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Does the Posting of Workers Directive apply to road transport operations? Conclusion of AG Bobek to the pending CJEU FNV case
by Fieke van Overbeeke, Legal Counsel at the International Institute for International and Foreign Law – the Netherlands and research fellow at the University of Antwerp – Belgium.
On 13 December 2018, the Dutch Supreme Court (Hoge Raad) has submitted a long-awaited preliminary question to the Court of Justice of the EU (C-815-/18): does the Posting of Workers Directive apply to road transport operations? The referring judgment (in Dutch) is available here.
The Posting of Workers Directive (96/71/EC) contains ‘mini’ conflict of laws rules for some important labour law regulations, such as minimum wages. These rules determine i.a. when these labour law regulations are mandatorily applicable in cross-border labour flows in the EU and consequently can have a profound impact on cross-border road transport operations. The aim of the Directive: to balance the free movement of services, worker protection and fair competition.
But why did this preliminary question actually need to be posed? It seems unconventional to assume that this Directive, which generally aims to regulate labour flows in the EU, should not apply to the particular labour flows in the road transport sector. The background of this ambiguity is that the Directive has been developed particularly in view of the labour flows in the construction sector and is tailored accordingly. In this sector, it is often about relatively simple facts: a construction worker usually works in Member State A and is temporarily posted to Member State B to work only in that state. The ‘scope rules’ of the Directive mirror this situation: a part of the labour law regulations of the temporary country of work, other than the country of usual employment, must be guaranteed to the worker (art. 2(1) Posting of Workers Directive).
These ‘scope rules’ are indeed difficult to apply to the atypical labour flows in road transport. There are many different employment models in road transport, but the common denominator is that, in principle, labour is not performed in one temporary country of work, but in a whole number of consecutive ‘very’ temporary countries of work, and, additionally, precisely because of these highly mobile activities it is often impossible to designate a country of ‘usual’ employment.
A perfect illustration is the employment model in the FNV case that forms the basis of the preliminary questions to the Court of Justice EU. In short: a Hungarian transport company posts drivers to a Dutch transport company to carry out transport in and from the Netherlands throughout the EU. The drivers are paid the lower Hungarian salary. The trade union FNV does not agree with the drivers being paid this lower salary and initiates court proceedings against the Hungarian transport companies before the Dutch courts.
Ruling in first instance: the Posting of Workers Directive applies; the ‘where’ scope rule of the Directive also includes the ‘from where’-rule. Consequence: the Dutch (minimum) wage is due. Ruling in second instance: the Posting of Workers Directive does not apply; the Directive cannot be interpreted as that it contains a ‘from where’-rule. Consequence: the Dutch (minimum) wage is not due. The Supreme Court concluded that this is not an acte eclair or éclairé and submitted the case to the Court of Justice EU.
In his conclusion of 30 April 2020, AG Bobek provides his take on the matter: 1. The Posting of Workers Directive applies to the road transport sector; 2. In order to qualify as a ‘temporary country of work’ within the meaning of the Directive, there must be a sufficient connection between the working activities and the country of work (and thus, in a sense, the Directive includes a ‘from where’-rule). E.g. according to the AG, the mere crossing of a territory (transit operations) will, as a rule, not meet the requirement of a sufficient connection, whereas posting drivers from transport company A to B to work in and from the premises of transport company B gives a good indication of a sufficient link. This seems to be good news for the trade union FNV.
AG Bobek’s conclusion is in line with the general assumption of the EU legislator that the Posting of Workers Directive applies to road transport. During the development of the new Posting of Workers Directive in 2018, which explicitly excludes the road transport sector from its scope (for the time being), the EU institutions (Council, Parliament, Commission) stated that the Posting of Workers Directive applies to road transport:
‘The new elements of this Directive will apply to the transport sector once the sector specific legislation (currently under negotiation) enters into force. Until that moment, there is a clear understanding by the three institutions and the Member States that the rules of the 1996 Posting Directive shall apply. This was called into question by a number of Member States in the past.’
From a legal point of view, this outcome can be well substantiated. Among other things, the AG points out that the Posting of Workers Directive fully excludes working activities in the maritime sector from its scope (Article 1(2) Posting of Workers Directive), which could indicate that the rest of the transport sectors are covered.
The AG also rightly rejects the argument that the Posting of Workers Directive does not apply to road transport because its legal basis is the free movement of services, which would not apply to the transport sector because this sector is regulated separately in the transport title of the TFEU (see in particular Article 58(1) TFEU). The AG considers it peculiar to interpret the scope of secondary EU law narrowly, in spite of the clear wording of the specific instrument. Moreover, according to the AG, this could create additional block exemptions, which are not contained, or at least hinted at, anywhere in the text of such a secondary law instrument. The AG then refers to other sectors that are regulated separately in the Treaties, such as public health, energy, tourism or culture and states that it would be a stretch to conclude that the Directive also misses application to working activities in these sectors. Finally, the AG indicates that, in any event, it is generally considered that legislation based on the free movement of services could apply to the transport sector.
The fact that the legal basis of the Posting of Workers Directive has no implications for its applicability to the transport sector was actually long and widely assumed. However, a recent judgement of the CJEU in the Dobersberger case (C-16/18) caused a great deal of confusion in this respect and the AG was therefore obliged to pay more attention to the matter. In the Dobersberger case it was about an employment model in a railway context; more specifically about the catering working activities of Hungarian personnel in trains, plying the route between Hungary, Austria and Germany. In this case, the CJEU starts its reasoning by observing that the legal basis of the Posting of Workers Directive is the free movement of services and that transport activities are regulated by the separate transport title; the Court then considers that catering activities (in a train) do not qualify as transport activities and that the case therefore could be examined in the light of the Posting of Workers Directive. By constructing its reasoning as such, the CJEU strongly suggests that the Posting of Workers Directive cannot apply to transport activities. Fortunately, AG Bobek now clarifies that the CJEU has not explicitly ruled that the Posting of Workers Directive cannot apply to transport activities and to that extent paves the way for the CJEU in the present FNV case to apply the Posting of Workers Directive.
Considering the general assumption of the EU legislator that the Posting of Workers Directive applies to road transport and the strong legal arguments mentioned above, it is to be expected that the Court will follow the AG in this respect.
Now that it has been established that the Posting of Workers Directive may apply to road transport operations, a second question must be addressed: when exactly can we speak of a temporary country of work within the meaning of the Posting of Workers Directive? The AG solves this question by pointing to the requirement of a sufficient link, which must be assessed on a case by case basis and taking into account all specific circumstances.
According to the AG, reference can be given to the interpretation of the habitual workplace criterion in Article 8 of the Rome I Regulation (Regulation 593/2008; the Directive’s ‘big brother’ that determines which employment law as a whole is applicable to the employment contract and to which the Directive can deviate with its mandatory labour law regulations).
In the Koelzsch case (C-29/10), the CJEU has given specific criteria for the interpretation of the ‘habitual workplace’ of Article 8 Rome I in the context of road transport operations, which, according to AG Bobek, is relevant for the definition of the temporary country of work in the Directive, since ‘both instruments seek to ascertain certain types of material connections between the worker and a given Member State’. The CJEU summed up various factors, such as the place: from which the work is carried out, where the work is carried out, where instructions are received, where the work is organised by the driver, where the lorries are parked, where the lorries are unloaded and to which the driver returns. The AG additionally points to the Nogueira case (C-168/10 and C-169/16) and the overall importance of aiming to reflect the ‘true nature of legal relationships’ and to prevent ‘circumvention strategies’.
It is more difficult to predict to what extent the AG will be followed by the Court on this second point. Indeed, the solution proposed by the AG concerning the sufficient link and the wide margin of appreciation can lead to very complex cases, which could turn out to be rather uncertain for transport planning in the sector. In addition, the EU proposal providing clarifications on the application of the Posting of Workers Directive to road transport operations (COM 2017, 278), currently under negotiation in Brussels, will not solve this either, given the primary focus of this proposal on bilateral, crosstrade and cabotage operations (without discussing the employment model of the posting of personnel between companies at all). See yesterday’s post on this blog and here for more information on this proposal.
To summarise: AG Bobek concludes that the Posting of Workers Directive can apply to road transport operations, which means that, i.a., the minimum wages of Member States where the drivers temporarily work must be guaranteed. This is in line with the general assumption of the EU legislator and is well founded in law. It is to be expected that the Court of Justice will follow the AG in this respect.
According to the AG, the criterion of a sufficient link should play an important role in determining the temporary country of work within the meaning of the Posting of Workers Directive. The criteria given by the CJEU in the Koelzsch case with regard to the definition of the ‘habitual workplace’ in the Rome I Regulation can provide guidance in this matter. It is more difficult to predict to what extent the Court will follow the AG regarding this point.
The author is a member of the International Institute for International and Foreign Law, a Hague-based NGO which has been providing legal consultancy to professionals (judges, lawyers, notaries, mediators etc.) regarding private international law and foreign law for over a hundred years.
CSA Okoli and RF Oppong, Private International Law in Nigeria (Hart Publishing, 2020)
This book examines the rules, principles, and doctrines in Nigerian law for resolving cases involving cross-border issues. It is the first book-length treatise devoted to the full spectrum of private international law issues in Nigeria. As a result of increased international business transactions, trade, and investment with Nigeria, such cross-border issues are more prevalent than ever. The book provides an overview of the relevant body of Nigerian law, with comparative perspectives from other legal systems. Drawing on over five hundred Nigerian cases, relevant statutes, and academic commentaries, this book examines jurisdiction in interstate and international disputes, choice of law, the enforcement of foreign judgments and international arbitral awards, domestic remedies affecting foreign proceedings, and international judicial assistance in the service of legal processes and taking of evidence. Academics, researchers, and students, as well as judges, arbitrators, practitioners, and legislators alike will find Private International Law in Nigeria an instructive and practical guide.
The table of contents and more information on the book can be found on the publisher’s website: https://www.bloomsburyprofessional.com/uk/private-international-law-in-nigeria-9781509911165/
New EU conflict of laws rule for minimum wages in road transport on the way? – Background, state of affairs and implications of the 2017 EC proposal that is (still!) under negotiation
By Fieke van Overbeeke, Legal Counsel at the International Institute for International and Foreign Law – the Netherlands and research fellow at the University of Antwerp – Belgium.
On 31 May 2017 the European Commission launched a proposal to adopt a special conflict-of-laws rule that determines (i.a.) which minimum wages apply to the highly mobile cross-border working activities of lorry drivers (COM 2017, 278). After more than three years of heavy debate, this proposal was profoundly modified and the Council and the European Parliament still do not find each other, leaving many aspects to be still worked out (see also the Legislative Train on the European Parliament’s website). The purpose of this piece is to give an overview of the background of this proposal, the current state of affairs and the possible influence of a special conflicts-of-law rule on the sector from a conflict-of-laws perspective.
The background of this proposal can be traced back to the unfair competition that has arisen in the EU road transport sector as a result of the enlargements of the EU to central and eastern EU Member States (in 2004, 2007 and 2013). This has led to a tripled increase in minimum wage differences between EU Member States. Given that labour costs are the largest expense in the provision of transport services, this creates a major competitive advantage for providers from low-wage EU member states.
In fifteen years, this has caused a metamorphosis of the road transport sector, with Eastern EU Member States now leading the lists of the largest transport providers in the EU. Several Western EU Member States, such as Germany and France, have responded to this competitive pressure by adopting their own national minimum wage legislation to be applied to transport operations on their territory. As a result, the EU road transport sector has become severely fragmented and the social position of drivers has been put under pressure. How could this have gone so wrong?
In the EU we have always agreed that it is not sustainable or responsible to allow competition that is purely based on labour costs. To this end, we have introduced minimum wages within the national borders and EU-wide we have developed the so-called ‘Posting of Workers Directive’ (1996/71). This Directive stipulates, amongst other things, that the minimum wages of the temporary country of employment must be applied if this is more favourable for the employee. In this way, it is ensured that efficient and innovative market players can actually compete on this efficiency and innovation (and thus not only on wage costs).
However, the Posting of Workers Directive did not come about with regard to road transport, but mainly with regard to the construction sector, where various social/economic problems arose in the 1990s. As a result, the Directive is very difficult to apply to the atypical and highly mobile road transport sector and this has led to widely divergent interpretations in the Member States, in many cases simply not enforcing the Directive at all with regard to this sector. In practice, this allows for direct competition on labour costs, with all its undesirable consequences as described above.
The EU legislator now wants to put an end to this situation by developing a special conflict-of-laws rule for minimum wages in road transport, which, among other things, determines to which transport operations the Posting of Workers Directive does and does not apply. The contrasts between Western and Eastern EU Member States, but also to some extent between central and peripheral Member States, makes for a lengthy legislative process lasting more than three years.
On 12 December 2019 the European Commission, the European Council and the European Parliament have reached a provisional agreement about some important aspects of the conflicts-of-law rule, which was approved to a certain extent within the institutions themselves in the following months: on 21 January 2020 the Parliament’s TRAN Committee accepted the provisional agreement informally by letter to the other institutions, the Council then adopted an official position on 7 April 2020 and the Commission gave its approval to the Council’s position on 14 April 2020 (subject to a number of matters not relevant here).
This looked very promising, but on 8 June 2020 the TRAN Committee suddenly threw a spanner in the works: the TRAN Committee adopted some severely different amendments compared to the position of the Council. If the plenary approves this, the negotiations will become very difficult. Yet, in this controversial legislative procedure it would not be the first time that the plenary rejects the position of the TRAN committee. To be continued!
If we take a closer look at the official position of the Council, a number of things stand out. Firstly, it is made clear that the mere crossing of a territory by lorries, also known as ‘transit’ operations, is excluded from the scope of the Posting of Workers Directive and that therefore the minimum wages of the crossed territory may not be applied to these activities. These operations are considered to be insufficiently closely connected to this territory and by extension the application of the minimum rates of pay cannot be justified.
On the other hand, the proposal provides that activities that remain within a certain territory, e.g. transport by a Polish transport company between The Hague and Rotterdam, also referred to as ‘cabotage’ operations, do fall within the scope of the Posting of Workers Directive and must therefore be subject to the minimum wages of the country where the cabotage is carried out from the first moment of the operation and if this is more favourable for the employee. These operations are deemed to have a connection only with the territory on which the cabotage is carried out and the application for these minimum rates of pay is therefore justified. In short: green light for transit operations and red light for cabotage operations.
So far the newly adopted amendments of the TRAN committee from the European Parliament on 8 June 2020 are largely in accordance with this.
But what about those intermediate forms of transport, such as bilateral transport operations between Member States A and B, or so-called ‘crosstrade’ operations carried out by a transport company from Member State A between Member States B and C? This is a lot more complicated and has been a hot issue in the legislative negotiations. Ultimately, the Council agreed to exempt bilateral transport operations, whether or not in combination with a maximum of two consecutive operations, from the Posting of Workers Directive, and therefore the minimum wages may not be applied to these operations. Crosstrade, on the other hand, must, according to the proposal, fall under the Posting of Workers Directive and are therefore subject to the minimum wages, from the first moment of this operation and if this is more favourable to the employee.
This does not sit well with the TRAN Committee, which states in its recently adopted amendments that: 1) on the one hand there should be much more possibilities to combine a bilateral transport with other transport operations and 2) on the other hand that a ‘certain number of cross-trade operations should be exempted from posting rules.’ The TRAN Committee thus opts for a much more liberal point of view. It seems that the Corona crisis also exerted influence on the discussions: many East-European Member States now regress to the argument that the road transport sector already severely suffers from the Corona crisis and point to the pivotal importance of the delivery of medicine and goods, which should release transport companies from the obligation to safeguard the social protection of their drivers.
Whatever the outcome of the negotiations, it is already clear that if a special conflict of laws rule for road transport will be adopted, it can be seen as a real ‘game changer’ for the sector since it would bring much more legal certainty regarding the application of the Posting of Workers Directive. Regarding some transport operations, internationally operating transport companies will have to take serious notice of the minimum wages they have to guarantee their drivers. Non-compliance with this new legislation is strongly discouraged: along with the new posting rules, the EU legislator aims to provide for a whole package of enforcement and control measures that are mandatory for the Member States and in which, for the first time, the EU legislator also keeps aspects under its own control.
New enforcement authorities should also be taken into account. In addition to possibly setting up a European road transport agency in the future, the more general European Labour Authority (ELA) has been set up in 2019, with the true mandate ‘to promote fair labour mobility within the EU’. It is expected that the ELA will be able to play a far-reaching role, unprecedented in the history of the EU, in the enforcement of social legislation; including in the road transport sector.
See for more information on this topic my recent article ‘Posting drivers in the EU road transport sector’, ERA Forum 2020 (freely available online). For those who read Dutch, see my PhD ‘Sociale concurrentie en conflictenrecht in het Europees wegtransport’, University of Antwerp 2018 (freely available online).
* The author is a member of the Hague-based ‘International Institute of International and Foreign Law’: www.iji.nl, which has been providing legal consultancy to professionals (judges, lawyers, notaries, mediators etc.) regarding private international law and foreign law for over a hundred years.