Social Security Ruling Affects Onboarding Checks

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At a Glance

The Court of Justice of the European Union has ruled that EU social security certificates can be called into question if there is evidence of fraud. Their ruling sets up a procedure for host countries who suspect workers of holding fraudulent social security documents to investigate and, if there is a finding of fraud, to remedy the situation. This ruling exposes employers to risks if their workers are found to have fraudulent social security documents and employers may have to make social security back payment contributions.  Furthermore, this ruling may also affect the validity of employee’s work permits, amongst other penalties. Therefore, this ruling increases the importance of onboarding checks and document retention for host entities.

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The situation

The Court of Justice of the European Union has ruled that EU social security certificates can be called into question if there is evidence of fraud.

A closer look

• Procedure for fraud investigation.
  • A host company must carefully check the documents obtained for the purpose of compliance for posting on the employee’s start date.
  • If a host company suspects fraud in a social security certificate, they should ask the home company to verify whether all facts and conditions for issuance of a valid EU social security certificate were disclosed with the home (issuing) authorities.
  • If a host authority detects or has a suspicion of fraud, then it will contact the home (issuing) authority and ask to investigate the facts underlying the issuance of the certificate again. If the social security certificate were to be invalidated, this means that the foreign national worker should have been under host social security all along, and one of the key work authorization application documents will be deemed fraudulent.
• Disregarding social security certificate. The courts of the host country may disregard the social security certificate if the applicant is found to have intentionally concealed that conditions for the social security certificate were not met and the home (issuing) authorities did not investigate clear concerns of fraud within a reasonable period of time.
• Posted workers affected. The ruling affects foreign national workers temporarily sent from one EU country to another who want to remain under the social security scheme of the sending EU country. Both EU and non-EU nationals can be posted workers and may be affected.
• Social Security coverage requirements. Eight EU countries require proof of social security coverage as part of the work authorization application for temporary workers. However, this does not mean that only those countries are affected. Pursuant to the present ruling, it is expected that all EU countries will more closely investigate A1 certificates (social security certificates) and start an investigation procedure with the EU Administrative Commission for social security.

 

Impact for foreign nationals

• If a social security certificate is disregarded, in principle, host social security will become due. This means a fragmentation of the social security record of the individual. In some countries, the authorities may retroactively question the validity of the work authorization itself.  

 

Impact for employers

• Social security penalties. If the social security certificate is disregarded, foreign workers are likely to fall under the host company’s country’s social security regulations.
  • Back pay. Employers are likely to be ordered to make back pay host social security contributions over the posting period, for both the employer and employee’s parts. These amounts can be considerable, especially in the case of fraud.
  • Fines. Host authorities are likely to impose fines on the host companies. Many EU countries have an ongoing policy to reduce differences in employment conditions between posted and host country (local) workers (known as “social dumping”).

 

Ensuring Compliance

• Onboarding checks. To prevent penalties, host companies are advised to check the social security coverage of their temporary/posted workers.
• Document retention. Many EU countries already include social security certificates in the list of documents that host employers must have on file for all foreign national workers on their worksites. Host entities are advised to strictly observe these document retention obligations. 
• Fragomen support. Fragomen offers support with immigration and social security advice and compliance checks and with planning a compliant EU migration policy.

 

Background

• Social security certificates. Foreign national workers posted to another country can prove that they continue to pay social security contributions in their home country via a Certificate of Coverage. Within the EU, these certificates were once called E101, now they are better known as A1 certificates.
• Cooperation and trust. EU Member States must respect each other according to the EU principles of sincere cooperation and mutual trust. An EU country may not unilaterally question or disregard the validity of social security certificates issued by another EU country, but they are able to commence an appropriate investigation procedure.
• Administrative errors. Even when a social security certificate has been issued based on an objective or administrative error, which has been confirmed by the issuing authority, but no fraud has been detected, authorities in the host country must continue to respect the certificate until it is formally withdrawn or declared invalid.

 

This alert is for informational purposes only. If you have any questions, please contact the global immigration professional with whom you work at Fragomen or send an email to [email protected].