Coordination of the national social security systems

EuGH, Judgement of 6th September of 2018 – C-527/16

Background

As a general rule, and in order to guarantee the equality of treatment of all persons occupied in the territory of a Member State as effectively as possible (Article 11 (3a) of Regulation No 883/2004), a worker is subject to the social security system of the Member State in which they conduct their activities . It is only under certain conditions that the EU legislature has provided for the possibility for a worker to be subject to the social security system of a different Member State to the one they are working in (in Article 12 of Regulation 883/2004). This is most notably in cases of international postings, whereby the posted worker remains subject to the social security system of the Member State in which they normally carry out their activities.

The legislature excluded the situation when a posted worker replaces an existing one. In the ruled case the court had to decide on the interpretation and scope of the prohibition of replacement.

Case details

Between 2012 and 2014 the Austrian company “Alpenrind”, concluded a service contract with a Hungarian company “Martimpex” for the delivery of cutting and packing meat at Alpenrind’s premises in Austria. Martimpex provided the services with its own employees that were posted from Hungary to Austria for the delivery of the services. Before and after that period these services were provided by another Hungarian company that posted workers from Hungary to Austria to deliver these services.

The Hungarian social security authorities issued A1 certificates to confirm the application of the Hungarian social security rules to Martimpex employees posted to Austria, automatically challenging the application of Austrian social security laws. It is against that background that the relevant Austrian Court asked the European Court of Justice to clarify the EU rules relating to the coordination of social security systems and, in particular, the interpretation of the prohibition of replacement as well as the binding effect of an A1 certificate, issued by the competent Member State.

Judgement

The court held that Article 12 of Regulation No 883/2004, as amended by Regulation No 1244/2010, must be interpreted to mean that if a worker who is posted by their employer to work in another Member State is replaced by a second worker posted by a different employer, the replacing employee must be regarded as being “sent to replace another person” within the meaning of that provision. This means that they cannot benefit from the rule exceptions in respect of international postings but will become subject to the social security system of the Member State in which the services are provided.

As justification, the court argued that it followed from the wording of Article 12(1) of Regulation No 883/2004 (expressing the fact that a posted worker replaces another person), that prevents the replacement worker from remaining subject to the legislation of the Member State in which they usually carry out their activities. Furthermore the absence of any express reference in the wording of Article 12 to the registered offices of the respective employers or to any personal or organisational connections between them tends to suggest that such facts are not relevant for the purposes of interpreting that provision.

By its judgment the Court further held that an A1 certificate issued by the competent social security institution of a Member State (Hungary in this case) is binding on both the social security institutions and the courts of the Member State in which the activity is carried out (Austria) so long as that certificate has not been withdrawn or declared invalid by the Member State in which it was issued (Hungary). Furthermore the Court states that an A1 certificate may apply with retroactive effect, even though the competent institution of the Member State in which the work is carried out (Austria) has already decided that the concerned worker is subject to the compulsory insurance of the latter Member State.

Practical results

Although the judgment clarifies the criteria for interpretation of Article 12, it also sets up further regulatory hurdles for employers planning cross-border postings of employees within the European Union. This is especially so for service providers where posting of workers forms a relevant part of the business model. The applicable social security regime has a relevant impact on personnel costs and will often be decisive on pricing and offers for such services. However, in many circumstances it will not be possible for the company to determine if such services were previously carried out by employees also posted by another company. . Where outsourcing is concerned, companies should include guarantees within the outsourcing agreement to confirm that certain services had not been provide by posted workers previously.