Eastern European workers: exploitation in the construction industry and enforcement by regulatory agencies

Zia AkhtarMonday 28 June 2021

Image credit: NORRIE3699/Shutterstock.com

With the vacancies available in the construction sector, the demand for Eastern European workers will not recede and many of these EU nationals have chosen to remain in the UK under the pre-settled or settled programme. The issue of discrimination against these workers in the construction industry can be addressed by the legal framework and in particular by the Modern Slavery Act 2015 and the Immigration Act 2016 provisions. This article argues that these can be strengthened and that work conditions will be improved if there is greater enforcement of legal mechanisms.

Introduction

The UK has departed from the EU, of which it had been a Member State from 1 January 1973 (when it joined what was the European Economic Community or EEC) to 31 January 2020.^[1] The execution of Article 50 Treaty on the European Union and EU (Withdrawal Agreement) Act 2020 has accomplished an objective after which the policy of labour migration will be formulated by legislation.^[2] There will be a new points system that will become effective in 2021, which will allow for only skilled-based migration commensurate with the Tier 2 occupations of skilled labour and medium skilled labour, although general labourers will be excluded. There is a transitional period until 30 June 2021, when the EU citizens and their families, already resident in the UK, will be able to apply for ‘Settled’ or ‘Pre-Settled’ status, and it is likely that nationals from EU countries such as Romania and Bulgaria who form most of the foreign workers in the construction industry, will remain in the UK.

The UK has also set out plans for a new single skills-based immigration system which will operate from 2021 and which would enable employers to attract the skills needed from around the world, while ensuring net migration is reduced to sustainable levels.^[3] The EU (Withdrawal Agreement) Act 2020 will preserve under Section 2(1) the EU-derived domestic legislation, as it has effect in law on and after exit day. The result is that all the Statutory Instruments (secondary law in the UK), such as those which implemented the EU Working Time Directive, will continue to apply in the UK.^[4] It will also allow the EU regulations on matters such as cross-border healthcare to have effect in the UK.^[5] The intention behind the legislation is that it will ensure a more gradual transition from the previous to new legal framework in the interest of maintaining as much continuity in the legal rules as possible.

The UK and the EU signed the Trade and Cooperation Agreement (TCA) on 24 December 2020. The TCA includes free trade in its framework as one of its three key principles and also ensures labour rights. It states:

‘Both parties have committed to ensuring a robust level playing field by maintaining high levels of protection in areas such as environmental protection, the fight against climate change and carbon pricing, social and labour rights, tax transparency and State aid, with effective, domestic enforcement, a binding dispute settlement mechanism and the possibility for both parties to take remedial measures’.^[6]

Despite the TCA, which has introduced measures that attempt to ease restrictions on the flow of goods between the UK and the EU following Brexit, and the retention of the EU Procurement Directives, it is estimated that the

‘increased customs checks, double product conformity assessments and restrictions on products, which do not originate from the UK or the EU, are likely to slow the progress of construction projects. Parties operating within the construction industry are also likely to incur additional costs due to delays in relation to goods and materials’. This is because of ‘the large quantities of building materials currently imported and exported from the EU’.^[7]

The mechanism for Brexit has to be considered in the context of the treatment alleged against the Eastern European workers, who have been discriminated against in the past. Romanian and Bulgarian workers, labelled A2/EU2 migrants since 2007 when Romania and Bulgaria joined the EU, have freely accessed the domestic labour markets from 2013. However, A2/EU2 nationals could only work under certain conditions, which primarily meant either being self-employed or working in specific sectors of the labour market, in agriculture, hospitality and construction. The immigrants from these two countries were consigned to a limited conditional status as ‘precarious workers’, who are only allowed to work in certain types of roles and are excluded from the workplace rights and benefits available to UK nationals.

This article considers the impact on the EU workers notably from the A2/EU countries who had been the subject of discrimination and exploitation in the construction industry. There is a need to analyse their contribution to the construction industry in terms of the ratio to the population. The determination that the workers from these Eastern European states have been victimised in UK law has to be followed by an assessment of how the regulatory framework can be further developed and this has to be built into the framework of the legal regime that protects against labour exploitation. This requires a detailed evaluation of the provisions of the Modern Slavery Act and the Immigration Act.

Contract work for migrant labourers

The UK construction sector has many strands and provides manpower for an infrastructure that includes mining, forestry, infrastructure, buildings, manufacturing and maintenance. The Home Office briefing paper shows that the construction industry contributes £117bn to the UK economy, six per cent of the total GDP in 2018–2019. In the same period there were 2.4 million jobs in the construction sector, seven per cent of total employment in the UK. The migrant labour force in construction has a similar proportion of non-UK nationals who work in the industry as in the economy as a whole. In London, a significantly higher proportion of migrants work in the construction sector than in the rest of the UK and there is a higher proportion of non-UK nationals in the construction of buildings sub-sector.

Government findings show that around 215,000 building workers employed in the construction industry at the end of 2019 were from non-UK countries. Ten per cent of the total workforce were non-UK nationals, of which 165,000 were from other EU countries and 50,000 were from non-EU countries. In the same period in London, 35 per cent of construction workers were non-UK nationals, of which 27 per cent were other EU nationals and seven per cent were non-EU nationals. In industries other than construction, 23 per cent of workers were non-UK nationals, of which 13 per cent were other EU nationals and ten per cent were non-EU nationals.^[8]

The above report comes on the back of another study conducted by the charity Focus on Labour Exploitation (FLEX), which reports that the construction industry is highly vulnerable to economic fluctuations that could lead to demand falling suddenly in recessions, or increasing rapidly during economic upturns as a consequence of government investment. The uncertainty and volatility of the market requires companies to adopt strategies that create the imperative for a highly adaptable workforce, often dependant on migrant workers. FLEX’s findings show that in London half of workers do not have a contract, a third report not getting paid, half have worked in dangerous conditions and a third have experienced abuse.^[9]

The FLEX survey also showed that the majority of migrant workers occupy lower-paid sections of the construction industry, making up 44 per cent of the low-wage ‘building’ workforce, suggesting an over-representation of migrant workers in low-paid work and a significant under-representation in higher paid positions. The main element of this low wage workforce is flexibility, as fluctuating demand across different geographical areas, both within London and nationwide, require unskilled labour and, to a lesser extent, skilled labour to be both mobile and available at short notice. The mobile workforce must also be willing and able to work with varying degrees of uncertainty, as the fluctuating demand that drives their employment can quickly make them expendable.

The findings confirm that the daily rate for work on building sites depreciates below the minimum wage for those aged 25 and over at £8.21 (April 2019–2020 figures) an hour, and half of workers do not have a written contract. Wages are paid in cash. There is also evidence of random discrimination against the construction workers leading to termination of jobs and lack of support such as transport to and from work. The inability of building companies to provide appropriate safeguards leads to much higher incidents of exploitative practices against migrant and informal workers, with higher risks of workplace accidents, sometimes resulting in death.

In the UK, migrant labour in the construction industry requires a worker’s card, which is contingent on reaching a certain standard of English and obtaining a bank account, a National Insurance number and an address. The free movement of workers under the Treaty of Accession of the Republic of Bulgaria and Romania (2005) contributed to these workers working under a framework that provided them legal rights along with the right of residence guaranteeing them ‘legal’ employment and ‘proper’ treatment. However, in construction work, labour exploitation is more prevalent as the data shows the UK’s construction sector has always been high risk due to its low profit margins, fragmentation, long supply chains and the consequential need for cheap labour.

In 2006, when the EU Council confirmed the accession of Romania and Bulgaria to membership in the EU, the UK

‘imposed transitional migration limits aimed at preventing Romanian and Bulgarian nationals from freely accessing domestic labour markets for a period of seven years. EU2 nationals could only work under conditions, which primarily meant either being self-employed or working in specific sectors of the labour market, agriculture and hospitality. As a result, A2 immigrants were consigned to a limited conditional status as precarious workers, allowed to work in certain kinds of roles and excluded from the workplace rights and benefits available to British and other EU citizens’.^[10]

The disadvantage that migrant workers from Eastern European countries suffer is that while the citizens of most EU countries are given ‘a £55 reduction, Bulgarians, Estonians, Lithuanians, Romanians and Slovenians are not’ and the reason proffered was that these countries had not ratified the Council of Europe’s Social Charter (CESC) of 1961.^[11] However, that does not prohibit the UK from unilaterally applying the waiver of the full charge to all EU countries; rather, the UK has decided not to.^[12] EU workers will be prevented from entering the UK without identity cards after the transition period from 1 January 2021 to EU, EEA, and Swiss national identity cards, until 1 October 2021. These identity cards with biometric chips will not be acceptable for travel to the UK by sea, land or air after the deadline, according to an updated GB–EU Border Operating Model. After that, the UK will operate a full, external border as a sovereign nation, and passports will be required for crossing the border into the UK.^[13]

Regulatory sector improvements

The issue is how to draw minimum standards for a regulatory framework to allow vulnerable EU workers in the construction sector to avail themselves of legal remedies. This requires consideration of the schemes in place that regulate the construction industry and provide the workforce with quantifiable skills which could then lead to the licensing of the industry by providing employers with quality certification.

There is an upward graph for the UK’s construction industry, over a ten-year period beginning in 2013. The Home Builders Association estimates that the housing supply in the UK has increased by 74 per cent during 2013–2017 and is expected to expand further over the next few years.^[14]

This is also supported by the Construction Skills Network, which has predicted a further 168,500 new jobs will be created in the industry during 2019–2023.^[15] However, there are a number of indictors that labour shortages will be caused by Brexit and the improved economy and higher demand for construction in Romania and Bulgaria, which were enjoying a construction boom just before the Covid-19 crisis slowed down this sector of the economy, consequently reducing the number of A2/EU construction workers seeking employment in the UK.

In order to maintain the supply for construction projects in the UK, the leading employers in the industry have had to improve the industry’s vocational education and training facilities. Organisations such as the Construction Industry Training Board have developed strategies through Covid-19 and post-Brexit challenges and created training programmes to attract the necessary workforce. The Skills Stability Plan is their latest initiative to attract labour into the construction industry through apprenticeships.^[16]

However, it is argued that:

‘[…] the training programmes are long-term solutions to labour shortages and thus require futuristic commitments of the government, employers and employees. This is difficult to achieve for the construction industry as their work is project-based, geographically mobile and jobs in this sector are casual. These result in short-term relationships between employers and employees, and reduce employers’ incentives for and workers’ commitment to training. It is accepted that the UK construction industry has adopted a “low-skills-low-wages” route, which has made the profit margin in this industry low and dependent on cheap labour; which is similar to the UK agricultural sector. The dependency on cheap labour discourages employer’s investment in worker’s skills or employer’s willingness to pay higher wages for skilled workers.’^[17]

The UK construction industry is dominated by small subcontracting firms, which have limited capacity to organise and provide firm-level training ‘with 86 % employing fewer than 10 staff at site’.^[18] The possibility of these firms to establish training programmes is arduous in the absence of a corporate structure and a dual training system, where there is a theoretical and a ‘hands-on’ training component. This is manifest in the UK in the low unionisation levels in this sector, especially after the amalgamation of the Union of Construction, Allied Trades and Technicians merged into the trade union Unite on 1 January 2017. Union membership in the construction sector fell from 56 per cent in 1995 to ten per cent in 2018.^[19]

The consequence of this structural change is that as the longer-term solution of training the local workforce appears unattainable, and employers in the UK construction sector are more likely to continue hiring immigrant workers at least in the short-term. There are also at present no seasonal visa arrangements for the construction industry on par with the agricultural sector, despite the construction industry’s advocacy of such short-term solutions. The UK government has made clear that there will be no ‘carve-outs’ under the points-based system granting extended stay for lower skilled workers. ^[20]

The Building Research Establishment (BRE) which is a 150-strong stakeholder group including clients, manufacturers, non-governmental organisations and contractors with complex international supply chains, works to drive positive change within industry. Their verification approach allows organisations to develop their ethical labour sourcing practices in a manner that is pertinent to them by enabling them to demonstrate continual improvement against a set of benchmarks. The BRE has developed BRE Global Certification, an Ethical Labour Sourcing Standard BES 6002 issued in February 2017 to uphold verifiable standards in sourcing labour and materials within a supply chain. The organisations that undergo the certification are verified annually by BRE assessors and the assessment covers
12 areas: organisational and management structure; HR; procurement; bribery and corruption; forums; management policies; immigration; supply chain management; learning and development; reporting; assurance and compliance with the Modern Slavery Act and improving their ethical labour sourcing practices. ^[21]

There has been some notable successes in verifying standards and granting companies with verification of standardisation. The landscaping products supplier Marshalls has become the first company verified as meeting a new ethical sourcing standard. Sir Robert McAlpine was the first labour contractor in the building trade to receive the award, and the construction labour supplier VGC also achieved verification in early 2018.^[22]

There is an awareness in the industry that a compulsory licensing scheme is needed. The Federation of Master Builders (FMB) has reached a consensus for there to be a mandatory licensing scheme for all UK construction companies to transform the sector into a ‘high quality and professional industry’. Currently, builders and contractors – unlike gas and electrical engineers – can set up their firms without a licence. This makes compliance with a uniform industry standard difficult to enforce across all the trades in the building industry. The licensing scheme is supported by the National Federation of Roofing Contractors (NFRC), Safe Contractor and CHAS, which all want compulsory licensing within the industry. There are

‘more than three-quarters (77%) of small and medium-sized (SME) construction firms which support the introduction of licensing to professionalise the industry, protect consumers and side-line unprofessional and incompetent building firms’.^[23]

Enshrining legal rights for expatriate workers

There is a legislative framework in the UK which provides statutory protection to migrant workers. This regime offers employees with the basic rights of not being exploited or being abused in the market. These are in the form of the Modern Slavery Act and the Immigration Act. These statutes have protection mechanisms that proactively assess and if necessary penalise businesses that are found to be exploiting their workforce.

The enactment of the Modern Slavery Act 2015 is intended to prohibit trafficking and conditions of employment that amount to modern slavery.^[24] Section 1 states that:

‘(1) A person commits an offence if –

(a) the person holds another person in slavery or servitude and the circumstances are such that the person knows or ought to know that the other person is held in slavery or servitude, or

(b) the person requires another person to perform forced or compulsory labour and the circumstances are such that the person knows or ought to know that the other person is being required to perform forced or compulsory labour.

(2) In subsection (1) the references to holding a person in slavery or servitude or requiring a person to perform forced or compulsory labour are to be construed in accordance with Article 4 of the Human Rights Convention.’

Section 3 of the Act sets out the meaning of exploitation as follows:

‘(1) For the purposes of section 2 a person is exploited only if one or more of the following subsections apply in relation to the person.

Slavery, servitude and forced or compulsory labour

(2) The person is the victim of behaviour –

(a) which involves the commission of an offence under section 1, or

(b) which would involve the commission of an offence under that section if it took place in England and Wales.’

Gangmasters from Romania who have trafficked and exploited construction workers and been found to have imposed oppressive conditions in order to reap financial rewards have been prosecuted under the Modern Slavery Act. In R v David Lugar,^[25] the defendant was convicted at the Inner London Crown Court on seven counts of holding another person in slavery or servitude or requiring them to perform fraud and compulsory labour. The accused had worked with other gang members to force trafficking victims to forfeit their identity cards, stay in overcrowded accommodation and to compel them to work on sites across London and in the surrounding counties using forged documents. The Court ordered the defendants to be served with a Slavery and Trafficking Order and to pay compensation under the Proceeds of Crime Act 2002.

The Anti-Slave Commissioner, Kevin Hyland has warned in the Chartered Institute of Builders (CIOB) report that ‘modern day slavery is hidden on construction sites across the UK today’ and that ‘workers in the construction sector are at risk of abuse and exploitation of traffickers and slave masters that target the vulnerable’. The CIOB has collaborated with Stronger Together, an industry alliance, to provide a tool kit to help construction businesses formulate their response in dealing with modern slavery. The tool kit provides construction companies and clients with practical resources and training based on the United Nations Guiding Principles on Business and Human Rights framework and in compliance with the Modern Slavery Act requirements. The CIOB published the report Contactors and the Modern Slavery Act, which

‘highlighted aggressive business models that create an environment for un-ethical procurement and recruitment practices and systematic auditing failures that allow criminals to infiltrate major projects undetected’.^[26]

The Immigration Act 2015 Part 1 has created the position of Director of Labour Market Enforcement. This person will provide strategic direction for those organisations ‘policing’ and regulating the UK labour market: Gangmasters and Labour Abuse Authority (GLAA); National Minimum Wage Unit; and the Employment Agency Standards Inspectorate. The GLAA has a broad remit to tackle exploitative practices across the industry spectrum. The GLAA has been involved in the litigation as amicus curiae when there has been abuse in recruitment of workers and when there is trafficking and exploitation of migrant labour.

The government has vested the GLAA and the Labour Market Enforcement Unit with powers to take remedial action against the exploitation of workers by identifying and punishing the offenders. The agency under the Director of Labour Market Enforcement also coordinates its work with the Modern Slavery Commissioner in order to identify and penalise those employers who are found to be in breach of the law.

In Antantos Galdikas and Others v DJ Houghton Catching Services Ltd (QB),^[27] six Lithuanian nationals, who were agricultural workers, filed a lawsuit in the UK against DJ Hougton Chicken Catching Services, accusing the company of human trafficking. The claimants alleged that they were trafficked to the UK with the involvement of a Lithuanian national who was paid for this service by the defendants. On arrival in the UK, the claimants say they were severely exploited by the company, based in Kent, which ran a business providing labour to poultry farms across the UK, including farms that supply chickens and free-range eggs for major brands, available in supermarkets across Britain.

The defendants paid the men for the number of chickens caught on farms, rather than paying for time worked at minimum rates including night rates and for time spent travelling. The claimants also alleged that they were not paid according to minimum wage requirements for agricultural workers, charged exorbitant fees, their wages were unlawfully withheld, and they were denied adequate facilities to wash, rest, eat and drink. The High Court found the company liable for labour exploitation and the defendants agreed to a settlement of £1m in compensation and legal costs for the Lithuanian victims. DJ Houghton was condemned as ‘the worst UK gangmaster ever’ by the GLAA. Their licence was revoked by the GLAA and 38 workers were referred to the UK Human Trafficking Centre, which confirmed that all the men were victims of trafficking.

The GLAA has developed an industry protocol and published a document called ‘Construction Industry Headline Trends’, which explains how expatriate construction workers become embedded in the domestic environment:

‘(i) Arrival “Workers commonly arrive by minibus, coach or van, with regular services from Romania particularly. Some potential exploiters will travel overseas to collect workers.” (ii) Accommodation “Regularly organised in residential properties, often with the potential exploiter and/or other employees. This may be in outbuildings. Some potential victims live onsite without access to basic facilities.”’^[28]

The protocol implements a framework to work with employers, agencies, trade and professional bodies to raise employment standards in the construction sector. The employer has to progress beyond box-ticking and conduct worker interviews on-site with the aim of identifying any deprivation of employee rights and failure to pay wages, paying below the minimum wage, withholding holiday pay and unlawful deductions for clothing or safety equipment. This protocol also requires personal protection equipment (PPE) for workers to prevent on-site injuries, and a complaints procedure that can be escalated to the management level.

There is also an incentive to consider reporting intelligence, such as on recruitment by labour users or labour providers. An example provided is of a construction company hiring workers from Eastern Europe and paying them below minimum wages in cash. The information provided in the form of any additional details will assist the GLAA in identifying the personnel and locations involved to improve their investigation of the employers who breach the protocol.^[29]

The GLAA has published the referrals that it has received for exploitation and modern slavery in a 12-month period ending in June 2020. The findings show that that for ‘car washing sector’ there were 349 referrals; for agriculture 250 referrals; for food packaging and post 246 referrals; for construction 175 referrals; for hotels and restaurants 150 referrals; for food service 113 referrals; and for cleaning 72 referrals.^[30] There is quite a high proportion for the building and construction sector, which reflects other studies that have revealed that exploitation is common place in this environment.

The GLAA has also given a robust definition of slavery in its guidelines and identified what may be visible indicators of slavery in a given set of circumstances:

‘workers being controlled by someone else, workers may be distrustful and reluctant to interact with people, a lack of belongings can indicate exploitation, evidence of injury, abuse or malnourishment; and victims of forced labour will often work excessively long hours’.

In construction, improvement can be made through achieving ‘transparency throughout the supply chain’.^[31]

Conclusion

The impact of Brexit will not affect the demand for construction workers because, like agricultural workers, they are needed for labour-intensive work. The freedom of movement for foreign labour has been terminated, but the provision for EU residents to apply for Settled or Pre-Settled status until mid-2021 has generated a huge demand for applicants. This implies that there will be workers on building sites from the A2/EU2 countries. Migrants from Romania and Bulgaria have claimed discrimination in the past from the employers in the UK. This discrimination is structural, as workers from these two countries, as well as three other Eastern European countries, have not been given the benefit of the European Social Charter by the UK.

The manner in which the discrimination from the contractors that employ labour from the A2/EU countries can be terminated is by a regulatory sector establishing standards that are uniform, verifiable and quality controlled. This can only apply if there is a benchmark for the whole sector in the building trade and which will include gas and electrical engineers, plumbers, masons and locksmiths and so on. There is still no compulsory licensing and it is still voluntary because the UK government considers this to be unmanageable and bureaucratic in application.

There is a legal mechanism available in the form of the Modern Slavery Act and the Immigration Act, the purpose of which is to end discriminatory practices in employment and contract work. These provide a statutory plank for the rights of migrant or settled workers to be protected. The drive towards enforcement has begun by the gathering of statistics, issuing of guidelines and checks on the employers. It is by recourse to litigation in case of breach of the laws that the protection can be achieved which will prevent the exploitation of labour.