You can teach a new court Mangold tricks – the horizontal effect of the Charter right to paid annual leave

Filippo Fontanelli, Senior Lecturer in International Economic Law, University of Edinburgh

On 6 November 2018, the Court of Justice of the European Union (the Court) delivered three judgments relating to paid annual leave. Some of its remarks transcend the specific topic, and touch on constitutional matters: the impact of the EU Charter of Fundamental Rights on private parties, the allocation of competences between the EU and the Member States, and the application of EU secondary law.

These cases teach a couple of lessons, and raise a wider point. The lessons are useful: first, alongside the right to non-discrimination and effective judicial protection, the right to annual paid leave in the Charter has direct effect not only in vertical disputes (ie disputes between the individual and the State), but also in horizontal disputes (ie disputes between individuals), even though EU Directives dealing with the same issue still do not in themselves have such horizontal direct effect.  Second, the Charter sometimes binds State acts in a decisive manner. This occurs rarely and, curiously, so far exclusively in disputes between individuals, when the domestic law transposing a directive is not in good order.

The wider point concerns the Charter’s application to domestic measures. In these cases, EU secondary law could not displace domestic measures, because Germany had not transposed a directive correctly. The directive’s mere existence, however, warranted the Charter’s application, and in turn enabled domestic courts to disregard German law and enforce the right to annual paid leave.

The now familiar combo “unimplemented directive plus Charter right” seems a Munchhausen trick. To justify the practice, one should go back to the Mangold case (in which the CJEU ruled that, prior to the Charter having binding force, the general principles of EU law meant that the right to non-discrimination could apply between private parties even if a Member State had not implemented a Directive), and perhaps look deeper into the difference between direct applicability and direct effect, or between a norm’s application and its scope of application. After looking back and looking in-depth, it is still difficult to see precisely how the Charter applied.

The judgments

In cases C-619/16 and C-684/16 Kreuziger and Max Planck, the facts were comparable. Messrs Kreuziger and Shimizu, respectively employed by the Land of Berlin and the Max Planck Institute, had failed to take the entire period of paid annual leave to which they were entitled. After their employment ended, the former employers denied their request to receive payment in lieu of leave. German law appeared to authorise the employers’ position that a failure to request paid annual leave automatically entailed its lapse upon termination.

The Court disposed of the Kreuziger case quickly, due to the dispute’s vertical nature (the employer was a German Land). Article 7 of Directive 2003/88 (the working time Directive) clearly confers the right to paid annual leave and, accordingly, payment in lieu for the leave not taken; the Court recently ruled on this issue in Bollacke. The Court dusted off the direct effect spiel. Since “provisions of a directive that are unconditional and sufficiently precise may be relied upon by individuals, in particular against a Member State and all the organs of its administration” [21], individuals can invoke the Directive and the judges must set aside domestic law if need be. The automatic lapse of this right upon termination of employment, without any safeguard to make sure that the employee could exercise it beforehand, violated EU law.

The reasoning of the Max Planck ruling extended further, since the main proceedings concerned a dispute between private parties. The reasoning of Kreuziger was copy-pasted: Article 7 of the Directive precludes an automatic lapse of the right to paid leave triggered by a mere failure to exercise it [40]. National courts must arrive, to the extent possible, at an interpretation of domestic law consistent with the Directive.

Failing all attempts at consistent interpretation, Mr Shimizu could not rely on the Directive alone, since “Max Planck had to be considered an individual” [65], and directives normally lack horizontal direct effect [68]. The Court thus turned to Article 31(2) of the Charter on the right to annual paid leave, noting that it entailed a clear, enforceable right, withstanding only derogations in compliance with Article 52(1) of the Charter [73]. Article 31(2) of the Charter needing no implementing act to operate, it could warrant disapplication of contrary domestic law:

74           The right to a period of paid annual leave, affirmed for every worker by Article 31(2) of the Charter, is thus, as regards its very existence, both mandatory and unconditional in nature, the unconditional nature not needing to be given concrete expression by the provisions of EU or national law, which are only required to specify the exact duration of annual leave and, where appropriate, certain conditions for the exercise of that right. It follows that that provision is sufficient in itself to confer on workers a right that they may actually rely on in disputes between them and their employer in a field covered by EU law and therefore falling within the scope of the Charter.

75           Article 31(2) of the Charter therefore entails, in particular, as regards the situations falling within the scope thereof, that the national court must disapply national legislation negating the principle [that the right to paid leave and/or payment in lieu cannot lapse automatically].

The last hurdle for the direct invocability of Article 31(2) of the Charter in German courts was the dispute’s horizontal nature. The Court recycled from its own case-law the bold suggestion that Article 51(1) of the Charter, which sets out who is bound by the Charter, is ambiguous in this respect and does not preclude individuals from relying on the Charter against each other:

76           … although Article 51(1) of the Charter states that the provisions thereof are addressed to the institutions, bodies, offices and agencies of the European Union … and to the Member States only when they are implementing EU law, Article 51(1) does not, however, address the question whether those individuals may, where appropriate, be directly required to comply with certain provisions of the Charter and cannot, accordingly, be interpreted as meaning that it would systematically preclude such a possibility.

Notably, the Court distinguishes Article 27 of the Charter on workers’ consultation (at issue in AMS) from Article 31(2) on annual leave, because the former Charter Article refers to national and EU law limits and the latter Charter Article does not. If this is the test for whether Charter provisions can have horizontal direct effect, it should be noted that most of the Charter provisions on social rights refer to national and EU limits – but most of the other provisions of the Charter do not.

73      By providing, in mandatory terms, that ‘every worker’ has ‘the right’ ‘to an annual period of paid leave’ — like, for example, Article 27 of the Charter which led to the judgment of 15 January 2014, Association de médiation sociale (C‑176/12, EU:C:2014:2) — without referring in particular in that regard to the ‘cases’ and ‘conditions provided for by Union law and national laws and practices’, Article 31(2) of the Charter, reflects the essential principle of EU social law from which there may be derogations only in compliance with the strict conditions laid down in Article 52(1) of the Charter and, in particular, the fundamental right to paid annual leave.

The Joined Cases C-596/16 and C-570/16 (Wuppertal v Bauer; Willmeroth v Broßonn) largely replicated the reasoning of the Max Planck and Kreuziger cases. Only, in the underlying disputes, it was rather the employees’ heirs seeking payment in lieu, on behalf of the deceased workers. According to the referring judge, German law provided that the right to unpaid annual leave, necessarily turned into payment in lieu upon the workers’ death, would not become part of their estates.

Building on prior case law (discussed here), the Court, besides noting the importance of the right under Article 7 of the Directive, stated that it should accrue, after the death, to the worker’s estate:

48      … from a financial perspective, the right to paid annual leave acquired by a worker is purely pecuniary in nature and, as such, is therefore intended to become part of the relevant person’s assets, as a result of which the latter’s death cannot retrospectively deprive his estate and, accordingly, those to whom it is to be transferred by way of inheritance, from the effective enjoyment of the financial aspect of the right to paid annual leave.

With respect to horizontal disputes (like the Willmeroth v Broßonn controversy, whereas Bauer was a public employee), the reasoning of the Court was identical to that used in the Max Planck case [87-91]. Article 31(2) of the Charter can be invoked in disputes between individuals, possibly leading to the setting aside of domestic norms like those at issue in the main proceedings.

The Charter’s effect on domestic measures

The Charter has many functions. It guides the interpretation of EU law and serves as standard of legality of EU acts. It does not enlarge the competences of the EU at the expense of the member states, but binds their action when they act as agents of the EU. In this residual scenario, delimited by the sibylline “implement[ation of] EU law” notion of Article 51(1) of the Charter, the Charter should serve as standard of EU-legality of national measures. In other words, the Charter can preclude some national measures.

The Charter applying to state measures falling “within the scope of EU law,” (a formula sanctified in Fransson [21], and unsurpassably frustrating), the following circumstances can arise:

a)      EU law does not apply to the matter, so neither does the Charter;

b)      EU law applies to the matter, and precludes the domestic measure. The Charter applies too: it might also preclude the domestic measure (“double preclusion”) or not;

c)       EU law applies to the domestic measure, but does not preclude it. The Charter applies too, and likewise does not preclude it;

d)      EU law applies to the domestic measure, without precluding it. The Charter, which also applies, precludes the domestic measure.

In the scenarios a), b) and c), the Charter is irrelevant to the ultimate determination of EU-legality.

Only in scenario d) does the Charter show its teeth, doing its standard of review job fully. Exclusively in this scenario, an otherwise EU law-compliant measure can breach the Charter and, accordingly, might be set aside by domestic judges. To this day, scenario d) has never occurred in its garden variety. Never has been the case that, for instance, a national measure that justifiably restricts one fundamental freedom (and falls therefore under the scope of Treaty law, without being precluded thereby) was found to breach the Charter. This unlikely coincidence warrants a deeper analysis (but not here), because it suggests that the Court is discreetly keeping the Charter in a locked drawer, lest member states react like the German Constitutional Court reacted after Fransson. A low-profile use of the Charter – one that essentially emptied it of its post-Lisbon potential – is what the Court’s record shows in the last 9 full years.

However, there is a hybrid category of cases, halfway between scenarios b) (double preclusion) and d) above. The paid annual leave rulings of 6 November 2018 belong in this atypical group, insofar as they relate to horizontal disputes. As far as their bearing on vertical disputes, they are squarely b)-type rulings: the measures are precluded by the Directive, and the breach of the Charter is just redundant.

The discussion below, instead, focuses only on the horizontal dimension of these rulings.

Did the Directive apply?

That the Directive applied must be assumed – otherwise the Charter would not have applied at all. Yet, the Directive could not apply to determine the outcome of the underlying dispute, for lack of horizontal direct effect. Can it be said that the Directive applied, and precluded the national measures, but was ineffective? The (ineffective) application of the Directive to the underlying scenario would then warrant the (very effective) application of the Charter. The Charter alone would warrant the disapplication of the German norms that breached both the ineffective Directive and the effective Charter.

The easier construction – that the Directive, lacking horizontal direct effect, could not apply – is untenable. Admitting that the Directive did not apply contradicts the notion that the German law fell within the “scope” of EU law, and would rule out the relevance of the Charter tout court. Some finer reasoning must support the Court’s decision. I suggest a couple of unnoticed distinctions that might help.

Direct application is not the same as direct effect: This is an all-time favourite for mid-term exams, so why not give this distinction a day in Court? Perhaps, the Directive did apply somehow (direct applicability), but could not be relied upon in domestic proceedings (lack of horizontal direct effect). This would explain the triggering of Article 51(1) of the Charter, but also the impossibility to use the Directive to solve the disputes between Mr Shimizu and Mrs Broßonn and their employers. Certainly the Directive applied, somehow. As soon as the transposition period expired, it deployed its legal obligatory effects and, even regarding horizontal disputes, triggered immediately Germany’s responsibility for failure to transpose correctly, which individuals can invoke to seek compensation without recourse to any implementing measure.

On the lack of direct effect, there is no real mystery: Article 7 of the Directive creates a precise and unconditional right, capable of invocation in domestic proceedings, so the direct effect checklist is in order. However, it can only work in vertical disputes. This distinction between direct applicability and direct effect could justify the Court’s truncated use of the Directive (sort-of applying to bring the Charter in under Article 51(1) of the Charter; not-really applying in its own right).

Scope of application is not the same as application: This is a contrived distinction, but it might operate in the background of these rulings. The Directive effectively cannot apply in domestic proceedings. However, the German law falls under the “scope” of the Directive, in a somewhat more abstract sense, as if applicable and applied were distinguishable. To accept that EU law reaches further than the circumstances to which it can actually apply is a head-scratcher. Yet, that is what the Court prescribed: domestic law must be set aside for intruding in an area that the Directive could not operate (the direct regulation of duties between private parties) but it nevertheless occupied – somehow. In the wake of Kücükdeveci (an earlier judgment on discrimination in employment), I noted the risk:

… it is necessary to evaluate the implications of Kücükdeveci: if the general principle of non-discrimination has a wider scope than the measures codifying it (the Directive), it follows that it can be invoked in a series of disputes that, despite concerning EU-regulated matters, fall outside the scope of the Directive.

Putting lipstick on Mangold

The distinctions above are nowhere mentioned in the rulings. So, if the Directive could not operate in domestic proceedings, how did the Court justify German law falling under the scope of EU law? This week’s rulings proffer only minimal reasons, but summon precedents to convey the idea that this apparent misalignment is nothing to worry about. From Bauer:

53           Since the national legislation at issue in the main proceedings is an implementation of Directive 2003/88, it follows that Article 31(2) of the Charter is intended to apply to the cases in the main proceedings (see, by analogy, judgment of 15 January 2014, Association de médiation sociale, C‑176/12, EU:C:2014:2, paragraph 43).

If one goes down the rabbit hole of cross-citations, however, Mangold awaits on the bottom. In terms of legal reasoning, it does not get any more controversial than Mangold. The judgment exasperated the former president of the German Constitutional Court and drafter of the Charter, who penned an op-ed wishing the Court of Justice to “Stop.” Ultimately, Mangold was criticised for encroaching into the Member States’ competence.

There are, in fact, a series of cases in which the Court prescribed the horizontal direct effect of a fundamental right, using a directive as a trampoline. Mangold was the first case, and Kücükdeveci followed. Dansk Industri (discussed here), also on discrimination on grounds of age, pulled the same trick, this time using the Charter rather than a general principle of law. AMS (discussed here) replicated the reasoning with respect to the workers’ right to consultation and information in the Charter, accepted its applicability but concluded that the Charter’s norm was not self-executing and stopped short of confirming its horizontal direct effect.

Egenberger (discussed here), very recently, asserted the horizontal effect of the right to non-discrimination on grounds of religion and the right of effective access to justice. In IR (discussed here), the Court consolidated Egenberger, and wisely recalled that non-discrimination is essentially a general principle: if the AMS explanation why the Charter applies to individuals were not compelling, the unwritten source might apply more liberally and come to the rescue just like in the good Mangold days:

69           Before the entry into force of the Treaty of Lisbon, which conferred on the Charter the same legal status as the treaties, that principle derived from the common constitutional traditions of the Member States. The prohibition of all discrimination on grounds of religion or belief, now enshrined in Article 21 of the Charter, is therefore a mandatory general principle of EU law and is sufficient in itself to confer on individuals a right that they may actually rely on in disputes between them in a field covered by EU law.

Conclusion

In all the cases mentioned, individuals could not rely on the directives in domestic proceedings. Yet, each directive somewhat marked the “scope” or “cover[age]” of EU law and let the fundamental right finish the work (unless some ingrained deficiency made it non self-executing, as in AMS). The simple annotation that the German law “is an implementation of [the] Directive” sanded over the uncomfortable truth: if the Directive was insufficient to set aside the norms of German law, perhaps these norms of German law lay outside the scope of EU law, and the Charter should not have found its way in the proceedings.

A sceptical reader might wonder what “a field covered by EU law” means, and wonder whether the Charter spilled over from the EU-law scope comfort zone. An optimist one can celebrate the expansive force of social rights. Horizontal application of fundamental rights translates into the creation of EU-based fundamental duties, and lets us catch a glimpse of solidarity in the making.

Barnard & Peers: chapter 9, chapter 20, chapter 6

Photo credit: PureTravel

Supreme allies: Top national courts and the implementation of EU law

Daniel Sarmiento, Professor of EU Law at the University Complutense of Madrid*

In a short time-frame, two high courts of two Member States, the French Cour de Cassation and the Spanish Tribunal Constitucional, have delivered two important judgments on the implementation of EU Law by lawyers and domestic courts. The two decisions touch different subject-matters and deal with different claims, but they are equally relevant for what they represent for the correct implementation of EU Law. As I said a few weeks ago in a previous post, national high courts are becoming key players in EU Law, and the Court of Justice should cherish and look after this highly valuable ally.

Last May, the French Cour de Cassation ruled in favor of a former worker who had sued his lawyer for not making a proper defense of his client (see the judgment here). The lawyer did not invoke the Court of Justice’s case-law stated in the well-known cases of Mangold, Kücükdeveci, Petersen, etc., on discrimination on the grounds of age. As a result of it, the worker lost his case against his former employer. The Cour de Cassation stated that the claimant’s chances of success in case of having invoked the Court of Justice’s case-law were up to 80%. Therefore, the certainty of the loss suffered entitled the claimant to successfully claim damages from his lawyer.

Yesterday, the Spanish Constitutional Court, in plenary formation, ruled in favour of another worker whose claim based on EU Law was plainly ignored by the High Court of Madrid (see the judgment here). Following the Court of Justice’s case-law in the cases of Gavieiro Gavieiro, Lorenzo Martínez and others, which solved a series of cases identical to the one of the claimant, it was obvious that this case-law applied and solved the case. However, the High Court of Madrid ignored this and dismissed the claimant’s appeal.

The Spanish Constitutional Court has now stated that any jurisdiction in Spain that ignores a judgment of the Court of Justice is breaching the fundamental right to a fair trial, as provided by article 24 of the Spanish Constitution. This gives any claimant in such circumstances the chance of invoking another ground of appeal, and, above all, the use of the special procedure for the protection of fundamental rights before the Constitutional Court (recurso de amparo).

These two judgments impose considerable responsibilities on lawyers and judges. The French decision sets a high standard of professional expertise on practitioners, especially on those who are highly qualified and (as in the case of France) allowed to plead before the highest courts of the country. The Spanish judgment is a nice reminder for all courts in Spain that the case-law of the Court of Justice is binding in the strongest possible way, and therefore binding for all courts. Both cases have in common a total absence of reference to EU Law, by the lawyer in his submissions in one case, and by a court in its judgment in another.

Therefore, the sum of both decisions is not revolutionary, because it is obvious that a total lack of reference to the applicable law, whether it is national or EU Law, raises serious issues about the decision at stake. However, it is important that the highest courts of Member States are assuming the task of ensuring the correct application of EU Law. This is of course a matter for the Court of Justice, but also for its domestic counterparts too. And it is nice to see that these cases have been solved without the need to make a preliminary reference to the Court of Justice. High courts know what their role is and how it must be put into practice under national law. Now it is time for lawyers and for the remaining domestic courts to act accordingly.

Photo credit: Wikipedia.en

Barnard & Peers: chapter 6

*This post previously appeared on the Despite our Differences blog

The UK implements EU free movement law – in the style of Franz Kafka

 

Steve Peers

Most laws are complicated enough to start with, but with EU Directives there is an extra complication – the obligation to transpose them into national law. A case study in poor transposition is the UK’s implementation of the EU’s citizens’ Directive, which regulates many aspects of the movement of EU citizens and their family members between EU Member States. Unfortunately, that defective implementation is exacerbated by a further gap between the wording of this national law and its apparent application in practice, and by the unwillingness of the EU Commission to sue the UK (or other Member States) even for the most obvious breaches of the law.

It’s left to private individuals, who usually have limited means, to spend considerable time and money challenging the UK government in the national courts. One such case was the recent victory in McCarthy (discussed here), concerning short-term visits to the UK by EU citizens (including UK citizens living elsewhere in the EU) with third-country (ie, non-EU) family members.  The UK government has just amended the national rules implementing the EU citizens’ Directive (the ‘EEA Regulations’) to give effect to that judgment – but it has neglected to amend the rules relating to another important free movement issue.

Implementing the McCarthy judgment

The citizens’ Directive provides that if EU citizens want to visit another Member State for a period of up to three months, they can do so with very few formalities. However, if those EU citizens are joined by a third-country family member, it’s possible that this family member will have to obtain a short-term visa for the purposes of the visit. The issue of who needs a short-term visa and who doesn’t is mostly left to national law in the case of people visiting the UK and Ireland, but it’s mostly fully harmonised as regards people visiting all the other Member States.

Although the EU’s citizens’ Directive does simplify the process of those family members obtaining a visa, it’s still a complication, and so the Directive goes further to facilitate free movement, by abolishing the visa requirement entirely in some cases. It provides that no visa can be demanded where the third-country family members have a ‘residence card’ issued by another EU Member State. According to the Directive, those residence cards have to be issued whenever an EU citizen with a third-country family member goes to live in another Member State – for instance, where a British man moves to Germany with his Indian wife. Conversely, though, they are not issued where an EU citizen has not left her own Member State – for instance, a British woman still living in the UK with her American wife.

How did the UK implement these rules? The main source of implementation is the EEA Regulations, which were first adopted in 2006, in order to give effect to the citizens’ Directive by the deadline of 30 April that year. Regulation 11 of these Regulation states that non-EU family members of EU citizens must be admitted to the UK if they have a passport, as well as an ‘EEA family permit, a residence card or a permanent residence card’. A residence card and permanent residence card are creations of the EU Directive, but an ‘EEA family permit’ is a creature of UK law.

While the wording of the Regulation appears to say that non-EU family members of EU citizens have a right of admission if they hold any of these three documents, the UK practice is more restrictive than the wording suggests. In practice, having a residence card was usually not enough to exempt those family members from a visa requirement to visit the UK, unless they also held an EEA family permit. Regulation 12 (in its current form) says that the family member is entitled to an EEA family permit if they are either travelling to the UK or will be joining or accompanying an EU citizen there. In practice, the family permit is issued by UK consulates upon application, for renewable periods of six months. In many ways, it works in the same way as a visa requirement.

An amendment to the Regulations in 2013 provided that a person with a ‘qualifying EEA State residence card’ did not need a visa to visit the UK. But only residence cards issued by Germany and Estonia met this definition. This distinction was made because the UK was worried that some residence cards were issued without sufficient checks or safeguards for forgery, but Germany and Estonia had developed biometric cards that were less likely to be forged.

In the McCarthy judgment, the CJEU ruled that the UK rules breached the EU Directive, which provides for no such thing as an EEA family permit as a condition for admission of non-EU family members of EU citizens with residence cards to the territory of a Member State. The UK waited nearly three months after the judgment to amend the EEA Regulations to give effect to it.

The new amendments cover many issues, but to implement McCarthy they simply redefine a ‘qualifying EEA State residence card’ to include a residence card issued by any EU Member State, as well as any residence card issued by the broader group of countries applying the EEA treaty; this extends the rule to cards issued by Norway, Iceland and Liechtenstein. Presumably this brings the rules into compliance with EU law on this point (the new rules apply from April 6th). That means that non-EU family members of EU citizens will not need a visa to visit the UK from this point, provided that they hold a residence card issued in accordance with EU law, because they are the non-EU family member of an EU citizen who has moved to another Member State. However, this depends also on the practice of interpretation of the rules, including the guidance given to airline staff.

‘Surinder Singh’ cases

On the other hand, the new Regulations do not implement other recent CJEU case law (discussed here) on what is known in the UK as the ‘Surinder Singh’ route. This is based on CJEU rulings which state that an EU citizen who moves to another Member State with non-EU family members can then return to his or her home Member State and invoke EU free movement law to ensure that this State admits his or her family members. The purpose of doing this is to avoid very restrictive rules on the admission of family members of British citizens into the UK, which are much more stringent than the EU free movement rules (Danish and Dutch citizens also use these rules).

The 2013 amendments to the Regulations state that this route can only be used where the ‘centre of life’ of the family concerned has shifted to another Member State. This is inconsistent with last year’s CJEU ruling, which requires only a three-month move to another Member State to trigger the rules. In practice, this test is then applied before an ‘EEA family permit’ is issued to the family member concerned, which allows that family member to reside in the UK with the UK citizen.

Since these parts of the Regulations have not been amended, and there is still provision for an ‘EEA family permit’ in the Regulations, presumably the intention is to continue to apply these rules to regulate the longer-term stay of UK citizens’ family members using the Surinder Singh route.

Conclusion

The better course from the outset for the UK would have been to avoid the creation of the ‘EEA family permit’, which is not provided for in any EU legislation or hinted at in any CJEU case law. Furthermore, not only do the UK rules not implement EU law correctly, they also are not applied in practice exactly as they are written, but on the basis of a general unwritten understanding about what they actually mean. This doesn’t even deserve to be called a ‘policy’. Instead, the best description comes from Yes, Minister: it’s the ‘policy of the administration of policy’.  

 

Barnard & Peers: chapter 13

What are the Member States doing regarding sanctions on employers of irregularly staying third country nationals?

Elspeth Guild, Jean Monnet professor ad personam Radboud University, Nijmegen, Queen Mary University of London.

Background

In 2009 the EU adopted a directive which required the Member States (except Denmark, Ireland and the UK) to adopt legislation creating fines and criminal sanctions against employers who hire third country nationals who are irregularly staying in their Member State. As is the case for most immigration and asylum directives and regulations, the Commission was mandated to prepare a report by 20 July 2014 and every three years thereafter on the application of the directive. The Commission has now published its report in advance of the deadline on 22 May 2014. 

This directive was so popular among the Member States that after the end of the transposition date, the Commission had to commence 20 infringement proceedings against Member States which had done nothing to transpose it. All of them have now been withdrawn as the Member States adopted national legislation.

The issue of employer inspections

The communication contains no information how many procedures have been taken against delinquent employers. It is unclear whether the Commission actually has access to this information but it did not include it nor indicate whether the Member States provided it. Under the directive, the Member States are required to provide annually information on the number of inspections which they have carried out to check that employers are compliant. The Commission has included a table on the number of such inspections carried out in 2012. This varies from 79 in Estonia to 243,847 in Italy. Of the other four big Member States, Germany chocked up 122,577, France 1,331 and Spain 53,671. Poland carried out 2,776.

These figures are very difficult to interpret not least as there is no clarity whether Member States with high numbers such as Italy, have included the obligation to check on irregular migrants into the job of general labour inspectors (which seems likely from the figures). Other Member States have probably not done this such as France where the number is very low. But this is supposition rather than knowledge.

There are of course, enormous issues which arise depending on which system a Member State uses. If labour inspectors are provided with general powers to check for irregularly staying migrants, they become sub-contracted immigration officers and, the argument goes, they are distracted from their main work of protecting labour standards. If the purpose of labour inspections is to ensure proper application of labour standards, it may not be wise to go down this route as it means that employers are more likely to hide any workers who have a dodgy immigration status from labour inspectors thus defeating the purpose of the inspection as regards the universality of the protection.

On the other hand, if a separate body must carry out the immigration status related labour inspections, that body must be identified (eg immigration officers?) given the powers to carry out inspections and set loose. As the UK system, which is based on this later approach shows, employers are not particularly delighted at having immigration related inspections. Also, while health and safety inspections include issues around migration, in the UK employers also have spot compliance inspections from immigration officers under the points-based system. UK Visas and Immigration (the successor of the UK Borders Authority) carry out these spot checks on employers.

How many irregularly staying third country nationals are working in the EU?

Returning then to the Communication, it is worth noting that it starts with the (relatively) new figures of the drop in third country nationals detected irregularly present in the EU between 2008 and 2013 (down 40% - the 2013 figure is 386,230). These figures originally appeared in the Commission’s report on the Returns Directive. The document, however points in two directions, on the one hand if the number of detected irregular migrants is dropping so fast one might have to question what the point of the directive is so the Communication states “the majority of irregular migrants remain undetected”. There is no evidence produced for this, though one can see the Commission’s interest in stating it. If the problem is merely that the Member State authorities have stopped detecting irregularly staying third country nationals then the blame falls on them and there could be huge numbers of contraventions of the directive. But if there has not really been much change in the intensity of the work of state authorities in the detection of irregular migrants, then the problem of irregular working is diminishing towards a vanishing point which is coming fast.

Once again, if the UK is any measure to go by, in 2008/9 the authorities issued 1,722 civil penalties to employers worth a total of GBP 16,715,000 but in 2012/3 it only issued 1,270 penalties worth GBP 10,843,750. This means that over the period, there has been about a 36% drop in the number of fines and a 35% drop in their value. While this is not as high as the 40% drop in detected irregular migrants in the EU as a whole, it is not far off. While the Commission’s document states that Austria, Cyprus and Slovakia have taken up the option of publishing lists of employers who committed the offence of employing an irregularly staying third country national, I have not been able to find and information or statistics on the respective government websites.

Why are irregularly staying third country nationals working in the EU?

According to the Commission people work to improve their lives and to meet demand from employers. There is nothing surprising here. However, as regards those who are irregularly staying in the EU, the Commission considers that they seek out employers “who are willing to take advantage of workers ready to undertake low-skilled, low-paid jobs in labour-intensive sectors such as construction, agriculture, cleaning and hotels/catering”. The Directive itself states that undocumented work is a pull factor in itself for people to stay irregularly.

All of this smells of arm-chair sociology based on supposition and prejudice rather than any actual empirical work. There is empirical work out there if anyone in the Commission is actually interested and much of it was produce in Commission funded research projects, but it does not necessarily support the Commission’s statements. (See, for instance, Vasta, E. (2011). Immigrants and the paper market: borrowing, renting and buying identities. Ethnic and racial studies, 34(2), 187-206).

In any event the Commission repeats the standard argument about the damage undocumented work causes: loss of tax revenues and social contributions (which may or may not be the case depending on whether the person is working under a registered identity or not), replacing workers or causing the “non-hiring” of workers through legal channels (strenuously denied by the Commission when it comes to EU national workers moving to find better jobs) and acceptance of hazardous working conditions.

These statements of ‘fact’ are unhelpful to the authority of the Communication. The Commission would be wise to refrain from such rather speculative asides which do nothing for its reputation as a source of reliable information.

How have the Member States implemented the sanctions against employers?

There are two types of sanctions which the directive obliges the Member States to create: financial and criminal. Regarding financial sanctions, the more irregularly staying third country nationals an employer hires, the greater the fine. Most Member States already had financial sanctions by the transposition date, only Belgium, Bulgaria, Finland and Latvia did not but now do. Among the sanctions which the Member States apply is the obligation to pay for the return of the third country national (somewhere outside the EU) though in Sweden and Italy this is simply included in the penalty. No information is provided about how the Member States calculate the cost of return or to where. Is it on the basis of actual costs incurred or some other basis? Further are employers required to pay the cost whether or not the return actually happens? Again there is no information.

The financial sanctions vary greatly in amount. The maximum fine for a natural person runs from 854 euros in Cyprus to 100,000 euros in Spain.  Alternatively where it is for the judge to set the fine, the maximum level varies from 500 euros in Latvia to 500,000 euros in Germany. The Commission queries whether these rather enormous variations constitute dissuasive and proportional sanctions as required by the directive.

It may be recalled that this directive was one of the first adopted after the CJEU held that the EU can use criminal sanctions to achieve EU objectives which are outside the provisions on cooperation in the field of criminal justice. As regards criminal sanctions, here again the Commission finds that there are very wide variations. In a minority of Member States illegal employment is a criminal offence to which aggravating factors may attach such as persistent and repeated infringements.

In the rest of the Member States a copy and paste approach to the obligation (in Article 9(1) of the Directive) to create criminal sanctions was adopted. Depending on the Member State the penalty can be between three months and five years imprisonment. For businesses the penalties for criminal sanctions include loss of public benefits and/or public contracts for five years, claw back of subsidies and closure. But there is a great variety among the Member States as to what they have transposed and what they have not. There is also a provision on liability for a chain of employers (Articles 2(c), 8, 9(2) and 11 of the Directive). The objective is to make sub-contractors also responsible for the offences of employing third country nationals irregularly staying in the Union, but this provision seems to have foxed a few Member States which have not transposed it. 

Protecting the third country national

The civil society sweetener in the directive has been its provisions which oblige employers to pay their third country national workers even if the state is expelling them or has already done so. It is interesting to note that few Member States have transposed these provisions. For instance, only Bulgaria, Cyprus, Greece and Slovenia have included in their laws the right of third country nationals who are (or were) irregularly staying and working to claim outstanding remuneration from their employer. The others rely on vague references to their civil law. Of course for the UK it would be a big step forward if third country nationals with an irregular immigration status could rely even on the labour contract to receive back pay but the UK does not participate in the directive.

More Member States have implemented the provisions requiring effective mechanisms for such third country nationals to lodge complaints against employers and to be represented by third parties (ie NGOs, trade unions etc). Only three Member States (Belgium, Greece and France) have put in place mechanisms so that these third country nationals can receive any payments due to them after they have left or been expelled. In the same vein, only ten Member States have introduced measures to comply with the duty to grant limited duration permits to third country nationals which are linked with the directive’s criminal proceedings.

Detection and enforcement

According to the Commission most Member States now require employers to keep accurate records of the immigration status of their employees. It is now pleased with the Member States’ compliance with their duty to provide it with information about inspections as they are required to do under Article 14 of the Directive (see above more generally). Further the Commission insists that Member States identify sectors most at risk in order to increase the effectiveness of the inspections. Offenders in this regard are the Czech Republic, Estonia, Lithuania, Malta and Romania which have not identified sectors according to the directive’s requirements. The others which have so identified sectors focus on: constructions, agriculture, horticulture, housework/cleaning, catering and hospitality services.

One is reminded of the joke about the rather drunk man who loses his keys on his way home one evening after dark. He retraces his steps and begins searching for his keys very carefully around a street lamp. A friend asks him why he thinks he lost his keys at that spot. The man answers that he has no reason to think that the keys are more likely to be under the lamppost than elsewhere on his route, but that it is much easier to look for them with the advantage of the light.

As the sectors identified by the member States have a fairly high staff turn over, are often short term contract based and in some cases are seasonal, the disruption to businesses generally may perhaps be less than in other sectors which are substantially globalized such as banking.

Conclusions

This is an interesting report notwithstanding its shortcomings. It is vital that the Commission continues to prepare and publish all of its reports on the functioning of the border, immigration and asylum measures so that we have some idea of what the outcomes are of the legislation adopted.

From the Communication, it is clear that the Member States are more interested in the coercive side of the directive than the provisions designed to help third country nationals claim and actually get their back pay from their employers. This is a pity as it undermines some of the key justifications for an EU measure in the field – not least that it was necessary to ensure fair play for third country nationals who are being or have been exploited by their employers. If there is somewhere for the Commission to increase pressure on the Member States as regards this directive it is in this respect.

Barnard & Peers: chapter 25, chapter 26

The Blue Card Directive on highly-skilled workers: why isn’t it working, and how can it be fixed?

Steve Peers

Back in 2009, the EU adopted the so-called ‘Blue Card’ Directive on highly-skilled third-country nationals.  This Directive is a key part of the Commission’s policy plan on legal migration, which subsequently also led to the adoption of the single permit Directive, the seasonal workers Directive and the intra-corporate transferees Directive.

According to its preamble, the Blue Card Directive aims to ‘attract and retain’ highly-skilled workers from the rest of the world to the EU. This objective is obviously an essential aspect of the EU’s labour migration policy. However, the Commission’s recent report on the Directive indicates that it has made little impact at achieving its intended objectives. So it is necessary to consider how the Directive ought to be amended to achieve them.  

Implementation of the Directive

The Directive had to be applied by 19 June 2011, and all Member States bound by the Directive (the UK, Ireland and Denmark opted out) ultimately implemented it (twenty Member States applied it late). So the question is now whether they have implemented it correctly, and what its impact has been.

In practical terms, its impact has been limited, with only 3,664 Blue Cards issued in 2012, and 15,261 issued in 2013. Most have been issued by Germany and Luxembourg, and the main countries of origin are India, China, Russia, the USA and Ukraine.

A key feature of the Directive is that it co-exists with national schemes for attracting highly-skilled migrants, and most Member States have such schemes. In most Member States, these national schemes attract more migrants than the Blue Card system, although there are exceptions (such as Germany, Luxembourg and Romania) where the Blue Card is more attractive than the national system.

Overall, national systems attracted nearly 20,000 applicants in 2012, over five times the number of Blue Cards issued in that year. However, as seen above, the number of Blue Cards issued in 2013 increased significantly; but there are no statistics on national schemes available for that year to indicate whether a significant number of applicants were changing from national schemes to the Blue Card system.

The number of Blue Card holders can be affected in several ways. First of all, Member States have an option to set a quota for the number of admissions, and eight Member States have exercised it. Secondly, in order to avoid ‘brain drain’, Member States can enter into treaties with third states or opt to reject applications in national law on these grounds. No Member States have taken up the former option, and six have taken up the latter one, although none have actually rejected an application on these grounds. Given the low number of Blue Cards issued, the Commission is therefore surely right to conclude that for now, there is no indication that the Directive has led to a brain drain.

Thirdly, only two Member States have set higher salary thresholds than the usual rule (1.5 times the average salary) set in the Directive. Fourthly, most Member States apply some kind of labour market test before issuing a Blue Card. Fifth, while the Directive implicitly allows for renewal of Blue Cards, one Member State (Sweden) has set an overall time limit of four years for Blue Card holders, even though there is no explicit rule in the Directive on this point (as compared to the Directives on seasonal workers and intra-corporate transferees).

Next, fifteen Member States have implemented the option to withdraw the Blue Card if the holder needs social assistance, and two Member States applied a pre-existing national rule requiring applicants to apply from outside the country of origin. About half the Member States require a 90-day wait for a decision on the application, and just under half set shorter deadlines. Nine Member States do not grant equal treatment in employment after a two-year waiting period, and most require authorisation in the event of a change in employer within that period. A number of Member States do not grant equal treatment in education, and about half of the Member States limit the application of a rule permitting longer absences from EU territory as regards acquiring long-term resident status.

There are also options for Member States wishing to apply more favourable rules. Twelve Member States have opted to treat experience as equivalent to qualifications. Nine Member States have set a lower salary threshold (1.2 times the average salary) for professions in shortage occupations. Most Member States allow applicants to apply for a Blue Card not just if they are legally resident, but also if they are legally present. Several Member States have more favourable standards as regards equal treatment.

Overall, the Commission concludes that it is too early to assess the actual impact of the Directive in terms of attracting highly-skilled applicants. It is concerned about ‘flaws in the transposition, the low level of coherence, [and] the limited set of rights and barriers to intra-EU mobility’. To that end, it issues veiled threats about possible infringement proceedings, but it does not intend to propose amendments to the legislation for now.  

Comments

What is the right immigration policy to attract highly-skilled migrants? In my assessment of this Directive in the Commentary on EU Immigration and Asylum Law, I examined the evidence in the Commission’s original impact assessment for this Directive, which suggests that the EU is comparatively weak at attracting highly-skilled migrants, in part due to its immigration regime. The main features of national immigration rules which attracted migrants were routes to permanent residence, geographical mobility, and the publicity effect of the schemes. Academic analysis also suggests that liberal rules on family reunion and job mobility are significant.

However, the main elements of the Blue Card proposal which aimed to attract highly-skilled migrants were dropped or watered down: a short decision-making deadline; a derogation from the salary threshold for younger workers; and the rules on in-country applications, job mobility and validity of permits.

The evidence as regards implementation of the Directive suggests that on most of these issues (except for in-country applications), most Member States apply the options in the Blue Card Directive in such a way as to deter applications. Moreover, the mere existence of competing national schemes dilutes the publicity effect of the Blue Card system.

Due to late implementation of the Directive and the absence of national statistics for 2013, it is too early to tell whether the use of national schemes for admission of the highly-skilled has actually declined following the implementation of the Directive. However, it is clear that the numbers admitted under the Blue Card system that year were less than the numbers admitted under national systems the year before. So it is clear that the Blue Card system has not by itself, at least initially, increased the total numbers of highly-skilled migrants entering the EU.

Interestingly, as discussed in a previous blog post, one of the candidates for Commission President, Jean-Claude Juncker, has specifically promised to re-examine this Directive, with a view to addressing demographic imbalances, providing a safe route to Europe and increasing the EU’s attractiveness to highly-skilled migrants.

What is the best route forward to this end? To increase the publicity effect of the scheme, it would be advisable to curtail or eliminate competing national schemes. To increase its attractiveness, it would be best to provide for: in-country applications for everyone legally resident or present in all Member States; shorter decision-making deadlines; a derogation from the salary threshold for younger workers; stronger rules on equal treatment as regards access to education and employment; a longer validity of initial permits; and flexibility to switch into self-employment, particularly if the migrant wants to establish a job-creating business. 

Member States would still be able to address social and economic concerns about migration by their power to set quotas on labour migration (which is guaranteed by the Treaties) and to require a labour market test before issuing a Blue Card; and they still could use the options available in the Directive, if necessary, to prevent a brain drain from developing countries.

Whoever ends up in charge of the European Commission this autumn should move forward at an early stage to relaunch the EU’s flagship labour migration policy.   

Barnard & Peers: chapter 26