News from the ECJ > Comment on ECJ case C-379/11 ‘Caves Krier Frères’ by Nicole Kerschen, Luxembourg trESS expert

In the Caves Krier Frères case, the ECJ states that “Article 45 TFEU precludes” Luxembourg legislation, “which makes the grant to employers of a subsidy for the recruitment of an unemployed person aged over 45 years subject to the condition that the recruited unemployed person has been registered as a jobseeker” in Luxembourg, “in the case where such registration is subject to a condition of residence in the national territory, this being a matter for the referring court to verify”. Although Regulation 1408/71 is not directly involved, this case law is an example of the complexity of the position of a frontier worker who seeks a job in the Member State of last employment and who intends to benefit from activation measures promoting the recruitment of special categories of unemployed workers in that Member State.

Beyond the particular case, the importance of this case-law is three-fold:

  • the EJC considers that a practice, which imposes indirectly a residence condition for the grant of a recruitment subsidy, restricts the workers' freedom of movement and conflicts with Article 45 TFEU;
  • the ECJ also recalls the conditions that Member States have to fulfil if they want to make restrictions to the workers' freedom of movement acceptable;
  • in addition, the ECJ specifies the discretionary power of the Member States regarding the shaping of their social policy and develops the theory of "the sufficient link of integration with the society", which allows frontier workers to benefit from the principle of equal treatment as compared with national workers and residential workers.

A Luxembourg wine producer recruits a Luxembourg national, aged 52, who resides in Germany. This worker has spent her entire working life in Luxembourg and has been temporarily unemployed before being recruited. The employer submits an application to the Luxembourg employment office ADEM for a subsidy in respect of the recruitment of an unemployed person over 45 years of age. ADEM rejects the application on the ground that the worker did not fulfil the condition of having been registered as a jobseeker with ADEM for at least one month.

The employer appeals against the decision of ADEM before the Administrative Court, pleading the breach of the principle of equality before the law. The Administrative Court dismisses that action. The employer appeals against that judgment to the Higher Administrative Court. The latter states that “it is common ground that only residents may register with ADEM,” but also that the recruitment subsidy is conditional on such registration and, in fact, the subsidy is reserved for employers who recruit resident unemployed workers. The Court refers the following question to the Court of Justice for a preliminary ruling:

‘Is the first paragraph of Article L. 541 1 of the Luxembourg Labour Code compatible with EU law, and more particularly with Articles 21 [TFEU] and 45 [TFEU], in so far as it subjects the right of private-sector employers to reimbursement of both the employer’s and the employee’s share of social security contributions upon the recruitment of unemployed persons aged over 45 years, regardless of whether they were receiving unemployment benefit, to the condition that the unemployed persons must have been registered as job seekers with a placement office of [ADEM] for at least one month, while employers who recruit unemployed persons registered as job seekers with equivalent foreign bodies do not benefit from that measure?’

The ECJ answered to this question by developing three main arguments.

Condemnation of a practice that imposes a residence condition

The ECJ does not condemn the Luxembourg legislation because it imposes a residence condition for the registration of a jobseeker to ADEM. No provision in Luxembourg legislation prescribes such a residence condition. However, it condemns a practice on which the Luxembourg court based its interpretation of the national law: "it is common ground that only residents may register with ADEM". Therefore, it sought several pieces of evidence: the fact that Luxembourg courts accepted that interpretation, the indication of a residence condition on ADEM’s internet site and preparatory documents from the Luxembourg Parliament relating to the reform of ADEM from 2012, suggesting that before 2012 access to all the services of ADEM was not possible for workers residing outside Luxembourg.

As a consequence, the ECJ held that this practice introduces a difference of treatment between nationals of the Member States who have the status of jobseekers residing in Luxembourg and nationals of the Member States who are residents in another Member State (in casu Germany). It places these workers at a disadvantage: access to employment in Luxembourg will be more difficult in case of unemployment, because employers established in Luxembourg may not obtain the recruitment subsidy provided by Luxembourg legislation. The ECJ decides that the concerned legislation constitutes a restriction of the workers' freedom of movement guaranteed by Article 45 TFEU.

Reminder of the conditions of the acceptability of restrictions of the workers' freedom of movement

The ECJ recalls that a measure restricting the freedom of movement of workers may be acceptable, but only if it pursues a legitimate aim compatible with the Treaty and if it is justified by overriding reasons in the public interest. In this case, Luxembourg had to show that the measure was appropriate for securing the attainment of the objective relied upon and that it did not go beyond what is necessary to attain it. But Luxembourg did not put forward any evidence to justify the residence condition in terms of overriding reasons in the public interest.

The theory of "the sufficient link of integration with the society"

Finally, the ECJ tackles the discretionary power of the Member States shaping their social policy. On the one hand, Member States have a broad discretion in exercising their power. On the other hand, their discretionary power may not conflict with the "rights granted to individuals by the Treaty provisions in which their fundamental freedoms are enshrined". Inside this framework, the ECJ develops the theory of the sufficient link of integration established by a migrant worker or a frontier worker with the society of a Member State. This sufficient link of integration arises particularly from two facts: participation in the employment market of the Member State and payment of taxes, which means contributing to the financing of social policy. It allows migrant workers and frontier workers to benefit from the principle of equal treatment with national workers and resident workers.

In this case-law, the ECJ applies the theory of the sufficient link of integration to registration as a jobseeker in the Member State of last employment. Are we to interpret this as a warning directed towards the Member States, in particular Luxembourg, regarding their attempts to exclude frontier workers from some of the benefits of the welfare state?

Since the ECJ judgment, ADEM has changed its Internet site on jobseekers registration. The residence condition has been replaced by the social insurance card. A jobseeker, who wants to register with ADEM must either present a Luxembourg social insurance card or a U2-form. Does this mean that ADEM considers the social insurance card as a material evidence of “the sufficient link of integration with the Luxembourg society”?

 

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