EU: Grand Chamber of the CJEU delivers a Serious Blow to Social Dumping Practices
In the highly anticipated case AFMB and Others v Raad van bestuur van de Sociale verzekeringsbank (C-610/18), the Grand Chamber of the CJEU has delivered a serious blow to social dumping practices, in its judgement of 16 July 2020. The CJEU does not consider the Cyprus-based letter box company to be the employer of international lorry drivers in the Netherlands, for purposes of determining the applicable social security system.
The case involved international long-distance lorry drivers who had signed an employment agreement with a Cypriot company called AFMB Ltd. This company concluded agreements with transport undertakings established in the Netherlands, whereby it undertook, in consideration of a commission, to take charge of the management of the heavy goods vehicles operated by those undertakings, on behalf of and at the risk of those undertakings. The long-distance lorry drivers concerned were employed, on behalf of the transport undertakings, in two or more Member States, and also in one or more States of the European Free Trade Association (EFTA). The Dutch Social Insurance Bank reasoned that the Dutch social security system was applicable to the lorry drivers, because it considered the Dutch transport undertakings to be the true employers of the drivers, while AFMB stated that the Cypriot social security system should apply, since, according to the employment contracts, AFMB was the employer and its registered office was in Cyprus.
The CJEU investigated the concept of employer with regard to Regulations No 1408/71 and No 883/2004, concerning the coordination of social security systems in the EU. The Court stated that the regulations do not, for the purposes of determining the meaning of the concepts of ‘employer’ and ‘personnel’, make any reference to national legislation or practice. Consequently, those concepts must be given an autonomous and uniform interpretation for the EU.
In view of the CJEU, the relationship between an ‘employer’ and its ‘personnel’ implies the existence of a hierarchical relationship. Further, the objective situation of the employed person concerned and all the circumstances of his or her work must be taken into account. While the conclusion of an employment contract may indicate the existence of a hierarchical relationship, that circumstance does not suffice to prove the existence of an employment relationship. Therefore, irrespective of the wording of the contractual documents, it is necessary to identify the entity which actually exercises authority over the worker, which bears, in reality, the relevant wage costs and which has the actual power to dismiss that worker.
Although it is a matter to be determined by the referring court, in this case, the CJEU found that the Dutch transport undertakings appeared to be the true employers of the lorry drivers. This follows from the fact that the drivers had already been chosen by the transport undertakings themselves, before the conclusion of the employment contracts with AFMB. Further, they were employed on behalf of and at the risk of those undertakings. In addition, the actual cost of their wages was borne, via the commission paid to AFMB, by the Dutch transport undertakings and they seemed to have the actual power of dismissal. Lastly, a number of the drivers had, prior to the conclusion of the employment contracts with AFMB, previously been employed by those Dutch undertakings.
Therefore, based on these objective circumstances, it is the Dutch transport undertakings who should be seen as the true employer. As a result, the Dutch social security system applies.
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