Green Paper on Modernising Labour Law

The aim of this Green Paper is to initiate a public debate in the European Union (EU) on the modernisation of labour law in the light of trends in European labour markets. They must become more flexible and guarantee optimum security. Labour law has an essential role to play in this regard. Promoting debate on this issue would allow the implementation of a suitable, proactive regulatory framework. Managing innovation and change well means that labour markets must take on board three main aspects: flexibility, job security and segmentation.

ACT

Commission Green Paper of 22 November 2006 entitled "Modernising labour law to meet the challenges of the 21st century" [COM(2006) 708 - not published in the Official Journal].

SUMMARY

In this Green Paper, the Commission identifies the main challenges regarding the gap between the existing legal frameworks and the realities of the labour market.

The aim is to involve the Member States, the social partners and other interested parties in an open debate, in order to look at how labour law can help to promote flexibility in conjunction with security, regardless of the type of employment contract.

The Commission plans to organise a public consultation over a four-month period based on the questions asked in this Green Paper. A follow-up communication at the end of the public consultation will be adopted by the Commission in 2007.

The Commission acts as a catalyst to support the action of the Member States, since protection of working conditions depends mainly on national legislation. At EU level, the social acquis supports and complements the action of the Member States.

Developments in European labour markets

Labour markets in Europe are changing primarily in line with rapid technological progress, more intensive competition in the face of globalisation and the development of consumer demand. This is leading to changes in the organisation of work and working time, pay and the number of workers employed in various stages of the production cycle.

This change has led to a diversification in types of employment contracts, with new categories of workers (such as those hired through temporary agencies) being created. The relationship between the law and collective labour agreements is thus developing in parallel. These collective agreements can be used to adapt the legal principles to the specific economic situations and circumstances of particular sectors.

At Community level, the EU has legislated in order to ensure that the new forms of more flexible working are associated with certain minimum social rights for all workers, in terms of both part-time work and fixed-term work. On the other hand, no common position has been adopted by the Council on a proposal for a directive on working conditions for temporary workers hired through agencies.

Proliferation of atypical forms of contract

These contracts include fixed-term and part-time contracts, on-call contracts, zero-hour contracts, contracts for workers hired through temporary employment agencies, and freelance contracts.

Freelance workers choose to work independently, despite a lower level of social protection, because it offers them more direct control over their conditions of employment and pay. The proportion of total employment represented by workers recruited on atypical contracts has risen from more than 36% in 2001 to almost 40% in EU-25 in 2005. Freelance workers represent 15% of the total workforce. Fixed-term work has risen from 12% of total employment in 1998 to more than 14% of total employment in EU-25 in 2005.

This greater diversity of contracts has certain negative effects. A succession of short-term, low-quality jobs with insufficient social protection can lead some people into a vulnerable position. The Commission would like to point out that the risk of vulnerability on the labour market affects primarily women, older people and young people recruited on the basis of atypical contracts.

Modernisation of labour law: questions for discussion

This Green Paper is intended to promote discussion on various issues associated with the modernisation of labour law, such as:

• employment transition involving the move from one status to another. The chances of entering the labour market, staying there and making progress vary considerably. Employment protection legislation and the rules on contracts at national level both have a significant impact on transitions between employment statuses, in particular as regards the long-term unemployed or those working in insecure jobs;
• legal uncertainty associated mainly with these forms of atypical employment. The phenomenon of disguised employment, when an employee is not considered as such in order to hide his real legal situation and avoid certain social costs, is widespread. The lack of legal clarity regarding the definition of freelance workers, for example, may lead to gaps in the application of the law. The idea of "economically dependent work" covers situations coming under neither the concept of regular employment, nor that of freelance work. There is no employment contract drawn up in such a case. Even if these workers are not in a situation of vulnerability, they remain economically dependent on a single customer, employer or principal for their income and may not fall within the scope of labour legislation;
• temporary agency work is a three-way relationship between a company, a worker and an agency. The complexity of these relationships is compounded when these workers are involved in long subcontracting chains;
• working time, subject to Community harmonisation, is also influenced by developments on the labour markets. The Directive on certain aspects of the organisation of working time had still not been adopted by the Employment, Social Policy, Health and Consumer Affairs Council (EPSCO) by the end of 2006;
• the mobility of workers in the light of the different definitions of a "worker". The mobility of workers is being jeopardised because the EU leaves it to the Member States to define the term. The Commission takes the view that having to refer constantly to national rather than Community law in this regard could weaken protection for workers;
• undeclared work is a persistent and worrying aspect of today's labour markets. As the main factor in social dumping, it is responsible not only for the exploitation of workers but also for distorting competition. In a Resolution adopted in 2003, the Council called on the Member States to resolve this problem by means of preventive measures and penalties, as well as by concluding partnerships between the social partners and the public authorities at national level.

Last updated: 23.02.2007