Can the EU restrict subcontracting? A legal perspective

Published: 9 September 2025

Can subcontracting practices be restricted?

Author: Erik Sinander, Associate Professor at Stockholm University

This legal study examines recent proposed restrictions to subcontracting in EU labour law. In the legal debate, it has, for example, been proposed that subcontracting should be limited to a certain number of tiers and that some sort of direct liability across the entire subcontracting chain should be introduced. Focusing specifically on these two restrictions, this study concludes that restricting subcontracting comes with several legal complexities.

Restricting subcontracting comes with several legal complexities and unintended consequences.

First, as subcontracting generally refers to the practice where someone delegates contractual obligations to a third party, subcontracting is such a common practice in the modern economy that it is hard to pinpoint for restriction purposes without unintended effects for business in general. In this part, this legal study concludes that any measure needs to be carefully defined and drafted to avoid negative legal side effects.

Additionally, the legal study concludes that subcontracting is an aspect of the freedom of contract, which is protected as a part of the right to conduct a business under Article 16 of the EU Charter, as well as under the free movement of services and the freedom of establishment. Here, it is noted that subcontracting has been recognised as a possibility for smaller companies to compete. Consequently, restrictions on the use of subcontracting will undermine competition, as restrictions will gain large companies that do not need to subcontract services. That subcontracting is protected under EU primary law means that restrictions cannot be done without carefully balancing their effects on the protected rights.

Mapping existing restrictions and measures that address labour law issues in subcontracting chains, the study finds that EU law takes no consistent approach to restrictions. Among the existing measures that, in one way or another, address labour law issues in subcontracting chains, direct liability, equal treatment of employees, as well as reporting and transparency obligations can be found. Importantly, the study finds that limiting subcontracting to a certain level of tiers is unprecedented in EU law. It is also noted that such national restrictions to subcontracting have repeatedly been found to be inconsistent with EU law.