Posting of workers-a more restrictive “non-replacement condition”

In Alperind GmbH and Others (C-527/16) the European Court of Justice confirms (once again) the binding and retroactive effect of the Portable Document A1, adds to the debate in regard to the interpretation of the ruling in Altun and Others(C-359/16), and rules for a restrictive interpretation of the “non-replacement condition”.

The case in the main proceedings

The dispute in the main proceedings concerns the determination of the social security legislation applicable to workers successively posted by two Hungarian undertakings to an undertaking established in Austria.

Question referred for a preliminary ruling

The Supreme Administrative Court of Austria referred to the ECJ as regards to the following issues at hand:

  • The binding effect of a Portable Document A1 on a court or tribunal of a Member State other than that in which the document was issued.
  • The binding effect of a Portable Document A1 in the context of findings and recommendations made by the Administrative Commission for the Coordination of Social Security Systems.
  • The retroactive effect of a Portable Document A1, when issued after the worker was subjected to the social security system of the host Member State.
  • The “non-replacement condition” applicable to posted workers in the context of successive postings by different employers (i.e. posting workers to the same undertaking established in another Member State).

It must be observed that the “non-replacement condition” is at the origin of the disagreement between the parties in the main proceedings.

The European Court of Justice ruling and its implications

1 Binding and retroactive effect of the PDA1

Following the Opinion delivered by Advocate General Saugmandsgaard Øe and settled case-law, the ECJ confirms the binding and retroactive effect of the Portable Document A1, regardless the particular circumstances invoked by the Salzburg Regional Health Insurance Fund and the Austrian Federal Minister of Labour, Social Affairs and Consumer Protection.

However, the ruling adds to the debate in regard to the interpretation of another landmark judgment, Altun and Others(C-359/16).

In the present case, the Court underlines that “apart from cases of fraud or abuse of rights”, accepting that a competent national institution could, by bringing proceedings before a court of the host Member State to which the institution belongs, “have an A1 certificate declared invalid”, the sincere cooperation system would be undermined.

It follows that in case of fraud and abuse of rights, the court of the host Member State could declare the PDA1 invalid. The social security subjection to the host Member State legislation would be then retroactively established, and the person concerned subject to the legislation of two countries, at least for a certain period.

In Altun and Others(C-359/16), the ECJ held that “in the context of proceedings brought against persons suspected of having used posted workers ostensibly covered by such certificates” the national court may” disregard those certificates”.

Disregard the PDA1 would presumably not involve a subjection to the social security systems of two Member States, on the contrary, invalidate a PDA1, is equivalent to withdrawal of such a certificate, and results in a double social security subjection.

It must be observed that in Altun and Others(C-359/16). Advocate General SAUGMANDSGAARD ØE, took the view that the situation of double social security cover, is inherent in a finding of fraud.

In Commission v Belgium (C-356/15), the ECJ recalled that pursuant to the ruling in Altun and Others, a national court may disregard the PDA1 and must determine whether the persons suspected of having used posted workers ostensibly covered by certificates obtained fraudulently, may be held liable under the applicable national law.

Prima facie, such a determination cannot result in double social security subjection, but only in an eventual conviction of the persons suspected of having used posted workers ostensibly covered by certificates obtained fraudulently.

In regard to the failure of the Member State that issued the PDA1 to carry out a review and if relevant withdraw the said certificate, Articles 258 and 259 TFEU provide the appropriate remedies.

In any circumstances, the ECJ rejected the argument invoked by Belgium, justifying a temporary subjection to the legislation of the host Member State, on grounds of Article 6(1)(a) of Regulation No 987/2009.

Another important highlight is the reference to decisions by which the competent institution of the Member State in which the activity is carried out, decides to make the workers concerned subject to compulsory insurance under its legislation. A document materialises such a decision, cannot be considered as showing the position of the person concerned, within the meaning of Article 5(1) of Regulation No 987/2009.

It should be understood that in any circumstances, the competent institution of the Member State in which the activity is carried out, may not proceed to an automatic subjection to its own legislation.

2 The “non-replacement condition”

Contrary to the  Opinion delivered by Advocate General Saugmandsgaard Øe, the ECJ observes that reading in conjunction the wording of Article 12(1) Regulation No 883/2004, in the version in force at the beginning of the period concerned, the recital 17 of Regulation No 883/2004 and recitals 5 and 8 of the said regulation, to grant the equality of treatment of all persons occupied in the territory of a Member State, the legislation applicable as a general rule is that of the Member State in which the person concerned pursues his activity.

The exemption provided for by Article 12(1), cannot be justified in case of recurrent use of posted workers to fill the same post, even though the employers (sending companies) are different.

Although the ruling addresses the wording of Article 12(1) Regulation 883/2004 in the version in force at the beginning of the period concerned by the case at issue “ sent to replace another person”, it is obviously applicable to the amended Article 12(1), “sent to replace other posted person”.

Having regard to all of the foregoing considerations, the answer to the third question is that Article 12(1) of Regulation No 883/2004 must be interpreted as meaning that, if a worker who is posted by his employer to carry out work in another Member State is replaced by another worker posted by another employer, the latter employee must be regarded as being ‘sent to replace another person’, within the meaning of that provision, so that he cannot benefit from the special rules laid down in that provision in order to remain subject to the legislation of the Member State in which his employer normally carries out its activities

Recipients of services running projects by making “permanent” use of posted staff (for the same work), will be seriously affected.

The judgment will raise a large academic debate.

It is interesting to understand how the restrictive “non-replacement condition” will be practically implemented. The Administrative Commission for the Coordination of Social Security Systems will probably bring more clarity. In any circumstances, contracts of provision of services must be amended to reflect the recipient liability in case of successive postings by different employers.

To further determine project feasibility and cost, the present ruling must be considered, in addition to the relevant legal instruments govern the posting of workers. Other expected rulings will bring more clarity in regard to certain particular situations.

 

 

 

 

 

 

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