In certain sectors – such as food and agriculture, the garment industry, road transport and construction – subcontracting practices are widespread, and abuse of workers’ rights is frequent. For companies in these sectors, subcontracting has become a strategy to increase their profit and competitiveness in the market.

Initially foreseen as a temporary solution to flexibly adapt to the market or to perform tasks that do not belong to the company’s core business, subcontracting nowadays can concern almost the entire production process. Sometimes, even the core activities of a company or sector are carried out by subcontracted workers, who perform the same tasks in the same workplace as employees directly employed by the client company or main contractor. The more complex a subcontracting chain, the higher the probability that workers’ rights are abused along the chain.

Between 2019-2021, the ETUC was running a project on securing workers’ rights in subcontracting chains through a more consistent EU approach towards subcontracting (Co-financed by EU).

There is a need to create better tools and conditions for workers’ and their representatives to know about their rights and to be informed and consulted about the practices of their company along its subcontracting chain. Strengthening the legal framework on subcontracting and making trade unions’ and workers’ representatives’ involvement an essential part of it would help improving the working conditions for millions of workers in the EU.

In several case studies, researchers illustrated how subcontracting is used as a business model. The research shows the diverse strategies to use subcontracting as a business model. Companies take full advantage of the existing national and European norms and aimed at externalising risks, by extending and complicating the subcontracting chain. The research team approached selected companies and interviewed various stakeholders including labour authorities and management associations. They found hard facts and sad stories about workers that fight until today to receive their salary.

In the cases of the report subcontracting practices are directly weakening the economic and normative employment conditions of the workforce: less income, less social contributions, longer working hours, worse H&S conditions, etc. Sometimes the employers even achieve to systematically hinder the social cohesion of the workers and consequently hinder collective action.

The research shows how companies in these sectors use subcontracting as a strategy to increase profits in highly competitive markets, without being liable for the consequences of their actions.

A group of experts concentrated on legal provisions in national and European legislation regarding the regulation of subcontracting with particular interest to due diligence, joint & several liability and transparency and reporting measures. The outcome of the assessment paints a clear picture of lacking legal provisions to regulate subcontracting through strong binding measures. Labour rights aspects are barely covered in the context of subcontracting but also mandatory shared responsibility, covering both domestic and cross border subcontracting situations, for compliance with legal obligations and labour standards is missing.

This Report assessed how the four Member States have exploited the social clauses present in the Public Procurement Directives. In particular, the national Reports focus on the Directive 2014/24/EU and took into consideration the principles of procurement, general principles on the choice of participants and award of contracts, exclusion grounds, reliance on the capacities of other entities, contract award criteria, abnormally low tenders, conditions for performance of contracts and subcontracting.

Although, it can generally be observed that all member states have implemented social clauses, the effectiveness in each member state is quite heterogenic. E.g. in all the four Member States, the contracting authorities shall reject low offers that result from non-compliance with environmental, social and labour obligations. Similarly, exclusion grounds have been defined and further subcontracting can be limited. On the other hand, many problems still remain unsolved. Cases about proportional national legislation and its consistency with EU law have sometimes resulted in detrimental decisions for workers and the contracting authorities. Furthermore, trade unions were mostly only given a marginal role in the transposition of the social clauses.

This legal analysis was crucial for the elaboration of policy recommendations for a consistent EU approach towards subcontracting.

To secure workers’ rights in supply chains, the ETUC is calling for a general legal framework on subcontracting, with a view to strengthening liability and transparency, and to ensure equal treatment, decent work and effective enforcement throughout the chain.

An EU legal framework on subcontracting should comprise, in particular:

Measures for enhanced liability

• mandatory joint and several full chain liability of contractors should strengthen compliance with legal obligations and labour standards, including applicable collective agreements;
• such liability schemes should cover both domestic and cross-border subcontracting situations, including in the context of public procurement;

Practices for ensuring decent work

• workers’ rights to information, consultation and participation at board-level should be guaranteed as a means for strengthening workers’ influence on corporate behaviour;
• alert systems, control and audit measures and compliance monitoring procedures, such as e.g.  codes of conduct or international framework agreements need to be established in collaboration with workers’ representatives and trade unions;
• subcontracting arrangements to circumvent collective agreements or opt for less favourable ones in the same sector of activity must be tackled. Collective bargaining and applicable collective agreements must be enforced throughout the subcontracting chain.
• the principle of equal treatment and its practical implementation in terms of equal pay for equal work in the same place should be ensured, independently of where the workers come from or how they are contracted;

Standards for increased transparency

• a limitation of the number of subcontracting levels and a prohibition of further subcontracting as soon as labour-only subcontracting enters into a chain should be introduced;
• mandatory non-financial reporting initiatives should be made more effective through the formulation of more precise and binding indicators, asking to ‘comply and explain’ instead of to ‘comply or explain’;
• a binding duty of investigation and verification by the main contractor or leading undertaking of the genuine activity of the subcontractor, its social record and compliance with applicable regulation should be established;

Tools for effective enforcement and access to justice

• solvency guarantees that secure the payment of wages, social security payments and other social obligations must be (re)installed;
• accessible mechanisms for legal redress and recovery should be available for all workers and their representatives to report abuses and enforce their rights;
• dissuasive and effective sanctions and compensations including back payments in case of non-respect of the applicable legislation and/or collective agreements.