Court decision extends freedom to provide services in EU

7 Nov 14

NETHERLANDS

IMPACT – MEDIUM

What is the change? The European Court of Justice has ruled that the Netherlands cannot require work permits for non-EU workers who are lawfully employed by a German company contracting to provide services to a Dutch company in the Netherlands.

What does the change mean? The court’s ruling puts an end to the Netherlands’ practice of requiring work permits for non-EU workers who provide services in the Netherlands on temporary assignments, so long as the employees in question have work authorization for the employment in another EU country. Whether and how quickly other EU countries implement the ruling is difficult to gauge at this point.

  • Implementation timeframe: Ongoing.
  • Visas/permits affected: Foreign nationals authorized to work in an EU country for a service provider established in the EU will no longer be required to obtain work permits upon being posted for temporary assignments in the Netherlands. Administrative notification is still required.
  • Who is affected: Dutch companies that contract with other EU-based companies employing foreign workers.
  • Impact on processing times: The change should reduce processing times because foreign employees authorized to work in an EU country will no longer be required to have Dutch work permits for temporary assignments in the Netherlands.
  • Business impact: The ruling not only makes it easier to move non-EU workers into the Netherlands, but also ends the hefty fines employers and service contractors faced for violating the work permit requirement.
  • Next steps: The EU-wide implications of the ruling are not yet clear. BAL will continue to monitor the impact the ruling has on other domestic laws concerning the temporary posting of foreign service providers.

Background: The case is Essent Energie Productie BV. v. Minister van Sociale Zaken en Werkgelegenheid. Essent is a Dutch company that hired another Dutch company, BIS Industrial Services Nederland BV (BIS), to erect scaffolding at a branch office in the Netherlands. BIS, in turn, turned to a German company, Ekinci, to help with the project. Ekinci posted 33 nationals from non-EU states, including 29 Turkish nationals, in the Netherlands. Following an inspection, Essent was fined €264,000 for infringing Dutch law requiring foreign employees to have work permits.

The court held that the Dutch law unjustifiably restricted freedom to provide services within the EU. The court reasoned that less-restrictive means were available, such as providing information about the duration of the assignment and proof of work authorization, employment, and social security coverage in Germany. Following the decision, the Dutch Minister of Social Affairs acknowledged that work permits cannot be required when foreign employees with work authorization in other EU countries are posted in the Netherlands. The country now requires only administrative notification.

BAL Analysis: The Essent ruling is an important victory for advocates of greater freedom to provide services within the EU. It marks an extension of the principle first recognized in Vander Elst v. Office des Migrations Internationales in 1994. The Essent ruling applies EU-wide, but it remains to be seen whether all EU countries will comply – and if so, how long it will take for them to move into compliance.

As it is, EU countries vary on their requirements for foreign workers posted under Vander Elst. Because it is not yet known how Essent will be implemented, companies accepting posting of foreign employees should consider the individual circumstances of each case and relevant domestic laws.

This alert has been provided by the BAL Global Practice group and our network provider located in the Netherlands. For additional information, please contact your BAL attorney.

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