Svenska Staten v Holmqvist

Someone working for an insolvent employer carrying out “activities” in at least two member states is entitled to be paid outstanding wages and other entitlements by the state in which they “work or habitually work” under the Insolvency Directive. In Svenska Staten v Holmqvist (IDS 867), the European Court of Justice (ECJ) said that “activities” did not mean that undertakings in one member state needed an actual physical branch in the other, but they did need a stable, economic presence.

Basic facts

Mr Holmqvist worked as a lorry driver for a company (Jorgen Nilsson) based in Sweden which had no branches abroad. He delivered goods from Sweden to Italy, crossing Germany and Austria en route.

On arrival, staff employed by Jorgen Nilsson’s customers unloaded the van and loaded it again with goods being sent back to Sweden. Mr Holmqvist supervised the loading to ensure compliance with the rules on road safety but did not do any of the work himself.

In April 2006, the company was declared insolvent. Under Swedish law Mr Holmqvist was entitled to his outstanding wages if he could show that he worked primarily in Sweden.

The Swedish Supervisory Authority on Insolvencies, however, declared that Mr Holmqvist was not entitled to this wage guarantee under the Insolvency Directive because the company carried out “activities” in member states other than Sweden and Mr Holmqvist worked habitually in those other states.

Relevant law

Article 8a of the Insolvency Directive (80/987) states:

“When an undertaking with activities in the territories of at least two Member States is in a state of insolvency …, the institution responsible for meeting employees’ outstanding claims shall be that in the Member State in whose territory they work or habitually work.”

National court questions

The national court asked the ECJ to clarify whether the reference to “activities” in Article 8a required a business (or undertaking) to have a permanent place of business in a second member state. And if not, what would constitute “activities” in at least two member states?

ECJ decision

The Court said that as the whole point of Article 8a was to strengthen workers’ rights, the concept of “activities” had to be interpreted broadly.

In support of this approach, the ECJ noted that the original wording “undertaking with establishments” had been changed to “activities” in the final version of the directive. This, said the Court, showed a wish “to expand the article’s scope and not to confine it to undertakings with branches or places of establishment in a number of Member States”.

It concluded, therefore, that an undertaking established in one member state did not need to have an actual branch or fixed establishment in another state to satisfy the definition of “activities” in the directive.

So what would qualify as an “activity”? The ECJ noted that given the recent changes in telecommunications, businesses might be based in one member state, but employ a large number of workers in another and do significant business there without any physical infrastructure such as an office.

It said that these undertakings had to have a degree of permanence in that other state, such as the “enduring employment of a worker or workers” (that is, work that was necessary and carried out at the employer’s behest) to satisfy the definition of “activities”.

And although no physical infrastructure was necessary, the ECJ said that undertakings also had to have a stable economic presence in the other member state “featuring human resources which enable it to perform activities there”.

Applying that definition to this case, the ECJ said that a transport business that employed a worker who delivered goods between the state in which it was based and another state by crossing other member states was not carrying out “activities” under the Insolvency Directive.

Comment

This made sense. It meant that Mr Holmqvist could have his entitlements paid by the Swedish Authority, rather than having to bring his claims in Italy, Germany and/or Austria. We don’t think that this case alters the damaging conclusions from the European Court of Justice in the Viking, Laval, Ruffert and Luxembourg cases because those cases concern employers established, rather than simply having activities, in other member states.