Intra-corporate posting of executives holding international positions

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Early this year the Labour Court of Brussels dealt with several often-disputed matters (2017/AB/997):

  • the place where an employee habitually carries out his work in the meaning of Article 19 of Regulation 44/2001 (Brussels I), in view of determining the Member State in which the employer may be sued
  • the extent of applicability of the posted workers right to bring legal proceedings in Belgium (i.e., host Member State), to enforce rights granted to them by the Law of 5 March 2002 transposing the Posting of Workers Directive into national law (without prejudice, where applicable, to the right to bring legal proceedings in another State in accordance with existing international conventions on jurisdiction)
  • the concept of authority as an imperative criterion in determining the existence of an employment relationship

The first two matters being related to enforcement of EU law, although not of EEA relevance, the ruling is at least of EEA interest.

The case at hand is concerned with an employee (Area Vice President Europe 1), employed by a UK established company, and posted to the latter’s subsidiary in Belgium (posting from the perspective of employment law, multi-state activity from the perspective of the social security coordination regulations). Following his dismissal, the employee brought a lawsuit in Belgium against both, the UK employer and the Belgian subsidiary.

The place where an employee habitually carries out his work

In Joined Cases C-168/16 and C-169/16 (Judgment of 14 September 2017, Nogueira, EU:C:2017:688), the ECH held that “the concept of ‘place where the employee habitually carries out his work’ enshrined in Article 19(2)(a) of the Brussels I Regulation 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.”

Recalling the ECJ ruling in Weber (C-37/00, 25 February 2002, EU:C:2002:122), the Labour Court observed that about a quantitative determination (“the place where the employee spends most of his working time”).

Assessing the case at hand, the Labour Court assessed “actual performance” rather than “intellectual interpretation” of certain documentary evidence

  • the existence of a situation of posting
  • the terminology used in the employer's administrative documents
  • the employee’s place of residence
  • the existence of an office space and related access badge, phone, secretariat etc.

do not represent per se relevant or sufficient evidence in determining the country in which the employee has spent most of his working time.

In view of determining the country in which the employee has spent most of his working time, the Labour Court considered:

  • the timetable drawn up for the tax declaration
  • expense notes
  • questionnaires completed in view of obtaining A1 certificates

The extent of applicability of the posted workers right to bring legal proceedings in the host Member State

The Labour Court suggested that the transposition of Article 3.10 Directive 96/71/EC into national law, overrides the interpretation given by the ECJ to public policy provisions (see to that extent the Judgment of 18 June 2008, C-319/06, Commission v Luxembourg, EU:C:2008:350, paragraph 32).Not all the working, remuneration and employment conditions laid down by legal and regulatory provisions sanctioned under criminal law, meet the imperative requirements of public interest.

In relation to the principle of favourability, remarkably, the Labour Court underlined that “the question of what constitutes a more favourable regime is sometimes difficult, if not impossible, to decide”.

In the case at hand, the Labour Court seems to have converted a suggested “piece by piece” application of the principle of favourability, into an overall assessment, facilitated by an annual remuneration substantially higher than any collectively agreed remuneration.

The Labour Court clarified that a performance bonus merely granted by the employer, and not arising from law, regulation, or administrative provision (in the case at hand sanctioned under criminal law), and/or collective agreements or arbitration awards (etc.), does not represent remuneration in the meaning of the Posting of Workers Directive.

Assessing the plaintiff’s claims, the Labour Court underlined that the posted workers right to bring legal proceedings in the host Member State, is limited to the terms and conditions of employment arising from the transposition of the Posting of Workers Directive into national law (having due regard to EU law).

The concept of authority as an imperative criterion in determining the existence of an employment relationship

The employee alleged that the Belgian subsidiary is the de facto employer, or at least is deemed to be a “co-employer” (legal grounds: Article 31 of the Law of 23 July 1987 on temporary work, temporary agency work, and hiring out of workers for the benefit of users).

Obviously, the Labour Court did not rule out the principle of co-employment under a sole employment contract in situations in which the employers share the exercise of the employer's functions.

However, the Labour Court recalled that in addition to the existence of an activity, and the payment of remuneration, the exercise (or at least the capacity to effectively exercise) authority over the employee, represents an imperative criterion in determining the existence of an employment relationship.

Again, the Labour Court looked into actual performance rather than suggested interpretation of certain documentary evidence:

  • the remuneration may be paid by a third party on behalf of the employer -the only relevant question is who has the authority to amend the remuneration must be paid to the employee
  • merely using a company letterhead in view of communicating performance evaluation, neither triggers employment by that company, and nor participation of the latter company in the evaluation procedure
  • the mere fact that a document related to the company organisation contains the name of an employee, however, does not contain clear reference to the relevant subordination, does not allow any conclusion in terms of exercise of the employer’s authority
  • the fact that the notice of termination (of employment) was signed on behalf of both, the UK company and its Belgian subsidiary, cannot trigger per se employment by the latter company
  • the indication in the questionnaire completed in view of obtaining the A1 certificate, that the employer is the Belgian subsidiary, is not a relevant indication either, since such an indication can be explained by administrative or practical reasons
  • the same applies to a series of elements such as the name of the employer mentioned on pay slips, the position in the UK or in Belgium indicated on an Internet page, the administrative procedures carried out vis-à-vis the tax authorities or the NSSO
  • the existence of an office space at the premises of the Belgian subsidiary, and the related advantages (such as company car, mobile phone etc.), do not trigger the exercise (or capacity to exercise) of any form of employer’s authority

However, e mails related to the activity carried out, leave requests and sick leave notices addressed to the UK employer, represent evidence of actual performance, and were considered as such by the Labour Court.

The takeaway

Only a reminder, but apparently a necessary reminder: when assessing employment related matters, the actual performance is decisive.  

Posting executives holding international positions to an establishment or to an undertaking owned by the group in the territory of another Member State, requires knowledge and understanding of legal grounds, and further rigorous monitoring.

The Labour Court’s assessment of the evidence substantiating the exercise of employer’s authority, represents an open door to “employers of record” (Professional Employment Organisations) who are precluded from exercising, and do not exercise authority over their customer’s employees, however, for “administrative or practical reasons”, must register in the capacity of employer.

Tanel Feldman

Senior Partner , Immigration Law Associates

Immigration Law Associates provides in-depth advice on rights and obligations triggered by the cross-border element of a given legal situation. Our know-how is built on an extensive experience in EU law and is supported by a network of partners across the EU. Social security coordination : • Autonomous application of the social security coordination regulations and ECJ case-law, to any situation involves a cross-border element EU Company law : • Establishment -permanent activities • Establishment -self-employment activities International Private Law : • Law applicable to the employment relationship Labour and employment law : • Freedom of movement of workers-equal treatment, access to social benefits • Employment contracts and termination of employment • Working conditions • Employee benefits • Transfer of undertakings • Authorisations of work for third-country nationals Special regimes : • Posted workers • Frontier workers • Highly mobile workers • Employment of record • Intra-EU mobility of third-country nationals