On the 6th of September 2018, the Court of Justice of the European Union ("CJEU") decided Case C-527/16 (Alpenrind) and in so doing clarified some important aspects of EU Law regulating the co-ordination of social security systems across the EU, particularly in relation to A1 Certificates and rules relating to posted workers.
By way of context, there is no single social security law applicable in all the EU Member States. The local rules on contributions, types of benefits and eligibility criteria to entitlements will vary from country to country. These are regulated by the local legislation of the Member States because they do not fall under the direct legislative competence of the EU.
That said, two somewhat complex EU Regulations (these being Regulation (EC) 883/2004, as amended, and its Implementing Regulation (EC) No 987/2009) seek to co-ordinate the various systems across the EU, with the primary objective of ensuring that individuals and workers do not lose out on social protection when they reside or work within EU borders. They have direct effect in EU Member States, including in Malta.
One of the first issues that the EU Regulations deal with is that of determining which Member State law is to apply to an individual. The EU seeks to apply the principle of singe-applicable-legislation - one person, one law - irrespective of cross border elements. Therefore, the general rule is that the laws of that Member State in which the person pursues his/her activity as an employed or self-employed person should apply. However, this is not always straightforward, and EU Law caters for special derogations depending on the circumstances. For instance, different rules apply if the individual is either (i) a seafarer engaged on seagoing vessels, or (ii) a crewmember engaged as a pilot or flying crew, or (iii) works in multiple Member-States or (iv) is posted temporarily by his employer to work in another Member-State. Determining the applicable law may be complex especially when there is a cross-border element involved, often becoming a headache for both the employer and authorities concerned, requiring lengthy procedures to iron the matter out, leaving them and the employee in a state of limbo in the meantime.
The same EU Regulations contemplate procedures that are intended to facilitate this co-ordination of social security systems. Once such procedure, which was relevant to the case in question, is that which gives rise to the so-called "A1 Certificate" (formerly the E101 or E103 certificate) - a document which is issued by the competent authority as a formal statement of applicable legislation for an individual.
An A1 Certificate is undoubtedly very useful to the individual, mainly for him to know which laws will regulate the social security system to which he is subject and eventually for him to be able to understand his entitlements. It is all the more important when that person is a posted worker or works in several countries at the same time as an A1 Certificate serves as the official proof that the individual is recognised by that Member State as being governed by its social security laws and that he is paying social contributions in that EU Member Sate. An A1 Certificate is issued by the social security institution with whom the individual is deemed registered, after the laws of the country of that institution are deemed to apply to that individual.
The EU Regulations also anticipate the scenario where the authorities of the EU Member States involved in a cross-border employment scenario might disagree. A mechanism allows for provisional determinations to be made and another mechanism allows the authorities to raise any disputed matter before a specialised "Administrative Commission for the Coordination of the Social Security Systems", which would then seek to reconcile the diverging position. If this fails, then recourse would have to be made to the Courts.
Facts of the Case C-527/16
The dispute in the main proceedings concerned the determination of the social security legislation applicable to workers posted by two Hungarian undertakings to an undertaking established in Austria. The Austrian company, Alpenrind, operated an abattoir in Salzburg and from 2012 to 2014 engaged workers posted to Austria by the Hungarian company Martimpex to cut and pack meat. Both before and after that period the work was carried out by the workers of another Hungarian company, Martin-Meat.
The Hungarian social security institution issued A1 certificates for circa 250 workers posted by Martimpex from 1 February 2012 to 13 December 2013, therefore attesting that the Hungarian social security laws applied to those workers. Some of these A1 Certificates were issued with retroactive effect and in some cases, these were issued despite the fact that the Austrian social security institution had decided that the workers concerned were subject to compulsory insurance in Austria.
The issue was raised before the Administrative Commission which eventually decided that the A1 Certificates issued by the Hungarian authorities were incorrect and should be withdrawn.
Concurrently, the decision of the Austrian social security institution establishing that the workers were subject to compulsory insurance in Austria was challenged before the Austrian courts. Against that background, the Upper Administrative Court in Austria made a request to the CJEU for a preliminary ruling to clarify the EU rules relating to the coordination of social security systems and, in particular, the binding effect of an A1 Certificate once it is issued by an authority.
Decision of the CJEU – Binding & Retroactive Effect of the A1 Certificate
In this judgement the CJEU ruled that the A1 Certificate, once issued, has a binding force and retroactive effect even if the Administrative Commission declares them to have been issued incorrectly.
This means that the A1 Certificates issued by the Hungarian Authority were deemed binding in Hungary and also in Austria, even if on the date of their issuance the Austrian authority had already decided that the worker concerned was subject to the compulsory insurance in Austria.
On the strength of prior case-law, the CJEU clarified that in accordance with Article 5(1) of Regulation 987/2009, such binding force applied not only to the social security authorities but also to the Courts of the Member State where the employee is to carry out the work, except in cases of fraud or abuse and as long as the certificate has not been withdrawn or declared invalid by the issuing Member State. The Court emphasised that if this principle were not upheld there would be the risk that the desired system based on "sincere cooperation" between the competent institutions of the Member States would be undermined.
Finally, the CJEU also clarified that the A1 Certificates are deemed to have this binding effect even if the EU Member State intuitions failed to pursue the mechanism contemplated by the Regulations for the issuance of a provisional determination. Even if the Austrian and Hungarian could have issued a provisional determination, not having done so does not impact the binding and retroactive effect of the A1 Certificate.
Decision of the CJEU – A Posted Worker who is sent to replace another Posted Worker cannot benefit from the special derogation under Article 12(1)
Article 12(1) of Regulation 883/2004 which deals with posted workers provides that:
"a person who pursues an activity as an employed person in a Member State on behalf of an employer which normally carries out its activities there and who is posted by that employer to another Member State to perform work on that employer's behalf shall continue to be subject to the legislation of the first Member State, provided that the anticipated duration of such work does not exceed 24 months and that he/she is not sent to replace another posted person."
The Austrian Court asked the CJEU to clarify the second limitation to Article 12(1) which reads "provided [..] that he/she is not sent to replace another posted person".
In its judgement, the CJEU clarified that it is only under certain conditions that EU Law allows for a posted worker to remain subject to the social security system of the Member State in which his employer normally carries on its activities. This is a derogation to the general rule and CJEU therefore asserted that the derogation should not be interpreted widely, particularly to mitigate the possibility of giving rise to differential treatment for persons who work on the same territory.
Therefore, the CJEU concluded that where a posted worker is replaced by another posted worker who is employed by a different employer, the second posted worker will not be able to rely on the system of the Member State in which his employer normally carries out its activities.
This rule applies irrespective of the fact that the employers of the two posted workers had their registered office in the same Member State and irrespective of them having personal or organisational links.
Originally published September 20, 2018
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.