Free movement v national labour law European Labour Law Spring 2015

Outline What does a free movement right imply? Free movement of workers Free movement of services –When a company provides a service in another MS and uses its own workers to do the work –Which law should apply to the employment contract? Free movement of establishment –Combat unfair competition through common minimum floor transnational rights to worker involvement

Starting point The founding purpose of the EU was the creation of a common market in which barriers to trade between Member States were progressively removed Free movement has significant implications for working people

The internal market Free movement rights for goods, services, capital and persons Remove obstacles Obstacles can be: –Directly or indirect discriminatory based on nationality or –Be liable to hinder or to make less attractive the exercise of fundamental freedoms Justified on grounds of public policy, public security or public health (art 45.3, 52, 62 TFEU) Gebhard test (C-55/94) –Justified by imperative requirements in the general interest –Suitable for securing the attainment of the objective which they pursue –Must not go beyond what is necessary in order to attain it

Worker’s right to free movement Establishing a free market for labour - a labour market which crosses national boundaries Why? –Lead to efficient allocation of jobs between the MS –Even out disparities in wages –More people in work – propsperity increase But… –Risks….transitional arrangements – 2004 and 2007 enlargements

Art 45 TFEU Art 45 is directly applicable – including horizontally against employers Freedom of movement for workers shall be secured within the EU This entails the abolition of any discrimination based on nationality between workers of the MSs as regards –Employment –Remuneration –And other conditions of work and employment

Who is this worker? I The court says: the essential features of an employment relationship should be fulfilled if –for a certain period of time –a person performs services for and –under the direction of another person –in return for which he receives remuneration” Lawrie Blum C-66/85 p 17 Levin, 53/81 pp –Does not have to be full time –No requirement to obtain any particular level of income –But not on such a small scale as to be marginal or ancillary

Who is this worker II The citizens’ rights directive 2004/38 says: If you looses the job, art 7.3 –Temporarily unable to work due to illness –Is involuntary unemployed In order to seek employment! Art 14.4.b –As long as the person can provide evidence that he or she is continuing to seek employment and has a genuine chance of being engaged

Why is it so important to be a worker? Art 14 CRD Other EU citizens can be expelled when they become an unreasonable burden on the social assistance system of the host MS But workers and job seekers can not be expelled for this reason Observe art 24.2 CRD – BUT the CJEU says: Benefits intended to facilitate access to the labour market do not fall within the definition of social assistance

Access to the labour market Discrimination prohibited Same requirements for all workers BUT removing obstacles in relation to foreigners not enough Rules in the home MS that make it less attractive to move are also obstacles Terhoeve C-19/95 The effect of working for a while in another MS made a person liable for a higher rate of social security contributions than if no work would have been conducted abroad Regulation 492/2011 equality required

Employment conditions EQUAL TREATMENT WITH NATIONALS Regulation 492/2011, Remuneration Dismissal Re-instatement re-emplyoment Access to training in vocational schools In Law and collective agreement Trade union membership Work place participation

The right to provide services Art 56 TFEU –When a company provides a service in another MS and uses its own workers to do the work –Which law should apply to the employment contract Staring point international private law ECJ- But a certain room for host state to apply national labour law - host MS must decide within the limits of acceptable restrictions on free movements ECJ-The limits seem to be too far reaching PWD - a minimum level of protection Laval-case – turned out to be a maximum level as well

Starting point - international private law Rome I Regulation Which country’s law governs the contract of employment Conflict of law’s rules –decided by the parties to the contract –(but can not contract out mandatory worker-protective legislation that would otherwise have been applicable to their relationship if they had not specified applicable law) –Or the law from which the worker habitually carries out the work of the contract The country where the work is habitually carried out shall not be deemed to have changed if the worker is temporarily employed in another country →home land law will generally apply

Why could this be a problem? Firms established in low-wage states might provide services in high wage states using their own workers to do the job This will enable them to provide services more cheaply than local firms →might lead to unemployment in high wage countries →or to cuts in terms and conditions of employment

History on how to solve this dilemma Rush Portuguesa C-113/89 –Seems ok for the host- state to apply its labour law to the posted workers - Arblade C-369/96 –But the national law must provide a genuine additional benefit to the workers –Proportionality test Mazzoleni C- 165/98 –requirements to pay minimum wage might be disproportionate

Posting of Workers Directive 96/71 Trying to balance –the aim to remove obstacles to cross-boarder provisions of services –while preserving the host state’s labour law system Posted workers are entitled to (art 3.1) –Minimum protection with regard to –Working time –Paid holidays –Rates of pay –Health and safety –Protection of pregnant women –Equality of treatment between men and women Provided for by law or certain widely applicable collective agreements

Article 3.7 the provisions shall not prevent application of terms and conditions of employment which are more favourable to workers Everyone thought that the directive was a minimum directive BUT……

Laval C-341/05 A trade union tried through a strike action to get a company, posting workers to Sweden, to conclude a Swedish collective agreement for the work performed in Sweden which went beyond the minimum requirements in the directive

ECJ I Art 3.7 protects posted workers where the home state’s labour law is more protective than that of the host state Art 3.7 allows the employer to agree on more favourable terms with the posted workers than those provided for by the host state BUT art 3.7 does not permit the imposition of more protective labour law requirements by the host state → PWD – both a minimum and a maximum directive – both a floor and a ceiling Art 3.1 is the result of the application of the proportionality test when balancing the free movement of services with national demands for combating social dumping

ECJ II In Sweden trade unions could bargain on wages with an employer at the workplace (local) level ECJ- considered that that process was to time consuming and unpredictable Did not fulfill the requirements for justifying a restriction of the free movement of services

Freedom of establishment Art 49 TFEU A company may set up a business in the MS of their choice Companies might choose low wage MS in order to lower their costs and leave their high wage MS of origin –MS can not do anything about this’ –In Viking a trade union tried, through a strike action, to do something about such a move from Finland to Estonia

Viking C- 438/05 The Court balanced the freedom of establishment and the fundamental right to strike Protection of workers –legitimate aim But was it proportionate? Probably not The fundamental freedom was given a stronger protection than the fundamental right

Freedom of establishment Art 49 TFEU also protects the right of a company in one MS to set up subsidiaries and branches in other MS This is encouraging transnational company structures As we saw in Fuijitsu Siemens national information and consultation procedures can have a limited value in such situations

European Works Councils 2009/38 (first 1994) A EWC a forum where workers from all parts of the company in all MS can meet with the employer in order to be informed and consulted

The EWC-directive Applies to larger transnational firms, art 2.1 The central management shall initiate (or the workers could take such a initiative) negotiations with the workers from the different entities on establishing a EWC or another information and consultation procedure The workers shall set up a special negotiating body, SNB, which represents all workers in the company on a proportional basis The negotiations shall deal with the scope, composition, functions and term of office of the EWC If the negotiations fail default provisions are applicable

Art 6.2 the negotiations could focus on –coverage of the EWC –Composition of the EWC –Frequency of its meetings –Resources available –Duration of the agreement Observe the definitions of information and consultation – no provision on the aim to reach an agreement The aim is to set up a dialogue between management and workers and give the workers a right to express an opinion EWCs are complementary to national information and consultations procedures – should only deal with transnational questions, art 1.4

Societas Europaea SE Removing obstacles to free movement of establishment was not enough to encourage EU transnational firms A special company form was established The SE-company, Regulation 1435/2003

Employee involvement Information Consultation Participation –A right of worker representatives to elect or appoint, or recommend or oppose the appointment of members of the firm’s supervisory or advisory board Some MS were afraid that established participation structures would be lost through the establishment of an SE

Directive on worker participation in SE The entities which want to establish an SE must in initiate negotiations with the workers on an agreement on worker involvement before the SE can be registered

The same structure as the EWC SNB Try to reach an agreement Default rules + the ambition is to safeguard that where participation arrangements are in place prior to the creation of an SE, participation remains a feature of the company’s worker involvement regime How this is protected depends on how the SE is established

Facilitate free movement of workers We have discussed mainly labour law issues But one significant aspect of removing obstacles is to ensure that workers will not loose any other important rights when they move Rights to the social security systems are often restricted in time – you must be part of a system for a certain period of time before you can benefit from it Therefore crucial that you can benefit from time spend in different MS – you can earn your right in different MS and carry that right with you where ever you are Unemployment benefits – one crucial example

Thank you!