Workers said the action was not racist, but about discrimination against Britons
The oil firm Total did not break the law in employing Italian workers at the Lindsey oil refinery in Lincolnshire, a report into the controversy has ruled.
Workers held wildcat strikes across the UK last month in solidarity with employees protesting over Italian and Portuguese labour at the refinery.
Industrial arbitrator Acas reported there was no evidence that the use of foreign workers broke the law.
But its chief executive said the EU law on the issue was "a source of tension".
The row flared up on 28 January and two days later had spread across Britain.
The scale of the conflict was such that the Department for Business, Enterprise and Regulatory Reform (BERR) charged Acas with investigating whether any EU laws had been broken by the use of foreign labour at the refinery.
John Taylor, Acas chief executive, said: "Whilst the report shows no evidence of the law being broken there is a source of tension around the Posted Workers Directive and its application to construction work and the UK's industrial relations system. These issues have been highlighted by the recession."
TUC general secretary Brendan Barber said: "It is hardly surprising that the Acas enquiry has found that no laws have been broken, as the major union complaint is that the law does not properly protect UK-based workers - wherever they were born.
Workers refused to return to work until the talks reach a conclusion
"The EU's Posted Workers Directive has been implemented in the UK in a way that fails to guarantee UK agreements, and recent EU court judgements have raised even more worries that the law favours employers that try to undermine existing standards."
The original strike began after owner Total gave a £200m contract to an Italian firm.
The striking workers at the Lindsey refinery in north Lincolnshire were soon joined by hundreds of other "sympathy" strikers in Scotland, Wales and other parts of England.
The contract in question was to extend the diesel refining capacity at Lindsey, which was first awarded to the California-based engineering group Jacobs in June 2006, with a completion date of 2009.
Jacobs, in turn, subcontracted to the Italian firm, IREM, after a tender process in which five UK and two European contractors responded.
The terms of the contract specified that IREM would be using its existing permanent Italian and Portuguese workforce for the job.