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“Letterbox Inc.” in the making: Commission proposal ignores fraud realities in construction
The European Federation of Building and Woodworkers (EFBWW) warns that the European Commission’s “EU Inc.” proposal risks opening new avenues for letterbox companies and exploitation.
EU Inc. will promote the creation of letterbox companies. The proposal completely ignores the reality in sectors such as construction, which are confronted with widespread fraud and abuse through letterbox companies and other intermediaries that engage in fake postings with the aim of exploiting cheap and precarious labour across the EU.
Creating a regime that allows the set-up of companies within 48 hours, online and with very limited capital, with limited verification and insufficient oversight, and that immediately allows those “companies” to operate across the internal market will seriously hamper enforcement efforts. This will ultimately drive an increase in letterbox companies, contributing to fraud and exploitation.
The “simplified insolvency procedures” will facilitate criminal intermediaries to escape liability when detected after inspections. This is already today a well-known phenomenon that creates an enforcement and liability gap in the internal market. These are not hypothetical risks. It reflects well-documented enforcement gaps, where companies dissolve, reappear under a new name, and continue operating while workers and authorities are left with nothing.
The proposal also fails to address the challenges faced by labour inspectors in receiving Member States, who often lack the necessary tools and information to act effectively, making enforcement extremely difficult. In that sense we are concerned about the intention to create “a blacklist of prohibited practices to ensure that EU Inc. companies are treated the same way as any other national companies”. EU Inc. should not further undermine the capacity of receiving Member States to control and verify if companies on its territory are legitimate companies.
Construction remains one of the most fraud-sensitive sectors in Europe, with persistent cases of social dumping, labour exploitation and criminal abuse. Workers in these schemes are often underpaid, denied basic rights, and exposed to dangerous working conditions. Letterbox companies, set up on paper in low-cost Member States while operating elsewhere, are not a marginal issue. They are a business model that significantly distorts fair competition in the internal market by pushing out compliant companies and SMEs. At the same time, they are a huge cost for Member States in terms of lost tax revenues and social security contributions.
Allowing construction companies to operate under this new regime will:
Facilitate the spread of letterbox companies and social fraud
Enable non-genuine posting and evasion of workers’ rights
Undermine fair competition and compliant businesses
Reduce transparency and enforcement capacity
Create new exit routes from liability through insolvency
Put workers’ lives and health at greater risk
“This is a bad proposal. In sectors like construction, EU Inc. will quickly turn into ‘Letterbox Inc’: it will fuel social dumping, weaken enforcement, and put workers at risk. The EU risks further eroding trust in the internal market and accelerating a race to the bottom in working conditions. What we need is an ambitious Subcontracting Directive and a Fair Labour Mobility Package. The EFBWW is ready to work with the Commission on solutions that matter for construction workers.”
— Tom Deleu, EFBWW General Secretary