Newsitem
2021-05-11
Academic Board Review 2020: Free movement and social insurance
Jean-Philippe Lhernould[1]
The determination of the applicable social security legislation is a strategic and highly sensitive subject, in a context where alleged fraud from companies wishing to take advantage of low-rate social security contributions from some Member States often comes before domestic courts. In a case dealing with cross-border lorry drivers formally employed by a company from Cyprus who entered into fleet management agreements with transport undertakings established in the Netherlands , the Court held that:
the employer of an international long-distance lorry driver […] is the undertaking which has actual authority over that long-distance lorry driver, which bears, in reality, the costs of paying his or her wages, and which has the actual power to dismiss him or her, and not the undertaking with which that long-distance lorry driver has concluded an employment contract and which is formally named in that contract as being the employer of that driver.
By so ruling, the Court of Justice aims to avoid situations where the real employer, established in one Member State, hides behind a purely formal employer established in another Member State where social security contributions are lower. In order to identify the real employer of a cross-border lorry driver, it remains necessary to have regard not only to the information formally contained in the employment contract but also to how the obligations under the contract incumbent on both the worker and the undertakings in question are performed in practice. It is necessary to identify the entity which actually exercises authority over the worker, which bears, in reality, the relevant wage costs and which has the actual power to dismiss that worker. In this case, the drivers, who always maintained their place of residence in the Netherlands throughout those periods, had, before the conclusion of the employment contracts with the Cyprus company, been chosen by the transport undertakings themselves. A number of them were, prior to conclusion of the employment contracts with the Cyprus company, previously employed by the Dutch transport undertakings (AFMB, C-610/18).
The fight against social security fraud is also at stake in two cases concerning the legal value of A1 certificates. In the first case, the Court of Justice confirmed the very strict conditions under which the alleged fraudulent forms can be disregarded by national institutions and courts and also indicated that in a situation where an employer has, in the host Member State, acquired a criminal conviction based on a definitive finding of fraud made in breach of EU law, a civil court or tribunal of a Member State is not bound by that criminal ruling whenever an A1 certificate has been issued and not withdrawn. Therefore, an employer does not have civil liability to pay damages to a worker or to a social security institution based on the criminal ruling (CRPNPAC, C-370/17 and C-37/18). In the second case, the Court ruled that since A1 certificates have binding effects limited solely to the obligations imposed by national legislation in the area of social security, these forms have no legal impact on matters relating to the employment relationship itself. Consequently, the fact that a worker holds a valid A1 certificate does not prevent him from being considered as a clandestine worker under national labour law rules. It follows that a worker may be posted under social security rules but, although he holds an A1 certificate, at the same time be considered as employed in the same country under employment rules. The lack of coordination between social security and employment law rules is highly problematic in practice (Bouygues TP, C-17/19).
There is no right for individuals to choose the social security legislation applicable. It is also not possible to take advantage of two or more legislations simultaneously. This is the reason why a migrant Union citizen, who was residing in Germany where she had ceased to work could not claim a benefit in Austria, her country of origin. Since the country of residence is in this case competent by virtue of the rules of conflict of law of Regulation 883/2004, there is no European legal grounds for claiming benefits in the country of origin, notwithstanding the fact the person used to work in that country or that the competent Member State does not provide any equivalent benefit (CW, C-135/19).
Implemented in the fields of social security coordination and free movement of workers, the principle of assimilation, which is a powerful instrument to encourage cross-border mobility, has been applied in a series of interesting cases. In the first one, the Court of Justice illustrated the polymorphic nature of the principle of assimilation set out in Article 5 of Regulation 883/2004. That principle, which applies only to benefits falling within the material scope of the Regulation and relating to a social security risk, is two-fold: If conditions set out by Article 5(a) are not met, assimilation may be granted under Article 5(b) which provides that where, under the legislation of the competent Member State, legal effects are attributed to the occurrence of certain facts or events, that Member State must take account of such facts or events occurring in any Member State as though they had taken place in its own territory. Concretely, in the case of a French teacher residing in Germany who had worked in both Germany and France, the French institutions must take into account, for the purposes of calculating the French worker’s pension, of the increase in career duration to which she is entitled in respect of the raising of her disabled child. Indeed, if the French child-rearing allowance for a disabled child and the German assistance for integration of mentally disabled children and young people cannot be considered to be benefits of an equivalent nature for the purposes of Article 5(a), in order to determine whether the level of the child’s permanent incapacity required by French law to justify the increase in the pension rate has been met, French authorities cannot refuse to take into account similar facts occurring in Germany which can be established by any evidence, and in particular by medical reports, certificates or even prescriptions for treatment or medicines. Article 5(b) looks like a ‘plan B’ to proceed to assimilation whenever Article 5(a) is not applicable. This dynamic interpretation is the best illustration of the importance and the potential impact of the principle of assimilation (CARSAT, C-769/18).
In a more classic case where pensioners were denied the right to receive an early retirement pension because the national institution refused to take into account the pension received in another Member State, the Court of Justice held that Article 5(a) precludes legislation of a Member State which requires, as a condition for a worker to be eligible for an early retirement pension, that the amount of the pension to be received must be higher than the minimum pension that would be due to that worker upon reaching the statutory retirement age under that legislation, where the term ‘pension to be received’ is interpreted as referring only to the pension from that Member State, and not including the pension which that worker may receive through equivalent benefits payable by one or more other Member States. Even if the response was expected, this case is interesting as it focuses on the coordination between the neighbouring principles of equality of treatment and assimilation, the latter being a specific expression of the former which remains the main guiding principle (Bocero Torrico, C-398/18 and C-428/18).
The principle of assimilation applied by social security coordination rules is indeed a mere development of the same principle known in the context of free movement rules. A recent case is a good illustration. The Court ruled that Article 45(1) TFEU precludes national legislation that, for the purpose of determining the remuneration rate of a person working as a school teacher with a local authority, takes into account that person’s previous periods of activity with an employer, other than that local authority, situated in another Member State, only up to a maximum of three years in total, when that activity is equivalent to that which that person is to perform in the context of his or her school teaching duties. Indeed, according to settled case law, national legislation which does not take into account in full previous periods of equivalent activity completed in a Member State other than the Member State of origin of a migrant worker is likely to render less attractive the freedom of movement for workers, in breach of Article 45(1) TFEU (WN, C-710/18).
Two cases are brought to our attention in the field of cross-border healthcare. The first case deals with the right for Jehovah’s Witnesses to receive healthcare treatments in another Member State, when care provided in their country of insurance does not comply with their religious beliefs. Balancing the technical social security coordination principles and the fundamental principle of prohibition of discrimination on the grounds of religious beliefs, the Court of Justice reached two conclusions. On the grounds of Regulation 883/2004, a Member State is entitled to make the authorisation to enjoy a planned hospital treatment abroad dependent upon exclusively medical considerations, thereby disregarding other reasons such as the person’s religious beliefs. On the grounds of Directive 2011/24 on the application of patients’ rights in cross-border healthcare, since the authorisation would imply no extra costs for the healthcare system issuing it, it is forbidden to refuse to grant the authorisation to receive planned hospital care abroad whenever the method of treatment used in the country of insurance is contrary to that patient’s religious beliefs, unless the refusal is objectively justified by a legitimate aim relating to maintaining treatment capacity or medical competence, and is an appropriate and necessary means of achieving that aim, which it is for the referring court to determine. This important case should encourage Member States which have not yet done so to formally set up two distinct procedures of prior authorisation for planned hospital healthcare abroad, one based on the Regulation and one on the Directive (Veselibas, C-243/19). The second case is a mere application of the well-established case law regarding the rules on access to planned hospital care. If the case is worth pointing out, it is for two reasons. Firstly, it confirms that the matter of access to cross-border healthcare must be understood through the complex combined application of primary and secondary rules on free moment of workers and on freedom of services. As case law and numerous field issues show, simplification of the rules applicable would be much welcome. Secondly, it demonstrates that the patients’ interests remain at the heart of the ECJ decisions, especially when emergency care is needed (WO, C-777/18).
Other cases in the field of coordination are worth being reported. The coordination of unemployment benefits is subject to rules on derogation and will remain so after the revision of the existing coordination regulations. In one case, a worker residing in Germany used to work in Switzerland before being employed in Germany for a couple of months. He was then made redundant. German institutions, which are competent to pay the unemployment benefits according to Regulation 883/2004, calculated their amount on the basis of a theoretical German salary much lower than that of the actual salary paid to the employee. For the Court of Justice, this method was a violation of Article 62 of Regulation 883/2004. The case is worth mentioning as it confirms the validity of that Regulation provision with regard to the Treaty goals as well as to the coordination regulations. This said, this case far from clarifies the matter. Member States retain several options for the concrete calculation of the ‘reference salary’ provided that, in the end, the equality of treatment between cross-border and other workers is guaranteed (ZP, C-29/19).
As it is known, the concept of social advantage under Regulation 492/2011 can be used as an alternative legal instrument to protect migrants’ rights when a benefit is excluded from the material scope of Regulation 883/2004. The year 2020 gives examples. If an additional benefit paid to certain high-level sports persons who have represented a Member State or its legal predecessors in international sporting competitions is not an ‘old-age benefit’ under the coordination regulation, it is a social advantage under Regulation 492/2011. Therefore, a Member State which grants such a benefit to its national workers cannot refuse to grant it to workers who are nationals of other Member States (UB, C-447/18). Similarly, a family allowance is a social advantage and should be paid without any discrimination on the grounds of nationality (FV, C-802/18).
Concerning free movement, the Court of Justice continues to refine the interpretation of the rules on the right to stay. In one case, a migrant citizen, even though he was non-active, enjoyed the right to stay with his children attending schools in the Member State where they stayed together. The Court added that this European citizen cannot be seen as being in the same situation as non-active citizens in Dano or Garcia-Nieto. Consequently, notwithstanding Article 24(2) of Directive 2004/38 which was not relevant in this case, the non-active citizen, who used to be a worker in that country, cannot be automatically excluded from benefits aiming to provide minimum income (JD, C-181/19). For the first time to our knowledge, the Court of Justice interpreted Article 17(1)(a) of Directive 2004/38 according to which, by way of derogation from Article 16, the right of permanent residence in the host Member State can be enjoyed before completion of a continuous period of five years of residence in some circumstances. When is a person to be regarded as having stopped working for the purpose of this provision? Following a strict interpretation of what constitutes a derogation to the five-year condition, the Court of Justice held that the conditions that a person must have been working in a Member State at least for the preceding 12 months and must have resided in that Member State continuously for more than three years apply to workers who, at the time they stop working, have reached the age laid down by the law of that Member State for entitlement to an old age pension. Indeed, while Article 17(1)(a) extends the scope of the derogation provided for in that provision to workers who cease paid employment to take early retirement, it cannot be inferred that it was necessarily intended to exempt the other workers from the conditions, set out in that provision, that already applied to them under Regulation 1251/70 or Directive 75/34. Furthermore, the residence directive introduced a gradual system as regards the right of residence in the host Member State, which reproduces, in essence, the stages and conditions set out in the various instruments of EU law and case law preceding that directive and culminates in the right of permanent residence. In practice, a Romanian citizen, who reached the legal pensionable age on 28 January 2015, who worked in Austria from 1 October 2013 until 31 August 2015 and then between 1 April 2016 until 1 February 2017, did not qualify for the permanent right to stay (AT, C-32/19).
Frontier workers’ social rights are regularly jeopardised by national legislation which refuses to treat these workers as any other migrant worker for the sole reason that their residence is situated in another country. The broad concept of ‘social advantage’ is used by the courts to denounce the residence clauses and more broadly discrimination on the grounds of nationality they are confronted with. Hence, the Court of Justice ruled that the notion of social advantage means that national legislation which makes the payment of school transport costs by a German Land subject to a requirement of residence in the territory of that Land constitutes indirect discrimination, in that it is intrinsically liable to affect frontier workers more than national workers. Practical difficulties linked to the effective organisation of school transport within a Land do not constitute an overriding reason in the public interest that is capable of justifying a national measure categorised as indirect discrimination (PF, C-830/18). In a second case, the Court held that a Member State cannot deny family benefits to frontier workers who work in that country for the reason that the children concerned are not their children but their partners’ whereas the condition of a legal parent/child relationship is not required for children who reside with the worker in that country (FV, C-802/18)..
[1] Jean-Philippe Lhernould is Professor of Law at Université de Poitiers.