Posts Tagged social dumping

Saugmandsgaard ØE in Altun: Detection of fraud /fighting social dumping trumps mutual trust.

Saugmandsgaard ØE’s would seem fast to become the CJEU’s Advocate General of choice in matters of social dumping – witness the recent Ryanair litigation. In C-359/16 Altun, at issue is the binding nature of the E101 certificate. This certifies that a worker moving within the EU is covered by the social security scheme of the Member State (‘MS’) to which the issuing institution belongs. Standing case-law is that the host MS is not entitled to scrutinise the validity of an E101 certificate in the light of the background against which it was issued: this is the result of the mutual trust built into the relevant secondary law.

In current case the Belgian Supreme Court queries whether that case-law applies where a court of the host MS finds that an E101 certificate was obtained or invoked fraudulently.

The AG summarises the relevant investigation at 10: ‘The Sociale Inspectie (Social Inspectorate, Belgium) conducted an investigation into the employment of the staff at Absa NV, an undertaking governed by Belgian law active in the construction sector in Belgium. That investigation established that from 2008 Absa had practically no staff in its employ and outsourced all manual labour to Bulgarian undertakings under subcontracting agreements. Those Bulgarian undertakings had no activities to speak of in Bulgaria and posted workers to work under subcontracting agreements in Belgium for Absa, partly with the involvement and cooperation of other Belgian companies. The employment of the workers concerned was not notified to the Belgian institution responsible for the collection of social security contributions, as they held E 101 certificates issued by the competent Bulgarian authority, certifying that they were covered by the Bulgarian social security system.’

What follows is essentially the Belgian authorities alleging that their Bulgarian counterparts, having been asked to withdraw the certificates, only answered halfheartedly if at all. The Court of Appeal found that the certificates had been obtained by fraud.

Saugmandsgaard ØE emphasises that the EU social security rules at issue effectively establish a private international law system for social security. They assign authorities competent to issue certificates; they designate the social security law applicable. The principle of mutual trust /sincere co-operation, laid down in Article 4(3) TEU, ensures that authorities in the host MS respect the certificates issued in the home MS. However, the AG then effectively flips the coin: sincere co-operation requires sincerity on both sides (my words, not the AG’s).

The AG recalls the Halifax case-law of the CJEU: EU law cannot be relied on for abusive or fraudulent ends and that national courts may, case by case, take account — on the basis of objective evidence — of abuse or fraudulent conduct on the part of the persons concerned in order, where appropriate, to deny them the benefit of the provisions of EU law, in the light of the objectives pursued by the provisions of EU law concerned. [Postscript 22 November 2017: The CJEU confirmed today in C-251/16 Cussens that this principle has direct effect and is directly applicable: it is a general principle of EU law which does not require a national measure transposing it).

The AG does not just refer to case-law on the very secondary law at issue. He opens up the debate to the wider implications of social dumping and regulatory competition:

At 46: ‘socio-economic considerations likewise support priority being given to the combating of fraud in such a situation. In the context of the system of conflict of laws established by … Regulation No 1408/71, fraud linked to the issue of E 101 certificates represents a threat to the coherence of the Member States’ social security schemes. In that regard, I consider that Member States have a legitimate interest in taking appropriate steps to protect their financial interests and to ensure the financial balance of their social security systems. In addition, the use of E 101 certificates obtained or invoked fraudulently is, in my view, a form of unfair competition and calls into question the equality of working conditions on national labour markets.‘ (footnotes omitted)

At 49, the AG suggest a finding of fraud requires the satisfaction of an objective criterion and of a subjective criterion. The objective criterion consists in the fact that the conditions for obtaining the advantage sought are not in fact satisfied. At 51, the subjective factor:  it is to be established that the persons concerned had the intention of concealing the fact that the conditions for the issue of the E 101 certificate were not in fact met, in order to obtain the advantage stemming from that certificate. Proof of the existence of such fraudulent intent may consist in an intentional act, in particular an inaccurate presentation of the true situation of the posted worker or of the undertaking posting that worker, or in an intentional omission, such as the non-disclosure of relevant information.

(In the case at issue, the facts point to non-fulfillment of one of the substantive criteria for the E101 to be issued, namely that only an undertaking which habitually carries on significant activities in the Member State in which it is established may be issued an E101 of that State).

The fraud must be established in the context of adversarial proceedings with legal guarantees for the persons concerned and in compliance with their fundamental rights, in particular the right to an effective remedy enshrined (at 52).

If the AG’s Opinion is followed, and taking into account Commissioner Thyssen’s recent progress on the reform of the relevant laws, the social dumping window is closing yet a bit more.

Geert.

 

 

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Expect some final turbulence. CJEU wrongfoots Ryanair and Crewlink on ‘place where the employee habitually carries out his work’.

I reported earlier on Saugmandsgaard ØE’s opinion in Cases C‑168/16 and C‑169/16, Nogueira et al and Osacar v Ryanair. The CJEU yesterday held and as I put it in immediate comment on the case reported in the FT, the Court’s view clearly resonates with the current mood against social dumping.

The case here ostensibly concerns jurisdiction only, however the Rome I Regulation includes mandatory protection of the employee guaranteed by the laws of the same place where (s)he habitually carries out his /her work. Hence a finding in the context of the Brussels I Recast inevitably has an impact on applicable law, too.

Firstly the Court has no mercy for the limiting choice of court agreement in the relevant contracts (at 53): in the case of employment contracts, a jurisdiction clause cannot apply exclusively and thus prohibit the employee from bringing proceedings before the courts which have jurisdiction under the protective regime of the Brussels I Recast.

The Court then essentially reiterates its AG: The concept of ‘place where the employee habitually carries out his work’ must be interpreted as referring to the place where, or from which, the employee in fact performs the essential part of his duties vis-à-vis his employer (at 59). Referring to its earlier case-law, the Court reiterates that national courts must, in particular, determine in which Member State is situated (i) the place from which the employee carries out his transport-related tasks, (ii) the place where he returns after his tasks, receives instructions concerning his tasks and organises his work, and (iii) the place where his work tools are to be found. (at 63). The place where the aircraft aboard which the work is habitually performed are stationed must also be taken into account (at 64).

The CJEU’s judgment then zooms in particularly on the notion of ‘home base’, a term used in relevant EU civil aviation law. The concept of ‘place where, or from which, the employee habitually performs his work’ cannot be equated with any concept referred to in another act of EU law (at 65).  However that does not mean that it is irrelevant to determine the place from which an employee habitually carries out his work. In fact, the Court held, the concept is likely to play a significant role in the identification of place of habitual employment in cases as these (at 69). In fact, taking account of the facts of each of the present cases, it would only be if applications, such as those at issue in the main proceedings, were to display closer connections with a place other than the ‘home base’ that the relevance of the latter for the identification of ‘the place from which employees habitually carry out their work’ would be undermined (at 73).

Nationality of the aircraft is summarily dismissed at 75, as being of any relevance at all.

At 62, the Court, importantly, also wars against fraudulent forum shopping: ‘That circumstantial method makes it possible not only to reflect the true nature of legal relationships, in that it must take account of all the factors which characterise the activity of the employee (see, by analogy, judgment of 15 March 2011, Koelzsch, C‑29/10, EU:C:2011:151, paragraph 48), but also to prevent a concept such as that of ‘place where, or from which, the employee habitually performs his work’ from being exploited or contributing to the achievement of circumvention strategies (see, by analogy, judgment of 27 October 2016, D’Oultremont andOthers, C‑290/15, EU:C:2016:816, paragraph 48 and the case-law cited).

The case now goes back to Mons howecer as has been reported, it is almost inconceivable for that court not to find Charleroi to be the place of habitual employment. Despite Ryanairs bravado, it is clear this judgment blows a hole in its regulatory strategy.

Geert.

(Handbook of) EU Private International Law, 2nd ed 2016, Chapter 2, Heading , Chapter 3, Heading 3.2.5.

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An update from the social dumping flightdeck. Saugmandsgaard ØE advises against Ryanair and Crewlink on ‘place where the employee habitually carries out his work’.

Saugmandsgaard ØE this morning Opined in Joined Cases C‑168/16 and C‑169/16, Nogueira et al and Osacar v Ryanair. Reference in the case was made by the Court of Appeal at Mons /Bergen in the Ryanair case I reported on in first instance. The weakest part of that judgment, I noted, was that it looked to the employer’s organisation as the most relevant criterion when deciding upon place of habitual employment. That clearly went against the favor laboris inherent in Article 19 of the Brussels I Recast Regulation.

The Advocate General at 100 in particular agrees with that view. Regular readers will know that I do not tend to paraphrase for the sake of it hence reference is best made to the AG’s Opinion as a whole. In summary:  Saugmandsgaard ØE recalls that CJEU case-law on the matter essentially requires the courts to either identify the ‘place where’ the employee principally carries out his obligations vis-à-vis his employer, or the ‘place from which’ he principally carries out those obligations. The workers at issue were employed as cabin crew on aircraft operated by Ryanair. Those employees performed their work in more than one Member State, namely in Belgium, where the airport of departure (Charleroi) was situated, the Member State of the airport of arrival and any other Member States crossed during the flight.  The AG suggests (at 92) that it is not possible, in such circumstances, to identify a ‘place where’ those employees principally carried out their obligations vis-à-vis their employers, for it is difficult to attach greater weight to the tasks carried out by those employees in the airport of departure, on board the aircraft or in the airport of arrival.

A ‘place from which’ those employees principally carried out their obligations vis-à-vis their employers, however, can be identified.  The referring court had listed a number of factual considerations among which the AG suggests the following as being highly relevant: (97 ff)

First, appellants started and ended their working day at Charleroi Airport. To the AG’s mind, that fact is of overriding importance, which he suggests is confirmed by the Court’s consistent case-law in particular Koelzch and Voogsgeerd.

Second, appellants received the instructions relating to their tasks and organised their work at Charleroi Airport, by consulting their employers’ intranet. (It is on this point that the AG rejects any relevance of the location of organisation of the work schedule by the employer).

Third, the aircraft operated by Ryanair, and on board which appellants worked as cabin staff, were based at Charleroi. Here the AG refers to CJEU case-law that, in the international transport sector, the place where the work tools are located constitutes a relevant indicium for the purposes of determining the place from which the worker principally fulfils his obligations vis-à-vis his employer.

Fourth, appellants were contractually required to live less than one hour from Charleroi Airport. It is noteworthy that this indication refers not to the worker’s actual place of residence but rather to the place of work near which he lives, namely Charleroi Airport in the main proceedings (at 103).

Fifth, the referring court noted that Ryanair and Crewlink jointly had a ‘crew room’ at Charleroi Airport. The existence of an office made available by the employer is another factor the relevance of which has been emphasised in the Court’s case-law. That this is not formally a ‘branch’ of either company, is irrelevant.

Finally, appellants were required to attend Charleroi Airport if they were unfit for work and in the event of disciplinary problems.

The AG points out that on the basis of the criteria, the Court at Mons formally will have to complete the analysis, however he concludes (at 107) that on the basis of the findings of fact communicated by that court in its request for a preliminary ruling, those six indicia unequivocally designate the courts of the place where Charleroi Airport is situated.

A few other issues are worth mentioning. Firstly (at 108) whether the worker is directly employed by Ryanair (Case C‑169/16) or assigned to Ryanair by Crewlink (Case C‑168/16) is irrelevant for the purposes of identifying the place where the work is habitually carried out, within the meaning of Article 19(2)(a) of Regulation No 44/2001. That place, the AG suggests, is independent of the legal link between the worker and the person who benefits from the work done.

Further, the AG suggests that the concept of ‘home base’ has  relevance to the analysis, albeit indirect. ‘Home base’ is a term used in relevant EU civil aviation law. At 109 ff: ‘place where the employee habitually carries out his work’, used in Article 19(2) of Regulation No 44/2001, should not have to depend on a concept in an act of Union law which belongs to a quite different area, namely that of the harmonisation of rules in the civil aviation sector.’ At 116: the relevance of the home base, for the purposes of identifying the place where the contract of employment is habitually carried out, is only indirect. Indeed, it should be taken into account only in so far as it supports the indicia mentioned above as relevant for the purposes of identifying that place.’ (Which it certainly did in casu).

Further and convincingly, the AG emphatically suggests that the nationality of the aircraft is entirely irrelevant for the discussion (118 ff).

Finally, at 73 ff the AG suggests that there ought to be parallel interpretation of the findings on jurisdiction, and the rules on applicable law, among others in the Rome I Regulation. Those rules were not included in the referring court’s request for preliminary ruling.

We have to await the Court’s judgment, of course. However all in al this is a convincing Opinion which, as specifically flagged by the AG (at 101), is instrumental in addressing forum shopping by employers and consequently will be extremely helpful in addressing social dumping in the EU.

Geert.

Handbook of) EU Private International Law, 2nd ed 2016, Chapter 2, Heading , Chapter 3, Heading 3.2.5.

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