In C-784/19, the Administrative Court of Varna (Bulgaria) referred to the ECJ a question on the interpretation of Article 12 (1) Regulation 883/2004, In the context of transnational hiring out of workers.

The case in the main proceedings

The competent authority of Bulgaria, refused to issue a Portable Document A1, to a worker employed by TPE, a company registered under Bulgarian law, with the object of hiring out of workers in Bulgaria and in other States.

Considering the facts addressed by the Administrative Court of Varna (ruling No 2512 of 4 October 2019):

• the service agreement was concluded by TPE with the user undertaking (located in Germany), under the German law. More ever, TPE has concluded the said agreement in its capacity of temporary work agency registered in Germany, and not in Bulgaria
• In Bulgaria TPE employs exclusively administrative and management staff
• 100% of the turnover is realized in Germany
• registered under the VAT Act in Bulgaria, TPE declares only delivery of services with a place of performance in the territory of another Member State
• TPE has not concluded any service agreement with a user undertaking located or operating in the territory of Bulgaria

Question referred

In the light of the arguments brought by TPE in the main proceedings, the question referred to the ECJ can be rephrased as follows:: whether the activity of selecting and recruiting in the territory of Bulgaria, and providing temporary workers from the territory of Bulgaria, represents a substantial activity carried out in the territory of the latter Member State, in the sense of Article 14(2) Regulation 987/2009, laying down the procedure for implementing  Article 12 (1) Regulation 883/2004.

Practically, provided that, considering the specific nature of the activity carried out by a temporary work or employment agency, the part of the activity carried out in Bulgaria (i.e. selection, recruitment and transnational hiring out), would qualify as substantial activity in the sense of Article 14(2) Regulation 987/2009, TPE would be satisfying the second condition from Article 12(1) Regulation 883/2004 (i.e. the temporary work agency must normally carry out its activities in the territory in which is established).

Remarks

The referring court has doubts as to the interpretation must be given to the ECJ rulings in Manpower (C-37/70) and essentially FTS (C-202/97).

Before assessing the case at issue in the light of the said rulings, it must be noted that prima facie, the very purpose of TPE’ activity, is the transnational hiring out of workers. With simple words, it can be eventually alleged that TPE was established to enforce Article 12(1) Regulation 883/2004, for the purpose of optimizing their economic activity.

In his Opinion delivered in AFMB and Others (C-610/18), AG  Pikamäe rephrased one of the questions referred as follows : “More specifically, the referring court has doubts as to the compatibility with EU law of a legal arrangement which allows a company to choose a particular registered office with the aim, in essence, of making its personnel legally subject to the social security legislation of a Member State of the European Union or EFTA in which the social security contributions payable are relatively low” (C-610/18, ECLI:EU:C:2019:1010, paragraph 75).

The AG found that as the case at issue, the objective and subjective elements determine the existence of an abuse of EU law are established. Such a position was suggested by the ECJ, at the hearing of the case. AFMB was called to bring clarity on the reason for which the company was established in Cyprus. Following an ambiguous response, the court has reiterated its question.

However, the reasoning from AFMB cannot be applied mutatis mutandis to the case at issue. After all, TPE a company established under Bulgarian law, recruits Bulgarian nationals in Bulgaria, to hire them out to users located in different EU countries in which there is a need for temporary workers. Can the company be compelled to hire out workers also or mainly to users located in Bulgaria, provided that eventually, there is no need for temporary workers in the latter country?

Most likely the response is in positive. On the contrary, Article 11 Regulation 883/2004 applies.

As regards the interpretation of the rulings in Manpower (C-37/70) and FTS (C-202/97), TPE can argue that certain criteria from FTS are met : the place where TPE has its seat and administration, the place where posted workers are recruited, the law applicable to the employment contracts concluded by TPE with its workers (see to that context C-202/97,  ECLI:EU:C:2000:75, paragraph 43). However, “the choice of criteria must be adapted to each specific case”. An overall assessment might result in the conclusion that no substantial activity is carried out in Bulgaria.

It is hard to allege that the concept of “volume of activity” from FTS, covers distinctively on the one hand selection and recruitment , and on the other hand, the work carried out by the worker recruited and subsequently hired out :” in order to determine whether FTS - in accordance with point 1(b) of Decision No 128 - normally carries on its activity in the Member State in which it is established, the LISV contends that it is necessary to make a comparison between the volume of that undertaking's activity in that Member State and the volume in the Member State to which it posts workers”( C-202/97, ECLI:EU:C:2000 :75, paragraph 39).

It must be recalled that point 1(b) of Administrative Commission Decision 128, contains a clear definition of the concept of activity normally carried out by temporary work agencies : “the undertaking normally carries out its activities in the first Member State, that is to say, in the case of an undertaking whose activity consists in making staff temporarily available to other undertakings, that it normally makes staff available to hirers established in that State for employment in that State”.

Decision 128 was replaced by Decision 162. The latter decision entails practically the same definition. The Decision 162 was valid until 31 December 2001.

Decision No A2 of 12 June 2009, contains a set of criteria to determine whether an employer ordinarily performs substantial activities in the territory of the Member State in which is established. The list is not exhaustive, the criteria must be adapted to each specific case and must consider the nature of the activity carried out.

Pursuant to the Practical guide on the applicable legislation in the European Union (EU), the European Economic Area (EEA) and in Switzerland ,“the presence of only administrative staff in the posting States rules out per se the applicability to the undertaking of the provisions governing posting” (page8). Is that statement applicable in the case at issue?

According to the same guide, a turnover of approximatively 25% of the total turnover achieved in the posting State, could be a sufficient indicator (i.e. of substantial activity), however, “cases where the turnover is under 25% would warrant greater scrutiny”. Does a turnover achieved exclusively in the Member State of employment, rule out per se the applicability of the provisions governing posting?

The proposed amendment of Article 14(2) Regulation 987/2009 does not contain any specific reference to undertakings making staff temporarily available (amendment 121 procedure 2016/0397(COD) document A8-0386/2018). The amendment “integrates the criteria developed to define substantial activity in Directive 2014/67/EC”.

An overall assessment of the criteria from the ECJ ruling in FTS and from Decision A2, might result in the conclusion that the definition of the concept of activity normally carried out by temporary work agencies, laid down in Decision 128, applies by virtue of such an overall assessment.