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Enforcement of the applicable law to aircrew - ACP, ECA & EurECCA common views

The aviation sector is particularly exposed to non-compliance with applicable law and misapplication of EU legislation in general. The reason identified by many is the transnational nature of the airlines’ operations and, consequently, the highly mobile character of the pilots/aircrew jobs that makes it difficult to determine the law applicable to employees as well as the State(s) with the regulatory oversight responsibility (incl. in the employment and taxation domains).

Executive Summary 

This paper concerns applicable legislation both from a social security (Regulation 883/2004) and an employment law perspective (Rome I Regulation). While social security law applicable to aircrew depends on the home base, applicable employment law is in principle determined based on the “habitual place of work”. The habitual place of work is also the main criterion for determining the competent jurisdiction when a dispute arises between an employer and its employee (Brussels Ibis Regulation). Recently, in the Crewlink cases (C-168/16 and C-169/16), the European Court of  Justice clarified that the home base is a significant factor/indicium when it comes to locating the “habitual place of work”.

As demonstrated by several studies, reports and recent court cases,  the aviation sector is particularly exposed to non-compliance with applicable law and misapplication of EU legislation in general. The reason identified by many is the transnational nature of the airlines’ operations and, consequently, the highly mobile character of the pilots/aircrew jobs that makes it difficult to determine the law applicable to employees as well as the State(s) with the regulatory oversight responsibility (incl. in the employment and taxation domains).

Our associations concur that both the social and competition dysfunctions of the EU aviation market need to be addressed as a matter of urgency at both EU and national level. Our associations developed this joint paper to express their concerns and to jointly propose concrete actions to remedy the identified problems. The suggested solutions focus mainly on two aspects and can be summarized as follows:

1. Establish a link from the legal and oversight perspective between any airline’s operational base (other than the Principal Place of Business) and the Member State where the base is located. Prior notification about the opening of each base and compliance with local/national law would be required.

2. Clarify by EU law that the ‘home base’ equates to ‘the habitual place of work’ and as such it should be as stable as possible. Change of home base entails a change of applicable legislation.
 

1. ECA, EurECCA and ACP concerns: distortion of competition and lack of social dimension in the EU aviation internal market.

The EU aviation internal market is considered by many a success in terms of regional integration and liberalisation (removal of all operational/commercial restrictions). However, it was found by the EU Commission’s report on the evaluation of the Air Services Regulation1 that the founding legal act of the aviation market - the Air Services Regulation2 - has not fully reached at least two of its overarching objectives: the establishment of a level playing field between EU airlines and a market where all players - incl. employees – can benefit from the created growth.

ECA, EurECCA and ACP identified two main reasons for this partial achievement and those were recently confirmed by the EU Commission’s report on the evaluation of the Air Services Regulation:

1. Lack of compliance and enforcement of the obligation for the airlines that operate in a stable and continuous manner from multiple operational bases (in several countries) to comply with every country/base’s set of national laws & regulations. Trans-national airlines operating in several Member States or subsidiaries, holding multiple Air Operator Certificates (AOC) and Operating Licenses (OL) in different countries have become a widely spread business model.

2. Lack of (binding) provision on the aircrew’s home base principle. More generally, the social repercussions of a fully integrated & liberalized EU aviation market were completely neglected so far.

[For background information on the notions of ‘home base’ and ‘operational bases’, see Annex 1].

ACP members and several other airlines that are committed to socially responsible business models are being gradually undermined by those ‘ingenious’ operators that exploit the legal loopholes of the Regulation to gain a competitive advantage and unduly benefit from advantageous regulatory frameworks and more lenient oversight mechanisms.

ECA & EurECCA members – airline pilots – are equally impacted by these legal loopholes that are indeed at the origin of numerous adverse social consequences. In fact, although the Regulation does not specifically cover social aspects, it has been recognised that some of its provisions have an impact on workers (e.g. leasing, ownership & control)3.

The Regulation, for instance, does not, within itself, set an obligation to tie an operational base to the compliance with the applicable employment & broader social legislation of a given country, although wider EU law would expect this. A reference can be only found in Recital 94 that implies that there is a link between the opening of a base outside the country of the Principal Place of Business (PPoB) and aircrews’ social conditions. However, Recital 9 served so far as a mere recommendation to Member States.

Today, airlines are free to designate (= choose) any country in the EU as their PPoB even though they do not have substantial air transport activities in that country. The Air Services Regulation does not adequately reflect the reality of today’s operations, namely the extensive use of outsourcing and multiple operational bases by certain airlines that operate in a permanent and stable manner from EU/EEA States other than their designated PPoB5. This  is a practice/business model that spread on a large scale after the Regulation was adopted and this process was also eased by the legal vacuum present in the Regulation itself.

As long as air carriers are allowed, under the Air Services Regulation, to conveniently pick a country for their regulatory compliance, some operators will continue designating the State(s) with a more business-friendly regulatory environment – incl. in the areas of taxation and employment6. But this flexibility & commercial freedoms (i.e. provision of services in a systematic manner from any point in the EU) – when unfairly exercised by some market players – do come at the expense of the employees, who are currently paying the highest price, and are subject to the gradual but steady deterioration of their working conditions. Additionally, those airlines that, by playing by the rules and operating in a responsible way – including towards their workforce – are gradually losing competitiveness, are faced with a decline of market share or may even see themselves compelled to go in a similar direction.

In some cases, it was ascertained that where the PPoB was set up in a country where the airline performed none or only a very few flights, the choice of PPoB was mainly – if not only – driven by regulatory/fiscal considerations specific to the employment/labour area e.g. loose national regulation on temporary agency work and self-employment, statutory restrictions to the right to strike, more advantageous social security regime.

The evaluation report issued by the Commission concluded, in fact, that there are indications that some level of ‘rule shopping’ to avoid higher labour costs is indeed taking place7.

The ever-increasing use of multiple operational bases (outside the PPoB) raises also questions as to which labour law is applicable to aircrew who are based outside the State of the PPoB and creates a high degree of legal uncertainty. This legal uncertainty leads to risks of an unlevel playing field in the internal market as well.

In joined cases 168/16 and 169/16 relating to aircrew specifically, the ECJ clarified that the concept of ‘home base’ constitutes a significant indicium for the purposes of determining the ‘place where the employee habitually carries out his work’ to establish jurisdiction of the courts in employment disputes8. However, the ECJ’s conclusions (September 2017) have not yet been linked to the applicable labour law (consistently with the jurisdiction aspect) and more importantly, have not been codified into EU law (e.g. through an amendment to the Air Services Regulation). This means that airlines are not required by law to abide by this principle, and employees, who are subject to malpractices can only try to bring a case before the national Court (provided they know which State has the competent jurisdiction) and wait to see if the judge rules in accordance with the ECJ’s conclusions.

For all the reasons stated above, our associations conclude that the Air Services Regulation is no longer fit for purpose in this particular context:

In fact, the Commission’s report itself concluded that despite the significant increase in the total level of flight activity across the EU, the overall level of employment in the aviation sector has decreased because of significant productivity improvements9 (e.g. outsourcing). And in terms of fair competition, the overarching internal market objectives of the Air Services Regulation linked to the creation of a level playing field and prevention of discrimination between EU carriers and market distortions, have only been partially met10.
 

France Marseille
The right & freedom to provide services is therefore guaranteed but it is also made conditional to the respect of local social legislation
2. Best practices

Certain EU countries have developed or amended national legislation to address the issue of ‘rule shopping’ and now require airlines that perform flights from their territory through operational bases but have their PPoB in another EU Member State, to comply with their national labour law.

The right & freedom to provide services is therefore guaranteed but it is also made conditional to the respect of local social legislation. In 2006, France adopted a decree that amended both the French Civil Aviation code and the French Labour Code to clarify that all operational bases of any airline (EU and non-EU) located in the French territory will fall under the scope of the French Labour Code Décret 2006 – 1425 (see Annex 3).

3. Suggested solutions
Operational base (applicable law)

#1 Amend the Air Services Regulation to create an obligation for airlines that provide in a stable and continuous manner services from operational bases outside their PPoB country to comply with the national legislations – incl. employment & labour law of the country where the base is located. One simple way would be to turn Recital 9 into an Article, hence a binding provision.

In 2007 during the legislative process that led to the adoption of the Regulation, the EU Commission missed the opportunity to introduce such a requirement. Despite the support of the EU Parliament, the amendment n. 35 (see Annex 4) was finally not retained in the Regulation.

One of the following proposals could be considered to amend the Regulation:

> EU air carriers shall comply, in accordance with EU law, with the rules on employment conditions, including those laid down in collective agreements, of the Member States where that carrier operates air services through an operational base.

> The Member State (other than the PPoB country) in which an EU air carrier operates services through an operational base shall not be prevented from applying, in accordance with EU law, its rules on employment conditions, including those laid down in collective agreements.

#2 Amend the Air Services Regulation to introduce a mandatory prior notification for the airlines that plan on opening a base in a Member State outside their PPoB.

Airlines should be required to notify their PPoB Member State about the opening of operational base(s) in other EU countries. The PPoB Member State should subsequently send the information to the Member State(s) of the new base(s). The prior notification will provide all relevant authorities with certainty about all operational bases of the airlines they will have to oversee. Moreover, a simple notification does not represent a disproportionate administrative burden.

#3 Amend the Air Services Regulation to introduce an obligation for airlines to notify the labour authorities of the Member State(s) in which they open stable operational bases.

Labour authorities should be notified about the personnel – incl. crew members – that will be (home) based in that given base and any other employee who may be temporarily transferred (in some cases, posted) from other bases. Base visits by the authorities should be regular to verify the lawfulness of the contractual employment relations (and social security affiliation) of the mobile personnel working in those operational bases.

Considered the highly mobile nature of aircrew’s jobs and because such a notification to labour authorities would be justified for reasons of ‘overriding general interest’ (see Annex 5), it does not represent an obstacle to the free provision of services.

Directive on Services in the Internal Market 2006/123/EC (that excludes transport from its scope) contains this important principle. The need felt by the regulators at that time was, in fact, to balance the fundamental economic freedom to provide services in the internal market with other no-less important considerations – incl. the need to comply with labour law – that could in some cases derogate/restrict that freedom.

The Air Services Regulation was adopted two years later to precisely regulate a type of services not covered by that general Directive. Therefore, for consistency, the Regulation should be changed to make air services also subject to the principle of overriding general interest. The Commission’s report itself refers to the necessity of balancing complete commercial freedoms against the interests of the society, by maintaining the safety of the operations, protecting consumers and workers11.

Home Base

#1 Amend the Air Services Regulation to codify the ‘home base’ as the default criterion for determining the competent jurisdiction and applicable mandatory labour law for aircrew, in line with the case law of the ECJ (C-168/16 and C-169/16). The default criterion of the home base should apply to all carriers with operational bases in the EU (incl. non-EU carriers). This solution should cover both employees (i.e. all employed aircrews, including those hired by intermediaries) and self-employed, as is the case for social security and safety rules.

#2 A new definition of ‘home base’ should be introduced:

“For the purpose of establishing applicable social security legislation and applicable labour law valid for a crew member based outside the territory of the Member State where the community carrier has its principal place of business, and notwithstanding the definition in Annex II of Regulation (EU) 83/2014 laying down technical requirements and administrative procedures related to air operations, the home base is the aircrew's place of work which shall be considered the location from which the crew member is carrying out his/her actual duties and main activities, and where under normal circumstances the operator is not responsible for the accommodation of the crew member concerned. This location shall remain stable. When a crew member is transferred to a home base in a different Member State this implies a change in an essential part of the employment contract (the place of work) and a change in the corresponding legislative framework”.

However, the ‘home base’ should not be made by law the only possible mandatory criterion to determine the applicable law (and jurisdiction), employees should be entitled to invoke other criteria, if need be. In practice, aircrew will enjoy the right to challenge the ‘home base’ criterion when their home base has been artificially assigned to them and demonstrate that there is a more relevant connecting factor to determine the applicable labour law. This way, unscrupulous employers would not be able to circumvent the labour/employment  legislation of a Member State by assigning a fake home base to their aircrew members or by changing their home base regularly – which is another creative (and bad) practice we observe in the market (so-called mobile pilots or ‘floaters’).
 

Footnotes
1  SWD (2019) 295 final COMMISSION STAFF WORKING DOCUMENT: EVALUATION of the Regulation (EC) No
1008/2008 on common rules for the operation of air services in the Community.
2 Regulation (EC) n. 1008/2008 on common rules for the operation of air services in the Community
3 The Commission only recently acknowledged in its Inception Impact Assessment that measures to allow the control of EU air carriers by foreign capital might also have an impact on jobs for EU nationals.
4 Recital 9: “With respect to employees of a Community air carrier operating air services from an operational base outside the territory of the Member State where that Community air carrier has its principal place of business, Member States should ensure the proper application of Community and national social legislation”.
5 Commission’s report SWD (2019) 295 final p. 81 found that the current definition of PPoB is open to interpretations as to which precise functions need to be exercised in the Member State of the PPoB, making the concept not easy to apply.
6 Malta and Ireland receive more operating licenses applications than other EU countries according to the Commission’s report SWD (2019) 295 final, p. 30
7 SWD (2019) 295 final, p. 30.
8 C-168/16 and C-169/16 – Nogueira and others vs. Crewlink and Moreno vs. Ryanair
9 SWD (2019) 295 final, p. 17
10 SWD (2019) 295 final, p. 28
11 SWD (2019) 295 final, p. 96.

 

Enforcement of the applicable law to aircrew, ACP ECA EurECCA Common views, 2019.pdf
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Who we represent

Airline Coordination Platform (ACP) is a group of major European airlines, with the purpose of advocating for fair competition in the European aviation sector, with a specific focus on social affairs and external air political relations. The airlines of the group employ a total of around 200.000 people. Contact: Hans Ollongren – office@airlinecoordinationplatform.com

European Cockpit Association (ECA) is the representative body of European pilot associations, representing over 40.000 pilots from across Europe, striving for the highest levels of aviation safety and fostering social rights and quality employment in Europe.

European Cabin Crew Association (EurECCA): is made up of cabin crew unions from ten European countries, representing over 70% of organized cabin crew in Europe, and promoting better living and work conditions, as well as aviation safety.
Contact : Xavier Gautier - contact@eurecca.eu