The recent European Court of Justice (ECJ) ruling in Federatie Nederlandse Vakbeweging (C-815/18), creates further legal uncertainty in relation to the applicability of the Posting of Workers Directive to highly mobile workers.
The ECJ further develops its reasoning around the concept of “sufficient connection” with the territory of a Member State (from the ruling in Michael Dobersberger, C-16/18).
Where exclusions from the scope of the Posting of Workers Directive (PWD), and other exemptions that stem from the said directive represent a controversial matter, it is important:
- to clarify the scope of the exemptions in question
- to distinguish between judicial and academic debate, evolving criteria, and legally binding text
Will address the concept of connection with the territory of a host Member State (MS) in the meaning of the PWD, clarify the exclusions from the scope of the PWD and the other exemptions laid down by the said directive, and in turn, assess the concept of “sufficient connection” in the light of the recent ECJ rulings above cited.
When a transnational activity triggers connection with the territory of a (host) Member State
In the context discussed, when a worker crosses a border in the framework of a transnational professional activity (i.e. under the employer’s responsibility), a connection with the territory of the host MS is deemed to be established from the perspective of EU law.
To that extent, there is no minimum time threshold that excludes the applicability of EU law: “an employee might, in the course of a day, a week or a month, be required to perform a part of his services in an adjacent country” , even if only several hours in a day (see to that context, the ECJ ruling of 15 March 2001,André Mazzoleni, C-165/98 ECLI:EU:C:2001:162, paragraph 13).
The concept of economic activity
Exclusively temporarily economic activities might fall under the scope of the Posting of Workers Directive.
Activities that do not fall under the scope of Art 57TFEU (definition of services), are obviously excluded from the scope of the Posting of Workers Directive as well (regardless the connection with the territory of the host MS).
Example: a conference organised by a publicly funded institution, does not constitute an economic activity in the sense of Art 57TFEU (see to that extent the ECJ ruling of 27 September 1988, Humbel,C-263/86, ECLI:EU:C:1988:451, paragraphs 17 to 19).
“The decisive factor which brings an activity within the ambit of the Treaty provisions on the freedom to provide services is its economic character, that is to say, the activity must not be provided for nothing” (ECJ ruling of 18 December 2007, Jundt, C-281/06, ECLI:EU:C:2007:816,paragraph 32).
Important remark : it must be distinguished between on the one hand, activities that do not fall under the scope of Art57TFEU (no economic character), and on the other hand, situations in which a service is not provided to a third-party (e.g. business trips when a service is not provided to a third-party).The latter situation falls under the scope of the PWD. Eventual exemptions from the applicability of certain terms and conditions of employment, must be addressed under the host MS national legislation.
To what extent that connection matters
“It is well-established that Community law does not preclude Member States from applying their legislation, or collective labour agreements entered into by both sides of industry relating to minimum wages, to any person who is employed, even temporarily, within their territory, no matter in which country the employer is established, just as Community law does not prohibit Member States from enforcing those rules by appropriate means” (see inter alia the ECJ ruling of 3 February 1982 Seco v Evi, Joined Cases 62 and 63/81, ECR 223, paragraph 14).
The objective pursued, is the protection of the persons concerned.
The ruling cited was delivered long before the PWD was adopted.
The host MS national legislation may apply in its entirety (local employment within the territory of a MS), or partially (posting to the territory of a MS).
The connection with the host MS in the light of the Posting of Workers Directive
The PWD shall strike “the right balance between the need to promote the freedom to provide services and ensure a level playing field on the one hand, and the need to protect the rights of posted workers on the other” (Preamble 4 Directive 2018/957/EU).
In accordance with settled case law, restrictions to the freedom to provide services are permissible if they are justified by overriding reasons in the public interest, and if they are proportionate and necessary.
Pursuant to settled ECJ case-law, protecting the rights of posted workers, represents a proportionate and necessary overriding reason in the public interest.
As regards the level playing field (“not that each player has an equal chance to succeed, but that they all play by the same set of rules”), in Hungary v Parliament and Council, AG Campos Sanchez-Bordona, underlines that : “A proper balance between those two interests must also ensure fair competition between undertakings which post workers and those established in the State of destination” (Opinion delivered on 28 May 2020, C‑620/18, ECLI:EU:C:2020:392, paragraph 63).
It follows that the concept of “connection” with the territory of the host MS, must be assessed considering the scope of the PWD (and certainly considering its provisions):
- protection of the posted worker
- fair competition between undertakings which post workers, and those established in the host MS
Exclusions from the scope of the PWD and other exemptions laid down by the PWD
As regards the application of the host MS legislation to posted workers, in Mazzoleni, the ECJ held :”However, there may be circumstances in which the application of such rules would be neither necessary nor proportionate to the objective pursued, namely the protection of the workers concerned” (ruling of 15 March 2001,André Mazzoleni, C-165/98 ECLI:EU:C:2001:162, paragraph 30).
Exemptions from the applicability of the host MS rules, are conceivable exclusively if the application of the said rules would not serve to grant the protection of posted workers (the ratio decidendi in determining and interpreting such exemptions).
Focused on minimum remuneration, the ruling in Mazzoleni was delivered after the adoption of Directive 96/71/EC, however, before its transposition deadline. Thus the ECJ decided that “it is not necessary to interpret its provisions for the purposes of the main proceedings” (ruling of 15 March 2001,André Mazzoleni, C-165/98 ECLI:EU:C:2001:162, paragraph 17).
In determining eventual exemptions from the applicability of the host MS rules “it is incumbent on the competent authorities of the host Member State”, “to evaluate all the relevant factors”, taking account “in particular, of the duration of the provision of services, of their predictability, and of whether the employees have actually been sent to work in the host Member State or continue to be attached to the operational base of their employer in the Member State in which it is established” (ruling of 15 March 2001,André Mazzoleni, C-165/98 ECLI:EU:C:2001:162, paragraphs 37 and 38).
The Posting of Workers Directive provides for:
- an exclusion from its scope (Art 1.2 merchant navy undertakings as regards seagoing personnel)
- a mandatory exemption from all the terms and conditions of employment (Art 3.7-the principle of favourability)
- a mandatory exemption from certain terms and conditions of employment (Art 3.2 initial assembly and/or first installation of goods, if the period of posting does not exceed eight days, and if the other conditions are met)
- optional exemptions from certain terms and conditions of employment (Art 3.3 to Art 3.5 -relating to the length of the posting, and to the significance of the work to be performed)
As regards the mandatory exemptions, the provisions are clear, precise, and unconditional. Provided that certain MS have failed to transpose mandatory exemptions (or have incorrectly transposed it), Articles 3.2 and 3.7 can be enforced by individuals before national courts (direct effect).
Optional exemptions stem from:
- the length of posting (with a maximum duration of one month)
- significance of the work to be performed (“amount of work to be done”)
More ever, Art 3.5 provides that MS which avail themselves of the option related to the significance of the work to be performed, “are to lay down the criteria which the work to be performed must meet in order to be considered as non-significant”.
It follows that as regards optional exemptions, the MS national legislations must be strictly considered.
Where provisions of national legislations are not sufficiently clear and precise, interpretations may not derogate from the ratio decidendi above enounced.
More ever, in principle, such interpretations may not disregard the principle of fair competition between undertakings which post workers, and those established in the host MS.
The concept of “sufficient connection”
The concept of “sufficient link” with the territory of the host Member State was developed first in Michael Dobersberger (C-16/18).
The case is concerned with highly mobile workers providing on-board services, cleaning or food and drink services, for passengers on international trains.
The EU Commission has suggested that “the directive applies in principle, but that, because of the particularities arising from the highly mobile nature of the cross-border services at issue in the main proceedings, as well as their insufficient link with the territory of the ‘host’ Member State, the application of minimum wage rates and rules on the minimum duration of paid leave are not justified. The Commission infers this from Article 56 TFEU, in the light of which it would like to interpret the directive” (Opinion AG Szpunar, 22 July 2019, C-16/18, ECLI:EU:C:2019:638, paragraph 62).
The argument made by the Austrian Government, notably that the services at issue in the main proceedings fall within the scope of Directive 96/71, because pursuant to Article 1.2, the directive does not apply to merchant navy undertakings as regards seagoing personnel. and consequently, it must apply to all other sectors, was ruled out by the AG.
The same argument was made by the ECJ in Federatie Nederlandse Vakbeweging (C-815/18), to justify the applicability of Directive 96/71/EC to transnational provision of services in the road transport sector (see to that context ruling of 1 December 2020, FNV, C-815/18, ECLI:EU:C:2020:976, paragraphs 32 and 33).
In Dobersberger, AG Szpunar alleged that “ Article 1(2) of Directive 96/71, which neither figured in the Commission’s initial proposal nor in the Parliament’s Opinion on first reading, was added by the Council in its Common Position to the amended Commission proposal and remained with the Council’s proposed wording until the adoption of the directive. There is no discernible evidence that this exception was to be exhaustive in the sense that it would pre-empt other possible exceptions” (Opinion AG Szpunar, 22 July 2019, C-16/18, ECLI:EU:C:2019:638, paragraph 52).
As regards the “historical intent of the legislature”, I can only refer to the Opinion delivered by AG Bobek in FNV (C-815/18): “Hopes, ideas, or wishes are not legally binding. The adopted text is” (30 April 2020, FNV, C-815/18, ECLI:EU:C:2020:319, paragraph 62).
AG Szpunar ruled out the relevance of Art 1.3 Directive 96/71/EC (i.e. excluded the case at hand from the scope of the said directive), by making a series of challengeable arguments.
The interpretation of the principle of “equal treatment” : “The underlying rationale of any form of posting is thus the following: a worker should not suffer, on a personal basis, any income or other labour-related loss vis-à-vis the local worker. The cost of living may be higher than that in the Member State of posting. That is why the country-of-destination principle applies in order to mitigate any possible discrimination” (paragraph 25).
Provided that the cost of living is lower than that in the MS of posting, the PWD does not apply?
As the case at issue, the AG concluded that “Their temporary presence in Austria during a given working day has no bearing on their cost of living”, “As a consequence, the whole rationale of Directive 96/71 falls flat, this directive simply should not come into play” (paragraphs 60 and 61).
Applying the above reasoning mutatis mutandis to the case of a worker posted from the Netherlands to France, where the expenditure incurred on account of the posting is reimbursed in actual, it follows that the PWD does not apply merely because the Netherlands is 18.2% more expensive than France?
The interpretation of the concept of “social dumping” (i.e. the AG took the view that is “too broadly applied” (paragraph 31).
Firstly, the Opinion was delivered on 29 July 2019, long after the adoption of the amended PWD (Directive 2018/957/EU). Apparently the AG disregarded the fact that the said directive shall strike “the right balance between the need to promote the freedom to provide services and ensure a level playing field on the one hand and the need to protect the rights of posted workers on the other” (Preamble 4 Directive 2018/957/EU).
Then, the argument made by AG Szpunar “However, the need to prevent ‘social dumping’ cannot be invoked against a service provider who simply turns the possibilities offered by the internal market to his economic advantage – and that of his client, the recipient of the services. After all, the internal market is underpinned by the principle of comparative advantage” (paragraph 31), reads somewhat alike the argument made by AFMB at the hearing before the ECJ : “a natural consequence of the single market” (AFMB, C-610/18).
In any circumstances, to support his argument, the AG referred to the ECJ ruling of 9 March 1999, Centros, C-212/97, EU:C:1999:126, paragraph 27, on freedom of establishment.
Exclusion of highly mobile workers from the scope of Directive 96/71/EC (paragraph 57).
I do not believe that highly mobile workers can be merely deprived of the protection conferred by the Posting of Workers Directive.
The ECJ ruling, disregards most of the arguments made by AG Szpunar, however, prima facie, retains the applicability of the concept of “sufficient connection” with the territory of the host MS. The (in)sufficient connection stems from the insignificant amount of work to be performed within the territory of the host MS (ruling of 19 December 2019,Dobersberger, C-16/18, ECLI:EU:C:2019:1110, paragraphs 31 and 32).
The ECJ disregards:
- the optional character of the exemption referred to in Art 3.5 Directive 96/71/EC
- the limited scope of that exemption (exclusively minimum rates of pay-to date remuneration, and minimum paid annual holidays are covered by Art 3.5)
In its conclusion the ECJ retains the following criteria:
- significant part of the work carried out in the country of establishment (necessarily triggers insufficient connection with the territory of the host MS? -open question)
- the workers begin or end their shifts within the territory of the MS of establishment
The concept of “sufficient connection” was further developed in Federatie Nederlandse Vakbeweging (C-815/18).
The Supreme Court of the Netherlands referred to the ECJ several questions for preliminary ruling, in relation to the applicability of the PWD to the international road transport sector.
Provided that the PWD is applicable to the international road transport sector, the ECJ was called upon to determine “what criterion or considerations should be used to determine whether a worker working as a driver in international road transport is posted “to the territory of a Member State” as referred to in Article 1(1) and (3) of [Directive 96/71], and whether that worker “for a limited period, carries out his work in the territory of a Member State other than the State in which he normally works” as referred to in Article 2(1) of [Directive 96/71]?”
To answer that question, AG Bobek developed his reasoning around the concept of “sufficient connection” from the ECJ ruling in Dobersberger, and suggested the following non-exhaustive criteria for determining whether a worker has a sufficient connection with the territory of a host MS, in the meaning of Art 2.1 Directive 96/71/EC (see to that context Opinion delivered on 30 April 2020, FNV,C-815/18, ECLI:EU:C:2020:319 paragraph 105):
- the location of the person to whom the services are addressed
- the place where the transport operations are organised and the drivers receive their assignments
- the place to which they return after the completion of their work
In its ruling delivered on 1 December 2020, the ECJ retains the relevance of the “sufficient connection” with the territory of the host MS, however, not the criteria suggested by AG Bobek. The following non-exhaustive criteria must be considered for determining whether a worker has a sufficient connection with the territory of a host MS, in the meaning of Art 2.1 Directive 96/71/EC (ruling of 1 December 2020, FNV, C-815/18, ECLI:EU:C:2020:976, paragraph 51) :
- the nature of the activities carried out by the worker concerned in that territory
- the degree of connection between the worker’s activities and the territory of each Member State in which the worker operates
- the proportion represented by those activities in the entire transport service
However, “The fact that a driver working in international road transport, who has been hired out by an undertaking established in one Member State to an undertaking established in another Member State, receives the instructions related to his or her tasks, starts or finishes them at the place of business of that second undertaking is not sufficient in itself to consider that that driver has been posted to the territory of that other Member State for the purposes of Directive 96/71, provided that the performance of that driver’s work does not have a sufficient connection with that territory on the basis of other factors” (ruling of 1 December 2020, FNV, C-815/18, ECLI:EU:C:2020:976, paragraph 52).
The principle of legal certainty, “requires that legal rules be clear and precise, and aims to ensure that situations and legal relationships governed by Community law remain foreseeable” (ECJ ruling of 15 February 1996, Duff, C-63/93, ECLI:EU:C:1996:51, paragraph 20).
The concept of “sufficient connection” within the territory of the host MS, supplementing and subordinating the concept of “significance of the work performed“ within the territory of the latter MS (in the meaning of Art 3.5 Directive 96/71/EC), infringes the principle of legal certainty, and in certain circumstances, might deprive posted workers of rights otherwise conferred by the Posting of Workers Directive.