Living Wage, Modern Slavery Act 2015, and Public Procurement

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1 Living Wage, Modern Slavery Act 2015, and Public 10 June 2016 Paul Henty, Partner charlesrussellspeechlys.com

2 Paul Henty Partner, CRS Tel: Paul Henty is a highly experienced regulatory lawyer, advising on nearly all aspects of EU and UK Law and regulation. His practice includes instructions on antitrust and public procurement, as well as public law and industry regulation. Paul has acted on contentious and advisory matters for public sector bodies and commercial organisations in a number of sectors. Recently, Paul has been busy advising contracting authorities and utilities in relation to their procurement obligations and helping businesses to prepare for the new Modern Slavery Act Previously, Paul worked at the EU Commission and UK Law Societies in Brussels. "Paul possesses commercial acumen alongside a keen and up-to-date legal mind and a talent for lateral thinking which allows us to achieve our objectives." Jilly Ward, UK Legal Director, WS Atkins plc 12 July

3 Living wage Minimum and living wage Why does it matter in public procurement? Case-law Modern Slavery Act 2015 What is it? Why is it relevant to public procurement? Change to public procurement law Conclusions 3

4 Minimum Wage and Living Wage Wages Councils were abolished in 1993 Single statutory national minimum wage introduced by the National Minimum Wage Act 1998, which is still in force. The rates are reviewed each year by the country's Low Pay Commission. Since 1 April 2016 the minimum wage has been paid as a mandatory National Living Wage for workers over 25. phased in between 2016 and 2020 and set at a significantly higher level than previous minimum wage rates. By 2020 it is expected to have risen to at least 9 per hour and represent a full-time annual pay equivalent to 60% of the median UK earnings. [ The National Living Wage is nevertheless lower than the value of the Living Wage calculated by the Living Wage Foundation. [ Some organisations voluntarily pay a living wage to their staff, at a level somewhat higher than the statutory level. From September 2014 all NHS Wales staff have been paid a minimum of the "living wage" recommended by the Living Wage Commission. About 2,400 employees received an initial salary increase of up to 470 above the UKwide Agenda for Change rates 4

5 Why is living wage an issue for public bodies? Public procurement as an instrument for encouraging improved living standards Public Services (Social Value) Act 2012 Public bodies have: Asked in ITT / PQQ whether bidders pay the national minimum wage Asked information only questions Inserted compliance clauses into contracts 5

6 Living wage is it legal? Commission guidance on social issues in public procurement Ruffert v Land Niedersachsen (C- 346/06) default position is that protection of the ability to provide cross-border services must prevail - even at the expense of an individual member state's social aims. For this reason, it seems likely that the CJEU would consider a "living wage" clause included in any procurement which might generate cross-border interest as contrary to Article 56. Commission v Luxembourg (C- 319/06) Correspondence between Government of Scotland and EU Commission and resulting guidelines 6

7 Case C-549/13 Bundesdruckerei GmbH v Stadt Dortmund Could National Wage apply to sub-contractor? German court asked ECJ whether national law can require that sub-contractors based in another member state pay a specified minimum wage Restriction within the meaning of Article 56 of the TFEU (the prohibition on restrictions on freedom to provide services). ECJ: said that a measure under national legislation which sets a minimum wage on contractors or subcontractors of a tenderer established in another member state, where minimum rates of pay are lower, constitutes an "additional economic burden that may prohibit, impede or render less attractive the provision of their services in the host member state." Conditions that protect employees do not always constitute restrictions. In this case though, the fixed minimum wage required to ensure reasonable remuneration for employees in Germany, bore no relation to the cost of living in Poland. In this case though, the fixed minimum wage required to ensure reasonable remuneration for employees in Germany, bore no relation to the cost of living in Poland. Case C-115/14, RegioPost GmbH & Co KG v Stadt Landau 7

8 Modern Slavery Act 2015 Consolidates offences in relation to slavery and human trafficking Increases sentences entered into force in March 2015 New disclosure requirements for companies who: have turnover of > 36 million do some business in the UK Why is it relevant to public procurement? Modern Slavery (Consequential Amendments) Act 2015 Entered into force 26 February 2016 An offence under MSA is an exclusion offence under Reg 57 of the PCRs 8

9 MSA - offences Knowingly holding person in slavery, servitude and forced or compulsory labour (Section 1) Human trafficking (Section 2) person commits an offence if the person arranges or facilitates the travel of another person ( V ) with a view to V being exploited; offence can be committed through deceiving or coercing V into travel. 9

10 Slavery and trafficking statement Section 54 MSA For qualifying organisations, statement must be published for every financial year on the homepage of main UK website Statement must be approved at Board level and signed by a Director / equivalent. NB: statement can catch public or quasi public bodies who provide goods or services (and satisfy thresholds) housing associations? utilities? central purchasing bodies? The statement can include information inter alia about: details of organisation and supply chain; due diligence on suppliers; risk assessment processes; corporate policies 10

11 Conclusions Ruffert is particularly relevant to the living wage debate. CJEU willing to impugn any protection greater than standard set out in the Posted Workers Directive as an unjustified restriction of a contractor's freedom under Article 56. Questions are still unresolved illustrated by Post Regio case MSA remember to update PQQs MSA learn lessons of living wage cases 11

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