The new Posted Workers Regulations could see a hike in the wage bills of construction companies that use overseas labour. Claire Holland explains.
Claire Holland
Construction companies which have large numbers of overseas workers on their sites may want to take note of the new Posted Workers Regulations – they could cause salary costs to spiral upwards.
Introduced last month, the regulations implement the European Commission’s Posted Workers Directive. This provides that workers who are posted by their employers to perform temporary work in other member states should enjoy the same protection of the minimum employment rights and working conditions available to other workers employed in the host country.
These include maximum work periods, minimum paid holidays, minimum rates of pay and overtime, as well as health and safety and hygiene at work and non-discrimination provisions.
What this means for employers
The main impact of the regulations for the construction industry is the introduction of a subcontracting liability. A construction worker posted to the UK can make a claim to an employment tribunal against the contractor or subcontractor immediately above their employer if their employer has failed to pay them the national minimum wage (NMW).
Key points
- Posted workers are employees sent by their employer to work in another
EU state on a temporary basis, not EU mobile workers who travel to seek work. - The construction sector accounts for 43.7% of the total number of postings within the EU.
- Posted workers can claim for a shortfall in wages from the contractor or subcontractor immediately above their employer in the chain.
- Contractors can offer a defence against claims if they can prove sufficient due diligence.
- The government is to publish guidance on the appropriate level of due diligence.
The posted worker will be able to choose whether to pursue the contractor or employer for unpaid wages up to the level of the NMW in an employment tribunal. The contractor’s liability would be limited to the balance of the NMW due. When the worker’s contractual rate of pay is above the NMW, any claim for a shortfall in wages would have to be made against the worker’s immediate employer in an employment tribunal or civil court.
If a worker chooses to bring a claim for deducted wages against the contractor immediately above their employer, they must do so within three months from the deduction, or last deduction if there has been a series. The right is also subject to the ACAS early conciliation procedure.
Should the claim be successful, an employment tribunal must make a declaration and order the contractor to pay the worker the shortfall in wages. The tribunal may also order the contractor to pay the worker additional compensation for any financial loss sustained because of the deduction.
Claiming from a contractor
But why would a posted worker try to claim from a contractor further up the supply chain rather than from their own employer?
It may be that the worker’s employer is based outside the UK so this may make it more difficult to bring and enforce a claim against them. Also, a worker may pursue a claim against the contractor if they have not made any progress with a claim against their own employer – for example, if the employer has disappeared or gone into liquidation.
In addition, the UK contractor may be a larger organisation with a more established profile than the employer and consequently may be more likely to pay the outstanding sums to the worker.
Having said that, a posted worker who makes a claim against a contractor will still be able to make a complaint to HM Revenue & Customs (HMRC) for enforcement of the NMW against their employer. And this route may be preferable and more cost effective, as it will not incur the legal costs, time or tribunal fees of pursuing a claim in an employment tribunal.
The Posted Workers Regulations acknowledge the extra burden they may place on contractors, and allow a defence against such claims where a contractor can prove it undertook appropriate due diligence to ensure its subcontractor would pay the worker the correct wage.
The government has said it will publish guidance setting out what due diligence might be appropriate. The guidance will avoid setting the bar too high, so that smaller firms find it difficult to comply, but is likely to shift on a case-by-case basis.
Complex supply chains
Many UK construction companies now have large and complex supply chains that employ overseas workers, directly or indirectly. These contractors will need to review their processes to ensure that appropriate due diligence is carried out before engaging subcontractors which employ posted workers. What level of due diligence is required will be clearer once the government’s guidance is published.
Contractors should also seek warranties and indemnities in any subcontracting arrangement to guard against any financial liabilities arising from the regulations, particularly if there is limited opportunity to carry out due diligence before entering into the contract.
It is worth noting, though, that any provision in a contract of employment or other agreement which attempts to exclude or limit the operation of the regulations, or prevent a worker from bringing a claim under the regulations, will be void. This does not apply to COT3 agreements (settlements of employment tribunal claims through ACAS).
Claire Holland is a senior associate at law firm Foot Anstey.
