Precarious employment and EU measures to handle it - Comparative labour law

Precarious employment (lesson 8)

No safe companies or easy firings are all features of the precarious employment. The major forms of precarious employment are:

Temporary employment

It has increased very fast since the late '80s for at least two reasons:

• Just in time model: It requires easy hiring and firing depending on the business cycle. In a situation of hard workload, the company will hire people; otherwise, the company will fire someone.
• Getting round strict dismissals protections and costs: which means avoiding dismissal protections and costs related to an open-ended contract through a fixed-term contract. This happens especially in high protective countries like Italy and France.

In Italy:

• In 1990, only 5% of workers had temporary employment.
• In 2000, they became 10.10% (they doubled).

But also in other countries the share of temporary employment has increased (Germany, Denmark, UK).

The outcome of temporary employment

Temporary employment (TE) has created the so-called segmentation of the labour market (DUAL LABOUR MARKET). Basically, since some are employed by permanent contracts and others by temporary contracts, we can identify two main categories of workers:

• Outsiders
  • Short-term employment relationships
  • Low skilled jobs
  • Little or no prospect of internal promotion
  • Low returns to education or experience
  • Determination of wages primarily by market forces (no minimum wage)
• Insiders
  • Permanent employment
  • More skilled jobs
  • Access to career path
  • Access to vocational training
  • Minimum wage granted by directive 99/70/EC

How the EU handles temporary employment

There exists a directive (99/70) about fixed-term contracts. It has been the result of a framework agreement (which is a collective bargaining at the EU level). The directive recognized that:

• Open-term contract is and will be the general form of employment relationship between employers and workers. In a perfect world, we should have only open-ended contracts.
• Open-term contract is the most desirable prospect for both the worker and the country. For the worker, because it recognizes more rights and less uncertainty; for the country, because having skilled workers is beneficial.
• However, fixed-term employment contracts respond, in certain circumstances, to the needs of both employers and workers (e.g., seasonal working, work in the entertainment industry).

The compromise

The use of fixed-term contracts has to be on a "basis acceptable". According to the aims of the directive, an acceptable basis means:

• Improving the quality of fixed-term contracts, which implies granting the principle of no discrimination.
• Establishing a framework to prevent abuse arising from the use of successive fixed-term employment contracts or relationships. Abuse describes a situation in which a permanent position is filled by a fixed-term worker.

Principle of no discrimination

In respect of employment conditions, fixed-term workers shall not be treated in a less favorable manner than comparable permanent workers (that is, the permanent worker in the same establishment, engaged in the same or similar work/occupation, with the same qualifications/skills); unless different treatment is justified on objective grounds.

An example of objective grounds can be: if I have signed a fixed-term contract, holidays or other particular benefits will be only a fraction of those recognized to a permanent worker. Where appropriate, the principle of pro rata temporis shall apply (a wage proportional to the working time).

Abuse prevention

To prevent abuses arising from the use of successive fixed-term employment contracts (in relation to a permanent position), Member States shall introduce one or more of the following measures:

• Justifying the renewal of such contracts or relationships with objective reasons. If I want to hire someone again, I need to prove that there is an objective justification, that I really need them.
• Setting the maximum total duration of successive fixed-term employment contracts or relationships. Some countries say you can hire someone by a fixed-term contract for no more than 1 or 2 years or whatever. This is not exactly a protection for workers; it seems unfair from a worker's point of view. The company may say, "I really want to hire you again, but the maximum total duration does not allow me to do so." But if this is true, why did you not hire me with an open-ended contract?
• Limiting the number of renewals of such contracts or relationships. A government can say to companies that you can hire workers through a fixed-term contract only a limited number of times.