According to the ECJ, a posting within the meaning of Directive 96/71/EC only exists if the work performance has a connection to the receiving state, i.e. to the country in which an employee employed by a foreign employer works. This has far-reaching effects on the legal framework that affects an employment relationship and the employer’s obligations.

What does that mean?

On the one hand, the EU Posting of Workers Directive regulates the implementation and enforcement of the most important principles of the EU internal market (freedom of movement for workers, freedom of establishment and freedom to provide services). European law should enable companies to deploy their employees in other member states. On the other hand, it should create equal conditions for companies in all Member States and guarantee respect for workers’ rights. The aim is to prevent wage dumping, which can occur when foreign workers are employed on significantly worse terms than workers in the respective member state. The EU Posting of Workers Directive therefore stipulates that certain mandatory national laws must also be complied with when foreign workers are employed in the respective member state. For example, foreign employers must notify the host country in advance and have documents relating to social security, employment contracts and proof of payment of wages available at the place of assignment. If violations of these obligations become known, administrative penalties may be imposed.

According to Art. 1 (1) of the Directive, the existence of a posting is the basic prerequisite for opening the scope of the Directive. If a company based in a Member State (sending state) posts workers to provide services in the territory of another Member State (host state), it must comply with the national law enacted to implement the Directive. The question of whether a posting exists in a specific case therefore plays a major role for companies.

The Dobersberger case

The questions now decided by the ECJ were referred to it by the Austrian Administrative Court. The court had to rule on an action brought by Michael Dobersberger, the managing director of a company based in Austria. Administrative penalties had been imposed on him for violating the law transposing the Posting of Workers Directive into Austrian law (AVRAG – Arbeitsvertragsrechts-Anpassungsgesetz).

The Austrian Federal Railways (ÖBB) had concluded a service contract for on-board service and management of the train restaurants with a limited liability company in Austria. This in turn used a (third) company based in Hungary through a series of subcontracts via the plaintiff’s company (Dobersberger). The services were therefore provided by the last company in the chain using workers resident in Hungary. Some of these employees were employed directly by the company, while others were leased to the company by another Hungarian company.

The ÖBB trains on which the services were provided ran from Salzburg or Munich to Budapest. The Hungarian workers were therefore temporarily working in another Member State on each journey. However, they were covered by social insurance in Hungary and always had to start and finish their work there. The loading of the trains and the stock checks were also always carried out in Budapest. Only the services to be provided during the journey were also provided on Austrian and German territory.

During an inspection at Vienna Central Station, the plaintiff was found guilty because the company he managed as employer had not fulfilled the obligations arising from the posting of Hungarian workers. The ECJ therefore now had to clarify whether such a case can actually be considered a posting within the meaning of the Directive.

Connection of the work performance to the territory of the receiving state required

The ECJ has now ruled that this case does not constitute a posting within the meaning of the Directive. In principle, these are services that fall under the term in Art. 1 para. 1 of the Directive, so that the applicability of the Directive is not excluded. However, a sufficient connection between the specific work performance and the territory of the receiving state is also always required for the services provided to be covered by the Posting of Workers Directive. According to the ECJ, this connection was lacking because the Hungarian employees performed all activities, with the exception of the on-board service, in the Member State in which the company they were employed is based. According to the ECJ, the fact that these services were provided on the basis of a contract with an Austrian company is irrelevant.

This case law is justified as follows: Article 2(1) of Directive 96/71 defines who is to be regarded as a posted worker. Afterwards

“a posted worker is any worker who, for a limited period of time, performs his work on the territory of a Member State other than the one on whose territory he normally works”.

In view of the system of the Directive, this definition must be interpreted (restrictively) in such a way that there must in any event be a connection between the work and the territory of the receiving state. This is indicated in particular by Article 3(2) in conjunction with Recital 15 of the Directive. This provides that the provisions of the Directive on minimum rates of pay and minimum paid annual leave do not apply to services of a very limited scope. From this, it can be concluded that a certain materiality threshold must also be exceeded for the concept of posting. Furthermore, according to the ECJ, the exceptions in Art. 3 para. 3 and 4 of the Directive for a rather narrow definition of the scope of application.

What impact does this have in practice?

Before the ECJ ruling was published, there was some hope that the Court of Justice would also lay down guidelines for the application of the Posting of Workers Directive to other services in international transport, i.e. not just rail transport. However, this did not happen. The ECJ merely defined that not only pure acts of transportation are covered by the term “transport services” within the meaning of the Directive, but also those acts that are inherently linked to transportation (such as on-board service). However, this did not create a binding clarification that could be used to clearly classify each borderline case.

Employers should therefore always check whether their employees are subject to the Posting of Workers Directive before deploying them abroad in the EU.

Significance for German law

European law and thus also its concretization by the ECJ must be implemented as effectively as possible in all member states (“effet utile”). Consequently, each EU member state must now review its national regulations implementing the directive to determine whether they are compatible with this current case law or require amendment. Certain activities, some of which were previously included in the posting rules, may now have to be excluded.

In Germany, the legislator is currently in the process of implementing the amendment to Directive 96/71, which came into force in 2018. The current case law should therefore already be integrated into the forthcoming implementing legislation.

With this ruling, the ECJ has therefore created a little more legal certainty. At least in rail transport, companies can thus avoid unnecessary bureaucracy in future without running the risk of being penalized. However, there are still many unanswered questions regarding the transferability of this case law to other services. In view of the stated purpose of the directive, it would probably make sense to further specify its scope of application at EU level. This could prevent employee protection from suffering from an overly narrow understanding of applicability or the freedoms of the internal market from being severely restricted by an overly extensive interpretation.