The retroactive effect of a portable document A1 and the “non-replacement condition”

In his opinion delivered on 31 January 2018 (C-527/16), Advocate General Saugmandsgaard Øe addresses issues related to the coordination of the social security systems, pursuant to Regulation 883/2004 and its implementation Regulation 987/2009.

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Feb 04, 2018
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In his opinion delivered on 31 January 2018 (C-527/16), Advocate General Saugmandsgaard Øe addresses issues related to the coordination of the social security systems, pursuant to Regulation 883/2004 and its implementation Regulation 987/2009.

The dispute in the main proceedings concerns the determination of the social security legislation applicable to workers posted by two Hungarian undertakings to an undertaking established in Austria.

The Supreme Administrative Court of Austria decided to refer to the European Court of Justice as regards to the following issues at hand:

  • The binding effect of a portable document A1 on a court or tribunal of a Member State other than that in which the document was issued.
  • The binding nature of the decisions of the Administrative Commission for the Coordination of Social Security Systems.
  • The retroactive effect of a portable document A1, in particular when issued after the worker became subject to the social security system of the host Member State.
  • The “non-replacement condition” applicable to posted workers in the context of successive postings by different employers (i.e. posting workers to the same undertaking established in another Member State).

Binding effect of a portable document A1

Referring to the Court’s settled case law, Advocate General Saugmandsgaard Øe takes the view that a court of the host Member State, is not entitled to scrutinise the validity of a portable document A1 in the light of the background against which was issued.

Binding nature of the decisions of the Administrative Commission

The Administrative Commission is responsible for dealing with administrative matters, questions of interpretation arising from the provisions of regulations on social security coordination, and for promoting and developing collaboration between EU countries.

The Administrative Commission concluded that Hungary had improperly declared that it had competence over the workers concerned and that, accordingly, the portable documents A1 must be withdrawn. However, the portable documents A1 were not withdrawn or cancelled by the competent Hungarian institution.

Pursuant to Article 5(4) Regulation 987/2009 and in the light of the Court’s case law, Advocate General Saugmandsgaard Øe takes the view that the Administrative Commission must only “endeavour to reconcile’ different points of view and as a consequence, neither the procedure before the commission and nor its decisions have impact on the binding effect of a portable document A1.

Retroactive effect of a portable document A1

Considering the Court’s case law, the Advocate General recalls that:

  • When issuing the document A1, the competent authority merely state that the worker concerned remains subject to the legislation of the Member State to which that institution belongs, throughout a given period.
  • Although it is preferable to issue such document before the beginning of the period concerned, the document may also be issued during the posting period or after its expiry.

In the same context, the Advocate General underlines the difference between a portable document A1 issued at the request of the person concerned or the employer, and a decision based on the authority's initiative, establishing that a person is subject to the social security of a Member State. The Advocate General takes the view that only the former can be considered as a document in the sense of Article 5(1) Regulation 987/2009, and as a consequence, only the former “shall be accepted by the institutions of the other Member States for as long as they have not been withdrawn or declared to be invalid by the Member State in which they were issued”.

Having regard to the above considerations, the Advocate General takes the view that there is nothing to prevent the portable document A1, where appropriate, from having retroactive effect. The document is binding where was issued after the worker concerned was made subject to the social security system of the host Member State (the Austrian authorities had established that the workers concerned were subject to the Austrian social security system).

The “non-replacement condition”

As the case at issue, the question can be rephrased to whether the “non-replacement” clause precludes an employer B from posting workers, where employer A had previously made such a posting (i.e. to the same recipient of services and to carry out similar activity).

The question is examined from two angles, in relation to whether or not, the employers have their registered office in the same Member State and staffing and/or organisational links are established between them.

The Advocate General suggests that as a matter of principle and regardless if the employers have their registered office in the same Member State, preventing an employer from posting workers where another employer had previously made such a posting to carry out the same activity, would undermine the freedom to provide services and the freedom of movement of workers. As a consequence, the recipient of the service in the host Member State, is not prevented from making use of successive and separate contracts with different undertakings relating to the performance of the same work, by posted workers who are not subject to the social security system of the host Member State.

Where the employers have staffing and/or organisational links, it is appropriate to examine whether the postings are aimed at circumventing the “non-replacement condition”.

A landmark ruling is expected.

The “non-replacement condition”, aims to prevent situations which consist in the fact that employers are circumventing the condition relating to the duration of the posting by making rotations of their posted staff to be able to continue to be subject to the legislation of the Member State of origin, where the social security contributions are lower than in the host Member State.

Considering the Advocate General’s opinion, the recipient of services is not prevented from making permanent use (for the same work) of posted staff subject to the legislation of the Member State of origin. It must be observed that regardless of whether the permanent rotation is sourced by the same or by different employers, its effect on the EU single market economy is the same.

Social dumping has been defined by Magdalena Bernaciak as “the practice, undertaken by self-interested market participants, of undermining or evading existing social regulations with the aim of gaining competitive advantage” (Social dumping and the EU integration process-2014). No distinction is made between provider and recipient of services.

The overriding reason of public interest can be invoked to justify the “non-replacement condition” (which constitutes a restriction of the freedom to provide services), should apply equally to both situations in discussion.

Lastly, the question referred to the ECJ is related to the social security subjection and the opinion delivered in the light of Article 12(1) Regulation 883/2004.

It will be interesting to assess the question in the light of Article 4.3 Directive 2014/67/EU (criteria to assess whether a posted worker temporarily carries out his or her work in a Member State).

 

 

Go to the profile of Tanel Feldman

Tanel Feldman

Managing Partner, Immigration Law Associates

Corporate Immigration Law/Employment Law/Social Security Law/European Law

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