In the construction industry workers change employers frequently. For that reason the collective agreement provides that the various employment relationships entered into in a year are to be treated as if they were a single employment relationship. That fiction enables the workers to accumulate holiday entitlement acquired with different employers in the course of the reference year and to claim that full entitlement from the current employer, irrespective of the duration of the employment relationship with that employer.

A fund was established in order to compensate the current employer for the heavy financial burden posed by the payment of holiday pay even for holiday acquired with other employers and to ensure an equitable distribution of the financial burden between the employers concerned.

From 1 January 1997 that leave scheme was extended to employment relationships between undertakings with registered offices outside Germany and workers they send to construction sites in Germany.

In 1997 eight employers established in Portugal and one in the United Kingdom each sent workers to Germany to do construction work. The fund requires that those employers contribute to the scheme to finance the holiday entitlement of construction workers, and also that they disclose information to it. The employers object to this.

Nine cases between the employers and the fund came before the Arbeitsgericht (Labour Court) Wiesbaden (Federal Republic of Germany) and that court submitted questions to the Court of Justice of the European Communities for a preliminary ruling on the compatibility of the German rules with Community law, and in particular with the freedom to provide services.

The German court considers that the formalities imposed on providers of services established outside Germany have the effect of increasing their costs and administrative and economic burdens. The Court of Justice finds that this is a restriction of the freedom to provide services.

The Court of Justice considered whether that restriction is justified. The declared aim of the German rules is to protect German businesses in the construction industry from the increasing pressure of competition in the European internal market, and thus from foreign providers of services. Such a law is therefore intended, above all, to combat the allegedly unfair practice of European businesses engaged in low-pay competition.

The Court has already held that measures restricting the freedom to provide services cannot be justified by economic aims such as the protection of national businesses. The Court considers that it is for the national court to check whether, viewed objectively, the rules in question in the main proceedings promote the protection of workers sent to work in another country.

Consequently, such workers must not enjoy an essentially similar level of protection under the law of the Member State in which their employer is established: the application of the national rules of the Member State to which they are sent must confer on them a genuine benefit which significantly adds to their social protection. The application of those rules must be proportionate to the public interest objective pursued.

N.B.
The Community directive 'concerning the posting of workers in the framework of the provision of services' was required to be implemented by 16 December 1999. Its provisions therefore have no bearing on the facts of this case, which occurred in 1997.

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