article by
Tanel Feldman
Senior Partner at Immigration Law Associates
EU Labour and Employment Law-Immigration Partner
CORPORATE MIGRATION CENTER
Expert in Intra-EU Labour Mobility, with a special focus on the Posting/Secondment of Workers
A third-country national who is lawfully employed by a temporary work agency in one EU Member State may, in principle, be assigned temporarily to a user undertaking in another Member State.
However, lawful employment in the sending country is only the starting point. Before accepting the assignment, the agency must verify how the Vander Elst principle is applied, whether the user may lawfully rely on temporary agency work, how long the assignment may last, which employment conditions must be guaranteed and whether host-country taxation may arise.
Failure to examine these issues may have serious consequences for the worker, the temporary work agency and the user undertaking, ranging from the interruption of the assignment and findings of unlawful employment to the creation of an employment relationship with the user undertaking under national law and administrative or criminal sanctions.
1 – How does the host country apply the Vander Elst principle?
Under the Vander Elst principle, a host Member State cannot systematically require a separate work permit for a third-country national who is lawfully employed by a service provider established in another Member State and is posted temporarily in the context of a genuine provision of services.
The Court of Justice has confirmed that the cross-border hiring out of workers is also a service protected by the freedom to provide services. The mere fact that a worker is supplied to a user undertaking does not therefore justify an automatic work-permit requirement.
Before accepting an assignment, it is important to bear in mind that the Vander Elst principle derives directly from EU law, as interpreted by the Court of Justice. In practice, however, the position in the host Member State must be assessed at two distinct levels:
- National law: Does the host country’s legislation fully reflect the Vander Elst principle, or does it provide for different rules, including situations where the principle is no longer recognised after 90 days in any 180-day period?
- National practice: Even where national legislation reflects EU law, do the competent authorities and national courts apply the Vander Elst principle differently in practice, particularly in relation to the transnational hiring out of third-country nationals?
These two levels do not always coincide. National legislation may correctly reflect EU law while the authorities apply a more restrictive interpretation.
What to verify: whether, and under which precise conditions, the Vander Elst principle is recognised and applied in the host Member State during the first 90 days in any 180-day period and thereafter.
2 – May the user undertaking lawfully use temporary agency work for the stated purpose?
Temporary agency work is not necessarily permitted for every purpose.
The host country may allow it only in specified situations, such as:
- replacing an employee;
- responding to a temporary increase in work;
- performing exceptional or clearly defined work; or
- recruiting a worker with a view to permanent employment.
Belgium provides a useful example. Its rules distinguish between several permitted grounds and attach specific procedures and time limits to each. The user undertaking may need prior agreement from employee representatives, may be required to make notifications and may be restricted in how long it can use temporary agency work for the stated reason.
This question may also affect reliance on the Vander Elst principle. Host-country authorities are entitled to verify that the freedom to provide services is not being used for a purpose other than the genuine temporary service declared by the agency.
If the assignment does not pursue a legally recognised temporary purpose or has no genuine temporary character, the authorities may conclude that the arrangement is in reality intended to give the worker access to the host-country labour market.
What to verify: whether the reason for using temporary agency work is permitted under host-country law and whether the user has fulfilled all related procedural requirements.
3 – How long may the same worker remain assigned to the same user?
Two separate questions must be distinguished. The commercial agreement between the temporary work agency and the user undertaking may remain in force for several years. This does not mean that the same worker may remain assigned to that user for the entire duration of that agreement.
Directive 2008/104 requires Member States to prevent misuse, particularly successive assignments designed to circumvent the protection granted to temporary agency workers. The Directive does not establish one uniform EU maximum, meaning that the applicable limits must be identified under the host country’s legislation and collective agreements.
Depending on the host country and the reason for using temporary agency work, national law may regulate the maximum duration of the assignment and the conditions under which it may be renewed, repeated or continued.
The Court of Justice has also held that successive assignments may amount to misuse where the same worker remains in the same job for longer than can reasonably be regarded as temporary and there is no objective explanation for the repeated use of temporary agency arrangements.
What to verify: the maximum duration applicable to the assignment of that individual worker to the same user undertaking, including previous and successive assignments.
4 – Which working and employment conditions must be guaranteed?
For posted workers, the starting point is the application of the mandatory terms and conditions of employment laid down by the host Member State, in accordance with the Posting of Workers Directive, including, in particular, the principle of equal pay for equal work.
Where the posted worker is supplied by a temporary work agency, Directive 2008/104 adds a further requirement: the principle of equal treatment.
Under Directive 2008/104, their basic working and employment conditions must, for the duration of the assignment, be at least those that would have applied if the user undertaking had recruited them directly to perform the same job.
The comparison covers, in particular:
- working time;
- overtime;
- breaks and rest periods;
- night work;
- holidays and public holidays; and
- pay.
The relevant conditions may arise from legislation, collective agreements, administrative provisions or other binding rules applicable within the user undertaking. Company-level arrangements may therefore also be relevant.
The user undertaking is required to communicate the relevant working and employment conditions to the temporary work agency. The agency should nevertheless ensure that the information received is complete and sufficient to determine what must be guaranteed to the worker.
Host-country legislation or an applicable collective agreement may provide for a lawful derogation from the equal-treatment principle. Any such derogation must be identified and assessed before accepting the assignment.
What to verify: the working and employment conditions applicable to the same job within the user undertaking, unless a lawful derogation applies under host-country law or an applicable collective agreement.
5 – Does the host country apply the economic-employer concept?
The short duration of an assignment does not automatically prevent host-country income taxation.
Under the 183-day rule commonly found in bilateral tax treaties, employment income may remain taxable only in the worker’s country of residence if all the relevant treaty conditions are satisfied.
In temporary agency work, the critical question is often whether the host country applies the economic-employer concept.
The temporary work agency remains the formal employer and pays the worker’s salary. However, in temporary agency work, the user undertaking normally directs and supervises the work and benefits from its results. Depending on the host country’s approach, these characteristics, together with the way employment costs are recharged, may lead the user undertaking to be regarded as the economic employer.
Where the host country applies the economic-employer concept, one or more of the conditions required for the 183-day exemption may no longer be satisfied. Host-country taxation and payroll obligations may then arise from the beginning of the assignment, even where the worker spends fewer than 183 days there.
What to verify: whether and how the economic-employer concept applies in the host country and what this means for taxation and payroll obligations from the start of the assignment.
Five checks before accepting the assignment
Before posting a third-country national to a user undertaking in another Member State, the temporary work agency should verify:
- whether and under which conditions the Vander Elst principle applies during the first 90 days in any 180-day period and thereafter;
- whether the user undertaking may lawfully use temporary agency work for the stated purpose;
- the maximum permitted duration of the individual worker’s assignment to that user;
- the working and employment conditions applicable under the equal-treatment principle; and
- whether and how the economic-employer concept applies in the host country.
Where any of these points is unclear, it should be resolved before accepting the assignment.