Court of Justice of the European Union – 16 July 2020 Ruling – Case C-658/18

The Court of Justice of the European Union, with its judgement of 16 July 2020 ruled on case C-610/18, and established that the actual “employer” should be considered the company that exercises authority over an employee, bears the corresponding wage cost and possesses the actual power to dismiss the employee, and not the company that only signs the employment contract, with the consequence that the employment is subject to the rules of the country where the real employer is established.

The case in question originates from a dispute started in the Netherlands by a company established in Cyprus that had signed employment contracts with international lorry divers resident in the Netherlands; based on these contracts the Cypriot company was designated as employer and stated that its legislation was applicable to the employment relationship. However, the employees had never lived or worked in Cyprus before these contracts and during their effectiveness they continued to live in the Netherlands.

The Dutch national court, taking into account these circumstances, declared the legislation of the Netherlands applicable to the lorry drivers’ employment in terms of social security and invested the Court of Justice of the European Union with the task of explaining if such employees should be considered as “part of the personnel” of the company with the formal position of employer or if, instead, they should be considered employees of the company at whose disposal they were at for at unlimited period of time.

The EU court hearing the case explained that signing of a job contract can be an indication of the existence of an employment relationship between the employee and company, but that alone may not be enough; it is also necessary to take into account the way in which the contract obligations are actually performed.

Therefore, regardless of the literal contents of the contract, the real employer is the entity whose authority is applicable to the worker, and who must bear the corresponding wages cost and who possesses the actual power for dismissal. The Court also stated that the objective of regulation 1408/71 is to ensure the free circulation of employees and self-employed workers within the European Union, but to comply with the particularities of national legislation concerning social security as well.