The abolition of the collective and several responsibility of the owner of a project, the contractor and the subcontractor towards the employees: The problem of collective responsibility and liability
1. Preamble
1.1. Regarding the collective responsibility and liability
“I do not know when the term “collective responsibility” first made its appearance, but I am reasonably sure that not only the term but also the problems it implies owe their relevance and general interest to political predicaments as distinguished from legal or moral ones. Legal and moral standards have one very important thing in common-they always relate to the person and what the person has done; if the person happens to be involved in a common undertaking as in the case of organized crime, what is to be judged is still this very person, the degree of his participation, his specific role, and so on, and not the group. The fact of his membership plays a role only insofar as it makes his having committed a crime more probable; and this is in principle not different from bad reputation or having a criminal record. Whether the defendant was a member of the Mafia or a member of the SS or some other criminal or political organization, assuring us that he was a mere cog who acted only upon superior orders and did what everybody else would have done just as well, the moment he appears in a court of justice he appears as a person and is judged according to what he did. It is the grandeur of court proceedings that even a cog can become a person again.
Thus wrote the Jewish German-American, Johanna “Hannah” Arendt, one of the most significant political philosophers of the 20th century, in her book “Collective Responsibility”, Schocken Books, New York 2003.
1.2. Regarding the collective responsibility and liability of the owner of a project, the contractor and the subcontractor
In contrast to what (quite obvious) Hannah Arendt, logic and law dictates, the pre-existing legal framework (article 9 of Act 4554/2018) established the collective and several responsibility and liability of more than one natural and legal persons (owner of the project, contractor, subcontractor) – no matter the actual involvement of each of them. The object: the obligations arising from a (possible) violation of the rights of employees, to be imposed on contractors and subcontractors.
How fair is that?
2. The necessity(?) for establishing the collective and several responsibility of the owner of a project, the contractor and subcontractor – explanatory memorandum.
During the past year the executive power saw the need to establish the collective and several responsibility of the owner of a project, the contractor and the subcontractor as a means to fight undeclared and uninsured employment. The lawmaker’s rationale behind the law they introduced to tackle this issue is stated in the relevant explanatory memorandum of Act 4554/2018.
2.1. General references
The relevant explanatory memorandum mentions, among others, regarding the issue at hand, that:
“1. The impact made from the implementation of the fiscal adjustment programs resulted in the increase of undeclared or underdeclared labor. … The suggested provisions introduce a new structure in the way fines are imposed from the Labor Inspection Body on the employers employing undeclared employees, giving incentives for the regulation of the labor market and aiming to the protection of employees and the creation of new jobs with social insurance”.
Especially regarding the issue of undeclared labor of employees working for businesses (: contractors) who take on the execution of projects on behalf of their clients, the explanatory memorandum mentions that:
“2. It is more than common for a business to assign specific works to an external associate (contractor), meaning to another business which usually specializes in one or more fields. Those works are executed by employees employed by the contractor, and not by the businessman who assigned the execution of those works to the contractor, in exchange for a fee, a fact that, in most cases, negatively impacts the rights of the employees …”
Thus: (generally) then intentions are good!
2.2. The specific provisions of article 9
The explanatory memorandum mentioned, among others, regarding the provision in question:
“…Many businesses tend to, more frequently, assign specific specialized or intensive works to contractors, mainly aiming to minimize productive costs.
…The extensive adoption of this regime blurs the boundaries between legal and illegal practices, increases the undeclared and underdeclared labor and, at the end, contributes to the violation of employees’ rights. The provisions suggested introduce the Greek legal system for the first time with a complete set of rules regulating the responsibilities of a project’s owner, the contractor and the subcontractor towards the latter’s employees, while they execute the works assigned. The introduced collective and several responsibility of the employer and contractor covers the employees’ rights on all levels…”
3. The establishment of the collective and several responsibility of the owner of a project, the contractor and the subcontractor and the relevant issues arising.
Based on the abovementioned, under 2, thoughts of the executive power, the provision of article 9 of Act 4554/2018 passed and, along with it, the collective and several responsibility of the employer (: owner of a project), contractor and any subcontractors towards the employees. Each of the cores of this provision acted against the owners of each project (natural persons or business entities) and, furthermore, created severe (in most cases unsolvable) problems when applied. To be more precise:
3.1. Regarding the several responsibility of both the owner of a project and the contractor.
(a) the provision of art. 9 par. 1 mentioned that:
“All natural or legal persons who assign, as part of their business, the execution of a project or of a part of a project (owner of a project) to another, natural or legal, person (contractor) is severally and collectively responsible, along with the contractor, towards the latter’s employees, for the payment of salaries, social contributions and any severance pay owed.
The above responsibility is limited to the employees’ rights arising from the contractual relation between the owner of a project and the contractor regarding the specific project or part of a project.
In case the execution of a project, or of part of a project, is assigned from the contractor to subcontractors, the collective and several responsibility burdens the owner of the project, the contractor and the subcontractor, subject to the above provision”.
(b) The problem
This provision covered all smaller, bigger or vast businesses. It also covered all natural persons-owners of projects. All those persons were liable, no matter the responsibilities of each, “for the payment of salaries, social contributions and any severance pay owed” to the employees who may have worked on a project assigned to a contractor. This responsibility was burdening the owner no matter whether they had paid the contractor in full or not.
3.2. Regarding the conclusion of a works contract between an owner and contractor and/or a contractor and subcontractor
(a) the provision of par. 3 mentioned that:
“When drafting a contract for the assignment of a project, or part of a project, a special term is included, which refers to the obligation of the contractor to abide by the provisions of labor and insurance legislation, the legislation relating to the health and safety of the employees, as well as the legislation relating to the prevention of occupational risk.
The same specific term is included in the contract concluded between the contractor and the subcontractor as well.”
(b) The problem
Most contracts, with only a few exceptions (e.g. contracts for transfers of immovable property), do not have to be written. The provision in question required for all works contracts to be written and to have specific content. It is more than obvious that the burden imposed (time or financial, on the owner and the contractor) did not bother the legislator much.
3.3. Regarding the bureaucracy imposed
(a) The provisions of par. 2,4 & 6 mentioned that:
“2. The contractor assigning a project or part of a project to a subcontractor who will employ staff for the conclusion of the project, must inform so in written the contractor with no delay.”
“4. The contractor must send to the owner proof of deposit of the salaries and of any pay owed and certificate of deposit of their employees’ severance pay, as long as the subcontractor’s employees, if there is a case of subcontracting.
This obligation burdens the subcontractor as well, towards the contractor.”
“6. a) The contractor and/or subcontractor must state all the owner’s or contractor’s information, respectively, at the staff establishment plan they submit to the Labor Inspection Body, for each employee who works in a place other than the base of the business. The contractor and/or subcontractor, who employ employees on two projects or more, are obligated to state in the staff establishment plan the working hours of their employees on each project separately, as well as the information of each of the owner or contractor respectively.
- b) The contractor and/or the subcontractor are obligated to provide the employees with a copy or abstract of the staff establishment plan when they work in a place other than the base of their business.
- c) When the contractor’s or subcontractor’s employees work on the owner’s establishment, the latter displays in the workplace a copy of the staff establishment plan described under b
In case of a violation of the principals of this paragraph, the sanctions described in Act 3996/2011 (A’ 170) are imposed.
(b) The problem
In case the parties involved (owners-employers, contractors and subcontractors) decided to comply, as they ought to, they would have to maintain (and if they did not already have one, establish) a separate department which would be in charge of their compliance, the relevant briefing of their counterparties involved as well as monitor the fulfillment (or not) of the obligations of their counterparties: The cost of which would be terribly high and the efficiency questionable. And let’s not forget: anyone could be an owner, contractor or subcontractor, even the smallest business and/or a person.
3.5. Regarding the right of recourse
(a) the provision of par. 5 mentioned that:
“The owner maintains the right of recourse, in accordance with the relevant provisions in place, especially when they operated in a diligent manner regarding the fulfillment of the contractor’s, or any subcontractor’s, obligations towards their employees. The owner acted diligently especially when they have conducted all of the following:
- a) has requested from the contractor to receive, in accordance with paragraph 4, all the monthly salary payment and the payment of any severance owed, as well as proof of payment of the social contributions for the contractor’s and any subcontractor’s employees,
- b) has sent to the contractor and any subcontractor an extra judicial protest as soon as a violation of their obligations towards their employees is brought to their attention, or if the contractor and any subcontractor have not fulfilled their obligations set under a’, requesting that they comply within fifteen (15) days, and
- c) terminate the contract with the contractor right after the expiration of the fifteen-day (15) period after the communication of the extra judicial protest described under b
The contractor has, under the same conditions, the right of recourse towards the subcontractor”.
(b) The problem
Let’s assume, for a moment, that the time has come that we take our car (our personal, possibly cheap car) for a service. We take it to the repair shop and tell the repairman to do whatever is needed (: oral works contract/assignment). The work that has to be done on the car turns out to be a bit bigger than anticipated and the service ends up taking the whole day. The repairman does not pay the mechanic who did this specific job -the mechanic is not even registered as one of the employees who worked that day. The mechanic (according to article 9) has the right to turn against us and we most likely would be obligated to pay them their daily wage and the relevant social contributions -despite the fact that we have already paid for the service in full: we would only be able to turn against the repairman asking for a reimbursement for what we had paid to the mechanic only after we had fulfilled our obligations (described under a). In any other case: too bad…
4. Retroactivity of the abolition of the provision in question
Based on article 117 par. 1 of Act 4623/2119 (Government Gazette Α 134/9.8.2019) it is provided that “article 9 of Act 4554/2018 is abolished from the moment it came into force”.
As for the issue of retroactivity of the abolition of this particular provision, despite the opposing views expressed (as happened in the case of the retroactivity of the abolition of the “valid reason” requirement), there is no issue of unconstitutionality. Both legal theory and case-law [even case-law deriving from precedents set by the Supreme Court (Arios Pagos) and the State Court] agree on the legality of a retroactive law – as long as the retroactivity does not affect any constitutional rights. And in the issue at hand, such rights are not affected. (Needless to say, it would be unconstitutional if a tax law, penal law or a law disguised as an explanatory law of a previous, clear law, to pass.)
5. In conclusion
It is clear that the lawmaker, when passing article 9 of Act 4554/2018, probably had in mind the protection of the employees’ rights from those who (as the infamous Greek song says) like “black ravens are attaching labor with their sharp nails”.
But they did not notice that the provisions they were passing were covering not only those (very few) who intended to maximize their profits by undermining the employees’ rights but, in general, all those assigning a project: even the nice neighbor, Ms. Eulalia, a pensioner, who asked a painter to paint her only room (for 50€ “paint included”) and they did not pay their employee who helped them for the two hours it took to paint the room.
Could anyone really consider explaining to Ms. Eulalia her obligations deriving from the provision in question?
And what would happen if the Labor Inspection Body, while inspecting Ms. Eulalia’s room, did not find the contractor’s staff establishment plan -which poor Ms. Eulalia was obligated to display according to article 9 § 6c Act 4554/2018?
It is obvious that the sanctions would be, according to the same provision, those of Act 3996/2011.
And to ease any concerns: Ms. Eulalia would not be burned at the stake or impaled! She would only(?) have to face administrative sanctions (: a financial penalty ranging from 300€ to 50.000€ -article 24) and, of course, criminal sanctions (: imprisonment for at least six months and/or a financial penalty of at least 900€ -article 28).
The example of Ms. Eulalia seems ridiculous, but it is not: that is what article 9 of Act 4554/2018 provided for all, none excluded, sly and honest, bigger Greek industries and smallest mini market in a neighborhood and the, aforementioned, kindhearted and sympathetic, Ms. Eulalia.
The provision in question was abolished with article 117 §1 of Act 4623/9.8.2019.
Thankfully.
Stavros Koumentakis
Senior Partner
P.S. A brief version of this article has been published in MAKEDONIA Newspaper (August 25th, 2019).
