of employment of every worker of the European Community shall be

stipulated in laws, in a collective agreement or in a contract of employment, according to

arrangements applying in each country’. With this in mind, the Directive establishes a uniform

framework intended to ensure this right to information throughout the European Union.

In the light of the economic crisis that has affected Member States and recent technological

developments, new forms of employment have emerged, characterised by increased flexibility.

These new practices are sometimes encouraged by voluntary reforms at national level. But despite

that, they have not been placed in a legal framework in all countries.

Given this background, the time is ripe for an evaluation of Directive 91/533/EEC to identify

whether its provisions need adapting to these new forms of employment.

In doing this, we have undertaken a two-fold examination to determine whether these new forms

- are included within the Directive’s scope or, on the contrary, have developed outside of

this framework and/or

- cause difficulties for the application of the Directive’s provisions.

This analysis has led us to consider several solutions. These differ according to the priority sought,

that is, employees’ information rights or flexibility in the definition of working conditions. In a

further step, we have sought to develop a solution that strikes an appropriate balance between

these two demands, reflecting the interests of workers and the businesses that employ them.

I. Summary of the main provisions of Directive 91/533/EEC

The Directive defines the employees included within its scope, the persons required to provide

information, the essential aspects of the employment relationship which have to be



communicated and when and how the information must be communicated. In addition, the

Directive includes certain provisions on the defence of employee rights.

Scope

- According to Article 1 of the Directive, it 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’. Logically, it can be deduced, therefore,

that any worker who is not an employee is not included within the Directive’s scope. These

are self-employed persons and individuals such as those who UK labour law regards as

‘workers’. This is an intermediate category of individuals who benefit from certain

statutory rights such as the right to paid annual leave and the minimum wage but who are

not employees and who do not enjoy the full set of rights granted to employees (in

particular, the right to notice of termination, sickness and maternity pay and compensation

for unfair dismissal).

- The flexibility in the Directive’s scope is set out in Article 1(2). Member States have the

option to exclude employees having contracts or employment relationships (a) with a total

duration not exceeding one month, and/or with a working week not exceeding eight hours

or (b) of a casual or specific nature. Member States have exercised these two possibilities.

On implementing the Directive into national law, several Member States chose, in the

name of flexibility, to remove any obligation on an employer to provide information to

employees whose contracts or employment relationships have a duration of less than one

month. This position was taken, for example, by the United Kingdom, Sweden and also

Spain.

- Other exclusions have been established by certain Member States. For example, in Italy,

where an employee is the spouse or a relative of the employer, the latter is not required to

provide the written information specified in the Directive. In Austria and Germany,

domestic workers and seasonal agricultural workers are excluded from the Directive’s

scope.

The obligations established by the Directive

Articles 2, 3, 4 and 5 determine the persons responsible for the notification required under the

Directive and the obligations relating to the information to be given to employees.

Who is required to inform employees?

The Directive specifies clearly that this is the task of ‘an employer’. At the same time, no specific

provision is made for the situation where employees have more than one employer. This leads us

to conclude that in such cases each and every employer is required, in relation to the individual

employment relationship concerned, to notify the relevant information to the employee.

When must the notification take place?

The Directive establishes the period within which employees must be informed of the essential

aspects of their employment relationship. For new contracts or employment relationships, the

employer has two months within which to communicate the information. In contrast, where there



is a change to any of the aspects referred to in the Directive, the written document must be

handed over no later than one month after the change enters into effect.

How must the notification be made?

The employee must be notified by means of a written document. In practical terms, the employer

will communicate the information by means of a written contract of employment, letter of

engagement and/or one or more other written document such as a pay slip where these contain,

as a minimum, certain essential information specified in the Directive.1

What information must be communicated?

- Directive 91/533/EEC relates to the ‘essential aspects’ of the contract or employment

relationship which it specifies non-exhaustively in Article 2(2), listing the minimum

requirements.

- These are specified as follows:

· the identity of the parties;

· the title, grade, nature or category of the work or a brief specification or description

of the work;

· the date of commencement of the contract or employment relationship;

· the expected duration of a temporary contract or employment relationship;

· the amount of paid leave or the procedures for determining such;

· the length of the notice periods or the method for determining such;

· the basic pay and other pay components and the frequency of payment;

· the length of the employee’s normal working day or week;

· the relevant collective agreements or the competent institutions that concluded

such.

- The Directive specifies additional information where an employee is posted to work in

another country to take account of the particular demands of that situation. The employee

must be informed before his departure of the duration of the employment abroad, the

currency to be used for the payment of remuneration, the benefits in cash or kind

attendant on the employment abroad and, where appropriate, the conditions governing

the employee’s repatriation.

- In two noteworthy judgments, the Court of Justice of the European Union has given a

broad interpretation to the requirements of Directive 91/533/EEC, emphasising the

obligation on the employer to supply information that is as complete and precise as

possible.

- In its judgment in Joined Cases C-253/96 to C-258/96 Kampelmann and Others [1997] ECR

I-6907, handed down while the Directive was still in the process of implementation, the

Court held that ‘the mere designation of an activity cannot in every case amount to even a

brief specification or description of the work done by an employee’. In Case C-350/99

Lange [2001] ECR I-1061, the Court held that a requirement on an employee obliging him

1 This comprises information on the identities of the parties, the place of work, the nature of the work, the date of commencement of the contract or employment relationship, the pay and the length of normal working hours.



to work overtime whenever requested by the employer constituted an essential aspect of

the employment relationship, although not mentioned in Article 2(2), and, consequently,

had to be communicated to the employee in writing.

- These two decisions reinforce the obligations imposed on employers, although in practice

employers may not always have available the information required by case-law.

What are the sanctions?

- Pursuant to Article 8 of the Directive, Member States must ensure the introduction of the

measures necessary to enable all employees to pursue their claims by judicial process after

possible recourse to other competent authorities. The sanctions chosen differ from one

Member State to the next. For example, Belgium has not provided for any sanctions on

employers who do not comply with their obligations whereas Italy imposes a fine of up to

1,500 euro for each employee not correctly informed.

- The purpose of the Directive is to ensure that employees are informed. However, the

emergence of today’s new forms of employment means that a review of its effectiveness is

has become necessary.

II. Directive 91/533/EEC and the development of new forms of employment

When drafted in the early 1990s, one of the objectives of Directive 91/533/EEC itself was to take

account of the development of new forms of working, now commonplace, such as part-time work

and telework, ensuring that every employee in the European Union has the same right to

information. Today, there are yet more new forms of employment, characterised by greater

flexibility in the working relationship. These call for an examination of (i) the Directive’s scope and

(ii) its substantive provisions.

1. Development of forms of employment not included within the Directive’s scope or whose

inclusion is uncertain.

Certain new forms of employment are not included within the scope of the Directive or their

inclusion is uncertain. This is particularly the case for employment relationships not based on

employee status. In addition, there are certain forms of employment that fall within exemptions

laid down by Member States, in accordance with the Directive, based on the volume of working

hours or the duration of the contract or, at the very least, it is unclear whether they can be

regarded not to fall within such exemptions.

a) Self-employed workers

Self-employed workers are not covered by the Directive, with Article 1 providing that it shall apply

‘to every paid employee having a contract or employment relationship’. All the same, in recent

years, self-employment has expanded considerably with the emergence of new forms of

organisation in self-employed work.

Self-employed workers increasingly engage in cooperation, working together to realise specific

projects. Such forms of cooperation may or may not be organised in the framework of a

cooperative. These workers do not necessarily share the same place of work but organise



themselves together as a network to spread the burden of certain administrative, particularly

back-office, tasks.

In addition, we have seen the development of self-employed work for a portfolio of clients

(portfolio work). This solution is sometimes chosen by individuals wishing to have greater

independence. The relationship that links the worker and client is regarded as a contract for the

provision of services and, hence, is not covered by the Directive.

Other forms of working not involving employee status

In certain Member States, the law provides for an intermediate status, located between

dependent labour (employee status) and self-employment. This is the case, for example, in the

United Kingdom where labour law establishes a category known as ‘workers’. This group is not

included within the Directive as this applies – according to the English wording of the Directive –

only to ‘paid employees’. This situation may affect a considerable proportion of a company’s

workforce, with these workers having a level of protection lower than employees. In Italy and

Germany, too, certain quasi-dependent workers have access to some of the benefits enjoyed by

employees (in Germany, for example, the right to paid leave).

On-demand work and zero-hours contracts

For certain contracts, it is difficult if not impossible to know at the time of hiring whether they are

covered by the Directive. This is the case for certain forms of on-demand work regulated by

instruments such as zero-hours contracts used in the United Kingdom and which allow the parties

not to make any commitment regarding a specific volume of work. Given that several Member

States have exercised the Directive’s option to exclude from its scope employees having a contract

or contractual relationship with a total duration not exceeding one month and/or with a working

week not exceeding eight hours, it is reasonable to ask whether these new forms of employment

are covered by those exclusions.

Difficulties encountered in applying the Directive’s requirements to new forms of employment

Article 2 of Directive 91/533/EEC lays down the requirement for employers to inform employees

of the essential aspects of the contract or working relationship. It must be questioned, however,

whether this obligation can be satisfied in the case of the new forms of employment observed

whose very objective is to allow employers, and sometimes also employees, to benefit from a

greater flexibility in certain key aspects of the employment relationship.

The Directive allows for flexibility in relation to the place of work. Specifically, it provides that

‘where there is no fixed or main place of work’, the notification may concern instead ‘the principle

that the employee is employed at various places and the registered place of business or, where

appropriate, the domicile of the employer’. This wording allows for the expansion of telework,

governed, in addition, by the Framework Agreement on Telework, agreed between the European

social partners on 16 July 2002. It is also suited to the expansion of work that is totally mobile

(‘ICT-enabled working’) not involving reference to any specific place of work currently spreading

beyond the world of sales representatives as a result of the possibilities offered, in particular, by

smart phones and tablet computers.



In addition, the Directive permits employers to provide their employees with the information

required in relation to paid leave, notice, basic pay and other pay components and the length of

the normal working day or week in the form of a reference to the laws, regulations and

administrative or statutory provisions or collective agreements governing those points.

All the same, it is doubtful that this reference allows employers in Member States with a flexible

legal framework not to define these elements and comply nonetheless with the national

implementing legislation. Rather, the provisions of zero-hours contracts in the United Kingdom or

contracts for on-demand work in Italy aimed at workers under 24 or over 55 years of age appear

incompatible with the rules of the Directive. The very essence of these contracts is that they allow

employers not to commit to a specific volume of work, whereas the Directive requires

specification of the ‘length of the employee’s normal working day or week’.

Moreover, in Lange, the Court held that the employer’s right to demand the provision of overtime

working had to be communicated in writing as an ‘essential aspect’ of the contract or working

relationship.

At the same time, with more than 1.4 million employees now working under zero-hours contracts,

this form of employment has become common practice and cannot be ignored. In as much as this

practice offers companies adaptability, allowing them to adjust their staff resources to changing

business needs, it is often presented as instrument that will encourage economic recovery or, at

the very least, as a means of limiting the impact of the crisis. At the same time, the considerable

uncertainty and the precarious situation of employees working under such contracts cannot be

ignored. They face major difficulties in organising both their working and private lives, not

knowing when they may be required to work.

In addition, mobile work (‘ICT-enabled work’), too, raises the question of how to determine

working hours. Namely, the essential characteristic of this form of employment is a maximisation

of employee flexibility in terms of when they go online to work and even if this involves pressures

not to say risks for their individual health it is also a factor that makes this pattern of work

attractive to younger workers, in particular in Nordic countries.

Similar observations can be expressed also in relation to other mandatory items of information.

Certain new forms of employment make it very difficult, if not impossible, for employers to

comply with the national implementing legislation.

In many cases, the employer is not in a position to provide even a brief specification of the work.

In France, in the framework of portage salarial, a form of quasi-dependent work for white-collar

and professional workers via umbrella companies that has considerably expanded, employees are

placed within the client company for whom they provide a service whilst remaining employed by

the umbrella company. In reality, it is the individual worker much more than the umbrella

company which has the relationship with the client for whom the services are provided. Thus, the

umbrella company is rarely in a position to specify the nature of the work.

The same is sometimes true in the case of job-sharing where the same position is shared between

several employees.



This practice, in existence in the Netherlands for many years, has expanded in numerous Member

States including Italy, the Czech Republic, Poland, Slovenia, Slovakia and Hungary. It is not always

easy for an employer to specify who will be working at a particular time or even the tasks

conferred on each employee. Nonetheless, this flexibility appears to be something that employees

themselves often favour (for example, young mothers looking to balance their working and family

lives).

Moreover, the pressures that the Directive imposes on employers are reinforced by the Court’s

earlier finding in Kampelmann (1997) that the mere designation of the employee’s activity is not

necessarily sufficient to satisfy the Directive’s requirements.

The parties may also encounter difficulties when it comes to specifying the duration of the

working relationship, in particular if the employee is hired to carry out a specific project. For

example, in the case of interim management, the term of an employee’s contract is determined by

the completion of the project, the duration of which cannot always be anticipated.

These difficulties also exist under voucher or cheque schemes for the purchase of certain services

used especially in relation to domestic work and in the agricultural sector in France, Belgium, Italy,

Greece and Austria, which leave the duration of the contract uncertain (i.e. whether it is for a

fixed-term or not), since the duration does not necessarily correspond to the frequency with which

wages are paid.

Similarly, crowdworking, a form of working in which companies and workers are brought together

through the intermediary of an online platform to carry out a particular project or task, often

offered by the workers themselves, does not sit easily with many of the information items

required under the Directive.

In these circumstances, it appears helpful to distinguish between (i) forms of employment where

the difficulties resulting from the Directive’s information requirements can be overcome and (ii)

those forms where the difficulties appear insurmountable or excessive.

(i) Difficulties that can be overcome

These difficulties arise in relation to:

Work via umbrella companies, known in France as ‘portage salarial’, where consultation with the

employee or a direct link with the client company should be sufficient to ensure that all the

elements required by the Directive can be specified even if the employer, that is the umbrella

company, is more of an administrative conduit than a party involved in defining the work to be

carried out.

Job-sharing, where, as a rule, the activities to be carried out and the length of the employee’s

normal working hours can be defined and, in addition, it appears possible that the parties ought to

be able to specify, without contravening the Directive’s requirements, a principle of substitution

by the other job-sharer in certain circumstances and subject to certain limits (defined, for

example, in terms of a number of hours).



Intermittent work, which is not incompatible with a requirement to define normal working hours

even if specification of the length of the employee’s working day or week fails to characterise

accurately the working relationship that results from such arrangements.

A contract for a project (task contract), since it appears possible that the anticipated duration of

the project can be specified together with a mention that the contract will expire only on

completion of the project.

(ii) Difficulties that are excessive or insurmountable

These difficulties relate to the following forms of employment:

Mobile working, which is associated with considerable freedom in the definition of both the place

and hours of work.

Crowdworking, a form of working in which workers and businesses are brought together at short

notice, often for a specific short-term task and for which the remuneration is only a few euro. The

connection between the two parties is established via an international platform (for example,

Amazon Mechanical Turk), often requiring no more than access to the internet. Only the work is

defined, together with its duration (number of hours) and the payment to follow. Definition of the

length of normal working hours, paid leave and, in particular, the applicable collective agreement

appears excessive in relation to this form of work.

On-demand work, such as that covered by a zero-hours contract, since the length of normal

working hours cannot be established.

Voucher and cheque schemes for the purchase of services, known in France as ‘Chèques emploi

service’. Admittedly, in many cases, such as in France, the primary purpose of these voucher

schemes is to make it easier to declare workers to the social security authorities and not to

exempt users from defining the length of the working relationship or contract. All the same, in

practice and also in other countries, they are associated with considerable flexibility in the

definition of these matters, with the obligation on the employer reduced effectively to payment of

wages due for work carried out in the course of a month.

For these forms of employment, the Directive imposes considerable difficulties on employers. This

result from the fact that, on implementing the Directive, Member States established means of

redress, allowing employees to require the provision of a written statement in accordance with

the Directive’s requirements. Consequently, employers in this situation faced with an enforcement

order would be forced to define a framework necessarily inconsistent with the very flexibility

inherent in these forms of work. Given that the Directive requires all modifications concerning the

mandatory information to be communicated in writing, employers would be frequently required

to provide such notification, entailing a considerable administrative burden, in particular, if many

employees were affected. Furthermore, in several Member States the rules governing provision of

the Directive’s mandatory information make employers that fail to comply liable to pay damages

in respect of such breach, thus exposing them to additional costs. Similarly, where Member States

have established administrative penalties for non-compliance with the information requirements,

employers with employees working in these forms of employment are necessarily exposed.



In addition, for certain new forms of employment the crucial information that characterises

forms of this kind is not included in the Directive’s requirements.

This is the case, for example, in the ever-expanding situations of postings or groupings of

employers by which businesses seek to share the cost of an employee between several employers.

Other than in the specific case of employment abroad, the Directive does not cover this situation

and, in particular, makes no provision in relation to the allocation of responsibility between the

different businesses. The example of work via umbrella companies should be mentioned here too.

Similarly, in the case of intermittent work, currently experiencing a period of expansion

particularly in eastern Europe even in the absence in certain cases of a specific legal framework,

definition of the periods worked appears crucial, although not required under the Directive.

In addition, certain new forms of employment are associated with lower levels of social

protection. This, too, is an important piece of information not required by the Directive.

III. Adaptation of the Directive to new forms of employment – possible solutions

Challenges resulting from the adoption of new forms of employment in the European Union mean

that the Directive is in need of reform. A common definition of the information to be provided

appears all the more necessary given that these forms of employment often involve working at a

distance. However, the solutions that are possible differ depending on the objective sought.

1. Proposals giving priority to workers’ information rights

If the priority objective is to improve the information given to workers in the light of new forms of

employment, there are three areas in which reform could be considered.

- The first involves expanding the Directive’s scope beyond employees to include all forms of

dependent and quasi-dependent labour. This would allow, in particular, for the inclusion of

those defined as ‘workers’ under English labour law; a group to which the statutory

provisions on notice do not apply.

- The second involves modifying to the Directive to specify that, even if the length of the

employment relationship or the weekly working hours cannot be determined at the start of

employment, once the thresholds of one month or eight hours have in fact been satisfied,

the Directive will apply. This would narrow the scope of the exemptions laid down in

Article 1(2).

It would also make clear that forms of on-demand work are included within the Directive’s

scope.

However, given that inclusion of these forms of work within the Directive would contradict

the very character of such contracts, a change of this kind is hardly likely to be acceptable

to Member States that have authorised this type of contract.

- The third involves extending the list of information specified in Article 2, adapting it to

various features of new forms of employment. Thus, Article 2 could be amended to require

employers



· to define, in the case of intermittent work, the active periods of employment,

· to specify the allocation of responsibilities in multi-employer situations, or

· in situations where the worker does not benefit from the usual protection reserved

for employees, to indicate this fact.

- And naturally these amendments would be in addition to and not in place of the

information already considered essential.

Although these suggestions result from a concern to protect workers, adoption of all three could

lead to a result which is the opposite of that intended. Namely, they would not resolve the

Directive’s fundamental inadequacies in relation to new forms of employment, which would

remain incompatible with the Directive’s requirements. Given that flexible forms of employment,

authorised by Member States, would then appear to be in clear breach of the Directive, certain

employers could be tempted to obtain the same flexibility by resorting to undeclared or self-

employed labour, thus reducing the share of employment accounted for by dependent labour

declared to the authorities and benefiting from greater social protection.

Moreover, a solution of this kind, not involving any response to criticisms of the Directive’s

excessive rigidity in relation to recent developments in EU employment practices, would be liable

to alienate workers themselves, with growing numbers appearing keen to benefit from greater

freedoms in their work arrangements.

Giving flexibility priority

If flexibility is given priority, some of the Directive’s rules could be relaxed. The exemption laid

down in Article 1(2)(b) (for contracts or employment relationships ‘of a casual and/or specific

nature’) could be modified to remove all doubts concerning its application to new forms of

employment. This would allow Member States wishing to prioritise this type of flexibility in the

fight against unemployment to take advantage of this exemption.

Another reform option is to specify that the list set out in Article 2(2) is simply indicative and not a

set of minimum requirements. In that case, the parties would be free to determine the aspects of

the contract or working relationship they deem to be essential and requiring notification in

writing. However, in our view, this solution is difficult to reconcile with the case-law of the Court

which might therefore annul any amendment of this kind, in particular, having regard to Article 9

of the Community Charter of Fundamental Social Rights for Workers.2

Opting in favour of flexibility would resolve many of the problems raised by the Directive’s

incompatibilities with new forms of employment to the extent that employees themselves could

determine, in agreement with their employer, the essential aspects of the employment

relationship for which information must be provided. Nonetheless, although flexibility of this kind

could be appropriate in the case of well-qualified employees, having greater negotiating power,

there is a real risk that it would offer insufficient protection to the overwhelming majority of

2 Article 9 of the Charter provides: ‘The conditions of employment of every worker of the European Community shall

be stipulated in laws, a collective agreement or a contract of employment, according to arrangements applying in each country.’



European workers, in particular, those employed in more traditional jobs or in jobs where certain

new practices make them increasingly precarious.

Towards a middle way

Between the two positions set out above, a third approach is possible, aiming to achieve a balance

between the flexibility businesses currently seek and the predictability of each party’s rights and

obligations, in the interests of workers and the businesses that employ them.

In developing this way forward, consideration might be given to the following proposals:

- To clarify that the exemptions laid down in the Directive do not apply to on-demand work

once the working relationship exceeds the thresholds of one month or a working week of

eight hours and possibly (as this point already seems established) that the exemption for

contracts or working relationships of ‘a casual and/or specific nature’ may apply to

individual self-contained activities such as those carried out in the framework of

crowdworking.

- To relax the requirements of the list laid down in Article 2 to take account of new forms of

employment, allowing, for example, for the anticipated length of the employment

relationship to be defined by reference to a project or setting out the conditions according

to which the length of the working relationship may be defined and communicated where

this cannot be determined in advance or to make provision for job-sharing.

- To improve the information given to employees relevant to new forms of employment,

including new information items appropriate to their situation. In this regard, as we set out

earlier, employers could be required:

· to define, in the case of intermittent work, the active periods of employment,

· to specify the allocation of responsibilities in multi-employer situations, or

· in situations where the worker does not benefit from the usual protection reserved

for employees, to indicate this fact.

- To achieve these improvements through the negotiation of one or more framework

agreements between the European social partners to reflect the realities of the most

widespread new forms of employment and modelled on the 2002 Framework Agreement

on Telework.

In our view, this middle way is the most appropriate to achieve a balance between the objective of

informing workers and the flexibility sought both by businesses in adapting to changing demands

and also by an increasing number of employees. Furthermore, using the European social partner

route is likely to result in solutions that are pragmatic, easy to apply and reflect the wishes of

European workers.

To conclude, our analysis has shown that the Directive adopted some 23 years ago does not

recognise adequately the new forms of employment observed within the European Union.

Amendment of its provisions appears necessary to ensure that provision of information to workers

remains within a harmonised framework.



The solutions that are possible depend on the objective to be prioritised. Several approaches could

be pursued, most notably, a middle way seeking to balance flexibility and the predictability of each

party’s rights and obligations in the interest of workers and the businesses that employ them.

October 2014

(Translated from French by Paul Skidmore)



8.1.3 Keynote Paper by Prof. Catherine Barnard

Non-standard employment: What can the EU do?

Prof. Catherine Barnard, Cambridge

I. The issue

1. There is now a large amount of data on non-standard workers; this conference has added to

this knowledge. I should like to begin by drawing a distinction between two situations:

(1) deliberate attempts by employers to circumvent employee status by using various

drafting techniques in order to avoid giving employment protection to those they employ.

This may - or may not – be associated with a more general problem of undeclared work3;

(2) the adoption of other, innovative employment statuses, to provide flexibility for the

employer.

2. Situation (1) essentially concerns false self-employment and has long been recognised as a

problem, as has undeclared work. Situation (2) concerns the evolution of employment

statuses whose primary objective is flexibility, not the avoidance of employment protection

and social security contributions (although there may well be an element of this). Each

Member State has its own specificities: for example, zero hours contracts for the UK,

portage salarial in France and increasingly Belgium, and labour pooling in the Czech

Republic. These arrangements may, sometimes, be beneficial to both parties, although more

usually they favour the employers over the individuals.

3. This, of course, engages the flexicurity debate: the employers’ need for flexibility, the

employees’ need for security. The question generally is: what are the problems associated

with the new forms of employment? The answer can be summarised by the term precarity.

This takes the following overlapping forms:

a.) Financial precarity: lack of guaranteed payment, lack of certainty over what work

will be provided and when, inability to build up pension contributions, uncertain

access to social security;

b.) Social precarity: lack of protection against the vicissitudes of life such as ill health,

unemployment, pregnancy

c.) Emotional precarity: lack of a sense of security, self-worth4

3 According to the Commission, undeclared work is defined as ‘paid activities that are lawful as regards their nature

but not declared to public authorities, taking into account differences in the regulatory system of Member States’:

COM (1998) 219. See also the Commission’s proposal for a platform on undeclared work:

http://europa.eu/rapid/press-release_STATEMENT-14-112_en.htm. 4 See generally J. Popma, ‘The Janus face of the 'New ways of Work': rise, risks and regulation of nomadic work’, ETUI,

2103.



4. These are big issues and not easily solvable. For the EU, the added question is what can and

should the EU, as opposed to the Member States, be doing? Social policy/employment law is

largely regarded as a domestic issue. The EU can act only if:

a.) There is specific competence to act (ie a suitable legal basis);

b.) The chosen measure can be better achieved at EU level (the subsidiarity question,

particularly important in the light of the so-called yellow card procedure used

effectively against the Monti II proposal5);

c.) There is sufficient will for the EU to act (essentially a political question).

It is not possible to say with any certainty that the proposal for any measure affecting non-

standard employment would satisfy one - let alone all three - levels, not least because

responding to the challenges of non-standard employment touches on the sensitive issue of

contractual relations in the Member States.

5. I realise that this sounds pessimistic but the proposals I wish to make need to be considered

against this backcloth of general hostility to EU action, particularly in the social field.

6. That said, as the recent successful adoption of the Posted Workers Enforcement Directive

2014/67/EU, and, shortly before that, Directive 2014/54/EU facilitating the free movement

of workers6 both show, the EU (and the Member States) feel happier to acknowledge the

EU’s right to intervene in the social field where there is an obvious cross-border dimension.

The advantage, too, of using free movement as a peg on which to hang EU action is that the

ordinary legislative procedure applies, including qualified majority voting. The free

movement legal bases which could be used include Article 46 TFEU, Articles 53(1) and Article

62 TFEU, and, as a (very) long-shot, Article 21(2) TFEU.

7. So the first part of my remarks focuses on what can be done to help vulnerable migrants,

especially those who are denied employment contracts (section B). The second part of my

remarks (section C) then looks at what could be done at EU level to help provide rights to

those workers, usually non-migrants, who are employed under the new (non-standard)

types of contracts. The legal basis for such measures will either be in the Social Title of the

Treaty, namely Article 153 TFEU, or the internal market provision Article 114(2) TFEU which

in turn refers to Article 115 TFEU, or (least likely) the residual legal basis Article 352 TFEU.

Given the general resistance by the Member States to act at EU level to provide additional

social rights, the suggestions made in section C largely build on the existing acquis. I

therefore envisage progress by (little) corgi steps rather than (giant) kangaroo leaps.7

5 COM(2012) 130. 6 See also Directive 2014/50/EU on minimum requirements for enhancing worker mobility between Member States by improving the acquisition and preservation of supplementary pension rights (OJ [2014] L128/1). 7 To borrow from JR Spencer, Noted but Not Invariably Approved (Oxford, Hart Publishing, 2014).



8. The final section of the paper raises the question whether, given that the current political

climate may well preclude some states from participating in any new EU legislative initiatives

in the social field, the Commission should consider greater use of enhanced cooperation.

II. Free movement of persons

9. Recent research shows that the treatment of migrant workers in certain sectors, particularly

food processing, can be poor.8 Agencies may well hire staff and describe them as self-

employed, as happened in the UK case of Kalwak.9 There the claimants, while still in Poland,

arranged for Consistent, an agency, to place them in work. They came to England where

Consistent provided them accommodation. Each claimant signed a contract written in both

English and Polish. This contract made clear that the individuals were self-employed. The

question whether the contract reflected the reality of the situation or this was a case of false

self-employment, was the subject of the litigation.

10. In the light of this, might the EU consider proposing a Directive on migrant workers

containing a presumption of worker status for all of those who satisfy the criteria laid down

in the familiar case of Lawrie-Blum10 (ie the essential feature of an employment relationship

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’)?. Such a Directive could be

adopted under Article 46 TFEU. It would build on the approach already used in Article 4(5) of

the Posted Workers Enforcement Directive 2014/67/EU which helps to determine whether a

person falls within the applicable definition of a worker (and is not falsely declared as self-

employed11). Article 4(5) provides: ‘Member States should be guided, inter alia, by the facts

relating to the performance of work, subordination and the remuneration of the worker,

notwithstanding how the relationship is characterised in any arrangement, whether

contractual or not, that may have been agreed between the parties’.12

11. Assuming that the individual has the relevant status, access to basic employment rights in

practice is often difficult. Research that I am currently undertaking with Amy Ludlow on the

use of Employment Tribunals in the UK by EU-8 migrant has shown that a large number of

the claims brought by migrant workers concern non-payment of wages and holiday pay. The

Joseph Rowntree Foundation also found similar: ‘Non-/under-payment of wages – this was

remarkably common, and migrants seemed unable to get back pay they were owed. A

popular tactic was to deduct a few hours' pay each week’. Interviews that we conducted

with the UK’s Gangmasters Licensing Authority (GLA) confirms that non-payment of wages

8 http://www.jrf.org.uk/publications/forced-labour-uk-food-industry 9 Consistent Group v Kalwak [2008] EWCA (Civ) 430. 10 Case 66/85 Lawrie-Blum v Land Baden-Wurttemberg [1986] ECR 2121 11 Recital 10. 12 See also Art. 3(2)(e) of Directive 2002/15/EC on the organisation of the working time of persons performing mobile road transport activities (OJ [2002] L80/35), adopted in part under the transport legal basis, Art. 91 TFEU, and the social policy legal basis Art. 153(2) TFEU, which contains a definition of the self-employed.



and holiday pay is one of the most frequent grounds of complaint they also receive. Other

interviews have suggested that this practice is so prevalent that it may form part of the

business model for some firms.

12. This brings us to the question of enforcement of rights. It is likely that one of the proposals

arising from our own research is that there should be a simplified system for individuals to

claim such money. The Citizens Advice Bureau (CAB) has come up with a proposal that the

Pay and Work Rights Helpline, which currently can channel complaints to the UK’s

enforcement bodies, should be replaced by a Fair Employment Agency (FEA) and provided

with the powers and resources both to secure individual workers their key statutory rights

that rest on questions of fact, and to tackle the illegal practices of rogue employers more

generally.13 They suggest an incremental approach, proposing that the right to paid holiday,

‘one of the most straightforward and readily verifiable workplace rights, but also one of the

most commonly abused, accounting for 11 per cent of all calls made to the Pay and Work

Rights Helpline – could be a very good one with which to start’.

13. Setting up such a body might help fulfil the UK‘s obligations under Directive 2014/54/EU.

Article 3(1) provides:

Member States shall ensure that after possible recourse to other competent authorities

including, where they deem it to be appropriate, conciliation procedures, judicial procedures,

for the enforcement of obligations under Article 45 TFEU and under Articles 1 to 10 of

Regulation (EU) No 492/2011, are available to all Union workers and members of their family

who consider that they have suffered or are suffering from unjustified restrictions and

obstacles to their right to free movement or who consider themselves wronged by a failure to

apply the principle of equal treatment to them, even after the relationship in which the

restriction and obstacle or discrimination is alleged to have occurred has ended.

14. But the reality is that even where there is an award against them, many employers refuse to

pay up. They may prefer to declare themselves bankrupt (if individuals) or insolvent (if

companies) to avoid meeting their debts.

15. The problem of non-payment may be exacerbated if the employer is based in another

Member State. Would it be possible to consider a simplified form of cross-border

enforcement of fines and awards, with the assistance of the IMI system for communications

between the relevant agencies in the Member States? Articles 13-19 of the Posted Workers

Enforcement Directive 2014/67/EU might provide something of a template. Any such reform

would necessitate an amendment to the Workers Enforcement Directive 2014/54/EU.

16. If there is evidence of particular employers refusing to pay the workers their entitlements,

then the revised provisions of the Public Procurement Directive 2014/24/EU might help.

Article 57(4)(a) allows Member States to exclude from participation in a procurement

procedure any economic operator where ‘the contracting authority can demonstrate by any

13 Give us a break! 2011, 10 (http://www.citizensadvice.org.uk/_/give_us_a_break).



appropriate means a violation of applicable obligations referred to in Article 18(2)’. Article

18(2) provides that Member States must take appropriate measures to ensure that in the

performance of public contracts ‘economic operators comply with applicable obligations in

the fields of environmental, social and labour law established by Union law, national law,

collective agreements or by the international environmental, social and labour law

provisions listed in Annex X’. Again, could the IMI database be developed to be used by

contracting authorities to check with their counterparts whether a particular tenderer from

another Member State has one or more entries for non-payment of wages/holiday pay? This

might necessitate an amendment to the Public Procurement Directive.

17. So far I have focused on migrant workers. I am conscious that the numbers of migrant

workers is very small compared with the number of non-migrant workers who may suffer

similar treatment. However, as the experience with the Services Directive 2006/123/EC has

shown, there are in fact spill over effects: if a state is obliged to set up an institution/system

for the benefit of migrants, the state may well extend it to nationals as well since it would

often be perverse to provide more protection to migrant workers than to nationals. In this

way nationals are the indirect beneficiaries of any reforms aimed at migrants.

III. Non-migrant workers

18. I turn now to consider the situation of the non-migrant worker with a non-standard contract.

The issues arising in respect of the diverse types of non-standard employment relationships

are various and may not be amenable to a single solution. I shall therefore focus mainly on

the particular problems that the new, non-standard forms of employment throw up and

examine how these problems might be tackled through amendment of the existing

directives. My approach is therefore bottom up: I do not offer a vision as to how a single

directive might cure all the ills of non-standard employment.

19. The issues identified in paragraph 3 above on precarity touch upon pensions and social

security, particularly sensitive issues for the Member States and subjects which have proved

difficult for the EU to address.14 I shall therefore focus on employment law matters. While

no panacea, a degree of stability and security in employment might open the doors to other

security which might allow for planning for the future.

20. As with migrant workers, non-migrant workers suffer from employers using drafting

techniques to avoid employee status. One way around this problem would be to adopt a

Directive which created a presumption of employee status for individuals where certain

indicative criteria, such as those proposed in ILO Recommendation No. 198 and considered

in detail in the ILO’s annotated guide, are made out. This would probably need to be a

separate measure from the Directive proposed at paragraph 10 above on migrant workers.

14 See eg COM(2005) 507 Proposal for a Directive of the European Parliament and of the Council on improving the portability of supplementary pension rights. This has, however, been adopted in a different form in deed. 2014/50/EU.



This is because the Lawrie-Blum definition of worker is broader than the definition of

employee and the measure proposed here should not narrow down the wider definition.15 A

Directive with a presumption of employee status could be a free standing measure adopted

under Article 153(1)(b) TFEU and Article 352 TFEU, or some sort of 29th regime or model law

which Member States could opt to apply.

21. However, the presumption of employee status may not help those on non-standard

contracts where it is hard to construct a case that the individual is an employee. One way of

addressing this problem is for a Directive that ensured that existing EU employment rights

applied to all those with a personal employment relationship, a concept much broader

than employee or worker, which might embrace those on, for example, interim

management arrangements (situations in which a worker is hired for a temporary period of

time by an employer, often to conduct a specific project).16 However, the chances of such a

measure being adopted seem slim – for reasons of principle and politics.

22. As for politics, it may be that such a Directive would have to be based on Article 115 TFEU

(the Transfer of Undertakings Directive and the Collective Redundancies Directive, for

example, were both based on this measure) and this requires unanimous voting. However,

an argument could be made that such a measure really concerns access to working

conditions and so Article 153(1)(b) TFEU could be engaged, requiring only the ordinary

legislative procedure. 17

23. As for principle, these Directives, as partial harmonisation measures, have traditionally

deferred to national systems for definitions of such sensitive terms as ‘employee’.18 Member

States may argue that the question of employment status goes to the core of national social

systems and so is a matter for domestic law alone. This has always been the objection to the

EU taking any steps towards advocating a single open ended contract (SOEC).

24. So what else can be done to assist those on non-standard contracts? One possibility would

be to grant those on non-standard employment contracts who have worked on average, say

25%, of their working week over a period of six months with a particular employer, the right

to request a permanent job with the lead employer. This might work in the case of ZHCs and

in the case of interns. It might also work in the case of employee sharing, although the 25%

threshold with any particular employer may have to be reduced. This new right to request

would build on existing rights, such as those in Article 6 of the Temporary Agency Work

Directive 2008/104/EC, that ‘Temporary agency workers shall be informed of any vacant

15 See further COM(2006) 708 and COM(2007) 627. 16 See Eurofound, New Forms of Employment: Preliminary Executive Summary, Jan 2014, 6. 17 Cf. the Seafarers’ Proposal to include seafarers within the scope of five EU labour law Directives, including Directive

2001/23/EC on transfer of undertakings and Directive 98/59/EC on collective redundancies. COM(2013) 798, 9 provides: ‘Despite the different legal bases of the Directives to be amended, having regard to their content, it is clear

that they all serve to support and complement Member States' activities in the fields enumerated in Article 153(1) TFEU, in order to further the social policy objectives of the Union. Article 153(2) TFEU is therefore the adequate legal basis for a single proposal amending the abovementioned five Directives. 18 See eg. Art. 2(1)(d) of Directive 2001/23/EC: ‘“employee” shall mean any person who, in the Member State

concerned, is protected as an employee under national employment law’.



posts in the user undertaking to give them the same opportunity as other workers in that

undertaking to find permanent employment.’

25. This right to request a permanent job could form part of the introduction of a wider right to

request law, not just for those with young children but also older workers who want to

reduce their hours. Experience in the UK with the operation of its own right to request law

has generally been positive. The right to request a job, of course, goes further than the right

to request an alteration of hours for someone already in an existing job. But the

formalisation of the process of requesting a right forces the employer and the individual to

engage in some dialogue.

26. Another possibility would be to examine the Temporary Agency Directive 2008/104/EC. Does

it cover labour pooling situation (ie where an individual worker is jointly hired by a group of

employers – not being traditional clients of a temporary work agency- and works on a

rotating basis in the participating companies)?19 It is not clear. Should the Directive be

amended to broaden the definition of temporary work agencies in the Agency Workers

Directive? Article 3(1)(b) currently provides: ‘temporary-work agency’ means any natural or

legal person who, in compliance with national law, concludes contracts of employment or

employment relationships with temporary agency workers in order to assign them to user

undertakings to work there temporarily under their supervision and direction’. Could this be

amended to include those organising the labour pooling service? Where does the portage

salarial fit? And what about users? According to Article 3(1)(d), the term ‘user undertaking’

means any natural or legal person for whom and under the supervision and direction of

whom a temporary agency worker works temporarily. Should this be amended to cover the

situation where there are a number of users?

27. Those working for various employers under a labour pooling scheme may not ever build up

the 12 weeks service to enjoy equal treatment rights under Directive 2008/104/EC. In this

situation would it be possible to envisage that the 12 weeks can be accrued through

aggregating periods of employment with all those in the labour pool?

28. If this is going too far, could guidance be issued on how the Directive might apply to those

labour pooling and portage salarial arrangements?

29. A further possibility would be to amend the Working Time Directive 2003/88/EC and

Pregnant Workers Directive 92/85/EEC to identify the lead employer in the situations of

labour pooling (defined in paragraph 21) or employee sharing (secondment of workers,

including those on the French portage salarial). The lead or ‘material’ employer should be

responsible for ensuring that the individual is able to receive their full entitlement to paid

annual leave and that they do not exceed their maximum working time.20 This should not

19 This might also apply to the German situation of labour pooling in the sense that an employer temporarily cannot provide work for his/her staff and sends employee to work for another company is known in Germany as genuine hiring-out of workers (echte Arbeitnehmerleihe). 20 See by analogy the Court’s decision in case C0242/09 Albron Catering BV v FNV Bondgenoten and John Roest ECLI:EU:C:2010:625



impose too much of an administrative burden. Employers in the UK already have to manage

that issue in relation to new employees who may have already taken some parental leave

and will have to do so again under the new right for mothers and fathers to share parental

leave.21 This requires employees to cooperate with employers by declaring leave taken, and

employers to cooperate with each other to check the declarations are correct. If however,

this does prove too much, what about amending Directives 2003/88/EC and 92/85/EEC to

impose some form of joint and several liability on all the employers? Article 24 of the

Posted Workers Enforcement Directive 2014/67/EU on subcontracting liability might provide

something of a template here.

30. For those on zero hours contracts and very short fixed term contracts, should the EU

contemplate putting a floor in place in terms of the minimum number of hours that must be

offered and paid for (ZHCs) or in the case of fixed term contracts (FTCs) a minimum period of

employment, with the possibility of derogation by collective agreement or equivalent. In the

case of ZHCs, could the employer, as in Norway, be required to objectively justify their use?

In an employee sharing situation, could the period of secondment be subject to a certain

upper period eg two years beyond which the secondee becomes an employee of the

receiving company, unless there are objectively justified reasons why not. All of this would

require an amendment to the Fixed Term Work Directive 99/70/EC.

IV. Enhanced cooperation

31. In the current climate a number of these proposals will not prove popular with certain

Member States. It is for this reason I would suggest that the Commission considers the use

of enhanced cooperation. This mechanism enables and encourages a group of Member

States to cooperate inside, rather than outside, the framework of Union law (including its

guarantees on democratic representation through the European Parliament and judicial

protection through the ECJ), where it is established that the objectives pursued by that

cooperation cannot be achieved by the Union as a whole.’ 22

32. Enhanced cooperation must involve at least nine Member States and must be authorised by

the Council. The Council is to give its authorisation as a last resort only, when it has

established that the objectives of such cooperation cannot be attained within a reasonable

period by the Union as a whole.23

21 For brief summary of the differences between these two schemes, see http://www.acas.org.uk/index.aspx?articleid=1637. 22 Opinion of Bot AG in Joined Cases C-274/11 and C-295/11 Spain and Italy v Council (‘Unitary Patent’) EU:C:2013:782, point 82. This section draws on C. Barnard and G. De Baere, ‘Towards a European Social Union: achievements and possibilities under the current EU constitutional framework’, paper presented at the University of Leuven seminar on European Social Union, 16 Sept 2014. 23 Art 20(2) TEU.



33. Enhanced cooperation must be aimed at furthering the objectives of the Union, at protecting

its interests and at reinforcing its integration process 24 and must comply with the Treaties

and Union law. 25 In addition, it must not undermine the internal market or economic, social

and territorial cohesion, must not constitute a barrier to, or discrimination in, trade between

Member States, and must not distort competition between them. 26 Potentially social policy

measures might satisfy these tests.

34. Acts adopted in the framework of enhanced cooperation are binding only on those Member

States that participate in such cooperation. They do not form part of the acquis that has to

be accepted by candidate States for accession to the Union. 27 At the same time, enhanced

cooperation must respect the competences, rights and obligations of those Member States

that do not participate in it. Those Member States, in turn, must not impede its

implementation by the participating Member States. 28

35. In July 2010, the Council approved for the first time a Commission proposal authorising

enhanced cooperation with respect to the law applicable to divorce and legal separation, 29

which led to the adoption on 20 December 2010 of the Rome III Regulation. 30 On 10 March

2011, the procedure was used again when the Council adopted a decision authorising

enhanced cooperation in the area of the creation of unitary patent protection,31 which

culminated in the adoption of Regulations 1257/2012 32 and 1260/2012 33 on 17 December

2012. The third and, at the moment, final instance, is the Council’s authorisation on 22

January 2013 of enhanced cooperation in the area of financial transaction tax. 34 The latter

two instances were contested by Italy and Spain, and by the UK, respectively, which opposed

enhanced cooperation as being potentially dangerous for strategic national interests, 35 but

the ECJ dismissed both actions.

36. Experience with the operation of the so-called Social Chapter (Social Policy Protocol and

Agreement) adopted at Maastricht to which the UK did not initially sign up, suggests that

24 Art 20(1), second subpara, TEU. 25 Art 326, first para, TFEU. 26 Art 326, second para, TFEU. 27 Art 20(4) TEU. 28 Art 327 TFEU. 29 Council Decision 2010/405/EU of 12 July 2010 authorising enhanced cooperation in the area of the law applicable to divorce and legal separation (OJ 2010 L189/12). 30 Council Regulation (EU) No 1259/2010 of 20 December 2010 implementing enhanced cooperation in the area of the law applicable to divorce and legal separation (OJ 2010 L 343/10). 31 Council Decision 2011/167/EU of 10 March 2011 authorising enhanced cooperation in the area of the creation of unitary patent protection (OJ 2011 L76/53). 32 Regulation (EU) No 1257/2012 of the European Parliament and of the Council of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection (OJ 2012 L361/1). 33 Council Regulation (EU) No 1260/2012 of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the applicable translation arrangements (OJ 2012 L361/89). 34 Council Decision 2013/52/EU of 22 January 2013 authorising enhanced cooperation in the area of financial transaction tax (OJ 2013 L22/11). 35 See E Pistoia, ‘Joined Cases C-274 & 295/11, Kingdom of Spain and Italian Republic v. Council of the European Union, Judgment of the Court of Justice (Grand Chamber) of 16 April 2013.



Member States were in fact reluctant to move forward without the participation of all

Member States. The use of enhanced cooperation in the context of three relatively recent

measures suggests that this view might be changing somewhat.

V. Conclusions

37. Prospects for the development of EU social policy going forward are not great but there is

some space for potential activity. Gone are the days of big plans and ideas; but a number of

smaller steps – collectively - might just make a difference especially to some of the most

vulnerable in the workforce, those on non-standard contracts.

September 2014



8.1.4 Keynote Paper by Prof. Tamás Gyulavári

Civil Law Contracts in Hungary

Prof. Tamás Gyulavári, Budapest

The Hungarian system of working relationships has traditionally been based on the binary system

of employment contracts and civil law contracts, and has been strengthened and sustained by the

parallel existence of the Labour Code and the Civil Code. However, the spread of bogus self-

employment in the last two decades has been striking, and has necessitated the elaboration of a

rather complex legal test to evaluate work contracts. The new Labour Code of 2012 made an

unsuccessful attempt to regulate economically dependent work. This paper analyses these labour

law issues.36

The Hungarian legal framework of working relationships

The division of the working population into two separate groups is the classic paradigm of

Hungarian labour law. The first group includes subordinated working relationships in typical and

atypical forms of employment. The second group consists of civil law working relationships that do

not entail strong personal subordination and are characterised by independent economic

activities. This binary system of working relationships was established by the separate Civil Code

(in force since 195937) and the Labour Code during the socialist era,38 a division that was

reinforced by the labour law legislation of the last two decades.

The typical employment relationship has always been the dominant legal form of work in labour

law regulations and in the labour market. Typical employment relationships constitute 90% of all

employment relationships and implies working for one employer in accordance with his/her

instructions, using the employer’s equipment and materials, at the employer’s place of business,

for fixed working hours and integrated in the employer’s organisation.39

The regulation of atypical employment relationships is evidently not a novelty in Hungarian labour

law, as fixed-term and part-time employment contracts were already regulated in former Labour

Codes. The new Labour Code of 2012 enhanced the number of atypical employment relationships,

36 This paper is based on research published in the following articles: Tamás Gyulavári: A bridge too far? The

Hungarian regulation of economically dependent work. Hungarian Labour Law E-Journal, hllj.hu, 1/2014, p. 1-22.; Tamás Gyulavári: Structure of legal relationships aimed at work: under construction? In: Tamás Gyulavári – Gábor Kártyás: The Hungarian Flexicurity Pathway: New Labour Code after Twenty Years in the Market Economy. 2014, amazon.com, Chapter 2. 37 Act 4 of 1959 on the Civil Code, which has recently been replaced by the new Civil Code, Act 5 of 2013 (in force since 15 March 2014). 38 There have been four Labour Codes (1951, 1967, 1992, 2012) and the current Labour Code is the Act 1 of 2012. 39 Kiss György (2005): Munkajog. Budapest, Osiris, p. 95.



which are characterised by three features. First, there are three entirely new forms of atypical

employment: on-call work, job sharing and employee sharing.40 Second, aspects of labour law

related to simplified (casual) employment are now regulated by the Labour Code.41 Third, home

workers are now also regulated by the Labour Code42 and they are considered to at least formally

work in an employment relationship. The spread of atypical employment relationships has

resulted in an extension of the personal scope of the Labour Code.

Civil law work contracts have always provided a legal alternative to those who want to sign a

contract for work without establishing a relationship of personal subordination between the

parties. However, civil law contracts were an exceptional form of work prior to the political and

economic changes of 1990, as employment relationships represented a perfect legal form of long-

term employment relationships under the socialist economic system. This quickly changed after

1990, when the significance of civil law contracts rapidly increased with the establishment of the

market economy. At the same time, such contracts were also increasingly being used to reduce

the costs of employment through bogus self-employment. Hence, bogus civil law contracts have

blurred the clear division of work contracts.

Certain forms of contractual relationships are represented in Hungarian labour law, and cover

partly or exclusively economically dependent work. These working relationships are usually

referred to as ’other legal relationships’. At present, the cluster ’other legal relationships’ covers

two types of work contracts: home working contracts and contracts for the provision of security or

private detective services.43 These contractual forms are based on the French labour law concept

(assimilation aux salariés), in which certain labour law provisions must be applied if the given

contractual form meets the statutory conditions.44

Incentives and consequences of bogus civil law contracts in the Hungarian labour market

There are two fundamental reasons for the rapid spread of bogus self-employment in Hungary:

first, to by-pass the Labour Code to reduce indirect production costs; secondly, the significantly

lower taxes and social security contributions associated with civil law working relationships to

minimise the direct expenses attached to employment. The strength and rigidity of labour law

provisions and consequently the level of indirect costs may differ depending on labour law policy.

During the financial crisis, national legislature opted for flexibilisation of labour law to reduce the

indirect costs of employment and increase employers’ competitiveness in Hungary (as was the

40 2012 Labour Code, Articles 193-195. 41 2012 Labour Code, Articles 201-203. Other technical provisions are now included in: Act 75 of 2010. 42 Home workers may be employed in jobs that can be performed independently, remunerated exclusively on the basis of the work performed (Articles 198-200 of the 2012 Labour Code). 43 Independent commercial agency contracts are the third type of such contracts, regulated by Act No. 117 of 2000. This separate law on commercial agency includes certain provisions on labour law protection, such as obligatory rules on notice periods. This law was repealed and replaced by the new Civil Code (Act No. 5 of 2013) of 15 March 2014. 44 Code du Travail, Art. 781-782; Adalberto PERULLI: Subordinate, Autonomous and Economically Dependent Work: A Comparative Analysis of Selected European Countries. In: Giuseppe CASALE: The employment relationship. A

Comparative Overview. Geneva, Hart Publishing, 2011, 182.



case in the majority of EU Member States), which resulted in shifting the risks of employment

from the employers to the employees. The flexibilisation process is widely criticised because of the

shift of risks from the employer to the employees.45 Even though the new Labour Code

significantly decreased the legal protection of employees, it also failed to discourage employers

from using bogus self-employment. In case of civil law contracts, the Civil Code is applied, there

are no protective provisions and the contractual parties may—by mutual agreement—deviate

more or less freely from the civil law provisions.

At the same time, the gap between employment and civil law relationships concerning the direct

costs of employment has been reduced or even filled, since the lower taxes and lower

contributions associated with civil law working relationships is simply a detrimental consequence

of misguided Hungarian financial legislation. The lower cost of non-employment (meaning

unprotected) working relationships is contrary to ILO Recommendation No. 198, which requires

Members to develop effective measures aimed at removing incentives to disguise an employment

relationship.46 It is understandable that tax policy makers wish to perceptibly reduce production

costs for a narrow circle of economic actors (e.g. small companies) at the lowest cost for the state

budget. However, this financial policy inevitably severely undermines labour law by enticing many

workers to leave the scope of the Labour Code and resort to least protected civil law contracts.

This unequal financial regulation is very harmful in the long term. In such a legal environment, only

those employers who are obliged to do so (e.g. large multinational companies, state employers,

etc.) or those who are concerned about investigations conducted by labour authorities, employ

workers in employment relationships. It is thus an urgent as well as logical legislative step to

equalise the Hungarian tax burden of employment relationships with all other working

relationships (and taxation forms) to fight bogus self-employment. Though attempts have been

made to countervail the taxes applicable to the different types of working relationships, several

new forms of taxation have recently given impetus to bogus self-employment by introducing

extremely low taxes for small companies and individual entrepreneurs.47

Applicability of EU Directives

EU Directives on working conditions have a restricted personal scope, since labour law

harmonisation is limited by the personal scope of the Directives to employment relationships, thus

amendments to harmonise labour law exclusively affect the Labour Code. However, Hungarian

labour law strategy seeks minimum harmonisation, i.e., the implementation of EU norms remains

minimal and the norms are only applied to the regulation of employment relationships.48 Legal

harmonisation with a focus on employment relationships has been tremendously facilitated by the

45 See, for example, Escande Varniol, Marie-Cécile – Laloum, Sylvaine – Mazuyer, Emmanuelle eds. (2012): Quel Droit

Social dans une Europe an Crise? Larcier, Bruxelles. 46 ILO Recommendation No. 198 (2006): “17. Members should develop…effective measures aimed at removing

incentives to disguise an employment relationship.” 47 See, for example, Act No. 147 of 2012 on small taxpayers. 48 Act 16 of 2001, Act 20 of 2003.



existence of the Labour Code, which contains most, if not all of the relevant provisions on

employment relationships.

Since the Labour Code is exclusively applied to employment relationships, legal harmonisation has

only improved the protection of employees. Consequently, EU Directives on working conditions

are not applied to civil law contracts. The only exception is the Young Workers Directive

(94/33/EC), since a shortlist of the Labour Code’s protective provisions are applied to civil law

contracts of young workers.49 Otherwise, all civil law contracts are exclusively regulated by the

Civil Code and do not implement any of the EU Directives on working conditions, as it is not

mandatory and would in fact contradict the general principles of Hungarian civil law. The practical

consequence of this legal structure is that workers who have signed civil law contracts are

completely excluded from all labour law protection, with the exception of equal treatment and

social security services.

Hence, the implementation of EU law has actually increased the gap of protection between

employees and non-employees, because labour law Directives do not cover the employment rights

of independent contractors (self-employed persons)50 and economically dependent workers

(formally self-employed persons). Although the employment rights of economically dependent

workers have been analysed and proposed in several EU documents and reports, the regulation of

this category of workers remains a recommendation by the European Commission, it is not an EU

law requirement. Consequently, the regulation of economically dependent work is an option for

Hungarian legislation, it is not an obligation that derives from international labour law

instruments. Hungary’s legal framework could be changed by extending the personal scope of

certain labour law Directives to economically dependent independent contractors.

The notion of self-employment is still not defined in Hungarian labour law.51 In practice, self-

employed persons are independent contractors who work under a civil law contract. The meaning

of self-employment had to be clarified with regard to the scope of the application of the equal

treatment principle and the implementation of the Gender Equality Directives (especially

86/613/EEC). Thus, the notion of self-employment was only addressed in Hungarian legislation in

the course of legal harmonisation; it would not have been a relevant issue under other

circumstances. Therefore, the interpretation of the notion of self-employment is still not a

theoretical component of Hungarian labour law, but only a technical problem confined to legal

harmonisation.52

All employees are entitled to a shortlist of minimum rights, such as equal treatment, health and

safety at work and social security in Hungarian law, i.e., these rights have a broader scope and do

not only apply to employment relationships. The unlimited scope of the Equal Treatment Act

49 2012 Labour Code, Article 4: “The provisions of this Act pertaining to young workers shall also apply mutatis

mutandis to the employment of persons under the age of eighteen within a non-employment relationship.” 50 At this stage, we do not take into account the freedom of establishment, because it is irrelevant with regard to the assessment of employment protection. 51 Hajdú József (2002): Social security protection of the self-employed persons in Hungary. In: Nagy Károly-emlékkönyv. Szeged, 175. o. 52 Kiss György (2001): Az Európai Unió munkajoga. Budapest, Osiris, 115–125. o.



(ETA)53 to working relationships is the result of the implementation of the equality directives

(gender equality directives, racial equality directive, employment equality directive) in the course

of the labour law harmonisation process that took place after 2001. The ETA applies the principles

of these directives through the use of two clusters of working relationships: a) employment

relationships, and b) other working relationships, including civil law contracts. Employers shall

observe the principle of equal treatment in employment relationships, as shall individuals entitled

to give instructions within the scope of other working relationships.54 These two forms of working

relationships cover all possible legal working relationships.

There has been academic debate about the unlimited scope of the equal treatment principle.

Some academics argue55 that such a broad scope of equal treatment provisions covering civil law

contracts is not necessary and in fact violates the basic doctrines of private law (freedom of

contract). In their view, the application of the equal treatment laws to employment relationships

as an exception under private law, may be explained by the weaker market position of

employees.56 Therefore, such protection is neither reasonable, nor justified in the case of civil law

contracts involving working relationships, since the position of independent contractors in civil law

relationships is fairly strong, and is commonly characterised by a balance between the two

contracting parties.

By contrast, I contend that independent contractors often find themselves in a weak labour

market position and may be deemed economically dependent workers, which in turn may justify

their inclusion under the wider scope of the ETA. The Racial Equality Directive (2000/43/EC) and

the Employment Equality Directive (2000/78/EC) are applicable to regulations on access to

employment, self-employment and occupation.57 In this reading, the disputed rule on the broad

scope of the equality provisions simply represents the implementation of EU equality directives.

There is no room for manoeuvre in national legislation, since the notion of self-employment

unequivocally implies the applicability of civil law contract provisions. However, this is a dormant

rule, for there has been no litigation on allegedly discriminatory civil law contracts.

Recent measures against bogus civil law contracts

In theory, parties may freely choose between employment contracts and two types of civil law

contracts (construction contracts and supply contracts).58 In case the nature of the work allows the

parties to conclude both an employment and/or a civil law contract, then the declared will of the

parties will be decisive in the assessment of the legal nature of the parties’ relationship.59 In such

cases, the parties have the freedom to choose the type of contractual relationship. Nevertheless,

53 Act 125 of 2003 on Equal Treatment and the Promotion of Equal Opportunities. 54 ETA, Article 5.d. 55 Vékás Lajos: Egyenlő bánásmód polgári jogi jogviszonyokban? Jogtudományi Közlöny, 2006/10: 355–364; Kiss György (2002): Az egyenlőségi jogok érvényesülése a munkajogban. Jura, 2002/1: 48–61. 56 Vékás (2006) 359. 57 Article 3 of Directive 2000/43/EC and 2000/78/EC. 58 Article 6:238 and 6:272 of the Civil Code. 59 Published decision of the Supreme Court in 1982: BH 1982/347.



this freedom of choice with regard to type of contract is not without restriction - if the contract,

which allegedly expresses the will of the parties, differs from the genuine, actual will of the

parties, it is considered bogus.

The Labour Code specifically stipulates that bogus agreements shall be null and void, and if a civil

law contract intends to disguise another type of agreement (namely, an employment contract), it

shall be evaluated as being a disguised agreement.60 If work is performed in accordance with

labour law provisions and has the characteristics of an employment relationship, the parties must

conclude an employment contract and the rules of the Labour Code must be applied.61 The legal

consequence of bogus civil law contracts is nullity declared by the court with automatic

application of the Labour Code. Furthermore, labour inspectors and tax inspectors are also

authorised to fine employers for bogus self-employment.

Assessment of the legal nature of working relationships

It would be an illusion to believe that bogus self-employment can be eliminated through ideal

financial legislation or other legal administrative measures (laws, sanctions, investigations, etc.).

For that very reason, the elaboration of a reliable and predictable assessment procedure of the

employment relationship will always be an essential component of labour legislation and court

practice. A legal definition of the employment relationship could provide a shortlist of the basic

elements of such a labour law definition, but the elaboration of a sophisticated assessment

procedure lies with the labour courts.

The insertion of basic labour law definitions in Hungarian labour legislation was long overdue.62

This shortcoming was repeatedly criticised by academics and specific proposals were published.63

The fact that the new Labour Code includes, for the first time, a brief legal definition of the

employment relationship, the employer and employee must be considered a positive

development. Accordingly, an employment relationship is established by an employment contract,

whereby the employee is required to work in accordance with the employer’s instructions, and the

employer shall provide work for the employee and pay his/her wages.64 Employer refers to any

person with the capacity to establish legal acts and is party to an employment contract with an

employee,65 while employee denotes a natural person who works under an employment

contract.66

Based on these definitions as well as on other provisions of the Labour Code, an employment

relationship is a legal relationship with employment at its core, which is established by an

60 2012 Labour Code, Article 27(2). 61 Bankó Zoltán (2008): Az atipikus munkajogviszonyok – a munkajogviszony általánostól eltérő formái az Európai

Unióban és Magyarországon. Pécs, Thesis, p. 28. 62 The Labour Codes of 1951 and 1967 did not contain such basic definitions, either. 63 See for example: György Kiss: A magyar munkajog megújulásának esélye az Európai Unió munkaügyi politikájának tükrében. Pécsi Munkajogi Közlemények, 2008/1., p. 28. 64 2012 Labour Code, Article 42. 65 2012 Labour Code, Article 33. 66 2012 Labour Code, Article 34 (1).



employment contract to regularly perform work defined by the scope of work. Furthermore, the

strong personal subordination between the parties within the employer’s organisational hierarchy

is substantiated by the obligation of the employer to provide work for the employee and the

broadly framed rights of the employer to instruct, supervise and control the work of the

employee. The employee is obliged to perform the work personally in return for remuneration

according to the instructions of the employer.

Despite the existence of the aforementioned definitions, it is crucial to define the criteria of an

employment relationship in line with the judicial practice of the last two decades.67 In Hungarian

labour law theory and practice, there is a tradition of differentiating between primary and

secondary evaluation criteria of an employment relationship. In my opinion, such a hierarchy of

the evaluation aspects may be useful to define the weight of the various characteristics of the

employment relationship.

The system of primary and secondary criteria was introduced by government decree in 2005,

which was a non-binding policy document issued by the Ministries of Employment and Finance to

introduce a uniform interpretation by labour and tax inspectors.68 The decree defines a taxation

list of primary and secondary criteria based on formerly published decisions of the Supreme Court.

In keeping with the decree, but slightly altering the list, I propose the following primary criteria of

an employment relationship: a) strong personal subordination, substantiated by the broad

direction, instruction and control of the employer; b) an obligation of the employee to perform

work personally (substitution is unlawful); c) an obligation of the employer to regularly pay wages

in return for work; d) regular performance of work activity defined by the scope of work set forth

in the employment contract; e) an obligation of the employer to provide work and of the

employee to perform work and be at the employer’s service (mutuality of obligations).

The list of secondary criteria is as follows: a) the employer organises working time; b) the

employer defines the place of work; c) the employer provides the equipment, technology and raw

materials; d) the employer ensures health and safety at work.

The problems in judicial practice did not arise due to this hierarchy of employment relationship

criteria, but rather due to the lack of clarity on the central role of personal subordination and the

ambiguous interpretation of its different manifestations. The primary mission of future judicial

reviews is to determine whether the primary and secondary criteria verify the existence or lack of

the high level of personal subordination characteristic of an employment relationship. According

to previous case law, the primary and secondary criteria must be jointly evaluated and assessed

with due consideration of the conditions and circumstances of the given case to determine

whether the working relationship is characterised by the necessary degree of personal

subordination required for an employment relationship. This stream of judicial interpretation

needs to be reinforced by the consistent application of the new definitions.

67 Gyulavári Tamás ed. (2013): Munkajog. Budapest, Eötvös Kiadó, p. 35-43. 68 Joint Decree of the Ministry of Employment and the Ministry of Finance No. 7001/2005. on the evaluation of legal employment relationships. This decree was used by the tax and labour authorities as well as by labour courts. The decree was repealed on 1 January 2011 (by Act No. 130 of 2010).



An unsuccessful attempt to regulate economically dependent work

The extension of the scope of the Labour Code to economically dependent workers was proposed

for the first time in June 2011 in the first draft of the new Labour Code. Article 3 of the Draft69

suggested an extension of the application of specific rules of the Labour Code to other forms of

employment, such as civil law working relationships. Article 3 aims to improve the employment

protection of economically dependent workers and to reduce the number of legal procedures

relating to bogus self-employment.70 Consequently, employers would also have benefitted from

the proposal, since they could have chosen to conclude a third type of working relationship with a

lower level of employee protection than that provided for under typical or atypical employment

relationships.

According to the proposed definition of economically dependent workers, a person similar to an

employee works personally under a contract other than an employment contract for

remuneration, on a regular basis for the same person, and beyond performing this contract, it

cannot be expected from this person to carry out any other work for remuneration on a regular

basis. The abovementioned presumptions were designed to establish a theoretical basis for the

delimitation of independent work and economically dependent work.71

In my opinion, a better solution would have been to deal with this problem on the basis of a

distribution of market risks instead of on the basis of the presumption of working for one entity

only. Economic dependency also exists when the worker normally works for one main client, but

also earns a low, but regular income from another client. I am not convinced that the exclusion of

working for another client is an effective approach to regulating economically dependent work, as

this condition is simply too rigid. As a result, many economically dependent workers may be

excluded from the scope of the provision which was designed specifically for them. One of the

main risks of regulating economically dependent work is focussing the emphasis on preventing

abuse of this contractual form of employment, thereby restricting the scope of the potential users

of this legal form of employment.

It is worth noting that the proposal excluded the application of the above rules in case the income

deriving from the contract exceeded 500% of the national minimum wage.72 This limitation was

presumably based on the assumption that only low-income economically dependent workers

require employment protection; however, the need for social protection may apply to

economically dependent workers who earn a higher income as well. The Hungarian proposal was

too rigid both in terms of fixing a wage limit and in terms of the amount of wage. It would be more

useful if the need for social protection were adjudicated in the labour courts. In addition, the

69 See the Hungarian text of the First Draft of the Labour Code: http://www.pazmanymunkajog.com/images/files/docs/2011/MT_2011_juliusi_Tervezet.pdf. 70 Ministerial explanation of the Draft Labour Code, June 2011 (www.pazmanymunkajog.com). 71 György Kiss (2013): A munkavállalóhoz hasonló jogállású személy problematikája az Európai Unióban és e jogállás

szabályozásának hiánya a Munka Törvénykönyvében. Jogtudományi Közlöny, 2013/1., p. 12. 72 Article 3 of the first proposal of the 2012 Labour Code.



technical implementation of wage limits would also be problematic, since it is not clear whether

this income ceiling ought to be calculated on the basis of the worker’s average yearly wage or

his/her monthly wage.

At the same time, the draft failed to clarify whether the parties enjoy the freedom of choice

between hiring a person as an employee or as an employee-like person. In my view, the same

cogency of the contractual type should apply as in the case of employment contracts. Labour

courts and labour inspectors shall thus consider the legal relationship of an employee-like person

to be an employment relationship73 in case the contract between the parties is in fact a disguised

employment contract. Consequently, this new notion is in itself inept to address all of the

problems arising from bogus self-employment.

The main concern with regard to the inherent limitations of the definition of employee-like

persons is that such rigorous requirements are difficult to comply with, unduly restricting the

potential personal scope of this third labour law category. Therefore, I do not believe that too

many people would choose to work as employee-like persons, but the definition could very quickly

end up being an empty clause. It seems that the substance was lost in these rather technical

paragraphs. The substance is not the existence of one client or the exclusivity of personal work,

but much rather the very presence of economic dependency in the relationship between the

parties. It is the economic dependency that renders the situation of employee-like persons similar

to that of employees, and this is the dogmatic basis of extending employment rights to this group

of the working population.

Beyond providing a definition, the second pillar of the proposal was a meticulous depiction of the

applicable Labour Code provisions. Accordingly, the proposal suggested extending the application

of the rules on minimum wage, paid leave, notice of termination of employment, severance pay

and liability for damages. The application of the Labour Code on holidays was mentioned in the

proposal with reference to the regular performance of work. The inclusion of the articles on

minimum wage, notice periods and severance pay were substantiated by the social objectives of

this legal institution.74

On the whole, the list of applicable rights is too weak to achieve the intended ambitious social

objectives. It is worth noting that the draft excluded employment rights such as provisions on

working time, labour disputes and collective bargaining. The extension of a certain level of labour

law protection could have been included in the definition, following the inclusion of economically

dependent workers in certain EU labour law directives, such as the Directive on Working Time,

which also cover information on employment conditions, namely, information and consultation.

However, the automatic application of labour law provisions may be problematic in some cases.

For example, the extension of company level collective bargaining (including the information and

consultation process) to economically dependent workers would be fairly difficult in light of the

present regulations of the Hungarian Labour Code, but the situation is very similar in all Eastern

73 Article 27 of the 2012 Labour Code on nullity. 74 Ministerial explanation of the Draft Labour Code, June 2011, Article 3.



European Member States. Notwithstanding these obstacles, special provisions for specific groups

of economically dependent workers may be introduced in the directives and in national labour

law.

At this point, I would like to mention two principles concerning the selection and modification of

the applicable labour standards. On the one hand, the theoretical restriction of extended

employee rights is the lack of personal subordination between the worker and the client. In this

category, the employer does not have a far-reaching right to instruct, direct, supervise and control

the worker. On the other hand, the reason for regulating this third transitional form of work is to

provide a level of protection for individuals that fall between employment and self-employment,

and as such, it is weaker than the protection of employees, but stronger than that of independent,

self-employed persons. An adequately balanced protection of quasi-employees would ensure a

sensible level of employment protection without overburdening employers with oversized

regulations on labour law protection. Evidently, the right balance between flexibility and security

is key. By contrast, the Hungarian proposal did not perceptibly improve the employment

protection for the small number of workers that fall within the scope of the restricted definition,

and the new provisions do not achieve their true social objectives. Consequently, flexibility lies at

the forefront.

In spite of these legislative problems, it is regrettable that this article was deleted from the second

draft as a consequence of the criticism voiced by trade unions and employers’ organisations, as it

would have been the first such regulation to be adopted in the entire Central Eastern European

region.75 The criticism put forward by trade unions focused on the problems of interpretation of

the definition. In my opinion, trade unions were concerned that a possible reduction in the

number of employees in subordinate employment relationships would arise instead of a decrease

in the incidences of bogus self-employment and genuine self-employment. Trade unions usually

consider the third labour law category to represent a new impetus for bogus self-employment.76

Employers’ organisations opposed the proposal since it adds an extra burden on employers by

ensuring costly employment rights for a wide range of workers, who, to date, had fallen within the

scope of civil law. Interestingly, both the trade unions and the employers’ organisations rejected

this legislative amendment on the basis of totally opposed grounds, with trade unions concerned

about diminishing employee rights, and employers’ organisations anxious about increasing worker

protection.

Another interesting question is why the government backed off from supporting its own proposal.

The explanation that the government shied away due to the social partners’ strong opposition to

75 The Draft of the new Polish Labour Code (published in 2006) also contained a similar article, but this Labour Code has not yet been passed (Swiatkowski, Andrzej Marian (2011): The protection of working relationships in Poland. In: Pennings, Frans – Bosse, Claire (eds.): The Protection of Working Relations. The Netherlands, Kluwer law International, pp. 122–123). 76 Opinion of trade unions on the draft of the Labour Code: 4 August 2011, www.erdek.u-szeged.hu; 2 August 2011, www.pofesz.hu (downloaded: 10 June 2013).



several articles is not convincing.77 It is more likely that this issue was simply not a priority for the

government, since it surrendered so quickly and easily at the first sign of resistance by the social

partners.78 The most likely reason behind this move is the underlying basic concept of the new

Labour Code, which is based on a drastic increase in labour market flexibility to create new jobs.

The concept of employee-like persons does not fit into this policy of deregulation policy, it would

have been alien to the new Code. The government was therefore keen to dispose of this ‘strange

provision’, a move that was supported and welcomed by the social partners.

Similarities in Eastern Europe

Full-time employment for an indefinite duration continues to be the leading form of employment

in most Eastern European Member States. This traditional model remains nearly intact in the

Baltic States and is still dominant in the Czech Republic, Slovakia and Hungary. In the Baltic States,

non-standard types of work are still not widespread, meaning that these countries have the lowest

share of atypical workers (below 20%) in the EU. In Slovenia and Poland, the high share of fixed-

term contracts slightly changes the overall picture, and in Poland, as an exception, self-

employment also plays quite an important role.79

This binary system of employment contracts and civil law contracts has a long history in the entire

region, because under socialist labour law (prior to 1990) all workers, whether employed in the

private or in the public sector, were employed under an employment contract, most notably as

regular employees. Hence, even after the establishment of the market economy 24 years ago,

employment law is still based almost exclusively on the contract of employment model with the

exception of civil law contracts regulated by the separate Civil Code.

Bogus self-employment has spread noticeably in all of these countries since 1990, especially in

Romania.80 The expansion of bogus self-employment was reflected in provisions prohibiting

disguised employment in many of the new Member States (e.g. Slovakia, Czech Republic,81

Hungary82 and Poland83) around the time of EU accession. This prohibition is usually based on the

basic labour law definitions, since statutory definitions of the employment relationship or the

employment contract are in effect in many of these countries, for example, in the Czech

Republic,84 Poland,85 Slovenia86 and Slovakia.87 These definitions are fairly vague and far from

77 See, for example, the provisions on the legal consequences of wrongful termination of employment (Article 82 of the Labour Code). 78 György Kiss expressed a similar opinion in his article [Kiss (2013) op. cit. 13]. 79 European Parliament, The impact of new forms of labour on industrial relations and the evolution of labour law in

the European Union, Study, 2007. http://www.europarl.europa.eu/meetdocs/2009_2014/organes/empl/empl_20090902_1500.htm 80 http://www.eurofound.europa.eu/ewco/2012/02/RO1202019I.htm. 81 Stefko, Martin, Czech labour law in European context, Charles University in Prague, Faculty of Law, 2007, pp. 17-20.; Pichrt, Jan and Stefko, Martin, Labour Law in Czech Republic, Kluwer Law International, 2007, p. 45. 82 Article 75/A of the Hungarian Labour Code on the prohibition of bogus self-employment entered into force in 2003. 83 Article 22 §1(2) of the Polish Labour Code. 84 Article 2(4) of the Czech Labour Act (No 262/2006 Coll.). 85 Article 22 §1 of the Polish Labour Code. 86 Article 4 of the Slovenian Employment Relationships Act (Ur.I.RS, No 42/2002, 193/2007).



exhaustive. Many statutory provisions do not go beyond a simple statement that personal work

shall be carried out by the person who works for the contractual partner.

Nonetheless, only two remarkably distinct proposals in Poland and in Hungary have been

introduced to regulate the third type of working relationships. In Poland, the draft of a new Labour

Code in 200688 sought to include work performed outside the scope of a regular employment

contract.89 According to the proposal, an agreement establishing a legal relationship between an

employer and an individual who is not an employee is not considered an employment agreement.

The necessary condition for a person to be considered a ‘non-employee with an agreement’ is that

he/she carries out continuous and repeated actions for the employer or others in return for

remuneration of more than half of the minimum wage. The intention of the proposal is to provide

these non-employees protection under the provisions of the draft Labour Code on collective

agreements, fair remuneration and conditions of work, with a special focus on health and safety

regulations. Unfortunately, this proposal shared the fate of the draft Labour Code, as it has not

been adopted by Parliament.90

Conclusions

The binary system of working relationships has been strengthened by labour legislation and labour

law harmonisation. At the same time, bogus self-employment has gradually become one of the

fundamental structural problems of the Hungarian labour market. The legal response to this

harmful phenomenon has been weakened by ambiguous labour law concepts as well as random

judicial practice. The extension of the protection of the Labour Code to economically dependent

workers would be a reasonable and positive development towards the desired modernisation of

labour law. This was the objective of the concept on employee-like persons in the first draft of the

new Labour Code in 2011. However, the failure of this proposal was attributable to the rejection

by the social partners.

September 2014

87 Article 1(2) of Slovak Act No 348/2007 Coll. 88 The draft is available in Polish http://www.mpips.gov.pl/prawo-pracy/projekty-kodeksow-pracy/ 89 Swiatkowski, Andrzej: The Protection of Working Relationships in Poland, In: Pennings, Frans and Bosse, Claire (eds.), The Protection of Working Relations, Kluwer Law International, The Hague, 2011, p. 110. 90 Ibid., p. 110-123.

Documents

4. Working Group Discussion Reports: Session 1 · 7th ANNUAL LEGAL SEMINAR EUROPEAN LABOUR LAW NETWORK WORKING GROUP DISCUSSIONS With regard to portage salarial, it is often uncertain