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Wage Dumping Hits Switzerland

BERN, Jan 7 2013 (IPS) - The Swiss parliament has decided to tackle wage dumping in the construction sector. With the introduction of chain liability, general contractors can soon be held accountable for labour agreement violations by their subcontractors.

Eight euros per hour instead of 27.5 euros guaranteed by the collective labour agreement is what some technicians of a Slovenian company working at Messe Basel have declared they earn. A new exhibition hall is being built there at a cost of nearly 360 million euros.

Time pressure is extreme, delays are considered a catastrophe. Up to a thousand labourers work day and night with the new hall due to open its doors at the end of April when Messe Basel hosts ‘Baselword’, the globally leading exhibition in the watch and jewellery sector.

The Slovenian technicians working on the façade are at the bottom of a chain of several subcontractors. Swiss general contractor HRS Real Estate has been charged with the work. But HRS denies accountability for the wage abuse, claiming it can’t control the payroll of its subcontractors. The owner of the building, MCH Messe Basel, holds HRS, responsible as its prime contractor.

The buck is passed around, and there are several victims: The workers don’t earn what they deserve, correctly employed labourers face pressure on their wages, and properly operating companies are confronted with unfair competition.

In Switzerland, that phenomena is called ‘wage dumping’. Labour unions say it has drastically increased over the past few years. It’s a result of the opening of the Swiss labour market to EU citizens which started in 2002 when the Agreement on the Free Movement of Persons came into force.

The agreement allows EU citizens to reside and work in Switzerland. Employees and self-employed persons working in Switzerland for less than 90 days don’t need permission, but they have to register with cantonal authorities. Since 2002 immigration from EU countries is on the rise.

In 2004 the Swiss government introduced ‘accompanying measures’ to protect employees from violations of labour and wage agreements. These include observation of the labour market and on-site controls of work conditions. However, several legal gaps remained.

This summer the Swiss parliament cracked down on fake self-employment. For the labour unions that wasn’t enough, as the problem of wage dumping by subcontractors remained.

Swiss minister for economic affairs and former entrepreneur Johann Schneider-Amman admits that the problem is getting bigger and bigger. “Interventions in the liberal principles of the free labour market are only permissible in cases of massive malpractice,” he says. “Unfortunately that’s the case.”

Swiss labour unions have demanded laws making general contractors legally accountable for misconduct by its subcontractors, so-called ‘chain liability’. General contractors are only freed from responsibility if they can show to have ensured that their subcontractors abide by the law.

The neo-liberal lobby along with the Swiss Employers’ Association has launched a much weaker counter-proposal. They want general contractors to be freed of any legal responsibility if their direct subcontractor simply signs a contract pledging to respect Swiss wage and labour conditions.

Last summer, Switzerland’s Council of States adopted chain liability. Then, it was the National Council’s turn. In the debate, advocates of chain liability could not only count on support from the Federal Council, but also from a number of liberal entrepreneurs.

One of these was Hans Grunder, a Bern representative of the Conservative Democratic Party (BDP). He explained that not quality, but prices had become the most important criteria in bidding procedures. “As a result, subcontracting assignments often go to foreign companies, leaving our enterprises at unfair competition,” he said.

Grunder was supported by the Green Party’s Alec von Graffenried, who works for a major construction company. He argued that since general contractors are already accountable for prices, schedules, quality, safety and environment protection, it was only logical that they would also assume responsibility for their subcontractors’ conduct.

Corrado Pardini, Social Democrat and unionist, said that strengthening instruments against wage dumping would ensure public support for free movement and residence of EU citizens, which is crucial for Switzerland’s economic prosperity. “Continuing abuses of wage and labour conditions will increase xenophobia,” he warned.

The right-wing Swiss People’s Party (SVP) again played an ambivalent role. Its representatives rejected chain liability. The strategy is well-known: public outrage against foreign workers is exactly what the SVP utilises to draw support for their populist policy and their latest popular initiative ‘Stop mass immigration’.

Finally, the National Council adopted chain liability. Labour unions applauded. Nico Lutz, responsible for the construction sector at Switzerland’s largest inter-professional trade union Unia said that companies as well as workers would profit. “It’s important however, that chain liability won’t be watered down during implementation.”

His opponents at the Swiss Association of Builders (SBV) hope for limited additional bureaucracy and promised to play a constructive role in the implementation process, even though they still doubt the practicability of chain liability. “It remains unclear how prime contractors can check the payrolls of their subcontractors’ subcontractors,” SBV media officer Matthias Engel says.

Engel also thinks that chain liability could lead to less law-abiding subcontractors because they know that for any violation the general contractor would be held responsible. “Chain liability will be like the sword of Damocles hanging over the general contractors,” he said.

Both employers as well as labour unions call for better controls on construction sites. On behalf of the builders, Matthias Engel calls for a badge system for workers which would regulate access to construction sites and in addition tackle problems such as fake self-employment and black labour. Unia’s Nico Lutz demands that sanctions should be aggravated and that in case of well-grounded evidence of wage dumping, entire construction sites could be halted.

In Basel, chain liability seems to find premature appliance. For the Slovenian façade technicians, the story may end well. In order to polish their image and avoid any delays of construction, MCH Messe Basel and its general contractor HRS promised in late December to step in over the outstanding salaries their subcontractor is supposed to pay.

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