The Labour Inspectorate has established the criteria used for detecting fraud on employment contracts for transnational services, pursuant to the latest European Union Directive that regulates this matter.
The Technical Criteria No 97/2016 (Criterio Técnico Núm. 97/2016) concerning the posting of workers within the framework of the provision of services (the “Technical Criteria“), aims to achieve a uniform application of Directive 2014/67/UE, of the European Parliament and of the Council, of 15 May 2014 (the “Directive“) regarding the posting of workers within the framework of the provision of services. The Directive is designed to combat the fraud that is committed when employees are contracted in a Member State, different from the Member State where the services are rendered, for the only purpose of applying the regulations of the Member State in which the services are contracted, in order to avoid the costs associated to the regulations of the Member State where the services are rendered.
Accordingly, the Technical Criteria is meant to ensure that the free movement of employees, and the prerogatives associated to it, is applied exclusively to the employees that are posted to companies with a real activity in the country where they are contracted. Therefore, the Labour Inspectorate will focus its activity on checking that the contracting company’s activity is actually justifying the posting of employees.
A summary of the requirements that, according to the Technical Criteria, are needed to justify the proper posting of employees is:
The company posting the employee must have a substantial activity in the Member State where the employee is contracted. The elements that prove the existence of a substantial activity in the contracting country are linked to the existence of a physical location (offices, premises, etc.), tax compliance and social security obligations, volume of employees and revenue.
Likewise, and with the aim of detecting irregularities, the Technical Criteria considers that it is necessary to compare the minimumemployment conditions applicable to the contract of the posted employee with the employment conditions of the employeescontracted in the place where the services are rendered. Moreover, the differences existing between the terms and conditions of the posted employees and those of the employees of the place where the services are rendered will also be considered.
The employee must fulfil the requirements that qualify him as a “posted employee”, which are determined in the regulations of each Member State. In the case of Spain, Law 45/1999, of 29 November, on the posting of workers to perform transnational services (“Law 45/1999“), which implements Directive 96/71/EC, of the European Parliament and of the Council, of 16 December 1996, contains the elements that determine the legal concept of “posted employee”.
According to Law 45/1999, a “posted employee” is someone who renders services for a limited period of time when one of the following situations applies: international contracting of services rendered in Spain; temporary employment agencies when the services take place in Spain; and, intra-group services when the company or office where the services are rendered is in Spain.
The Technical Criteria establishes that the elements that reveal the existence of a “posted employee” are: the existence of an employment contract prior to the posting; and the maintenance of said employment contract during the posting period.
Nevertheless, neither Law 45/1999 nor the Technical Criteria forbids entering into new contracts for the sole purposes of the posting, provided that the employers’ management and obligations remain in the Member State where the employee was contracted. In any case, whether these are new or prior contracts, the employer will have to prove that the management and control faculties and the assumption of the risks inherent to the exercise of the business are being borne in the country where the employee was contracted.
Furthermore, the employer will have to prove that the nature of the activities justifies the posting, that it is temporary and that the posted employees are linked to the services that caused the posting.
If it has been chosen to maintain the application of the social security regulations of the Member State where the employee was contracted instead of the regulations of the Member State where the services are rendered, according to Communitarian Regulations 883/2004, of 29 April, and 987/2009, of 16 September, of the European Parliament and of the Council, the existence of a posting certificate will have to be proven. Therefore, in these cases, the Labour Inspectorate will verify the authenticity of the A1 form issued by the relevant social security administration of the Member State where the employee is contracted.
Finally, compliance with the occupational hazards regulations applicable to the activity in which the posted employee renders services will be assessed.
As a consequence of the Technical Criteria, the Labour Inspectorate has created a specific program to fight fraud pursuant to the European Union’s regulations for the transnational posting of employees, which will be enforced from 2017 onwards. Therefore, it is recommended that companies with posted employees, who render their services or are contracted in Spain, review the conditions that are being applied to them, the posting agreements and the connection between the services rendered and the company’s activities. In this regard, it is also advisable to reach an employment agreement, or to establish a specific provision in the current employment contracts stating the conditions that will apply during the posting, if this has not been established in advance.