Anti-discrimination Legislation and Protection of Working Conditions of the Self-employed

Introduction

This contribution discusses the CJEU ruling in C-356/21 J.K. v TP S.A. It concludes that the ruling contributes to the ongoing development that disentangles the concept of the protection of working conditions from the employment relationship, granting self-employed workers who provide work on a personal basis protection against discrimination. It further discusses the ruling in the context of the spread of non-standard forms of employment on the labour market and policy initiatives to tackle them, pointing out some dangers associated with this development that should be considered by policymakers and courts.

Factual background

J.K, an audiovisual editor engaging in independent economic activity, provided editing services to TP S.A. (the largest Polish TV station owned by the state) via short-term contracts for specific work (a type of civil law contract). The contracts were signed on a continuous basis between 2010 and 2017. In October 2017, in the context of TP's internal reorganisation, J.K.'s work was positively evaluated. In late November 2017, J.K. was provided with a new contract for specific work and assigned two shifts in December 2017. In early December 2017, J.K. and his partner published a YouTube video promoting tolerance towards same-sex couples. A few days later, J.K. received an email from TP cancelling his shifts and, from that moment onwards, he did not receive any new contracts from TP. J.K. filed a suit against TP at the District Court in Warsaw, claiming compensation for non-material harm resulting from a breach of the principle of equal treatment in the form of direct discrimination on grounds of sexual orientation in respect of the conditions for accessing and pursuing an economic activity under a civil law contract. The claim was based on the Council Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation (hereinafter the Framework Directive).

Polish transposition of the Framework Directive provides that the law applies to ‘the conditions for taking up and pursuing economic or professional activities, including in particular in the context of an employment relationship or work performed under a civil-law contract’, but it does not apply to ‘the freedom of choice of parties to a contract so long as that choice is not based on sex, race, ethnic origin or nationality’. Therefore, Polish law does not contain explicit reference to the sexual orientation while describing the freedom of choice of parties. However, in a following provision, it prohibits unequal treatment based on other factors, including sexual orientation with respect to the conditions for taking up and pursuing economic or professional activities.

The District Court posed two questions to the CJEU. The first question concerned whether the applicant's independent activity based on contracts for specific work could be classified as self-employment within the meaning of the Framework Directive, in particular its Article 3(1)(a) which provides that the Directive applies to persons in relation to ‘conditions for access to employment, to self-employment or to occupation’. The second was whether Article 3(1)(a) must be interpreted as protecting against discrimination based on sexual orientation also in a situation where the refusal to conclude a contract with a self-employed person solely on the ground of his sexual orientation appears to constitute a restriction on the conditions for access to self-employment.

The CJEU ruled that the Framework Directive must be interpreted as precluding national legislation from having the effect of excluding, on the basis of the freedom of choice of contracting parties, from the protection against discrimination conferred by the Directive. More specifically, it ruled out that national legislation cannot treat the refusal, based on the sexual orientation of a person, to conclude or renew with that person a contract concerning the performance of specific work by that person in the context of the pursuit of a self-employed activity, as being within the freedom of choice of contracting parties.

Commentary

The issue considered by the Court was the scope of applicability of Article 3(1)(a) and the definitions provided therein of employment, self-employment, and occupation. This became one of the focal points of Advocate General Ćapeta's opinion in the case. The Advocate General claimed that the Directive refers to the autonomous understanding of the concept of self-employment and proposed that the Framework Directive's ‘application is that a person engages in personal work, irrespective of the legal form under which the work is provided’. The Advocate General referred to various contributions within the labour law field. ¹

The Court did not want to provide binding definitions of employment, self-employment and occupation, but rather to offer some guidance on how to identify situations where EU anti-discrimination law would apply. It claimed that the provision of Article 3(1)(a) applies to ‘conditions for access to any occupational activity, whatever the nature and characteristics of such activity’ (para 36), effectively covering ‘a wide range of occupational activities’ (para 44), following its previous position from the HK/Danmark and HK/Privat case. ² The Court concluded that the applicability of Article 3(1)(a) is constructed broadly and ‘does not depend on the classification of that activity as “employment” or “self-employment”’ (para 47). It thus concluded that Article 3(1)(a) applies to occupational activities when ‘activities are genuine and are pursued in the context of a legal relationship characterised by a degree of stability’ (para 45). Further, it suggested that activities shall be provided ‘on a personal basis […] enabling the applicant to earn his livelihood, in whole or in part’ (para 47). The only limitation that the Court noted referred to activities ‘consisting of the mere provision of goods or services’ (para 44), which shall be interpreted as not meeting the previous criteria.

The next problem in the ruling concerned Article 3(1)(c), which is applicable ‘in relation to employment and working conditions, including dismissals and pay’. The problem with the interpretation is that while Article 3(1)(a) explicitly refers to self-employment, Article 3(1)(c) refers only to ‘employment’ and ‘working’ conditions. The Court assumed a broad interpretation of applicability, claiming that the Directive aims to eliminate ‘all discriminatory obstacles to access to livelihoods and to the capacity to contribute to society through work, irrespective of the legal form in which it is provided’ (paras 54 and 58).

Thus, the Court claimed that protection under the Directive cannot depend on how national law categorises an employment (or self-employment) relationship. As such, the ruling must be seen as one of the elements constructing a European definition of the protection of working conditions as distinct from that associated only with an employment relationship.

The ruling contributes to the growing ambiguity on how to understand the concept of working conditions at the EU level. Article 3(1)(c) of the Framework Directive clearly distinguishes between employment and working conditions, while the idea of working conditions has usually been associated with the EU concept of worker and linked to an employment relationship. ³ In particular, the recent Directive 2019/1152 on transparent and predictable working conditions in the European Union provides that that ‘genuinely self-employed persons should not fall within the scope of this Directive since they do not fulfil those criteria [of the CJEU for determining the status of a worker]’. This distinction has a foundation in the long-established understanding that the Article 31 of the Charter of Fundamental Rights is limited to workers in an employment relationship, and of Principle 5 of the European Pillar of Social Rights that workers have a right to fair and equal treatment regarding working conditions ‘regardless of the type and duration of the employment relationship’.

Recently however, some regulatory initiatives have aimed to broaden the scope of the protection of working conditions to some groups of self-employed, i.e., persons not in employment relationship. The European Commission's Guidelines on collective agreements by solo self-employed people ⁴ adopted the concept of working conditions to formulate exceptions to Article 101 TFUE by defining them as ‘matters such as remuneration, rewards and bonuses, working time and working patterns, holiday, leave, physical spaces where work takes place, health and safety, insurance and social security, and conditions under which solo self-employed persons are entitled to cease providing their services or under which the counterparty is entitled to cease using their services’. The proposal for a directive on improving working conditions in platform work ⁵ has also assumed a broader understanding of working conditions, also covering, to some extent, genuine self-employed (Article 10 of the proposal). However, the protection provided by the proposal is limited to a number of areas, such as transparency and human oversight over algorithmic decision-making.

An important point must be made on this ambiguity. In fact, in this ruling the Court aims to establish that the meaning of the protection of working conditions should be interpreted differently in the different subdomains of the law, as the ruling explicitly highlights that the Framework Directive must not be understood as based upon Article 153 TFEU that gives the EU competence to regulate the issues concerning working conditions and which is still understood in the context of the employment relationship (para 43). This remark by the CJEU reflects the legal basis of the Framework Directive.

The next section will analyse how these incoherent initiatives blurring the link between the protection of working conditions and the employment relationship might create a problematic situation from the point of view of working standards.

Broadening protection for the self-employed and undermining reclassification?

In the labour law field, there are long-standing voices pointing out the dangers of creating ‘third status’ forms of protection, aiming to distinguish (some) groups of self-employed workers and grant them forms of protection similar to those associated with employment status. If the working conditions of some groups of self-employed workers are protected, this (supposedly) reduces the incentive to prevent misclassification by stakeholders such as policymakers, trade unions, and the self-employed workers themselves. Providing protections for (some) groups of self-employed workers might contribute to a blurring of the distinction between self-employment and employment.

J.K. v TP S.A. indirectly manifests these controversies. On the one hand, on the positive note, the ruling effectively improves the situation of the self-employed by clarifying the applicability of existing regulations. It can be argued that the risk of blurring the boundaries has not materialised as the CJEU distinguishes between the personal provision of work from the ‘mere provision of goods or services’ characteristic of other businesses, and that this does not interfere in any way with labour laws protecting workers in an employment relationship. Moreover, one might argue that the broadening of the scope of protection is limited to the area of anti-discrimination legislation. This is loosely linked to issues traditionally associated with the protection of working conditions, such as those related to pay, working time, etc.

However, such an argument needs to be contextualised. While reclassification was not the subject of the CJEU ruling nor the claim of J.K., the facts discussed in the ruling suggest that it is highly likely that J.K. was in fact misclassified. The Polish labour market is riddled with non-standard forms of employment, with labour law scholars and case law struggling to draw the line between employment and self-employment. ⁶ In this context, continuously renewed contracts for specific work based on civil law (concluded either with sole proprietors or with persons who do not even run registered businesses) have been used as substitutes for employment contracts, and to a much larger extent in Poland than in most EU countries. ⁷ This applies particularly to TP, an employer which adopted HR practices that prioritised aggressively bringing down labour costs, and that was known to engage in outsourcing and outplacement activities. In the past, employees hired directly by TP were transferred to spin-off enterprises where they were offered non-standard forms of employment, which were questioned several times by the Social Security Institution and the authority supervising TP as a public broadcaster. ⁸ Trade unions also highlighted the fact that TP workers were unofficially forced by the management to become self-employed to avoid effectively being dismissed. ⁹ New workers at TP were continuously hired as independent contractors and not as employees, even though it did not bring financial savings, as noted by the Supreme Audit Office. ¹⁰

Setting the issue of the refusal to renew a contract based on discrimination aside, J.K. seems to be one of those affected by the austerity-like policies of this public company long before the actual discriminatory practices took place. He worked for TP for seven years and was deeply integrated within the HR structure, as manifested by performance reviews undertaken by the company. The ruling is highly likely a result of an action of a formally self-employed worker who pursued a claim based on protection against discrimination as a businessperson. The alternative for J.K. would have been to bring a reclassification claim that would have brought the benefit of protection by the Framework Directive anyway. Of course, reclassification would have had much broader implications for J.K.'s rights.

The path taken by J.K. and his lawyers was not coincidental. Polish courts are increasingly reluctant to reclassify self-employed workers in the context where they have been provided with some employment protections that characteristic of the third status. In the last 10 years, Polish governments have expanded social security protection for self-employed civil law contractors, introduced an hourly minimum rate, and have granted them a right to association. These measures went hand in hand with the introduction of new types of civil law contracts for specific sectors like temporary agency work and agriculture. The result is that despite very good macroeconomic indicators and unprecedented levels of low unemployment, the share of those who are self-employed without employees remains very high at around 18% for men and 10% for women. ¹¹ This is because self-employment, with its fragmented forms of working conditions protection, has virtually become a substitute for employment, accepted by both policymakers, courts, and it has confused labour inspection. Still, the use of self-employment by employers brings its tax and regulatory advantages, while self-employed workers remain without basic protections that are characteristic of labour law, including protection against dismissals, regulated working time, and paid holidays. This highlights the substantial risk associated with an emergence of third status-like solutions where basic labour law rights are undermined by the (effectively) blurred boundaries and substantiated by the regulatory actions aimed to expand the protection of self-employed workers, but without tackling the most fundamental problem, namely, the misclassification.

These ambiguities are, to some extent, manifested in the regulatory initiatives at the EU level. For instance, the proposal for the platform work directive assumes broad criteria to prevent misclassification of workers, but it also assumes the co-existence of (reclassified) employees and genuine self-employed workers on the same labour platforms, with differing forms of protection. Distinguishing between these two groups in the context of both implementation and adjudication based on the platform work directive might be challenging, as the latter group will also benefit from some forms of working conditions protection (see Article 10 of the proposal on the platform work directive; the guidelines on solo self-employed; and the ruling discussed).