The Legal 500

Article 49 of the EC Treaty (Article 49) establishes the principle that member states should ensure the freedom to provide services within the European Union (EU). This fundamental freedom includes the right of a service provider established in a member state to temporarily post workers to other member states in order to provide a service.

A posted worker is someone who works for a limited period of time, carrying out their work in the territory of a member state of the EU other than the state in which they normally work.

Under the current case law, the freedom to provide services can only be restricted by rules justified on one of the grounds listed in Article 461 of the EC Treaty and by overriding reasons based on the general interest. The posting of workers is regulated by the Posting of Workers Directive 96/71/EC (the Directive), which broadly requires that where a member state has certain minimum terms and conditions of employment, these must be applied to workers posted temporarily by their employers to work in that member state. These terms and conditions include:

• maximum work periods and minimum rest periods;
• minimum paid annual holiday;
• minimum rates of pay, and the condition of hiring-out of workers, in particular the supply of workers by temporary employment undertakings;
• health, safety and hygiene at work; and
• protective measures with regard to the terms and conditions of employment of pregnant women or women who have recently given birth, of children and of young people.

 

The Directive applies to organisations that:

• post workers to another member state under a contract between them and a party in the state for which the services are intended;
• make intra-company postings; or
• are employment businesses that post workers and maintain employment relationships during the posting.

  

Internal Market Barriers and Trans-border Posting

Despite Article 49, service providers are often dissuaded, if not altogether prevented from providing services in other member states by various 'internal market barriers'.

One example of these barriers is the requirement for some workers who reside in another member state to obtain a work permit in order to provide the service. This constitutes a major obstacle to the 'posting' of workers who are not EU nationals and, in some cases, EU nationals of new member states. IT and hi-tech companies that employ and deploy non-EU workers due to the current shortage of skills are particularly affected by this requirement. A multinational IT company is reported to spend €8,700 per year on administrative and legal support for the intra-EU posting of each of its 700 intra-EU assignees. This comes to an approximate total cost of €6m.

The European Commission (the Commission) has issued infringement proceedings against several member states that still have administrative practices in place which are incompatible with Article 49.

Greece

In Greece, for instance, work permits must still be obtained for workers from non-member countries legally employed by businesses in other member states before they can be temporarily posted. Additionally, the granting of work permits depends on an assessment of the situation on the Greek labour market. The employer in the other member state is required to demonstrate that there are no suitable resident workers to carry out the service in Greece. This requirement runs against the core spirit of Article 49. The Commission has therefore recently decided

to formally ask Greece to amend its legislation accordingly, so that non-EU national workers who are employed by an EU businesses can be posted without having to obtain a work permit or be subject to the labour test of the Greek market. The Commission's request takes the form of a reasoned opinion, which is the second step in infringement procedure under Article 226 of the EC Treaty. If Greece fails to give a satisfactory response within two months of receiving the opinion, the Commission may bring the matter before the European Court of Justice (ECJ). The reasoned opinion concerns only workers from non-member countries who have the right to live and work in an EU member state, who are legally employed by an EU employer and who are being posted on a temporary basis to perform specific tasks (such as installing software, equipment, or providing after-sales service).

The Netherlands

In the Netherlands, businesses in eight new European member states (ie all except Cyprus and Malta) wishing to post staff to the Netherlands on a temporary basis in order to provide services are still required to first obtain work permits. This requirement clearly discriminates against businesses in these new member states, as their employees cannot move freely in order to provide services in the Netherlands. A work permit may not be refused if the workers in question are permanent employees of the business. However, in order to be part of the permanent staff a worker must have been employed by the business for more than a year. The Commission has recognised that this requirement is sometimes difficult to meet in sectors where frequent changes of employer and fixed-term contracts are standard. The Commission has, as a result, recently launched an infringement procedure after receiving several complaints from businesses in one of the new member states.

Luxembourg

The ECJ also recently sent Luxembourg another letter of formal notice for failure to comply with a judgment. In October 2004 the Court found that the Grand Duchy of Luxembourg had failed to fulfil its obligations under Article 49:

'... by imposing on service providers established in another member state who wish to deploy in its territory workers who are nationals of non-member state countries, a requirement of individual work permits, the issuance of which is subject to considerations relating to the employment market, or a requirement of a collective work permit, which moreover is granted only in exceptional cases and only when the workers concerned have, for at least six months prior to the deployment, been in a relationship with their undertaking of origin through a contract of employment of indefinite duration, and by requiring those service providers to provide a bank guarantee.'

Recalcitrant states

Even the EU member states that seem to have amended their legislations, so that non-EU posted workers can be deployed in their territory without having to obtain a work permit, are still not fully complying - as they have put other measures in place which still create or uphold unjustified and disproportionate restrictions to the free provision of services within the EU.

Germany

Companies offering services in Germany must apply for visas to be issued to their employees from non-member states. However, to qualify for the visas the employees are required to have been employed for a minimum of one year by the company. The Commission considers this an obstruction of the freedom to provide services and opened a proceeding for the violation of treaties in 2004 (Commission v Germany).

Belgium

Companies offering services in Belgium must also apply for visas to be issued to their employees from non-member states. In support of the visa applications, the employees are required to produce police certificates for each country they have lived in over the past five years. This usually creates considerable delays as most non-EU nationals are likely to have lived in various countries and the process to obtain the relevant certificate can sometimes take months rather than days.

Ireland

Companies wishing to deploy employees from non-member states to Ireland are facing delays of up to three months as visa applications are referred to the visa section of the Department of Justice.

Impact of delays

In today's fast-moving business world, time is of the essence, and lengthy delays usually result in companies not being able to deliver within their schedule and subsequently losing contracts. This ultimately could have a knock-on effect in a multilayered service provider chain, with commercial and economic repercussions affecting companies at various levels.

While it is obvious that some restrictions and control must be imposed to avoid the circumvention of the freedom to provide services and ensure the protection of employees, the ECJ takes the view that the practice of certain member states sometime goes far beyond what is necessary.

European Commission Guidance

Control measures

After having examined the practical day-to-day implementation of the Directive in the framework of the provision of services under Article 49, the Commission has recently published a communication containing guidance to member states on the operation of the Directive.

The communication is to help EU member states conform to the Directive's obligations in line with the EC Treaty and court rulings and to improve co-operation and access to information.

The guidance refers to various measures implemented by certain member states and offers clarification on the basis of the case law of the ECJ based on Article 49.

The guidance addresses the specific checks intended to control posted workers from non-member states. In the existing case law2 on the freedom to provide services in accordance with Article 49, the ECJ was of the opinion that workers who were regularly and habitually employed by a service provider established in a member state could be posted to another member state without having to comply with the latter state's administrative requirements, such as the obligation to obtain a work permit or work authorisation. The Court also took the view that certain member states imposed additional conditions to the posting of third countries' national workers, which were excessive. In Commission v Germany3, the Court held that German legislation, requiring non-EU national workers posted to Germany to have been employed by the posting company for at least a year to qualify for a residence visa, was not in accordance with Article 49. This judgment was upheld in Commission v Luxembourg4. Here the Court concluded that legislation requiring third countries' national posted workers to have been employed for at least six months by the posting company prior to being posted exceeded what was required to comply with the Directive and could therefore not be justified.

In line with the existing case law, the Commission recommends that host member states should not impose administrative formalities on non-EU national posted workers when they are lawfully employed by the service provider trading in another member state.

The guidance also refers to four measures that apply to all posted workers and establish that:

• There is no obligation for a service provider to have a permanent representative in the territory of the host member. The Commission states:

'... the appointment of a person from among the posted workers, for instance a foreman, to act as the link between the foreign company and the labour inspectorate, should suffice.'

• No prior authorisation can be required by the host country for the posting of workers, but service companies may have to obtain a general authorisation in certain sectors when rendering services in another member state.
• Member states can ask for a declaration on the posting of workers before they begin work, to facilitate controls in the host countries. The Commission's standing on this is that to be able to check that the conditions of employment laid down in the Directive are complied with, the host member state should be able to demand that the service provider submit a declaration by the time the work starts. The declaration should state the type of service they will provide, how long the work will take and where it will be carried out. The declaration could also confirm that posted workers from third countries are in a lawful situation in the country where the service provider is established, including with regard to the visa requirements, and legally employed in that country.
• Service providers must keep social documents. The Commission takes the view that to monitor compliance with the conditions of employment stipulated in the Directive, the host member state must be able to demand that documents such as time-sheets or documents relating to health and safety conditions be kept in the workplace.

Co-operation on information

In its communication the Commission also calls on the member states to fulfill their obligation under Article 4(3)5 of the Directive by improving access to the information on the terms and conditions of employment that must be applied to service providers. The national authorities of the countries of origin have to co-operate with the authorities in the host member states and provide them all with the required information, so that they can perform their monitoring duties and prevent illegal practices. Member states must have liaison offices and the monitoring authorities must be adequately equipped and resourced. Appropriate measures must be in place to sanction non-compliant foreign service providers. The communication suggests a number of actions, such as the improvement of websites and other means of information, the strengthening of liaison offices and monitoring authorities, and the improvement of communication between the various labour inspectorates.

Commission conclusion

The Commission urges member states to ensure that the guidance and orientation provided in its communication are acted upon. To monitor progress, the Commission intends to adopt, within 12 months, a report that will look at the status in all member states of all the issues covered by the communication.

If the Commission comes to the conclusion that co-operation between member states under the Directive has not improved, it will take the necessary steps in order to remedy the situation.

It is not clear what this actually means, but it is highly probable that the Commission may amend the Directive or take infringement proceedings to the ECJ against non-compliant member states.

In the meantime, anyone affected by a member state's restrictive measures (law, regulation or administrative action) or administrative practices, which they consider incompatible with EU law, may lodge a complaint with the Commission. Ultimately, the Commission's recent proposal for an EU 'green card' which would allow highly qualified/skilled foreign immigrants to apply for Europe-wide work permits could render some of today's cross-border barriers a thing of the past and ensure true trans-euro mobility.

 

By Delphine Dervin, Magrath & Co.

E-mail: delphine.dervin@magrath.co.uk.

 

Case refs

Commission v Germany

(ECJ case C-341/02, 14 April 2005)

Raymond Vander Elst v Office des Migrations Internationales

(ECJ case C-43/93, 9 August 1994)

Commission v Luxembourg

(ECJ case C-445/03, 21 October 2004)

Commission v Germany

(ECJ case C-224/04, 19 January 2006)

 

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