Warning of a black work market

"The labour law is going through a quiet revolution. Several small changes have contributed to a trend where the Court of Justice of the European Communities in Luxembourg, and the European Court of Human rights in Strasbourg, have gained increased powers on issues of labour law leaving national parties and legislators with less control. Even if there was a strong national will to push an important question within the labour law, it would be difficult to get anything done", says Niklas Bruun.

Niklas Bruun and Jonas Malmberg, both professors of labour law at Sweden’s National Institute for Working Life, have studied how Swedish and Finnish labour legislation has been affected by ten years of EU membership.

Fight between labour and economic law

They underline several considerable changes. Not only did they find that national control of labour law has diminished in both countries. They also established that in an increasingly internationalised economy there is a fight for territory between labour and economic law. The third important change is that the EU courts have gained a decisive role in creating case law. In other words, the final decision on what is allowed within labour law in Sweden and Finland is made by international courts of law.

For a long time, labour law was a national issue. But around the same time as Finland and Sweden became EU members ten years ago, questions on how to regulate working life also became a question of European cooperation. The social dimension has been developed through the social protocol in the Maastricht agreement. The parties in the labour market were granted a formal role in the development of new labour market legislation.

“The social dimension has developed a lot. We have never received so much legislation from the EU as we have during this period, and nearly all changes in Swedish labour laws have been in response to EU directives”, says Jonas Malmberg.

Ahead of the Swedish referendum on membership, one of the big questions was whether it would be possible to protect the Swedish model for labour laws if the country became an EU member state. Unions spearheaded a drive to make sure any changes should continue to be made through negotiations and agreements, rather than through legislation. There was widespread agreement on this, a sentiment conveyed in writing to the then Commissioner in charge, Padraig Flynn.

And in fact, that is the way it has worked mainly for Denmark, but also for Finland. The labour market parties agree on the directives, and make collective agreements. Then legislators fill any loopholes. Since directives often leave things open to interpretation, the national parties still have a chance to reach agreements of a national nature. Sweden, however, has not chosen this possibility.

“We’ve completely failed at this in Sweden. The labour market parties have failed to agree, and the decision-making has been left to legislators. The chance to influence any outcome has been lost”, says Jonas Malmberg.

Different relationship to EU

Niklas Bruun, who works in both Sweden and Finland, can see that both countries generally choose different strategies in their relationship with the EU. There is less of a pro/anti-EU debate in Finland compared to Sweden. That improves the cooperation also when it comes to labour law.

“In Finland the central cooperation between the parties has worked better, and they’ve tried to work together to adapt the labour law. In my opinion, relations are more strained between the parties in Sweden”, says Niklas Bruun.

Many of the changes to the law have been relatively small. The individual has been given stronger legal protection.

On the other hand there has been a weakening of certain collective regulations, which means the national labour law has been more difficult to construe. An increasingly internationalised economy also opens up for more ways to interpret labour laws. There is no longer a clear opinion of what is right and what is wrong. Disputes are mostly taken to the European Courts of Justice, and their power in adapting legislation increases. The question is also how much of an influence the new EU countries will have on the labour law.

Those countries have lower wages and less job security, and their focus is more on an individualistic, model inspired by America, according to Niklas Bruun.

The Vaxholm case

One recent example from the Swedish town of Vaxholm illustrates how the Swedish collective agreement tradition clashes with the EU’s rule of paying the minimum wage of the country in which the work is carried out.

A Lithuanian construction company were commissioned to build a school there, and the company worked on the basis of a collective agreement from Lithuania. But the Swedish Building Workers’ Union argued Swedish agreements and conditions should apply in Sweden. So the union blocked the construction work, and demanded that the Lithuanian construction company followed a Swedish collective agreement. The company agreed to pay the minimum wage, according to EU rules. But in Sweden there is no minimum wage, so the Swedish Building Workers’ Union demanded that the Lithuanian workers should be paid the average wage which had been negotiated for the Stockholm area. Now the Lithuanian company has pulled out, and the case will be tested in the Swedish Labour Court.

Lithuanian protest

The Lithuanian government has protested and turned to the EU Commission. According to Swedish Radio, the Lithuanian Prime Minister, Aigars Kalvitis, has said this was not what they had expected when becoming members of the European Union. So what have the changes which have taken place since Sweden and Finland joined the EU meant for the workers? Has the development been good or bad for them?

Jonas Malmberg thinks that is an impossible question to answer, and says it all depends on how you look at it. No doubt the stability which used to characterise the labour market is gone. But that is a result of other factors than judicial regulations of labour law. There has been a change in the international distribution of labour, exemplified by businesses moving, increased economic integration, lower transport costs and an increased movement of people and capital.

The privatisation of public sector businesses and new rules of purchasing have changed what used to be safe jobs.

All in all working life is now considerably more instable, claims Jonas Malmberg.

The black labour markets have never been particularly large in neither Sweden nor Finland. In order to prevent the emergence of black labour, it is important that both legislators and the parties are on guard. They must ensure to keep a check on businesses and entrepreneurs taking on commissions abroad.

- From a union perspective it’s extremely important to keep an eye on European labour law issues, says Niklas Bruun.

- The idea of an international regulation of labour law was already there at the end of the 1800s. When we now see an increasingly internationalised economy, I think the international regulation of labour law would be a way to balance that development. The main responsibility to make this happen rests with the politicians and the labour market parties, says Jonas Malmberg.