Is it possible to appeal against an excessive fine for breaches of duty when posting workers abroad?

Have you inadvertently breached administrative obligations when posting employees abroad and then been disproportionately sanctioned? In this article read what the Court of Justice of the European Union (ECJ) says about the issue.

Article 20 of Directive 2014/67/EU[1] ("Article 20") states: "Member States shall lay down rules on penalties applicable in the event of infringements of national provisions adopted pursuant to this Directive and shall take all the necessary measures to ensure that they are implemented and complied with. The penalties provided for shall be effective, proportionate and dissuasive. (...)"

Within the limits of Article 20, individual Member States are entitled to provide for sanctions in their national legislation for possible breaches of the obligations relating to the cross-border posting of workers. But what if these national laws lead to a disproportionately high sanction being imposed? Can the amount of the fine be directly and effectively challenged by the company that has been sanctioned?

The issue of disproportionate penalties for breaches of obligations when posting of workers abroad has been addressed in an ECJ judgment of 8 March 2022 (case C-205/20[2]). In this decision, the ECJ commented on the direct applicability of the requirement of proportionality of sanctions under Article 20. In addition, the ECJ also commented on the extent to which national legislation that infringes Article 20 must be applied.

The facts of the case

A Slovak company posted some employees to an Austrian company. Due to non-compliance with a number of obligations under Austrian labour law—in particular the keeping and reporting of wage records and social security documents—an Austrian authority imposed a fine of EUR 54,000 on the company, which was assessed under Austrian law. The sanctioned company disputed the amount of the fine and brought an action before the Austrian national court. The Austrian national court referred the matter to the ECJ for a preliminary ruling.

The ECJ’s decision

The ECJ ruled that the requirement under Article 20 for sanctions to be proportionate has direct effect, so entities (companies affected by a disproportionate sanction) can directly use this provision before the national authority of a Member State if the State has not properly transposed Article 20 into national law.

The ECJ also held that, in order to ensure the requirement for proportional penalties laid down in Article 20 is fully applied, the national rules may only be set aside to the extent that they result in disproportionate penalties - i.e., to the extent that ensures the penalties imposed are proportional. A competent national court is therefore obliged to mitigate, where appropriate, the severity of sanctions which, although in accordance with national law, were imposed in breach of Article 20. Specifically, the ECJ held: “the principle of the primacy of EU law must be interpreted as obliging national authorities to apply national legislation which partially infringes the requirement of proportionality of penalties laid down in Article 20 of Directive 2014/67 only to the extent necessary to impose proportionate penalties.”

Entrepreneurs who have been subject to disproportionate fines for breaching their obligations in the cross-border posting of workers may therefore directly invoke European legislation providing for the imposition of proportionate sanctions; the competent national authorities are then obliged, in accordance with the principle of the primacy of European law, to mitigate disproportionate sanctions to bring them in line with European rules.

[1] Directive 2014/67/EU of the European Parliament and of the Council of 15 May 2014 on the enforcement of Directive 96/71/EC concerning the posting of workers in the framework of the provision of services and amending Regulation (EU) No 1024/2012 on administrative cooperation through the Internal Market Information System ("IMI Regulation").

[2] Litigation NE v. Bezirkshauptmannschaft Hartberg-Fürstenfeld, involving the Financial Police Team 91.