European Commission Green Paper - Modernising labour law to meet the challenges of the 21st century: BECTU response

9 March 2007

1. BECTU is the British trade union for all workers in the audiovisual and live entertainment sectors (excluding performers and journalists) - encompassing creative, craft and administrative occupations. We welcome the opportunity to respond to the EC Green Paper which is of particular relevance to the freelance workers who constitute almost half of our membership (as well as to casual workers in the theatre sector). Our response will, of necessity, focus on the issues of most significance for our members - and therefore particularly on the issue of legal uncertainty on employment status (Q7/8). We have not responded to questions of less relevance to our members.

   Q1: What would you consider to be the priorities for a meaningful law reform agenda?

   Q2: Can the adoption of labour law and collective agreements contribute to improved flexibility and employment security and a reduction in labour market segmentation?

   Q3: Do existing regulations, whether in the form of law and/or collective agreements, hinder or stimulate enterprises and employees seeking to avail of opportunities to increase productivity and adjust to the introduction of new technologies and changes linked to international competition?

2. From the experience of our freelance members, there is a fundamental need to prioritise a clear and consistent legal definition of 'worker'. Legal uncertainty on employment status - which we will address under Q7/8 - is therefore, in our view, the single most important issue requiring labour law reform. Without this, many thousands of individuals who the EC intends to, and certainly ought to, include within the framework of European labour law will in practice remain excluded. This is a fundamental problem of legal definitions and of scope - and should be treated as an absolute priority for a European labour law reform agenda (as referred to in Q1).
3. Q2 refers to employment 'flexibility' and 'security' and thereby touches on the so-called 'flexicurity' model for the development of labour law. Within the EU as a whole, the UK labour market is at the 'flexible' end of the spectrum (as confirmed by the EC's own 'Employment in Europe' Report 2006). Within the UK labour market, our freelance members and many others like them, are at the extreme end of this spectrum of flexibility. In our view, and for reasons to be put forward in our response to Q8, there is now too much flexibility and insufficient security in this approach to labour law, which seems to place a neoconservative emphasis on the needs of capital rather than labour.
4. On the contrary, we believe that decent employment rights for all workers, allied to investment in training and the skillsbase, is a superior approach to labour law policy - which will encourage the development of a skilled and motivated workforce and therefore to the productivity gains referred to in Q3. European workers cannot, and should not seek to, win a 'race to the bottom' in terms of labour standards. The best route to international competitiveness will, in our view, be on a high standards/high skills basis.

   Q6: What role might law and/or collective agreements negotiated between the social partners play in promoting access to training?

5. Specifically in terms of training (Q6), a key issue for freelances is that of access to training in the absence of a single sponsoring employer - both for people leaving 'permanent' employment to go freelance and for existing freelances seeking to improve their skills and therefore their employment prospects within the freelance labour market
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6. The model which is operated in the UK audiovisual sector is that of training levies on employers. This recognises that individual employers cannot provide in-house training for freelances who are moving from company to company. Instead, employers pay into a common fund which is then used to pay for freelance training by training providers.
   • The Freelance Training Fund applies to independent production companies commissioned by broadcasters. A voluntary training levy is taken from the production fees earned by independents and channelled via their trade association to the relevant national training body (Skillset), which in turn subsidises freelance training courses up to a level of 75% of the cost to the individual freelance (ie the freelance only pays 25% of the full cost).
   • In the UK film industry there is currently a voluntary training levy which is due to be replaced by a statutory levy on companies, with the funding channelled via an Industry Training Board (based at Skillset) to finance freelance training courses.
7. Training levies appear to be a useful model in sectors with a fragmented company structure and a significant freelance labour force. In the absence of an effective voluntary levy, consideration should be given to a compulsory or statutory approach. The whole industry ultimately benefits from this form of investment in the freelance skillsbase - especially in a labour intensive sector.

   Q7: Legal definitions of employment and self-employment

   Q8: Is there a need for a 'floor of rights' dealing with the working conditions of all workers regardless of the form of their work contract?

8. While the phrase 'floor of rights' has the unfortunate connotation of minimum standards, we believe this question, and the related section of the Green Paper on 'Uncertainty with regard to the law' encompasses the issue of greatest concern to us - which the employment status of our freelance members and specifically of our Schedule D freelances (see para 11). The UK Government held a very long running consultation on employment status leading effectively to an outcome of 'no change' on the problems of most concern to us. We therefore welcome the opportunity for a debate at European level on the same issue.
9. BECTU has approximately 10,000 freelance members who work in areas such as independent production for film and television; in commercials, music promos and corporate audiovisual production; and directly for broadcasters. While the broadcasters have a shrinking core of permanent staff, the rest of the audiovisual sector is overwhelmingly freelance. The amount and nature of work obtained is unpredictable. These are all classic atypical workers.
10. Within this freelance labour-pool there are two categories: those whose employment status is as employees and whose tax is deducted at source (PAYE), and those who employment status is sometimes as workers and sometimes unclear and whose tax status is self-employed (Schedule D). We are adamant that it is unacceptable for tax status to dictate employment status. However, in the current uncertain situation, tax status does provide a useful shorthand to distinguish these two groups of freelances. In this document we will therefore refer to 'PAYE freelances' and 'Schedule D freelances'.
11. The problem is that UK labour law - which confers some employment rights on 'employees' and some on a notionally-broader category of 'workers' - effectively excludes Schedule D freelances from any clear and unambiguous access to employment rights. For freelances working in a characteristically long-hours sector, this has the particularly unfortunate effect of denying Schedule D freelances access to any rights under the Working Time Directive (an issue on which some of our members have taken cases to Employment Tribunals and been refused access on the grounds that they do not count as 'workers'). Other rights are of course also affected (including the sometimes important right to claim 8-weeks back pay in situations of employer insolvency and the right to appoint safety representatives). Lack of access to such employment rights is a fundamental problem (and also means, in our view, that EU Directives on employment rights are not being consistently applied).
12. The problem is made more acute since:
    • Schedule D freelances often work side by side with PAYE freelances and with broadcasters' staff on the same projects in the same locations and under the same collective agreements.
    • Very many of these workers are not freelance by choice. There are simply no permanent jobs in large parts of the UK audiovisual sector and a shrinking number of permanent jobs even in broadcasting - with many former staff members being made redundant and forced to transfer to the freelance labour market. They are prime examples of the 'unemployment push' noted in the paper (page 102) by Professor Perulli referred to below.
    • We note that our Schedule D freelances form part of a much larger number of workers in the same category. As the Green Paper indicates (p8), 'Self-employed workers in the EU -25 numbered over 31m in 2005 or 15% of the total workforce'. We strongly suspect that the problems experienced by our workers are also experienced by many workers in other sectors and other member states.
13. We note with interest that the Green Paper refers (p11) to the concept of 'economically dependent work' which falls 'between the two established concepts of subordinate employment and independent self-employment.' However, the Green Paper's reference (p11) to the UK's 'targeted approach' appears to miss the point that Schedule D freelances count neither as 'employees' nor as 'workers' in the UK.
14. We further acknowledge that Professor Perulli has investigated this concept at greater length in his EC-sponsored paper 'Economically dependent employment: legal, social and economic aspects'. We note from his analysis that:
    • The lack of clarity in employment law definitions is leading to a growing trend whereby 'protective legislation is facing a problem of 'defocusing' '(p31).
    'Economically-dependent workers are currently included in the self-employed category' and they 'must not be confused with false self-employment' (p76).
    • A recent EIRO study has found that economically-dependent work is most widespread in the service sector, specifically including the media (p92).
    • The ILO has proposed extending the scope of employment law to cover 'relationships other than subordinate employment' (p96).
    • Economic dependence should encompass criteria such as that the work is performed personally (p98) and that there is no contact with the end-market (p105).
15. We believe that Schedule D freelances such as our members fall clearly into the category of economically-dependent workers. They are not entrepreneurs who create their own work; they are entirely dependent for work on the employers operating in this labour market.
16. However, we strongly disagree with one aspect of the concept of 'economically-dependent' as described in the Green Paper ie that they remain 'dependent on a single principal or client/employer for their source of income' (p11). Schedule D freelances such as our members may work for many different clients/employers in any given year. They remain, however, completely dependent on the prevailing terms and conditions in this freelance labour market. They cannot set their own terms and have to operate within the rates already set. Their ability to negotiate truly independent terms is non-existent for all but an elite. The notion that their ability to work for more than one employer implies economic independence is therefore a complete fiction. Schedule D freelances move from engagement to engagement and company to company not out of independence but necessity. The classic freelance experience is not of independent choice but of chronic insecurity. They are, unambiguously, economically dependent workers.
17. With this amendment, we accept that the concept of economically-dependent worker, as referred to in the Green Paper encompasses our Schedule D freelance members. We believe that EC labour law requires reforms in the following way to overcome the problems faced by such workers:
    • There should be encouragement for, new, inclusive definitions of 'worker' - to be developed and applied by member states - encompassing such economically-dependent individuals.
    • Any such definition should give access to the full range of employment rights, specifically including working time rights. We recognise that some rights might still be subject to a period of qualifying service.
    • There should be a statutory presumption of coverage for all such workers. In the event of a legal dispute, there should be a burden of proof on the employer to show that an individual is not a 'worker'.
18. We believe it is vital to approach this issue in this way ie, by 'equalising up' so that Schedule D freelances become eligible for full access to the range of employment rights enjoyed by those currently defined as 'workers'. We would be strongly opposed to setting an inferior and lower floor of rights for economically dependent workers. We believe this would be unjustified and would merely offer unscrupulous employers a means of watering down rights for existing workers rather than improving the position of economically-dependent freelances ie an equalising down in the form of a race to the bottom tier of employment rights.
19. NB: All of the above arguments are also potentially applicable to casual workers in the theatre and live entertainment sector. We therefore call for the same approach in relation to this group ie their inclusion within a new definition of "worker" with access to the full range of employment rights.
20. We further acknowledge that, in parallel to the whole issue of employment status, there are connections to issues of tax/social insurance status. Our view on this is very clear. We believe employment status issues should be resolved solely through reform of labour /employment law. We believe any attempt at a linked reform of tax/social insurance law would have such complex and far-reaching implications in other areas that it would, in effect, stall the whole initiative. We therefore believe that there should be no call, arising from the Green Paper debate, for any consequential reform of tax/social insurance law (even if, as a result, there are some residual anomalies).
21. In stressing the need to address employment status issues solely by means of labour law, we also take the view that the introduction of competition law into this area (eg on the matter of collective agreements encompassing freelances) is wholly inappropriate. Competition law and competition authorities should, in our view, not seek to interfere in this area.

    Q9 & Q10 Three way employment relationships/agency workers

22. A minority of BECTU members operate via agencies. In all cases, the employer remains the film/television company for whom they perform the work, with the agency acting as an introducer or intermediary.
23. There are a number of long-standing issues concerning such agencies in the entertainment sector. However, these concern financial/contractual matters (eg the need for licencing, the problem of upfront fees, compulsory charges for non-work finding services, charges even when the individual finds their own work or leaves the agency). They do not primarily concern issues of employment status or 'dual employer' situations.

    Q11 Organisation of working time

24. Our freelance members work in a sector characterised by long working hours - where daily hours are commonly 12 hours (ie 'plus') - and weekly hours are 60 hours+. In this context, we have long been opposed to the individual opt-out from the maximum 48-hour week, which was, of course, a concession originally negotiated by the UK Government.
25. We believe that the individual opt out has become, in practice, a means of undermining the original aim of the Working Time Directive (WTD) to regulate working time in the interests of health and safety. The very unequal relationship between an individual freelance and an employer means that the opt out can, in effect, become a requirement rather than a voluntary option. Employers routinely issue contracts already containing an opt out clause to freelances seeking work. The overwhelming majority of freelances feel they have to accept the opt out rather than object and risk losing the work. The opt out has become compulsory and constitutes, in our view, an abuse of the system of working time regulation.
26. We are very aware that the review of the WTD has stalled on the issue of the opt-out - largely owing to the attitude of the UK Government. We continue to oppose any formula involving the retention of the individual opt out and the related use of freelance contracts with opt-out clauses at the initial point of engagement.

    Q12 Mobility Of workers

27. We welcomed the exclusion of labour law from the Services in the Internal Market Directive - thereby allowing member states to apply domestic employment standards to incoming workers from other member states. However, the continued exclusion of Schedule D freelances from the provisions of domestic employment law - as described above in our response to Q7/8 - means that there is a glaring absence of protection in this area and an incentive for unscrupulous employers to bring in foreign 'Schedule D' workers with no domestic employment protection.
28. We believe this makes it all the more necessary to resolve the problems of employment status for Schedule D freelances by revising the definition of 'workers' so that they can clearly be included within the provisions of domestic employment legislation.