Academic Board Review 2021: Free movement and social insurance

Jean-Philippe Lhernould (Université de Poitiers)

The right for jobseekers to stay in the territory of the Member State where they seek employment has been defined in the Antonissen case (Case C-292/89) and then codified in the ‘residence directive’ (Directive 2004/38/EC) which ambiguously provides that these workers “may not be expelled for as long as the Union citizens can provide evidence that they are continuing to seek employment and that they have a genuine chance of being engaged” (Article 14(1)(b)). A case clarified the matter by designating three periods: for three months, jobseekers can stay without any condition; during a period of six months, they can stay if they register as a jobseeker and continue to seek employment; during an indefinite period of time, they can stay if they continue to seek employment and have a genuine chance of being engaged. Even if issues will remain, this case is a nice illustration of the denial by the Court of Justice of a strict interpretation of Article 45(3) TFEU which would jeopardise the actual chances that a national of a Member State who is seeking employment will find it in another Member State, and would, as a result, make that provision ineffective (Case C-710/19, GMA).

If the rules on free movement of workers must be interpreted broadly, they should not be used to receive an unfair advantage. This is why the Court held that Article 45 TFEU and Article 7 of Regulation (EU) 492/2011 do not preclude national legislation which uses, as the reference year for the calculation of family allowances to be allocated, the penultimate year preceding the payment period. Even if this method of calculation led in practice to the loss of family benefits, it was not the exercise of the right to free movement that led to that result, but the fact that the income received during the mobility was higher than that received in the country where the worker had returned (Case C-27/20, QG).

For third-country nationals, the right to stay and to enjoy various benefits in the Member States is more limited than that of Union citizens. The Court of Justice is however vigilant to protect their rights. In a Grand Chamber case, it ruled that Directive 2011/98/EU precludes national legislation which excludes third-country nationals holding a single permit from entitlement to a childbirth allowance and a maternity allowance provided for by that legislation (Case C-350/20, OD). In another case though, the Court underlined the limits set by Union law. It held that a Member State may impose legislation which requires a work permit for third-country national crew members of a vessel flying the flag of a Member State, owned by a company in another Member State. Indeed, it is apparent from Article 79(5) TFEU that Member States retain the right to determine volumes of admission of third-country nationals coming from third countries to their territory in order to seek work, whether employed or self-employed (Case C-71/20, VAS shipping).

The CJEU confirmed in two noteworthy cases dealing with social security matters its desire to strictly regulate posting and combat potential situations of fraud and unfair competition. It has long been admitted that temporary employment agencies may post workers across borders. Among the conditions for posting is the obligation for the employer to carry out its activities normally in the State where it is established. This is to avoid the proliferation of ‘letterbox’ companies. Should the fact that a temporary employment agency carries out in the country where it is established the activities of selection, recruitment and social security affiliation of temporary workers be considered sufficient to characterise substantial activities for the temporary workers to be considered as posted? The answer by the Court is fortunately in the negative. In order to benefit from the posting rules, a temporary work agency must carry out activities in the territory where it has established a significant part of its activities of assigning temporary agency workers for the benefit of user undertakings established and carrying out their activity in that country (Case C-784/19, Team Power Europe).

The distinction between posting and other forms of cross-border work has been discussed in another case. In 2012, the ECJ had ruled that an employee employed by a Polish construction company, posted by successive fixed-term contracts in France, then in France again, and finally in Finland could not be considered as being posted or in state of ‘pluriactivity’ (within the meaning of Regulation (EEC) 1408/71) (Case C-115/11, Format I). This case though did not make it possible to know whether, as regards any successive periods of activity exercised in the territory of more than one Member State, Article 14 of Regulation 1408/71 establishes a temporal limit preventing the application of the posting status. The answer is provided by a case where the Court held that posting rules do not apply to a person who, under a single employment contract concluded with a single employer providing for the pursuit of professional activity in several Member States, works, for several successive months, solely in the territory of each of those Member States, where the duration of the uninterrupted periods of work completed by that person in each of those Member States exceeds 12 months (Case C-879/19, Format II).

More surprisingly, since it goes against posted workers’ interests and fair competition principles, the Court considered in a third case dealing this time with the posting directive (Directive 96/71/EC), that a daily allowance, the amount of which varied according to the duration of the worker’s posting, constituted in principle an allowance specific to the posting and was thus part of the posted worker’s minimum wage. This ruling may result in a de facto substantial reduction in the actual remuneration of posted employees since it will be easy for employers to hide reimbursement of expenditure actually incurred behind a flat rate bonus (Case C-428/19, OL).

The CJEU traditionally interprets social security coordination rules in favour of individuals, including for the determination of the legislation applicable. This was the case for a German employed person who had been hired under a contract of employment as a development aid worker by an employer established in Austria and who was covered by the Austrian compulsory social security scheme. They were assigned to Uganda not immediately after being employed but after completing a short training course in Austria. They subsequently returned there for a reintegration period before quitting their job. For the CJEU, they were to be regarded as pursuing an activity as an employed person in Austria under Regulation (EC) 883/2004. This case confirms that the lex loci laboris rule of conflict has an attractive function. It may apply regardless of the existence of factors to the contrary, in particular the fact that the activity is actually carried out in a third country (Case C-372/20, QY).

The Court of Justice has issued two rulings about access to scheduled cross-border healthcare. These cases, although favourable to patients, emphasise the necessity to simplify the rules applicable and to put an end to the ‘double path’ reimbursement system. In the first case, the Court added a new situation where an insured person can obtain reimbursement of the costs of scheduled healthcare requiring in principle a prior authorisation, even though the authorisation was not requested. It covers situations where a medical opinion from a doctor in the State of stay gives the same diagnosis as the one given in the State of residence but proposes a treatment of equivalent efficacy which is less incapacitating. This ruling shows the importance given by the Court to the state of health of the person concerned (seriousness of the condition, urgency of care) and the comparative quality of the treatments offered in the States concerned. It puts the insured person and the need to receive the best possible care at the heart of the reasoning (Case C-538/19, TS). In the second case, the Court held that Directive 2011/24/EU on the application of patients’ rights in cross-border healthcare read in combination with Regulation (EC) 883/2004 meant that a Dutch national residing in Belgium, in receipt of a Dutch pension, who had a right under the Regulation to the benefits in kind provided by the country of residence (Belgium) at the expense of the Member State responsible for paying their pension (the Netherlands), must be regarded as an ‘insured person’, within the meaning of that Directive, who is able to obtain reimbursement of the costs of the planned cross-border healthcare that they have received in Germany, without being affiliated to the Dutch compulsory sickness insurance scheme and without having requested a prior authorisation. These cases illustrate the unnecessary complex interaction between the Directive and the Regulation. In sum, the Directive applies only when the Regulation does not cover the situation in question or when it brings a more beneficial result to the insured person or when the latter chooses to refer to it in a preferential manner (Case C-636/19, Y).

With regard to unemployment benefits, Article 65 of Regulation 883/2004 is often contested because of the unfair distribution of financial burdens between countries. While the contributions are paid in the State of employment, it is the State of residence that pays the benefits. Does Article 65 extend to a worker being off sick in the last Member State of work? Yes, if the person on sick leave receives sickness benefits paid by the country of work (Case C-285/20, K). The regulation currently being revised could provide that, for frontier workers, it is in principle the State of last employment that will pay unemployment benefits, with a right to export to the State of residence for at least 15 months (or six months). But who knows when and how the regulation will be revised.

The recent case law shows the importance of the protection granted to mobile non-active persons. Firstly, the CJEU ruled that Regulation 883/2004, read in the light of Directive 2004/38, precludes national legislation which excludes from the right to be affiliated to the public sickness insurance scheme of the host Member State economically inactive Union citizens who are nationals of another Member State and who fall, by virtue of Article 11(3)(e) of Regulation 883/2004, within the scope of the legislation of the host Member State and who are exercising their right of residence in the territory of that State under Article 7(1)(b) of that Directive. In essence, this cornerstone case means that the Regulation allows the condition of complete sickness insurance to be met directly for non-active persons through the country of residence public insurance scheme. The only, but important, reservation made by the Court is that access to the country of residence health insurance system can be subject to a proportionate contribution to be paid by the person concerned (Case C-535/19, A). Secondly, for Union citizens residing legally, on the basis of national law, in the territory of a Member State other than that of which they are nationals, the national authorities empowered to grant social assistance are required to check that a refusal to grant such benefits based on that legislation does not expose that citizen, and the children for which he or she is responsible, to an actual and current risk of violation of their fundamental rights, as enshrined in Articles 1, 7 and 24 of the Charter of Fundamental Rights of the European Union (Case C-709/20, CG).

Workers’ mobility may be affected by various principles and rules of the international market. Many rulings deal with such matters. For example, the Court has held, in essence, that pursuant to Article 49 TFEU, a (host) Member State cannot make the exclusion of pension rights from a bankruptcy estate dependent on obtaining prior tax approval in that country if the scheme has already been tax approved in the home Member State unless there is an overriding reason of public interest to do so (Case C-168/20, BJ).In another case, the Court has held that legislation which reserves dock work to ‘recognised workers’ may be compatible with Articles 49 and 56 TFEU only if it is aimed at ensuring safety in port areas and preventing workplace accidents. However, the intervention of a joint administrative committee in the recognition of dockers is neither necessary nor appropriate for attaining the objective pursued. This judgment shows the vigilance of the CJEU towards labour market protection practices – aiming to avoid access to the local job market by foreigners – but also the need for a European regulation that would set the basis for the – difficult – working conditions of port workers (Case C-407/19, Katoen Natie Bulk Terminals).