"Subcontracting: Exploitation by design. Tackling the business model for social dumping", 7. December 2022

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Following numerous scandals, subcontracting has become a topic of interest for academics and journalists alike, and its negative impact on employment and working conditions has been widely condemned.

This report sets out the various ways that subcontracting undermines labour laws in the EU. Using case studies we seek to demonstrate that subcontracting is not a temporary solution to deal with specific market situations or a necessary solution to performing tasks that do not belong to the company’s core business, but is instead the business model, normalising exploitation and social dumping so that companies can increase their profits.

Subcontracting allows companies to separate power and profits, on one side, from risks and responsibilities, on the other side. In fact, the lead company and the main contractor(s) often decide the conditions that must be respected in the service provision or in the good production; instead, the risks and the responsibilities are displaced on subcontractors that, in order to comply with the conditions imposed by the lead company or the main contractor, are often forced tobreach labour regulation. [...]

Subcontracting is therefore often involved in both legal and illegal forms of workers’ exploitation (i.e. practices aimed at progressively deteriorating working conditions) and social dumping (i.e. practices aimed at exploiting poor labour conditions with the aim of gaining a competitive advantage).

Despite the widespread presence of abuse in subcontracting chains, this report focuses mainly on the legal forms of workers’ exploitation and social dumping. In this report, we argue that the exploitation of workers and social dumping result from not only legal breaches, but that these phenomena are actually supported by lawmakers. In other words, lawmakers deliberately decide to facilitate subcontracting, despite its negative impact on labour.

As a result, we are calling for intervention at EU level to ensure decent living and working conditions for workers involved in subcontracting chains.

This should be achieved by: limiting the length and level of subcontracting chains; promoting full joint and several liability; strengthening work stability; assuring workers’ equal treatment; supporting trade unions and worker representatives along the entire subcontracting chain.

To do this our recommendations are two-fold:

1. A new European Regulation on decent work in the subcontracting chain that:

• Limits the possibility to contract out and shortens the length of the subcontracting chain by [...]
• Promotes joint and several liability: [...]
• Strengthens work stability by using social clauses currently present in public procurement legislation to protect workers when a new subcontractor takes over the work or service.
• Guarantees equal treatment of workers, applying the same terms and conditions of employment across the subcontracting chain.
• Supports trade unions and worker representatives along the entire subcontracting chain and guarantees the right to strike. To monitor the subcontracting chain and to participate in the entire due diligence processes, worker representatives shall be present and their role, including the role of the European Work Council, shall be strengthened.

2. Modification of the existing legal framework, in particular:

• Amending the Corporate Sustainability Due Diligence proposal in order to:
  • Ensure transparency of the entire supply chain, obliging companies to disclose information on all the suppliers involved;
  • Introduce a rule on joint and several liability for human right violations committed by suppliers;
  • Limit the use of contract termination clauses and contractual insurance to avoid any risk of burden-shifting by the lead company onto its suppliers and to guarantee work stability in the supply chain;
    • Strengthen the equality clause by: Enlarging and making illustrative and non-exhaustive the lists of human rights and Treaties in Annex of the Directive on Corporate Sustainability Due Diligence (CSDD) proposal;
    • Obliging companies to monitor the respect of legislation that implement these Treaties (where it exists); and
    • Including collective agreements (including transnational collective agreements) in the human rights framework that companies have to respect.
  • Ensuring the full involvement of trade unions and workers’ representatives throughout the whole due diligence process, including the development and implementation process.
• Amending the legislation on public procurement in order to: [...]
• Supporting the creation of worker representatives along the entire subcontracting chains, as well as in sites and groups by [...]