The discussion on the revision of the coordination rules of unemployment benefits – a battlefield between East and West
| Date | 01 June 2020 |
| Author | Frans Pennings |
| DOI | 10.1177/1388262720924862 |
| Published date | 01 June 2020 |
| Subject Matter | Articles |
EJSS
Article
European Journal of Social Security
2020, Vol. 22(2) 148–162
The discussion on the revision
ª The Author(s) 2020
of the coordination rules
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of unemployment benefits –
DOI: 10.1177/1388262720924862
journals.sagepub.com/home/ejs
a battlefield between
East and West
Frans Pennings
School of Law, Utrecht University, the Netherlands
Abstract
Unemployment benefits are a special type of benefit for coordination purposes since Member
States exporting benefits tend to fear that supervision of their benefit recipients in the host State
will not be satisfactory. For this reason, several complicated rules have been made, which are
disadvantageous for the benefit recipients living in a country with low unemployment benefits who
last worked in a country with higher benefits. The rules are also disadvantageous for countries with
many outgoing frontier workers. Although the proposal for revising the Regulation includes new
rules to address these problems, the large differences in interests between Member States make it
difficult to reach a compromise.
Keywords
coordination of social security, unemployment benefits, revision of the coordination regulation
1. The context of the coordination of unemployment benefits
Coordination of unemployment benefits has encountered some specific problems over time which
seem to follow from the specific characteristics of this type of benefit. These benefits are closely
related to the right of free movement and create a safety net in case the take-up of work in a new
Member State fails. On the basis of coordination rules, periods completed in the State of origin can
be aggregated. Without such rules, a person who becomes unemployed may be without income
protection. Losing employment is serious risk for persons who take up work in another Member
State since there is generally no employment protection during the probation period in a new job.
Corresponding author:
Professor Frans Pennings, School of Law, Newtonlaan 201, Utrecht 3584 HB, the Netherlands.
E-mail: f.pennings@uu.nl
Pennings
149
The rule that unemployment benefits can be used as a means of income support when seeking
work in another Member State is also relevant for promoting free movement; this is known as the
export of unemployment benefit.
There are two major issues that affect the coordination of unemployment benefits. The first is
that the search for work leads to movements that are not symmetrical for Member States, but they
go predominantly from poorer Member States to richer States and from East to West. This means
that the aggregation of periods is mainly paid for by the richer States while the export of benefits is
mainly paid for by the richer States.1 The second major problem is related to the condition that, in
order to be entitled to unemployment benefit, a person has to be seeking work. This is a compli-
cated condition, particularly for the export of unemployment benefits, as supervision of the work-
seeking activities of the benefit recipient has to be carried out by a State other than the one that
pays the benefits. Doubts whether the host State is really monitoring search activities are very
relevant to discussions of the maximum duration and possible extension of the export of unem-
ployment benefit. Both in the case of aggregation and in the case of export of benefit there can be a
suspicion of abuse of the rules, i.e. that persons have entered work and lost work in the host State in
order to obtain higher benefits in the State of origin and, in case of export, that they are not really
seeking work, but have a kind of holiday, often in the State of origin. This is the context of the
discussions of the revision of the Coordination Regulation.
Since the accession of Central and Eastern European States to the EU, movement of workers
from these States to Western States has grown considerably. Although in absolute numbers the cost
of unemployment benefit for cross-border workers is relatively small, the issue of the fair distri-
bution of costs is a matter of principle for some receiving States.2
In preparation for the revision of the Coordination Regulation, the issues concerning unem-
ployment benefits were a major topic for discussion. Disagreement on this chapter was even the
reason for suspending the revision of the Regulation in Spring 2019 although agreement had
already been reached on the other chapters. At the time of completion of this article, no agreement
on a final text has been reached. Still, it is worth discussing the issues that were the subject of
heated debate, which even caught the attention in some national Parliaments and news media.
The staff of the European Commission produced an Impact document (hereafter, Impact Doc-
ument) containing valuable figures on the actual use of unemployment benefits.3 It also mentions
the different points of views of the Member States in the Administrative Commission on the
proposals, and provides a good insight into how the coordination of unemployment benefits is
understood. There will be frequent references to this document in the discussion below.
2. Aggregation rules
2.1. Which periods can be aggregated?
For unemployment benefits, the general aggregation rules (Article 6 of the Coordination Regula-
tion) do not apply. Instead, Article 61 gives special rules, which have to do with the fact that there
are differences between national unemployment benefit schemes in which types of periods are
1. See De Wispelaere, De Smedt and Pacolet (2020).
2. Idem.
3. European Commission, Commission staff working document. Impact assessment. Initiative to partially review
Regulation (EC) No 883/2004), SWD (2016) 460, Brussels, 2016.
150
European Journal of Social Security 22(2)
relevant to acquiring benefit rights. The EU legislature did not want to treat all these periods in the
same way, hence this special article.
Article 61 provides that the competent institution of a Member State has to aggregate periods of
insurance, employment or self-employment completed under the legislation of any other Member
State as though they were completed under the legislation it applies. However, when the applicable
legislation requires periods of insurance, the periods of employment or self-employment com-
pleted under the legislation of another Member State shall not be taken into account unless such
periods would have been considered to be periods of insurance had they been completed in
accordance with the applicable legislation.
The Court of Justice, however, has given a broad interpretation of term ‘period of insurance’ in
the Warmerdam judgment.4 The Court considered that the term ‘periods of work’ refers only to
periods in which work was done which, under the system under which these periods are performed,
are not considered as periods which give the right to affiliation with a system of unemployment
insurance. In other words, periods of insurance are all periods which are relevant to acquiring a
right under the unemployment benefit scheme. Secondly, the Court of Justice considered that the
aggregation rule does not require that periods have to be completed as periods of insurance for
the same branch of social security. As a consequence, the Netherlands had to take into account the
periods completed in the United Kingdom even though these were not periods of insurance for the
British Unemployment Benefit Act, since these periods would have been periods of insurance if
they had been completed in the Netherlands.
The effect can be seen in respect of the mini jobs in Germany. In Germany, jobs for which less
than 450 euros are paid are not insured for unemployment. In the Netherlands, there are no
thresholds for considering periods of work as insured. If a person has first worked in Germany
and then starts to work in the Netherlands, and needs the aggregation of periods in Germany for his
claim in the Netherlands, the periods in Germany count for this purpose since they are considered
as insured periods in the Netherlands; the fact that they are not insured for unemployment insur-
ance in Germany is no obstacle to the aggregation of these periods.
The Impact Document5 discusses the example of Denmark that provides coverage in an unem-
ployment scheme on a voluntary basis. Take a mobile worker who chose not to be covered by this
voluntary scheme during her period of employment in Denmark. As result of the Warmerdam case
law of the Court of Justice, she is able to aggregate the periods of work in Denmark when she
claims unemployment benefit (after having taken up work there) in another Member State if the
periods fulfilled in Denmark would qualify as insured periods against the risk of unemployment in
that other Member State.
According to the Impact Document, the Warmerdam case law is not consistently applied in the
various Member States. An explanatory factor for this is, as appeared in discussions in the Admin-
istrative Commission, that many Member States are of the view that the wide interpretation of the
Court leads to unjustified results.6
Consequently, there is an uneven application of the rules, which leads to legal uncertainty. This
is undesirable, inter alia since it may discourage the search for work in another Member State.
4. Case 388/87, [1989] ECR 1203.
5. Impact Document: 39.
6. Impact Document: 43.
Pennings
151
2.2. The proposed new rules for assimilation
For this reason, in the proposal for revision of the Coordination Regulation a new Article 60a is
proposed, that has...
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