The intended framework for further Swiss integration into the European Union has collapsed – at least for the time being – after years of negotiations. Switzerland withdrew from the discussions partly due to the EU’s demand that the Confederation’s “additional measures” targeted at restricting clandestine employment violate the single market’s rules.
This essentially indicates that the freedom to supply services everywhere in the EU takes precedence over the idea of “same compensation for equal work in the same place” – at the expense of EU27 employees. In terms of the unions, a European-wide solution is required – and this should be a top priority for the Conference on the Future of Europe, which will begin a year-long reform process on May 9, 2021.
While the member states and the European Commission expressed disappointment and surprise at what they described as a “radicalization of Bern’s position,” the Swiss Federal Council’s skepticism was already evident.
The EU’s unwillingness to recognize Switzerland’s efforts to curb illegal employment demonstrates that it does not regard weakening the concept of “equal pay for equal work in the same place,” which is enshrined in the EU Posted Workers Directive, to be a major concern.
After all, this concept underpins Switzerland’s policies: it establishes deadlines for posted workers to start working in Switzerland, demands the payment of a deposit from which fines (determined on a scale) can be removed, and regulates the frequency of checks. These are unquestionably protective measures against wage dumping in the real economy, not simply on paper. As a result, they are entirely consistent with the Commission’s own action plan for implementing the European Pillar of Social Rights, which promises to ensure fair working conditions.
The proposed framework was intended to weave this frayed legal tapestry together and determine how future changes to European law would be integrated. Currently, EU-Swiss relations are governed by a plethora of around 20 bilateral treaties and over 100 other agreements; the proposed framework was intended to weave this frayed legal tapestry together and determine how future changes to European law would be integrated. Instead of renegotiating agreements between the two countries point by point, Switzerland would dynamically adopt European legislation.
While the Swiss Parliament granted it an ‘overall positive’ rating as recently as 2020, the arguments against the proposed framework ultimately outnumbered the ones in favor. Because of the way workers posted from countries with lower standards can be used to practice wage dumping and clandestine employment, the Swiss were alarmed at the prospect of a de facto reduction in labor protection – all the more so given the current lack of ambitious, Europe-wide legislation to monitor employment and prosecute those behind illicit labor. Indeed, it was because of this deficiency that Switzerland was advised to cut or perhaps eliminate its “additional measures.”
Furthermore, the European Court of Justice (ECJ) would have been responsible for interpreting the framework, and the ECJ has previously confirmed the primacy of the freedom to provide services over member-state laws to prevent clandestine employment and wage dumping (for example, Čepelnik, Maksimovic, and Dobersberger). Discontent grew in the Swiss Parliament and among the country’s unions as a result of the ECJ’s decision.
As a result, on May 26, 2021, the Federal Council opted not to sign the framework, despite the fact that it had been negotiated to completion, citing significant disparities in how the EU and Switzerland define the idea of “equal compensation for equal effort.”
What are the implications of the collapse of these negotiations? Clearly, in order to ensure fair competition inside the internal market, legislative protections at both the European and member-state levels must be strong enough to prohibit undercutting minimum salaries and collective bargaining agreements, as well as the use of disguised or clandestine employment.
In this regard, Switzerland’s decision should serve as a timely warning to the EU to begin implementing the rules of its own Posted Workers Directive with adequate checks and standards. After all, if wages and working conditions are harmed in one member state, it affects other members because the door to other labor markets is open. This was recently demonstrated in Germany’s meat processing business, where a lack of even basic controls resulted in widespread exploitation – with deadly repercussions in the midst of a pandemic.
For Europe’s unions, it’s critical that those who work across borders aren’t discriminated against – because undercutting local wage levels leads to worker conflict, fertile ground for xenophobia. When the European Pillar of Social Rights was established in 2017, 20 guiding principles were announced as establishing a route toward a strong, cohesive union that is fair and inclusive and provides equal opportunity to all. Now it’s only a matter of putting the charter into action – and doing it in a way that balances core market freedoms with protection for mobile workers across Europe.
The amended Posted Workers’ Directive, which now guarantees workers the same wage components as those granted to domestic workers by law or through collective bargaining in the member state, is an example of actual development. However, this right now exists only on paper and requires European provisions on how it will be implemented, a post-hoc adjustment indicated in the European Pillar of Social Rights under “fair working conditions” and “social protection and inclusion”. There are plenty of blueprints available, such as the Austrian wage and social dumping law, or the French proclamation of 4 June 2019 on employers’ responsibility of care when posting workers. There are, of course, Switzerland’s “additional measures.”
Aside from this type of regulation, European legislation is required to eliminate all temporary or fixed-term employment without social insurance coverage, as well as an EU-wide real-time registration of social insurance status for all cross-border workers. This would allow the labor authorities to work more effectively and quickly with the newly constituted European Labour Authority to identify and stop illegal or unauthorized employment.
This would put an end to the competition distortions caused by wage dumping, the effects of which are borne by workers; it would also improve acceptance of people’s right to move around and offer services. Not least, it would turn Switzerland’s protections into a precondition for deepening ties with the European Union, from framework agreements to membership applications. For unions, the year-long conversation as part of the Conference on the Future of Europe, in which all European people are invited to participate and submit ideas, is a significant opportunity. They can demonstrate what employees need in order to protect their rights in the European Single Market.