Social Responsibility of subcontracting undertakings in production chains (short presentation) 
President
The next item is the report by Mr Lehtinen, on behalf of the Committee on Employment and Social Affairs, on the social responsibility of subcontracting undertakings in production chains.
Lasse Lehtinen
rapporteur. - (FI) Mr President, Commissioner, subcontracting chains are commonplace in business. They help organise work efficiently and flexibly. They are essential for the internal market to function properly and constitute a necessary economic and logistical network.
For the sake of the viability of the markets and consumer protection, however, it is crucial to use legislation to establish the key responsibilities of contractors and subcontractors. In this report the Commission is urged to establish a clear-cut legal instrument introducing contractor's liability at European level, while respecting the different legal systems in place in the Member States and the principles of subsidiarity and proportionality.
Eight Member States already have legislation along these lines in place, but we also need to be able to regulate relationships between subcontracting chains at Community level. Common European problems have to be solved with common rules. Otherwise, those countries that have not regulated this area of business can distort competition at the expense of the others.
This is therefore not just a matter of the protection of workers, but of safeguarding the competitiveness of companies that respect the rules. In a word, it is about prevention of the grey economy. As long as subcontracting chains are a surreptitious way to keep wages down and avoid paying tax and social contributions, the burden will fall on the taxpayer and competing companies, most of which are small- and medium-sized enterprises. The subcontractors too, which are frequently small firms, need clear rules when they are working for very big contractors.
We have already seen how country-specific systems also act as preventive forces. The threshold for neglecting employers' obligations will be higher if people can expect to be punished for criminal activity.
It is in the interests of all Europeans to adhere to minimal conditions of employment and clear rules. Then the workforce can confidently move from one country to another, businesses can trust contracts, and consumers can be sure that the cost of a product or service is the right one and has been transparently determined. It is no coincidence that the report talks specifically about the social responsibility of undertakings.
Louis Michel
Mr President, ladies and gentlemen, the Commission very much welcomes this report.
However important subcontracting may be for increasing productivity and competitiveness, we fully recognise the need for effective measures to ensure that it neither encourages nor facilitates non-compliance with employment conditions, particularly where there are long subcontracting chains. Adequate, effective, deterrent penalties are needed to ensure that subcontractors meet their legal and contractual obligations in full, in particular in relation to workers' rights. Greater transparency in the subcontracting process will lead to greater overall protection of workers' rights, an issue to which the Commission is - and will remain - very attached, as you know.
Whilst I might approve of your general principle, according to which European problems require European solutions, I would be more prudent in relation to the conclusion set out in paragraph 14 of the report, which says that the problem can only be resolved by introducing a clear-cut legal instrument that introduces joint and several liability at European level.
The report also seems to go in this direction in paragraph 15, where it calls for an impact assessment on the added value and feasibility of such a Community instrument. As regards the call for the Commission to guarantee effective compliance with the directive on the posting of workers, made in paragraph 25, I would like to point out that we have recently set up a high-level working party on the posting of workers. This working party consists of representatives from the Member States and the social partners and is aimed at improving the practical application of the directive and, in particular, administrative cooperation among Member States. It will hold its first meeting on 25 March.
In this regard, I would like to mention a study entitled 'Liability in subcontracting processes in the European construction sector', published in 2008 by the European Foundation for the Improvement of Living and Working Conditions, which highlights both the major differences between the national joint liability systems and their level of effectiveness. This study also highlighted the fact that there would appear to be no universal solution and recommended further debate and research, particularly in relation to cross-border issues.
The problem that we are trying to solve is of a social nature, but the solution proposed clearly has implications that go well beyond the social domain. We therefore need to study its economic and legal repercussions in detail.
I fully agree that this problem deserves more complete research and that, before presenting draft legislation, we must study carefully various non-regulatory methods for dealing with some of the issues raised in the report, in other words: improved cooperation and coordination among national authorities, inspection and other national enforcement authorities; an awareness of good practice within companies; current guidelines and standards; initiatives on social responsibility; and transnational company agreements, into which are already built innovative provisions relating to risk assessment procedures and the supervision of subcontractors.
President
The presentation is closed.
The vote will take place on Thursday, 26 March 2009.
Written Statements (Rule 142)
Proinsias De Rossa  
in writing. - The rise of sub-contracting in Europe has had far-reaching consequences for labour relations. It is not just labour that is subcontracted. The associated legal and financial obligations, such as, observing standards on wages and working conditions, and, the payment of taxes and social security contributions are also thereby externalised to subcontractors and employment agencies. Worryingly, subcontracting may increasingly be used as a way of reducing direct social responsibility.
Thus, the idea of 'joint and several liability' is crucial for ensuring that companies are responsible for their sub-contractors' practices. Clearly, the enforcement of legal obligations becomes more difficult in long and complex chains of interconnected companies. This is especially so across borders where various levels of contractors can be established in different Member States and subject to different rules. At the moment only eight Member States have national legislation covering the responsibility of subcontracting undertakings.
I strongly support this ETUC endorsed report which calls on the Commission to establish a clear-cut Community legal instrument introducing joint and several liability at European level, and, also requests the Commission to launch an assessment of the feasibility of an instrument on chain liability as a way of increasing transparency in the sub-contracting process.
