Posting of workers: the A1 certificate may be disregarded by national jurisdictions in case of fraud!

Spotlight
15 March 2018

For the first time, the European Court of Justice has ruled, in a judgment on 6 February 2018 (C 359/16),  that the national courts of a host Member State may disregard an A1 certificate of a posted worker in case of fraud if the institutions of the home Member State remain inactive. This judgment facilitates the work of the social inspectorate in combating illegal posting. 

Context

The judgment of the Court of Justice was rendered within the context of the posting of workers. In principle, for social security purposes, workers are subject to the legislation of the Member State in which they are employed. As an exception, workers who are temporarily posted to another Member State (the host Member State) remain subject to the social security system of their home Member State if (i) the undertaking posting the worker maintains a direct relationship with the worker, and (ii) the undertaking habitually carries out significant activities on the territory of the home Member State. 

When these conditions governing the posting of workers are met, an A1 (previously E101) certificate is issued by the competent institution of the home Member State, declaring that the posted workers continue to be subject to the social security system of the home Member State. 

The question in this case regards the possibility of challenging the validity of the A1 certificate. In principle, a request to review the certificate must be sent by the authorities of the host Member State to the institutions of the home Member State when they are in doubt regarding the validity of the certificate. However, in reality, the institutions of the home Member State do not always respond properly, as was demonstrated in this case. 

Facts

The facts giving rise to this case concern a Belgian company active in the construction sector. An investigation conducted by the social inspectorate found that the company employed practically no staff and subcontracted all its sites to Bulgarian undertakings posting workers to Belgium. 

No social security contributions were paid for these workers in Belgium, since they had valid E101 certificates stating they were subject to the Bulgarian social security system. Yet, an investigation conducted in Bulgaria ordered by a Belgian social inspectorate found that these Bulgarian undertakings did not carry out any significant activity in Bulgaria. Thus, the conditions required in order to benefit from a posting and continue to be subject to Bulgarian social security were not met. 

Therefore, the Belgian authorities sent the Bulgarian authorities a reasoned request for review or withdrawal of the E101 certificates issued to the workers concerned. The Bulgarian authorities responded to that request by simply sending a summary of the certificates issued to the workers concerned, without taking into account the facts established by the Belgian social inspectorate. 

The company and its directors were then the subject of legal proceedings before the Belgian courts , and the case was brought before the Court of Cassation, which decided to refer a question to the Court of Justice for a preliminary ruling on whether a court was allowed to disregard an E101 certificate obtained fraudulently by the posted workers. 

Response of the Court of Justice

The Court of Justice recognises the possibility of disregarding an E101 certificate in case of fraud, when the institutions of the home Member State remain inactive.

Until now, the Court of Justice had relied upon the principles of sincere cooperation and mutual trust in refusing to allow valid E101 certificate to be disregarded: The principle of sincere cooperation requires the issuing institution to carry out a proper assessment of the relevant facts, and thus to verify whether the conditions for posting are met. The principle of mutual trust requires the competent institution of the host Member State (in Belgium, the National Social Security Office) to recognise the validity of an E101 certificate as long as the issuing institution has not declared the certificate invalid. If the competent institution of the host Member State doubts the validity of an E101 certificate, it may notify the issuing institution, which will then reconsider the E101 certificate. 

Unfortunately, in practice this system was not efficient, given the unwillingness of the institutions of certain Member States to reconsider the validity of an E101 certificate. Consequently, the competent institution of the host Member State did not have any means of action. 

The Court of Justice ended this deadlock by ruling that the principle of sincere cooperation also requires the issuing institution to reconsider the grounds for its issuing of an E101 certificate in case of new elements provided by the institution of the host Member State. The Court also relies on the principle of prohibition of abuse of rights to enable national judges to disregard an E101 certificate when an issuing institution fails to respond within a reasonable period of time to the elements provided by the institution of the host Member State proving the fraud. 

The Court of Justice specifies, however, that the persons who are alleged to have used posted workers covered by fraudulently obtained certificates must be given the opportunity to defend themselves with due regard to the safeguards associated with the right to a fair trial. 

Practical impact 

This long-awaited judgment gives the social inspectorate new instruments in its fight against fraudulent posting of workers. It enables Belgian courts to disregard invalid E101/A1 certificates if the issuing institution fails to respond, and thus to make the workers subject to Belgian social security and to criminally prosecute their employers. 

Companies relying on posted workers should, more than ever, ensure that the conditions for posting are met.