EU Court of Justice Gives Broad Interpretation of the “non-replacement condition” for Posted Workers

According to consistent case-law of the Court of Justice of the European Union (‘CJEU’ or ‘the Court’), confirmed in the current European Regulations, a Certificate of Coverage (CoC, commonly known before as E101, and now as A1 certificate) should be considered binding, and therefore in principle it does not allow the institutions of the host country to investigate on its validity.

However, in the recent Altun-judgment of 6 February 2018 (C-359/16), the Court has for the first time allowed an exception to this consolidated approach: 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.

Due to the changing legal landscape, especially in Europe, the application for a CoC has become fundamental, not only for showing compliance with social security obligations during the temporary secondment period, but also for securing work permits and for guaranteeing compliance with posted worker notification requirements from day 1.

The CJEU Judgment

In its recent judgement of 6 September 2018 (Alpenrind C-527/16), the Court replied to a request for preliminary ruling from an Austrian Upper Administrative court regarding one of the formal conditions for a valid posting under the EU Regulations, i.e. the fact that an employee cannot be sent to replace another employee (the so-called ‘non-replacement condition’). 

To underline the importance of the present judgment, not less than eight Member States as well as the European Commission have submitted their observations to the Court in this respect.

The Court re-confirms, as a starting point, the binding nature of the E101 or A1 certificate so long as the certificate has not been withdrawn or invalidated by the issuing Member State, and even if it was issued with retro-active effect (after the employee concerned was made subject to the social security system of the host Member State), except in the case of fraud or abuse of rights. Moreover, the Court recalls the procedure to be followed if the host country authorities have doubts about the accuracy of the facts on the basis of which the CoC has been issued by the home country authorities. 

But what is important about this judgement is that the Court has ruled that the non-replacement condition for a genuine posting of an employee is an objective criterion, in the sense that one merely has to consider whether there is a recurrent use of posted workers to fill the same role, or do the same job activity at the premises of the (same) host country entity. This is regardless of whether the replacement worker is posted by a different employer, located in the same Member State, and irrespectively whether there are staffing or organisational links between the employers concerned.

Interestingly, the Advocate General Saug­mands­gaard Øe had come to a completely different conclusion in his opinion earlier this year (See one of our previous blogs - here), where he underlined the need for the intentional element in order not to allow maintenance of the Home country social security coverage for the posted worker: i.e., the wish of the linked employers to bypass the non-replacement condition with the postings.

It is worthwhile to mention that an amendment proposed in the new draft EU Regulation specifically aims at making the non-replacement condition more flexible, at least for postings up to 24 months.  

How We Can Help

The present ruling can be seen as another attempt to fight ‘social dumping’ and the willingness to introduce stricter rules with regard to A1 forms. It will most likely give rise to more careful investigation activities from the host country authorities in case of audits, whereas until now the non-replacement condition was interpreted and applied in a more relaxed manner.

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

For any social security related question, please contact us at [email protected]