Which national social security law is applicable to temporary agency workers working across borders? The European Court of Justice (ECJ) has now dealt with this explosive question (judgment of 03.06.2021, ref. C-784/19).
The common practice of companies to gain competitive advantages in cross-border temporary work within the European Union (EU) by choosing a “favourable” social security law has now been put a stop to.
The complaint was brought by the Bulgarian company Team Power Europe, which was founded under Bulgarian law and is active in the provision of temporary work and employment services. The company had temporarily placed a Bulgarian temporary worker at the disposal of a German employer.
The company had applied for an A1 certificate from the competent Bulgarian administrative authorities. This was to serve as proof that the worker was subject to Bulgarian law during his temporary assignment. However, the Bulgarian authorities refused to issue the certificate. One of the reasons given was that the temporary employment agency did not carry out any significant part of its activities – the hiring out of workers – in Bulgaria.
The company filed a complaint against this. It did indeed carry out its activities in Bulgaria. The recruitment and placement of temporary workers takes place in Bulgaria. The company essentially relied on Article 12(1) of Regulation 883/2004 and Article 14(2) of Regulation 987/2009, according to which workers are subject to the legislation of the Member State in which their contractual employer habitually carries on business, even if they are posted to another Member State for a period of up to 24 months and do not replace another posted person.
According to the Bulgarian Administrative Court, it was not clear from the ECJ’s previous rulings whether it was sufficient for temporary employment agencies to conclude employment contracts with workers posted to another Member State (the State of employment, in this case Germany) in the posting State (in this case Bulgaria).
In its judgment, the ECJ emphasised the principle that a person who is actually employed in the territory of a Member State is subject to the legislation of that State. A temporary work agency could not claim that it alone carried out “significant selection and recruitment activities” in the posting state. Even if this could not be classified as “purely internal administrative activity”, it served solely the subsequent supply of the temporary workers. Only with this supply does the temporary employment agency generate a turnover.
In addition, the ECJ refers to the Temporary Agency Workers Directive: According to this directive, temporary workers are employees who have concluded an employment contract with a temporary work agency or have entered into an employment relationship in order to be assigned to a user undertaking and to work there temporarily under its supervision and management. This expresses the purpose of the activity of a temporary work agency. The latter can therefore only carry out “significant activities” in the state in which it is established if the temporary workers are also deployed in that state.
The ECJ concludes from this: A temporary employment agency that hires out workers exclusively or mainly to undertakings established in another Member State may invoke the freedom to provide services. In such a case, however, the temporary workers are not subject to the social security system of the state in which they are established. This can only be considered if the temporary work agency carries out a significant part of its temporary work activity for user undertakings established and operating in the same Member State.
This ruling by the EU Court of Justice is likely to have far-reaching consequences for the temporary employment industry. The comparison in the context of European employment under the EU Posting of Workers Directive (i.e. the equal pay approach) will therefore continue to be of greater importance for this industry. We will continue to keep you informed about the movements and developments.