1 The practice of subcontracting is sometimes referred to as outsourcing. The process involves three principal partners: (1) The client who orders the work; (2) the principal contractor who in part performs some work and in part outsources part or all of the work from the client; and (3) the subcontractor who receives the work from the contractor, and then either performs that work or in part outsources it to another lower tier of subcontractor.Google Scholar

2 It is helpful to think of subcontracting as links in a chain. The client resides at the top of the chain. The client, either an individual or a business entity, is the ultimate recipient and beneficiary of a contracted-for work. Typically, the client contracts with a principal contractor, the next link in the subcontracting chain, for work to be done. Any further links are merely sub or intermediary contractors or temporary work agencies. See infra Part C.Google Scholar

3 See, e.g., Daniel Kahneman & Tversky, Amos, Prospect Theory: An Analysis of Decision Under Risk, 47 Econometrica 263 (1979); Brian Skyrms, Evolution of the Social Contract (1996); Cristina Bicchieri, The Grammar of Society: The Nature and Dynamics of Social Norms (2005).Google Scholar

4 See infra Part C.Google Scholar

5 Traditionally, the strategic game model is focused on what we refer to in this essay as the economic freedoms based perspective and certainly there is a wealth of literature linking economics, and economic theory, to the strategic model. However, we felt that connecting game theory to a broader scope of social contexts provides a more integrated approach. Because of this, we have devoted more attention to the rights based perspective and its corollary literature. This will hopefully not be seen as biased, but rather as an explanation of less established or unfamiliar viewpoints.Google Scholar

6 That is Austria, Belgium, Finland, France, Germany, Italy, the Netherlands, and Spain. In half of the countries, the Sectoral Social Partners have played a significant role in the law making processes.Google Scholar

7 See Mijke Houwerzijl & Saskia Peters, Eurofound, Liability in Subcontracting Processes in the European Construction Sector: Netherlands (2009), available at http://www.eurofound.europa.eu/publications/htmlfiles/ef08877.htm. See also European Commission, Study on the Protection of Workers’ Rights in Subcontracting Processes in the European Union: Final Study, Project DG EMPL/B2 - VC/2011/0015 (2012) (by Yves Jorens, Saskia Peters & Mijke Houwerzijl).Google Scholar

8 Case C-60/03, Wolff & Müller v. Pereira Félix, 2004 E.C.R. I-9553.Google Scholar

9 See Wolfgang Koberski, Gregor Asshoff & Dieter Hold, Arbeitnehmer-Entsendegesetz (2002).Google Scholar

10 Below, we will use the terms actors, agents, participants, and stakeholders more or less as synonyms.Google Scholar

11 Council Directive 96/71, 1997 O.J. (L 18) 1 (EC).Google Scholar

12 In Germany especially there was a fierce debate between the “free market advocates” and defenders of “social Europe.” See, e.g., Paul Davies, Posted Workers: Single Market or Protection of National Labour Law Systems?, 34 Common Mkt. L. Rev. 571, 572–73 (1997).Google Scholar

13 See, e.g., Brigitte Steck, Geplante Entsende-Richtlinie nach Maastricht ohne Rechtsgrundlage?, 5 Europäische Zeitschrift für Wirtschaftsrecht 140, 141–42 (1994).Google Scholar

14 Däubler added to these arguments. See Wolfgang Däubler, Posted Workers and Freedom to Supply Services: Directive 96–71-EC and the German Courts, 27 Indus. L. J. 264, 266 (1998).Google Scholar

15 See EU Charter of Fundamental Rights, 2000 O.J. (C 364) 1. For criticism of this omission, see Jeff Kenner, Economic and Social Rights in the EU Legal Order: The Mirage of Indivisibility, in Economic and Social Rights Under the EU Charter of Fundamental Rights 1, 17 (Tamara Hervey & Jeff Kenner eds., 2003).Google Scholar

16 This reflects the state of affairs in secondary EU employment law. As was observed during the adoption process of the PWD, apart from minimum wages, all other issues were already covered by minimum harmonization at the EU level. See Wolfgang Däubler, Der Richtlinien-vorschlag zur Entsendung von Arbeitnehmern: Ein Mittelzur Abwehr von Sozialem Dumping?, 4 Europäische Zeitschrift für Wirtschaftsrecht [EuZW] 370, 373 (1993).Google Scholar

17 Community Charter of the Fundamental Social Rights of Workers, Dec. 9, 1989, http://www.aedh.eu/The-Community-Charter-of.html.Google Scholar

18 Commission Opinion on an Equitable Wage, COM (1993) 388 final (Sept. 1, 1993).Google Scholar

19 European Social Charter, Feb. 26, 1965, C.E.T.S. 35.Google Scholar

20 This is in contrast to the European Convention of Human Rights (ECHR). European Convention of Human Rights, Apr. 4, 1950. The Lisbon Treaty provided for the accession of the EU to the ECHR (Article 6(2) TEU). Treat of Lisbon Amending the Treaty on European Union and the Treaty Establishing the European Communities, Dec. 13, 2007, art. 6(2), 2007 O.J. (C 306) 135 [hereinafter Lisbon Treaty]. Protocol No. 8 sets forth that the agreement relating to the accession of the Union to the ECHR provided for in Article 6(2) TEU shall make provision for preserving the specific characteristics of the Union and Union law. Id. The negotiations for the accession started in Spring 2010 and are still underway. Cross-references between Luxembourg and Strasbourg have been increasing over time. Moreover, the need for the CJEU to take into account the ECHR for the interpretation of the Charter has been enshrined in Article 52(3) of the Charter. Charter of Fundamental Rights of the European Union, Oct. 26, 2012, 2012 O.J. (C 326) 406. [hereinafter the Charter]. Over 2010–2011, according to the CURIA database, the ECJ has mentioned the ECHR in 57 judgments. See Alejandro Saiz Arnaiz & Aida Torres Pérez, Eur. Parliament, Main Trends in the Recent Case Law of the EU Court of Justice and the European Court of Human Rights in the Field of Fundamental Rights (2012).Google Scholar

21 See supra note 17, at art. 5.Google Scholar

22 See supra note 18, at 2.Google Scholar

23 Please note that Art. 153(5) TFEU does not give any competence to the EU to support and complement the activities of the Member States in the field of “pay.” Consolidated Version of the Treaty on the Functioning of the European Union art 153(5), Mar. 30, 2010, 2010 O.J. (C 83) 116 [hereinafter TFEU].Google Scholar

24 See International Labour Organization, Convention Concerning the Creation of Minimum Wage-Fixing Machinery, June 16, 1928, C026, available at http://www.ilo.org/dyn/normlex/en/f?p=1000:12000:0::NO. See also International Labour Organization, Convention Concerning Minimum Wage Fixing, with Special Reference to Developing Countries, June 22, 1970, C131, available at http://www.ilo.org/dyn/normlex/en/f?p=1000:12000:0::NO.Google Scholar

25 See supra note 17, at art. 31.Google Scholar

26 Actually, in the pending case, Sindicatos dos Bancários do Norte v. Banco Portuguěs de Negócios, the CJEU is asked, in question four, to clarify whether the right to working conditions that respect dignity, laid down in Article 31(1) of the Charter, may be interpreted as meaning that employees have the right to fair remuneration which ensures that they and their families can enjoy a satisfactory standard of living. 2012 O.J. (151) 35. See also 2012 O.J. (209) 9 (posing a similar question).Google Scholar

27 Proposal for a Directive of the European Parliament and of the Council on the Enforcement of Directive 96/71/EC Concerning the Posting of Workers in the Framework of the Provision of Services, COM (2012) 131 final (Mar. 21, 2012).Google Scholar

28 Id. at 11. In this proposal for an Enforcement Directive of the PWD, a joint and several liability mechanism is included in Article 12. Id. at 36. Regarding illegal employment of third country nationals, such a liability mechanism is already ensured by EU legislation. See Directive 2009/52, of the European Parliament and of the Council of 18 June 2009 Providing for Minimum Standards on Sanctions and Measures Against Employers of Illegally Staying Third-Country Nationals, 2009 O.J. (L 168) 24.Google Scholar

29 Article 5 of the PWD, according to which Member States shall take appropriate measures in the event of failure to comply with this Directive, may be seen as a translation of Article 47 of the Charter. The Charter, supra note 20, at 405.Google Scholar

30 See supra note 27, at 20.Google Scholar

31 Arbeitnehmer-EntsendeGesetz [AEntG] [Posted Workers Act], Feb. 26, 1996, BGBl. I at 227 (Ger.).Google Scholar

32 Houwerzijl, & Peters, , supra note 7; see also European Commission, supra note 7 (providing more explanation and modalities).Google Scholar

33 See Commission, European, supra note 7.Google Scholar

34 Proposal for a Directive of the European Parliament and of the Council on the Enforcement of Directive 96/71/EC Concerning the Posting of Workers in the Framework of the Provision of Services, COM (2012) 131 final, at art. 12 (Mar. 21, 2012) (proposing something similar).Google Scholar

35 Houwerzijl, & Peters, , supra note 7; see also European Commission, supra note 7.Google Scholar

36 Case C-60/03, Wolff & Müller v. Pereira Félix, 2004 E.C.R. I-9553, para. 10.Google Scholar

37 Id. ¶ 45.Google Scholar

38 See e.g., European Commission, supra note 7.Google Scholar

39 Id. Google Scholar

40 More precisely, a payoff function u(x) represents a decision-maker's preferences if: For any available actions a and b, u(a) >u(b), if and only if the decision-maker prefers a to b. See Martin J. Osborne, An Introduction to Game Theory (2004).u(b),+if+and+only+if+the+decision-maker+prefers+a+to+b.+See+Martin+J.+Osborne,+An+Introduction+to+Game+Theory+(2004).>Google Scholar

41 We are using the term benefit to represent the satisfaction an agent assigns to the benefit in question. When considering an agent's preference for an action we must take the net expected utility for all of the relevant factors involved. Specifically, if we represent individual benefits with the variable B_n, individual costs with C_m, and the probability of B_n or C_m occurring as Pr(B_n) and Pr(C_m) respectively, then the proper formula for the payoff function for a given action profile a is: u(a) = Pr(B₁)*B₁ + Pr(B₂)*B₂ + … +Pr(B_n)*B_n - Pr(C₁)*C₁ - Pr(C₂)*C₂ -…- Pr(C_m)*C_m. This formula does not distinguish between mutually exclusive actions; therefore there is no restriction for the sum of all action probabilities to be equal or less than 1. However, care should be taken that if mutually exclusive events are considered, then the probability of those events should be equal to or less than 1.Google Scholar

42 Dominant strategies are a result of the underlying assumptions of the strategic game model. In so being, they are not strictly abstractions of actual world circumstances, but have proven to be useful analytic tools for decision making nonetheless. See also John von Neumann & Oskar Morgenstern, Theory of Games and Economic Behavior (1947).Google Scholar

43 It is worth noting that in some cases agents appear to not have a choice. For example, because wage liability is invoked by the worker, when hiring workers the employer is an implicit participant in wage liability schema. In such cases, non-participation cannot be the rejection or circumvention of legislation, but rather non-participation should be seen as an agent's challenging of, or objection to, the current legislation. This was exactly the action in the Wolff & Müller case. Case C-60/03, Wolff & Müller v. Pereira Félix, 2004 E.C.R. I-9553.Google Scholar

44 See Thomas Hobbes, Leviathan: With Selected Variants from the Latin Edition of 1668 (Edwin Curley ed. 1994).Google Scholar

45 Player 1's preferences (in the white triangles) are read from left to right, and Player 2's preferences (in the grey triangles) from top to bottom.Google Scholar

46 See Nicholas Barr, Economics of the Welfare State 43–46 (2012).Google Scholar

47 Similar to the Hobbesian social contract, see supra note 44.Google Scholar

48 See Thaler, Richard H. & Sunstein, Cass R., Nudge: Improving Decisions About Health, Wealth, and Happiness (2008) (discussing more on how systemic structures can affect agent's preferences).Google Scholar

49 Such mixed game structures, or structures with conflicting equilibriums, are often represented in prisoner's dilemma or stag hunt examples. See Brian Skyrms, The Stag Hunt and the Evolution of Social Structure (2004).Google Scholar

50 But cf. Proposal for a Directive of the European Parliament and of the Council on the Enforcement of Directive 96/71/EC Concerning the Posting of Workers in the Framework of the Provision of Services, COM (2012) 131 final (Mar. 21, 2012).Google Scholar