Brussels, 01/08/2001 (Agence Europe) - Following a complaint filed by a Community company, the European Commission decided Tuesday to send a reasoned opinion to Germany for non-compliance of certain provisions of its legislation, applicable in the case of secondment of employees, with the rules of article 49 of the EC treaty on the free provision of services in the single market. The Commission considers that these provisions are discriminatory for Community companies not established in Germany which second employees or make them available in Germany so as to ensure their services there. If Germany does not comply within two months with the requirements for compliance contained in the Commission's reasoned opinion, the latter could decide to take the matter to the Court of Justice.
The Community companies which are not established in Germany and which want to second their employees there are subject to constraints that competing German companies are not subject to, which is against the rules of the treaty. According to German law on secondment, for foreign companies, only activities carried out on German soil are taken into consideration to determine if they are to be considered as "construction companies", in which case they come under the German system for minimum pay and paid leave. For German companies, however, all the activities are taken into account, which may exempt them from paying a minimum wage. This acts as a deterrent to foreign companies. Construction material producers for example, who only second employees to Germany to instal prefabricated products, are obliged to pay a minimum wage whilst their German competitors are free to pay lower wages. The Commission considers that this is a discriminatory restriction based on the location of the company headquarters which is incompatible with article 49 of the EC treaty.
Secondly, foreign companies must pay a contribution to the German holiday fund even if they are already obliged to guarantee paid leave in the country of origin. Only companies affiliated to a holiday system equivalent to the Member States' are exempt from this obligation. This means that if there is no equivalent body in their country of origin, British, Irish, Dutch, Portuguese and Swedish service providers are obliged to take on the double payment of a fee both in the Member State where company headquarters are located and in the host Member State. This means unequal treatment between foreign service providers, a situation which is not compatible with articles 49 and 50 of the treaty.
Thirdly, the companies which are not established in Germany must have a significant number of working documents translated that the German supervisory authorities consider essential (pay slips and working hours, work contract etc.). The Commission considers that such an obligation, which forces foreign service providers to supply two sets of documents and to absorb translation costs for short-term services, is a disproportionate restriction and is therefore incompatible with article 49.
Fourthly, foreign temping companies must declare, to the German employment authorities, any employee made available to a German client before the beginning of each particular building work. The Commission considers that the obligation of a prior declaration not only for making employees available but also for each employment on each site is a measure which makes the provision of cross-boundary services more difficult by comparison with a domestic provision of services, which is contrary to the rules of the treaty relating to the free provision of services.
Finally, according to German law, any foreign building company or temping company is bound, subject to penalties, to send to German employment authorities a prior declaration so as to inform them of the secondment. Non-compliance with this obligation may lead to a fine up to 50,000 DM and include a temporary exclusion from public procurement, which is far higher than penalties inflicted on German companies (10,000 DM).
According to the Commission, subjecting foreign companies to more rigorous penalties than German companies is contrary to article 49. In addition, it considers that the current level of sanctions is disproportionate by comparison with construction companies which do not come under the German system on minimum pay and paid leave, notably the SMEs and companies from the prefabricated housing sector who are threatened with a temporary exclusion from public procurement, without there being any connection with employee protection.