Insights

Summary

On 15 June 2023, the Court of Justice of the European Union (“CJEU”), in delivering a ruling in the case of Thermalhotel Fontana Hotelbetriebsgesellschaft mbH (“Thermalhotel”), a hotel operating in Austria, and the Bezirkshauptmannschaft Südoststeiermark (the “Austrian Administrative Authority”), found that the compensation granted to employees who had been ordered to isolate in terms of national legislation is discriminatory against employees who had been ordered to isolate in terms of their Member States’ national legislation.

Background to the case and proceedings before Austrian courts

In 2020, numerous employees of Thermalhotel, underwent COVID-19 testing. Thermalhotel promptly reported the positive test results to the relevant health authority in Austria. However, some of the employees affected were residents of Slovenia and Hungary. Consequently, the Austrian health authority did not enforce isolation measures on these individuals in accordance with Austrian law on epidemics (the “EpiG”). Instead, Thermalhotel informed the competent authorities in Hungary and Slovenia, who subsequently imposed isolation measures on the affected employees as per their respective national laws. Throughout the isolation period, Thermalhotel continued to compensate the employees in accordance with Austrian labour regulations, based on the belief that the wage payments would transfer the right of compensation for loss of earnings onto the Thermalhotel. However, when Thermalhotel applied to the Austrian Administrative Authority for compensation on behalf of the employees, its application was rejected.

Thermalhotel appealed this decision before the Landesverwaltungsgericht Steiermark (Regional Administrative Court, Styria, Austria), which dismissed its claims on the grounds that compensation was only applicable when an administrative measure resulted in a loss of earnings for employees under the EpiG. It, therefore, followed that Thermalhotel would not be entitled to compensation for loss of earnings for its Slovenian and Hungarian resident employees who had not been required to isolate in terms of the EpiG.

Thermalhotel brought an extraordinary appeal against the judgement dismissing its action before the Verwaltungsgerichtshof (Supreme Administrative Court) by challenging the compatibility of:

1. the relevant article of the EpiG, as interpreted by Landesverwaltungsgericht Steiermark;
2. Article 45 TFEU on the abolition of any discrimination based on nationality between workers of the Member States and Article 7 of Regulation No 492/2011 on the freedom of movement for workers within the Union; and
3. Regulation 883/2004 on the coordination of social security systems.

Legal context and background to the Preliminary reference

The Austrian Supreme Administrative Court (the “Referring Court”) suspended the proceedings until the CJEU provided guidance on whether the compensation received by isolated employees constitutes ‘sickness benefits’ under Regulation No 883/2004 on the coordination of social security systems, and whether the EpiG’s granting of compensation on isolation measures ordered by Austrian authorities, violates Article 45 TFEU and Article 7 of Regulation No 492/2011.

CJEU’s considerations

The Referring Court firstly sought clarification as to whether Article 3(1)(a) of Regulation No 883/2004 must be interpreted as meaning that compensation, financed by the State, which is due to workers for the pecuniary disadvantages caused by the impediment to their employment during their isolation as persons infected with, suspected of being infected with, or suspected of being contagious with COVID-19 constitutes a ‘sickness benefit’, referred to in that provision, and therefore comes within the scope of that regulation.

The CJEU has consistently held that a benefit may be regarded as a ‘social security benefit’ in so far as the following criteria are satisfied cumulatively:

1. The social security benefit is granted, without any individual and discretionary assessment of personal needs to recipients on the basis of a legally defined position.

This condition is satisfied since the benefit at issue is granted on the basis of legally defined objective criteria, without the competent authority taking into account personal circumstances of employees other than their isolation and the amount of their regular remuneration.

AND

2. The social security benefit relates to one of the risks expressly listed in Article 3(1) of Regulation No 883/2004

The CJEU held that the essential aim of ‘social security benefit’ within the meaning of Regulation No 883/2004 is the patient’s recovery, by securing the care which his/her condition requires, and that they thus cover the risk connected to a state of ill health.

However, that is not the case as regards compensation such as that provided for in the EpiG. In order to obtain compensation in terms of the EpiG, it is irrelevant whether person subject to an isolation measure is infected with a disease or not, since it is sufficient that he or she is suspected of being infected with COVID‑19. Secondly, the isolation measure is imposed, not for the purposes of the recovery of the person, but to protect the population from being infected by that person.

Since the compensation under the EpiG does not satisfy both criteria outlined above, it does not fall within the scope of a social security benefit in terms of Article 3(1)(a) of Regulation No 883/2004.

The Referring Court also sought clarification as to whether Article 45 TFEU and Article 7 of Regulation No 492/2011 must be interpreted as precluding legislation of a Member State under which the granting of compensation for loss of earnings suffered by workers as a result of isolation ordered following a positive COVID-19 test result is subject to the condition that the imposition of the isolation measure be ordered by an authority of that Member State under that legislation.

The concept of a ‘social advantage’, extended by Article 7(2) of Regulation No 492/2011 to workers who are nationals of other Member States, comprises all advantages which, whether or not linked to a contract of employment, are generally granted to national workers, primarily because of their objective status as workers or by virtue of the mere fact of their residence in the national territory, and the extension of which to workers who are nationals of other Member States, therefore, seems suitable to facilitate their mobility within the European Union and, consequently, their integration into the host Member State.

However, the compensation outlined in the EpiG is exclusively provided to individuals required to isolate under Austrian law due to measures implemented by national health authorities. Consequently, the compensation indirectly relates to residency within Austrian territory, which disproportionately affects migrant workers and consequently constitutes indirect discrimination. While public health is a legitimate reason to restrict the freedom of movement for workers, the CJEU acknowledges that isolation measures and the provision of compensation encourage compliance. However, this is to the exclusion of migrant workers required to isolate under the health measures in force in their Member State of residence, and the compensation provided in terms of the EpiG consequently does not appear to be appropriate to achieve the objective of compliance for public health.

CJEU’s Ruling

The equal treatment required under Article 45(2) TFEU and Article 7(2) of Regulation No 492/2011 prohibits all covert forms of discrimination which, through the application of other distinguishing criteria, lead in fact to the same result. Thus, a provision of national law, even if it applies regardless of nationality, must be regarded as indirectly discriminatory if it is intrinsically liable to affect workers who are nationals of other Member States more than national workers unless it is objectively justified and proportionate to the aim pursued.

The CJEU thus held that Article 45 TFEU and Article 7 of Regulation No 492/2011 preclude legislation of a Member State under which the granting of compensation for loss of earnings suffered by workers as a result of isolation ordered following a positive COVID-19 test result is subject to the condition that the imposition of the isolation measure be ordered by an authority of that Member State under that legislation.

This article was first published in The Malta Independent on 14/06/2023.