Posting of Workers- after-sales service

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One of the matters covered by Article 3.1 Directive 96/71/EC amended by Directive 2018/957/EU (Posting of Workers Directive) is the hiring-out of workers, in particular the supply of workers by temporary employment undertakings.

The ECJ case-law, national laws and jurisprudence, deal with hiring out of workers by undertakings that are not temporary work agencies (see inter alia judgment of 14 November 2018, Danieli & C. Officine Meccaniche SpA, C-18/17, EU:C:2018:904).

In principle, hiring out of workers by undertakings other than temporary work agencies is banned by national laws.

Still, the question is when a certain “scenario” constitutes hiring out of workers.

Hiring out of workers is regulated by the national law of the country in whose territory the relevant scenario takes place.

When about transnational hiring out of workers, the ECJ case-law may not be disregarded. To that extent, in certain cases, it is important to assess alleged “hiring out of workers” scenarios from both perspectives : social security coordination (see inter alia judgments of 17 December 1970, Manpower, C-35/70, EU:C:1970:120), and Directive 96/71/EC (see inter alia judgments of 10 February 2011, Vicoplus SC PUH, Joined Cases C-307/09 to C-309/09, EU:C:2011:64, and of 18 June 2015, Martin Meat kft, C‑586/13, EU:C:2015:405).

Certain rather usual business scenarios can give rise to situations in which labour inspectors are looking to determine whether said scenarios constitute hiring out of workers.

An undertaking located in a Member State A (“the manufacturer”), sold a machine to an undertaking located in a Member State B (“the buyer”). In turn, the buyer sold the machine to another undertaking located in the Member State B (“the end user”).

The sale agreement concluded by and between the manufacturer and the buyer contains the following provision: “After sales service shall be performed by the contractual partner of the end user. To facilitate after sales service, the manufacturer will set up and maintain a spare part stock at its facility according to the market requirements at its own expense, and provide when required, trained service technicians.”

The agreement concluded by and between the buyer and the end user, appoints the former to carry out after-sales service.

Lastly, an additional agreement concluded by and between the manufacturer and the buyer contains inter alia the following provisions:

  • the buyer must provide the necessary auxiliary staff in the number and for the time required to perform the after-sale service (note: it appears that the number of auxiliary staff required is determined by the manufacturer)
  • said auxiliary staff shall follow instructions and orders issued by the manufacturer
  • the manufacturer shall not assume any liability for said auxiliary staff (i.e., If auxiliary staff cause a defect or damage on account of instructions or orders issued by the manufacturer’s service technicians)
  • in the event of deficient services performed by the manufacturer, the latter shall first be entitled, and obligated to perform rectification
  • if rectification ultimately fails to eliminate the deficient service, the buyer may elect to withdraw from the contract, reduce payment for the services or request damages

1 To carry out after-sales service, the manufacturer (located in Member State A), posts service technicians employed by the latter, to the premises of the end user (located in Member State B).

2 In view of performing after-sales service, technicians posted by the manufacturer, are supported by auxiliary staff employed by the buyer. Auxiliary staff receives instructions and orders from the manufacturer (note: it appears that the instructions and orders given are beyond technical matters- e.g., organization of working time).

The first scenario (that implies transnational posting of workers) represents a classical subcontracting scenario, and that appears from both, documentary evidence and factual performance.

Practically the buyer does not possess the knowledge required to provide after-sales service, and consequently has subcontracted said service.

Looking into the subcontracting agreement and factual performance:

  • there is no partial transfer of the authority normally exercised by the manufacturer over its technicians to the buyer, and consequently, from the perspective of social security coordination that scenario falls under the scope of Article 12 Regulation 883/2004
  • from the perspective of Directive 96/71/EC as interpreted by ECJ case-law, i) the technicians concerned remain in the employ of the manufacturer, however, ii) the movement of the technicians to the host Member State does not constitute the very purpose of the provision of services effected by the manufacturer (the manufacturer is liable for the failure to perform the service in accordance with the contract, and is free to determine the number of technicians he deems necessary to send to the host Member State), and, iii) the technicians carry out their tasks under the control and direction of the manufacturer, and not of the buyer (control and direction are constitutive elements of the authority normally exercised by the employer)

It follows that in the first scenario, the manufacturer lawfully posts technicians to perform after-sales service, at the end user premises.

The second scenario is intrinsically linked to the first. It must be however assessed exclusively from the perspective of the national law of the Member State B (the cross-border element does not entail movement of technicians across the border).

The buyer located in Member State B, hires out its workers (“auxiliary staff”) to the manufacturer located in Member State A and operating in Member State B.

A part of the authority normally exercised by the buyer over its workers is transferred to the manufacturer (notably control, and certain elements of direction normally exercised by the buyer).

Does the fact that the manufacturer shall not assume any liability if auxiliary staff cause a defect or damage by reason of instructions or orders issued by the former, account for determining the eventual breach?

Finally, the solution could have been a matter of documentary, and (mainly) factual performance’ “nuance”.

I would imagine two independent teams, one directly subordinated to the buyer and executing auxiliary works (by virtue of the agreement concluded with the end user), and a second, the manufacturer’s team carrying out “substantive” after-sales service (by virtue of the subcontracting agreement concluded with the buyer). The respective team managers may collaborate and coordinate as regards organizational and technical matters.

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