The requirement to hire workers under employment contracts in public procurement
Following the July 2016 amendment to the Public Procurement Law, contracting authorities must indicate which activities during performance of a public contract fall within the definition of an employment relationship under Labour Code Art. 22 §1. They must also require contractors to hire persons performing those activities on the basis of an employment contract and verify that the contractors are in compliance with this obligation.
This change was introduced because contracting authorities commonly failed to apply optional regulations. Under the prior Art. 29(4) of Poland’s Public Procurement Law, a contracting authority could require contractors or subcontractors to hire persons carrying out certain activities in performance of construction works or services on the basis of an employment contract, if justified by the subject matter or nature of the activities. But a study by the Public Procurement Office found that the percentage of procurement procedures where employment clauses were used was in the low single digits.
The higher costs inevitably connected with hiring staff under employment contracts effectively discouraged contractors, particularly when they were competing on price as the main criterion for evaluation of offers. Contracting authorities were also not eager to include employment clauses in contract announcements, because that would result in higher contract costs as bidders complying with an employment clause would have to offer a higher price for performing the contract.
Under Art. 1(42)(b) of the amending act, a new Art. 29(3a) was added to the Public Procurement Law of 29 January 2004, under which the contracting authority must require contractors to hire persons carrying out activities in performance of the contract under an employment contract if they fall within the scope of Art. 22 §1 of the Labour Code.
The requirement to hire workers under an employment contract must be included by the contracting authority in the contract description in the case of procurement of construction works or services. Thus the requirement to use employment clauses applies only to contracts for construction works and services, and does not apply to supply contracts.
The obligation to hire people performing work indicated by the contracting authority under an employment contract also extends to subcontractors. Thus if the contractor performs the contract with the help of subcontractors, it must hold evidence in the form of the contract with the subcontractor showing that the actions specified by the contracting authority in the terms of reference as subject to performance on the basis of an employment contract are actually performed by persons employed by the subcontractor.
When the contracting authority requires contractors to hire workers under an employment contract to perform specific activities, under Art. 36(2)(8a) of the Public Procurement Law it must also specify in the terms of reference:
- The method of documenting employment of such persons
- The contracting authority’s entitlements to inspect the contractor’s compliance with the employment clause, and
- Potential sanctions for failure to comply with these requirements.
The contracting authority is also required to list in the terms of reference the activities under the contract that must be performed on the basis of an employment contract. This means that under current law, the contracting authority determines which activities fall within Labour Code Art. 22 §1. Thus it must examine the activities to be performed under the contract and divide them into those that must be performed on the basis of an employment contract and those for which the contractor can choose any form of hiring.
It should be pointed out that contracting authorities do not have discretion in deciding to require hiring under employment contracts if the analysis demonstrates that the activity falls within the definition of employment. If the contracting authority reaches that conclusion, it must require that given activities be performed on the basis of an employment contract—whether staff of the contractor or subcontractors. On the other hand, the contracting authority may not require that individuals performing activities that do not fall within Labour Code Art. 22 §1 be hired under employment contracts, leaving it up to the contractors to hire such people for example under civil-law contracts.
Concept of employment relationship
The definition of an employment relationship is set forth in Labour Code Art. 22 §1, under which, in forming an employment relationship, the employee undertakes to perform work of a defined type for the employer, under its direction, at a place and time designated by the employer, and the employer undertakes to hire the worker for pay. And under Labour Code Art. 22 §12, it is impermissible to replace an employment contract with a civil-law contract while maintaining the working conditions for employment set forth in Art. 22 §1.
If the work of a given person is performed under conditions typical of an employment relationship, the hiring is employment regardless of what the parties call the contract. The requirements introduced by the amendment to the Public Procurement Law thus confirm the existing requirements concerning the legal basis of employment arising under the Labour Code, and represent a significant limitation on the freedom to select the form for hiring persons carrying out the public procurement. The purpose of Art. 29 §3a of the Public Procurement Law is to introduce additional guarantees preventing employment contracts from being replaced by civil-law contracts.
Employment contract from when?
Because the employment clause is an element of the contract description, the contractor is not required to hire people performing the activities indicated by the contracting authority under an employment contract at the time offers are filed. However, the contractor must declare its readiness to hire staff in the manner indicated in the contract description after conclusion of the public contract, which can be verified during the course of performance.
The contracting authority may require bidders to enclose with their offers a separate undertaking in this respect, and the bidder’s refusal to consent to this method of hiring people performing the indicated tasks under the contract will result in rejection of the offer under Public Procurement Law Art. 89(1)(2).
Duty to verify the basis of employment
Imposing an obligation on contractors to hire staff on the basis of an employment contract, and on contracting authorities to include such a requirement in instances where the type of work and the circumstances in which it is performed justify application of Labour Code Art. 22 §1, also makes it necessary to ensure effective oversight of compliance with these obligations.
The contracting authority is required to verify whether contractors and subcontractors are truly hiring people under employment contracts when they perform activities under conditions characteristic of an employment relationship. Unfortunately, contracting authorities are not vested with any means of control in this respect. It is thus in the interest of the contracting authority to include provisions in the contract specifying the manner and scope of this control.
Verification of basis of employment and protection of personal data
A barrier to carrying out the duty of verification by the contracting authority is the issue of protection of the personal data of the employees performing the contract. There is no legal basis empowering the contractor to provide the contracting authority with the personal data of the employees hired to perform the contract. Neither the Public Procurement Law nor the Regulation of the Minister of Development of 26 July 2016 on the Types of Documents the Contracting Authority May Demand from a Contractor in a Procedure for Award of a Contract entitles the contracting authority to obtain copies of the staff’s employment contracts.
The contract under which the contractor hires an employee cannot be provided to the contracting authority without the employee’s consent. This situation does not fall within any of the other grounds in Art. 23 of the Personal Data Protection Act of 29 August 1997, which provides a fixed catalogue of situations in which “ordinary” personal data may be processed, or Art. 27(2) for sensitive personal data.
Under the Personal Data Protection Act, the personal data of such an employee could be processed only with his consent, but it is doubtful whether consent given by an employee aware that lack of consent could result in loss of employment could be regarded as voluntary. In its judgment of 1 December 2009 (Case I OSK 249/09), the Supreme Administrative Court confirmed that the imbalance between the employee and the employer belies the voluntariness of the consent to processing of the employee’s personal data. Perceiving this problem, in Labour Code Art. 221, the Parliament limited the data which the employer can demand from the employee.
It should be pointed out by the way that relying on the employee’s consent as the basis for the contracting authority to fulfil its obligation to verify hiring under an employment contract would be inadequate in any event, because under Art. 7(5) of the Personal Data Protection Act, such consent could be withdrawn by the employee at any time.
To shed light on these doubts, the Public Procurement Office sought an opinion from Poland’s data protection authority, the Inspector General for Personal Data Protection (GIODO), who confirmed that processing of data from employment contracts, including for the reasons indicated above, cannot serve as the basis for performance of verification by the contracting authority. Art. 29(3a) and 36(2)(8a) of the Public Procurement Law also do not justify the contractor’s providing employees’ personal data to the contracting authority. Consequently, there are no regulations legitimating contractors’ provision of personal data of their employees to contracting authorities.
But GIODO sees other possibilities for resolving this issue, recognising that to carry out the verification obligation, it may be sufficient for the contractor to provide a statement on this subject or submit documents with personal details removed. In GIODO’s opinion, for the purpose of verification it is not necessary to provide access to the employees’ personal data, but only to demonstrate the fact of employment of the persons in the required form.
Katarzyna Śliwak, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners