If an international transport company exercises the actual management authority, bears the driver’s wage costs, and has the right to make dismissals, it can be considered an employer.
Read attorney Hans Sønderby Christensen’s article published on Monday, October 5, 2020, on Jyllands-Posten’s website here or download it as a PDF here.
In a judgment of 16 July 2020, the Court of Justice of the European Union (CJEU) states that the company with whom international truck drivers enter into employment contracts should not necessarily be regarded as their respective employer. In addition to the formal information contained in the employment contract, further consideration must be given to the manner in which the obligations incumbent on both the worker concerned and the company concerned are in practice performed in connection with the performance of the contract. In order to identify the employer, it must therefore be determined which company has the actual powers over the worker, who bears the associated wage costs, and who possesses the actual right to dismiss the worker.
The case concerned a Cypriot company, AFMB Ltd, which entered into “fleet management agreements” with transport companies in the Netherlands. The company also entered into employment contracts with several international truck drivers, who were also based in the Netherlands, for various periods between 1 October 2011 and 26 May 2015. It followed that they were subject to management powers from the various transport companies. Both the drivers and AFMB Ltd. believed that the latter was their rightful employer, as that was what formally appeared in the contracts. Raad van bestuur van de Sociale verzekeringsbank (the board of the social insurance, the Netherlands), on the other hand, designated the Dutch transport companies as their respective employer, and the case therefore ended up before the national court in the Netherlands, where the Centrale Raad van Beroep (the appeal court in cases concerning social security and civil servants, the Netherlands) decided to postpone the case with a view to submitting questions to the CJEU. The court emphasised that who could be considered the employer was of decisive importance in order to determine which national legislation on social security applies – the Dutch or Cypriot. That question was submitted to the CJEU.
The question concerned the legal position of truck drivers with reference to EU Directive No 1408/71 on the application of social security schemes to employed persons, self-employed persons and their family members moving within the Community, and Regulation No 883/2004 on the coordination of social security systems. According to these common EU rules on social security, persons who are employed in two or more Member States, without being predominantly employed in the Member State in which they reside, are subject to the legislation of the Member State in which the employer has its registered office or place of business. The court wished to clarify whether the transport companies or AFMB Ltd., respectively, should be regarded as the drivers’ employer, following an interpretation of the aforementioned EU rules. Specifically, it wanted to know whether it was the transport company to which the drivers must be actually available, which exercises the actual management authority over the drivers, and bears the actual wage costs, that should be considered the employer. If not, whether it was the company that had entered into a employment agreement with the drivers, and which, according to an agreement with the transport company in question, paid wages to the drivers and paid contributions thereof in the Member State in which that company has its registered office, and not in the Member State where the transport company has its registered office.
The CJEU initially noted that an interpretation of the term “staff” and the term “employer”, as referred to in the EU rules, is of decisive importance in order to determine which national legislation on social security applies to the truck drivers. The Advocate General stated that the term “employer” constitutes the connecting factor for the application of the choice of law rule, which aims to designate one state’s legislation in the area of social security as applicable law.
As the rules do not contain any reference to either national legislation or practice, it follows from the Court’s established case law that the EU provision must be subject to an independent and uniform interpretation throughout the European Union. The Court’s style of interpretation incorporates both the purpose of the EU rule and the context in which it is included. In the absence of a fixed EU definition, account must therefore be taken of the normal meaning of the terms in ordinary language usage for corresponding terms such as “staff” and “employer”. The Court took into account the objective situation in which the worker concerned finds himself, and all the circumstances surrounding the employment itself. Although an employment contract may indicate that there is a relationship of subordination, it is not necessarily the one designated by the contract that is the employer. Also decisive are the obligations that exist in practice between the worker and the workplace. Specifically, it is of significant importance who the worker is subject to, who bears the wage costs, and who has the right to dismiss the worker concerned.
Such an interpretation is supported by the purposes pursued by the EU rules. These are to coordinate the national social security schemes of the individual Member States in order to ensure the effective exercise of the free movement of workers. An interpretation which only found support in formal considerations, such as an employment contract, would make it possible for companies to move to the place which is to be used as the basis for the choice of national legislation. In doing so, the purpose pursued by the EU rules risks being jeopardised. The Court’s conclusion was, on this basis, that the drivers are found to have been attached to the staff of the transport companies in the respective periods. As the companies were based in the Netherlands, it was therefore the Dutch legislation on social security that was considered to apply – however, it was up to the referring court to verify the evidence in the case.
The reason for this was, in its entirety, that the transport companies themselves had designated the drivers whom they had an interest in using, before AFMB Ltd. entered into contracts with them. Some of the drivers were even already employed by these prior to the conclusion of the contract. The transport companies were also responsible for the drivers, so that they performed their work for the companies’ account and risk. Furthermore, it appeared to the Court that the companies in reality had the actual power of dismissal of the drivers, just as they paid them by means of commission paid to AFMB Ltd. Thus, it is not decisive for the determination of the employer who formally appears as the employer in an employment contract – at least not if you are a truck driver in international road transport. The decisive factor here is who has the actual management authority, bears the wage costs, and possesses the right to dismiss the staff.