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17 July 2020 / article

Is the European Court of Justice opening the door to material employment practice in social security?

On 16 July 2020 The Court of Justice of the European Union ruled that international lorry drivers who work in more than one country are covered by social security regime in the member state in which their employer has its registered office. The Court considered the employer to be the entity which actually 1) exercises authority over the driver, 2) pays the salary of the driver, and 3) was able to dismiss the driver, rather than the entity that holds the employment contract.

The case was referred to the Court of Justice following a of decision of the Dutch Social Insurance Bank (Sociaal Verzekeringsbank, SVB) to declare Dutch social insurance regime applicable to international lorry drivers . The drivers in this case were working for a Dutch company which acted both effectively and materially as the employer but were employed by a Cypriot employer. These drivers carry out their work in more than one EU member state. The European social security rules determines that where employees work in more than two EU member states, they will be liable to pay social security contributions in the state in which the employer has its registered office.

In this particular case, the international lorry drivers were dealing with a Cypriot company, with which a formal employment contract had been concluded, and a Dutch company which acted both effectively and materially as the employer.

The Court of Justice has now ruled that Dutch social security regime is applicable, despite the fact that an employment contract exists with a formal employer in Cyprus.

Our commentary

In this ruling, the Court of Justice established that the drivers did in fact appear to have been personnel of the Dutch transport companies, as a result Dutch social security regime applies to the drivers and their Dutch employer. The Supreme Court is yet to rule on this case following the Court of Justice decision, and therefore a final conclusion still has to be reached.

Businesses that have employees carrying out their work in several EU member states simultaneously, should undertake a review to determine if the applicable social security regime has been established correctly and closely should follow the developments in this area. We expect that several countries will scrutinise existing arrangements where there is potentially more than one employer.

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