EU Court of Justice opens the door for host country to disregard Certificate of Coverage for Posted Workers

Within the field of global mobility of personnel, social security costs are as significant as immigration compliance. Due to the changing European legal landscape for immigration as well as for the posting of workers, social security has grown in importance as companies strategically plan for personnel assignments.

The application for a certificate of social security coverage (commonly now known as a CoC, or an A1 certificate amongst all the countries that apply the EU Regulations on social security) has become fundamental not only for showing compliance with social security obligations for the period of a temporary secondment, but also for securing work permits and for guaranteeing compliance with posted worker notification requirements from Day 1. New categories of work permits offering the possibility to work in various EU countries at the same time, like the ICT permit, raise important social security challenges.

According to consistent case-law of the Court of Justice of the European Union (‘CJEU’ or ‘the Court’), set out in the current European Regulations, a CoC should be considered binding, and therefore in principle does not allow the institutions of the host country to examine its validity.

The CJEU Judgment  

Today the CJEU has replied to a very important request for a preliminary ruling from the Belgian Supreme Court, in respect of the scope of the binding nature of the E101 certificate (C-359/16).

In its ruling, the CJEU follows the opinion of the Advocate-General Saug­mands­gaard Øe by stating that a court of the host country may disregard an E101 (or A1) certificate, formally issued in accordance with the provisions of the EU Regulations, by the competent institution of the home country, if that court finds that the certificate was obtained or invoked fraudulently.

In the current EU Regulations there is no definition of ‘fraud’ (yet). Anticipating an amendment of the Regulations, the CJEU suggests that fraud can be detected in cases where the applicant has the intention of concealing the fact that the objective conditions for requesting a CoC are not fulfilled. E.g. the condition that the employer continues to have an actual business in the home country.

The present ruling comes after yet another very important judgement of the CJEU of last year (C-620/15) in which the Court had re-confirmed its consolidated case-law by stating that a CoC is binding as long as the certificate has not been withdrawn or declared invalid by the authorities of the issuing Member State. This holds true even where it is found that the conditions under which the worker carries out his/her activities clearly do not fall within the material scope of the legal provision under which the certificate is issued.

Recalling the principles of cooperation and mutual trust between Member States, the CJEU’s decision today opens the door, for the first time, for the host country’s competent authorities to investigate the facts underlying the issuance of a CoC. If the home country fails to carry out a review of the certificate within a reasonable period of time in the light of evidence of fraud, and the certificate is not withdrawn or declared invalid by the home country, the host country will therefore be allowed to disregard the certificate. In practice, this will likely lead to retro-active applicability of host country social security, along with rather significant penalties.

Finally, considering another opinion of the same Advocate-General in a very recent pronouncement of January 31^st, 2018, the CJEU may continue down the same road in the future in respect of other conditions that are fundamental for the issuance of a CoC, such as the fact that a posted worker cannot be sent in replacement of another posted worker.

How We Can Help

Although today’s judgment has to be viewed in light of the protests of many European countries in relation to ‘social dumping’ and the need to intervene in that respect, it will likely give rise to more investigative actions in respect of the CoC, from host country authorities.

Fragomen can assist your company with ensuring that A1 certificates are requested in accordance with the requirements of the EU Regulations, and make sure your company is compliant in both immigration and social security, from Day 1.