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An end to social dumping

December 2011 - Employment. Legal Developments by Norrbom Vinding Law Firm, member of ius laboris.

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by Christian K. Clasen

General legal news
Foreign enterprises operating in Denmark must comply with Danish labour market practices and standards. The issue of social dumping has been addressed by the Danish Government and the Red-Green Alliance party in a new agreement.
 
As part of the negotiations to get the Finance Bill through the Danish Parliament, the Danish Government and the Red-Green Alliance party have decided to earmark DKK 65 million to combat social dumping. Social dumping is described in the agreement as, for instance, foreign enterprises operating in the Danish labour market and paying their employees half the going rate, thus ignoring the Danish collective bargaining model, and with it the minimum wage and working conditions.
The agreement is thus intended to protect existing working conditions in Denmark and ensure that Danish enterprises are not exposed to unfair competition from abroad. As a result, foreign enterprises doing business in Denmark will be subject to increased control.
 
The agreement provides for four general initiatives:
  • A new specialist unit to oversee compliance with Danish legislation on taxes, VAT, health and safety and working environment, manned by staff from the Danish Working Environment Authority, the tax authorities and the police

  • A more rigorous procedure to control whether foreign enterprises are established in their home country

  • Heavier fines for illegal lorry driving

  • A new committee to examine how to combat social dumping and what additional initiatives can be taken
It is not yet clear how the initiatives will be financed.
 
Norrbom Vinding notes:
  • that none of the initiatives planned will in themselves prevent social dumping as understood by the two parties;

  • that foreign enterprises will thus still not be required to comply with Danish collective agreements and pay conditions;

  • that such a requirement, if introduced, would be likely to conflict with the EU rules on free movement of labour and services; and

  • that the outcome of the committee work that has now been initiated is therefore anticipated with excitement since additional controls will most likely not solve the problem that the parties wish to solve.
Norrbom Vinding will follow developments closely.
 
The above does not constitute legal advice and should not be relied upon as such

For more information please visit www.norrbomvinding.com