EELC Law Review 2019: Free movement and social insurance

Jean-Philippe Lhernould (Professor of Law at Université de Poitiers, France)

Do national rules constitute obstacles to free movement of workers? Although the jurisprudence of the Court of Justice is quite elaborate on Article 45 TFEU, there are still court disputes which could mean either that its implementation is not settled or that it remains difficult for Member States to give up a territorial approach where the residence and/or periods of work in another Member State continue to be disregarded. In the scope of tax law, the Court rules that Article 45 TFEU precludes the Belgian legislation which provides that the tax exemption applicable to disability allowances is subject to the condition that those allowances are paid by a body of Belgium and, therefore, excludes from that exemption allowances of the same nature paid by another Member State, even where the recipient of those allowances is a resident of the Member State concerned (BU, C-35/19). Article 45 TFEU and Article 7(2) of Regulation (EU) 492/2011 also precludes (again) the legislation of Luxembourg which makes the grant of financial aid for higher education studies to non-resident students subject to the condition that, at the date of the application for financial aid, one of the parents of the student has been employed or carried on an activity in that Member State for a period of at least five years in the course of a reference period of seven years calculated retroactively from the date of that application for financial aid (Aubriet, C-410/18). It is sometimes in conjunction with social security matters that rules on free movement are interpreted. The ECJ holds indeed that Article 4(3) TEU, in conjunction with the Staff Regulations of Officials of the EU, precludes the legislation of Belgium under which, when determining the pension entitlement of a worker who occupied a position as an employed person in that Member State before becoming an EU official and completed, after becoming an EU official, his compulsory military service in that Member State, that worker is not entitled to have his period of military service treated as equivalent to a period of actual work as an employed person (Rohart, C-179/18).

One case underlines the difficulty of assessing the conformity of some domestic regulations. A perfect example is given by the Austrian legislation which grants an extra week of annual leave to employees who have 25 years of professional experience in the same company. Periods completed in other companies (in Austria or abroad) can be counted but for a maximum of five years. For the ECJ, this regulation does not violate Article 45 TFEU since it has not been established that that legislation gives Austrian workers an advantage over workers who are nationals of other Member States. Furthermore, in line with the Graf case (C-190/98), the legislation at stake is not of such a kind as to deter Austrian workers who wish to leave their current employer in order to work for an employer in another Member State, while at the same time hoping subsequently to return to their original employer (Schallerbach GmbH, C-437/17).

The right to stay in a Member State gives rise to interesting cases focusing on the ‘resource test’. In the first case, Article 7(1)(b) of Directive 2004/38 means, according to the ECJ, that a Union citizen minor can be considered as having sufficient resources not to become an unreasonable burden on the social assistance system of the host Member State during his period of residence, despite his resources being derived from income obtained from the unlawful employment of his father, a third-country national without a residence card and work permit (Bajratari, C-93/18). Indeed, while the Union citizen must have sufficient resources, EU law does not lay down any requirement whatsoever as to their origin. A similar flexible interpretation of Article 5(1)(a) of Directive 2003/109 leads the Court of Justice to decide that the concept of ‘resources’ referred to in that provision does not concern solely the ‘own resources’ of the applicant for long-term resident status, but may also cover the resources made available to that applicant by a third party provided that, in the light of the individual circumstances of the applicant concerned, they are considered to be stable, regular and sufficient (X, C-302/18).

Concerning the right to maintain the status of workers, the ECJ ruled that a Romanian citizen who, having exercised his right to free movement in Ireland, acquired there the status of worker within the meaning of Article 7(1)(a) of Directive 2004/38 on account of the activity he pursued there for a period of only two weeks and retained the status of worker for a further period of no less than six months. Thus this migrant jobless worker is not subject to the stringent status of non-active persons and is entitled to full equality of treatment with regard to social benefits. The solution is transposable to self-employed workers. This said, a very short-term activity may lead national institutions to consider that the activity was marginal and therefore insufficient to grant the worker status (Tarola, C-483/17).

Several cases interpret the social security coordination rules and conflict of laws. For instance, in which Member State(s) are Holiday on Ice skaters, who are third country citizens, insured when they perform their show in several European countries? Using a pragmatic approach disregarding the requirement of a ‘legal residence’ in Europe, the Court of Justice considers that even if they only temporarily reside and work in different Member States in the service of an employer established in a Member State, these workers can rely on the coordination rules laid down by Regulation 883/2004 (Balandin, C-477/17). The logical follow-up question, which was unfortunately not discussed before the ECJ, is to determine in which Member State they are insured according to the Regulation conflict rules. Although the ruling clarifies the fact that EU social security provisions determining the legislation applicable are relevant for that kind of case, their concrete implementation is tricky. Indeed, if Article 13 of Regulation 883/2004 is relevant for workers who perform their activities in two or more Member States, it is not adapted to workers who reside outside the EU or whose employer is located in a third country.

The competent legislation may provide low social security benefits, sometimes no benefits at all. Is it allowed to claim the benefits from another Member State – non-competent under conflict rules – the worker has close links with? For the ECJ a difference must be made between the right to claim and the obligation to pay: the Member State of residence is not obliged to serve a residence-based benefit to a person who works in Germany (and who is insured there) but who, because of their low wage, is entitled to no social security benefit in that country. This strict application of Regulation 883/2004 is questionable, since it leaves a migrant worker without actual coverage. The reasoning behind this is that Article 45 TFEU does not confer on a migrant worker an entitlement, in their Member State of residence, to the same social welfare coverage that they would have enjoyed in the country of social security insurance (Van den Berg, C-95/18 and C-96/18). What about a Romanian citizen who worked several years in Ireland before losing his job, who was granted a non-contributory unemployment benefit in that country, and who claims Irish family benefits for his family residing in Romania? Since he is insured in Ireland by virtue of conflict rules, he must receive the said benefits (Bogatu, C-322/17). Another case had to tackle a tricky factual situation where several solutions were conceivable: for the ECJ, Article 11(3)(e) of Regulation 883/2004 must be interpreted to the effect that a situation in which a person, whilst working as a seaman for an employer established in a Member State on board a vessel flying the flag of a third State and travelling outside of the territory of the European Union, maintaining his residence in his Member State of origin, falls within the scope of that provision, such that the applicable national legislation is that of the Member State of residence of that person. This case implicitly insists on the complementary role of the lex domicilii, which is below the lex loci laboris in the hierarchy of the conflict rules, but still plays a major role in avoiding the absence of social security coverage for migrant workers (SF, C-631/17). Finally, the Court of Justice ruled that a retiree who spent his entire career working in Switzerland (where he is insured) and who resides in France cannot be subject in that country to the CSG/CRDS taxes levied in respect of income from assets received in France since these taxes fall within the scope of Regulation 883/2004. This solution applies the single applicable legislation principle (Dreyer, C-372/18).

Understanding the links between social security coordination rules and Article 45 TFEU is hard. A case illustrates the fact that the Court of Justice sometimes manage to apply the Treaty rules when the social security coordination rules lead to inappropriate solutions. In this regard, the Court of Justice refers to Article 45 TFEU in a case where, due to the difference in two national social security legislations, a migrant worker was deprived of invalidity benefits in both countries. For the Court, where such a difference in legislation exists, the principle of cooperation in good faith laid down in Article 4(3) TEU requires the competent authorities in the Member States to use all the means at their disposal to achieve the aim of Article 45 TFEU (Vester, C-134/18). However, Article 45 TFEU cannot solve all the gaps deriving from the coordination technique, as a case on the amount of social security contributions payable by a worker shows (Zyla, C-272/17). It is worth mentioning two cases providing further explanations on the functioning of overlapping rules applicable to the payment of family benefits by two competent Member States (Moser, C-32/18; GP, C-473/18).

One case applies well-established case law on gender discrimination in the field of retirement pension. The mere fact that the amounts of retirement pensions are adjusted pro rata temporis, in order to take account of the reduced time worked by a part-time worker as compared with that of a full-time worker, is not contrary to EU law. Nevertheless, a measure which has the effect of reducing a worker’s retirement pension by a proportion greater than that resulting when their periods of part-time work are taken into account cannot be regarded as objectively justified on the ground that the pension is in that case consideration for less work. This is the reason why, unsurprisingly, the Spanish retirement regulation applicable to part-time workers is not compatible with Article 4(1) of Council Directive 79/7 (Villar Láiz, C-161/18).