C-79/01

PAYROLL AND OTHERS

OPINION OF ADVOCATE GENERAL MISCHO delivered on 7 May 2002 1

1. By order of 29 January 2001 the Corte Article 58(16) of Law No 144 of 17 May d'appello di Milano (Court of Appeal, 1999 3 (Law 144/99), lays down the follow- Milan) (Italy) referred a question to the ing rules: Court of Justice for a preliminary ruling concerning the interpretation of Articles 43 EC and 49 EC. Article 1(1) of Law 12/79:

'Where they are not carried out by the employer, directly or through his employees, all obligations relating to the employment, and social security and assist- ance of employed staff must be carried out exclusively by professionally qualified per- sons who are registered with the associ- ation of employment consultants or with the associations of lawyers, accountants, or business consultants, who are required, in that event, to give notice thereof to the employment inspectors of the provinces in whose territory they intend to carry out the abovementioned obligations.'

‘The following paragraphs shall be added at the end of Article 1 of Law No 12 of 11 January 1979, as subsequently amended:

4. I would observe, as Payroll Data Services Srl (Italy) (‘Payroll’) 4 points out, that Article 9(i) of Law 12/79 includes a certifi- For the purpose of performing the calculat- cate of residence among the documents to ing and printing operations relating to the be submitted in order to obtain registration obligations referred to in paragraph 1, and as an employment consultant. of carrying out the technical and ancillary activities relating to those operations, the undertakings referred to in paragraph 4 may use the services of data-processing centres (DPCs) provided that they are established and staffed exclusively by per- sons registered with the professional associ- ations previously mentioned in this law.... 5. Payroll, a company incorporated under Italian law, is a subsidiary of two French undertakings, ADP Europe SA and ADP GSI SA, whose activity is the provision of data-processing services for the preparation and printing of pay slips. Since Payroll did … Undertakings with more than 250 not meet the requirements with regard to employees which do not have their own internal departments to carry out the abovementioned operations may entrust 4 — Page 17, footnote 8, observations submitted to the Court by them also to data-processing centres (set Payroll.

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its staff laid down in Article 1 of Law that matter, to refer the following question 12/79, as amended by Law 144/99 ('the to the Court of Justice: contested provision'), the Tribunale di Milano (Italy) refused its application for approval of an amendment to the objects of that company, which read as follows:

6. In the case in the main proceedings before the Corte d'appello di Milano, 8. May I say, by way of a preliminary Payroll, together with ADP Europe SA remark, that the case in the main proceed- and ADP GSI SA, are challenging the ings does contain the foreign element refusal to approve the amendment, and required in order for Articles 43 EC and contend that the contested provision should 49 EC to apply. The adoption and exten- not be applied because it conflicts with the sion of the objects of a subsidiary company principles of freedom of establishment and by two undertakings whose registered freedom to provide services laid down in office is located in the territory of another Articles 43 EC and 49 EC. They contend Member State does indeed fall within the that that legislation by no means seeks to scope of Article 43 EC. 5 protect the public interest and in fact merely serves to protect persons who are registered with the abovementioned pro- fessional associations from competition.

9. In the wording of the question it has referred for a preliminary ruling the national court mentions that the Italian legislation 'prohibits, in absolute terms' 7. Since a matter relating to the interpre- undertakings having less than 250 tation of Community law was thus raised before it, the Corte d'appello di Milano 5 — Case C-108/96 Mac Quen and Others [2001] ECR I-837, considered it necessary, in order to resolve paragraph 16.

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employees from using 'external undertak- quoted by the Italian Government. It is ings providing services' relating to the settled case-law that the existence of cir- preparation and printing of their pay slips. culars or administrative practices cannot In that regard, a reading of the order for make national law conform to Community reference shows that it prohibits more law where national laws are incompatible particularly recourse to external service with the latter. 6 providers which are not staffed exclusively by persons registered with the abovemen- tioned professional associations.

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20. It remains to be seen whether the Treaty provisions relating to right of estab- requirement of registration with a profes- lishment by requiring a 'data-processing sional association leads to a different centre' like Payroll to be 'staffed exclus- assessment of the validity of the contested ively' by specialists registered in particular provision. professional registers.

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27. Article 43 EC states that 'freedom of 30. In that context, one cannot fail to establishment shall include the right to take criticise the judgment in Commission v up and pursue activities as self-employed Italy,10 cited by the Commission in its persons... under the conditions laid down observations. The action for failure to fulfil for its own nationals by the law of the obligations brought by the Commission country where such establishment is concerned the provision of services. It effected'. There can be no question of sought a declaration that, by maintaining rendering that provision simply meaning­ rules requiring that Community nationals less by stating that nationals of other who carried on haulage activities as service Member States are not required to comply providers in Italy be entered on the pro­ with those conditions if no such conditions fessional register kept by the Chambers of exist in their country of origin or if they Commerce following authorisation by the entail certain formalities being completed. Ministry of the Interior, the Italian Repub­ lic had failed to fulfil its obligations under Articles 12 EC, 43 EC and 49 EC.

'the requirement that lawyers be registered be submitted in order to obtain registration at a bar laid down by certain Member as an employment consultant. Does that States must be regarded as lawful in requirement constitute indirect discrimi- relation to Community law provided, how- nation on grounds of nationality where it ever, that such registration is open to is imposed on non-Italians? As we well nationals of all Member States without know, in Case C-145/99,14 the Court held discrimination. The requirement seeks to that the requirement that lawyers reside in ensure the observance of moral and ethical the judicial district of the court to which principles and the disciplinary control of the Bar at which they are enrolled is the activity of lawyers and thus pursues an attached is 'incompatible with Article 52 objective worthy of protection'. 12 of the Treaty, inasmuch as it prevents members of the Bar established in Member States other than the Italian Republic from maintaining an establishment in Italy'. The Court based its ruling on the case-law that 'the right of establishment enshrined in Article 52 of the Treaty entails the right to 34. In Corsten,13 the Court at least envis- set up and maintain, subject to observance aged the possibility that the requirement on of the rules of professional practice, more foreign skilled-trade undertakings to be than one place of work within the Com- entered in the trades register could be munity'. 15 justified in the case of establishment.

38. The answer to that question can only that not only must DPCs be 'staffed' be in the negative, since otherwise the result exclusively by persons registered with the would be the complete removal of the professional associations mentioned in the boundary between freedom of establish- law, but they must also be 'established' by ment and freedom to provide services. It is such persons. important in that regard to point out that another passage from Gebhard, cited above, namely paragraph 28, which states that 'a national from a Member State who... pursues a professional activity on a stable and continuous basis in another 41. In my view, this means that the found- Member State where he holds himself out ing members and the members of the from an established professional base to, boards of management of DPCs must also amongst others, nationals of that State' be such persons. relates to the chapter concerning the right of establishment.

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discrimination which is overtly based on 47. Even though I may have doubts on the nationality. The rule in question constitutes question whether those decisions do not an improper restriction on the right 'to set extend the scope of Article 43 EC too up and manage undertakings', within the far, 18 I am forced to acknowledge that meaning of the second paragraph of they are becoming settled case-law. The Article 43 EC. court making the reference refers to them expressly.

45. I do not see how that restriction could be justified on grounds of public policy, 48. I shall now consider whether the con- public security or public health (Article 56 tested provision can be justified by over- of the EC Treaty (now, after amendment, riding requirements relating to the public Article 46 EC)). interest.

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51. The Court considered that such legis- adopt stricter provisions than the others to lation was justified on grounds of public ensure that, according to Law 12/79 'all interest associated with the protection of obligations relating to the employment, and creditors or in order to ensure the proper social security and assistance of employed administration of justice as regards the staff' are strictly observed, in order in provision of professional legal services, particular to ensure that those workers and that the Member State in question would not one day have the unpleasant was entitled to consider that the objectives surprise of being refused certain benefits pursued by that legislation could not be which would have been due to them if all attained by less restrictive means. their contributions had been paid correctly.

52. The Court added that the fact that the 55. Protection for employees is one of the Member State of origin of the service overriding requirements relating to the provider imposed less strict rules than public interest already recognised by the another Member State did not mean that Court of Justice (see in particular Webb, 19 those rules were disproportionate and Arblade and Others, 20 Mazzoleni and hence incompatible with Community law ISA, 21 Finalarte and Others 22 and Por- (paragraphs 41 and 42 of Reisebüro tugaia Construções 23). Broeder, cited above).

56. It remains to be seen whether the 53. In Mac Quen and Others, cited above, specific rule at issue here, which applies the Court held, on the basis of similar only to undertakings with fewer than 250 reasoning, that, as Community law stood at employees, can be justified on grounds of that time, Article 52 of the EC Treaty overriding requirements relating to the (now, after amendment, Article 43 EC) public interest. did not preclude certain types of eye examination being reserved, for reasons relating to the protection of public health, for a category of professionals holding specific qualifications, such as ophthalmol- ogists, to the exclusion, in particular, of 57. In that connection, there first arises the opticians who were not qualified medical question as to what is to be understood by doctors. 'calculating and printing' operations. If, as

Payroll has claimed, the employers them- 60. In the grounds of its order for refer- selves supply to the DPCs, under their own ence, the national court, although it does exclusive responsibility, software which not take a clear view on the exact nature of already contains all the information on the tasks performed by DPCs, states that it individual employees, including all the cannot see what overriding requirement deductions to be made from their wages relating to the public interest might justify in respect of the various social security and the contested legislation. Payroll and the social insurance schemes, then it may be Commission share that view. The Italian concluded, as the Court held in Säger, that Government refers to a motive of protect- these are 'tasks, which... are essentially of a ing workers' rights. straightforward nature and do not call for specific professional aptitudes, as is indi- cated by the high level of computerisation which, in the present case, appears to have been attained by the defendant in the main proceedings'.24 61. For my part, I am also of the view that the distinction drawn in Law 12/79 between undertakings according to the number of staff they employ is hard to reconcile with any objective of worker protection. How is it to be explained that such protection does not require, depend- 58. In this case no obvious overriding ing on the size of the undertaking or, requirement relating to the public interest moreover, on whether pay slips are pro- can be relied upon in order to justify the duced within or outside it, the same inter- legislation in question. vention by employment consultants or persons with equivalent status? As Payroll quite rightly points out, the interests of the employees are the same whether the under- taking which employs them is large or small. Such a segmentation precludes in reality any justification by an alleged con- cern for worker protection. 59. If, however, as the Italian Government states, 'fulfilment of the obligations in question is not a simple matter of carrying out instructions received by the employer, but directly engages the responsibility of a qualified professional', in other words, if the undertaking which prepares the pay 62. The Italian Government has, moreover, slips undertakes as a first step the intellec- put forward no convincing justification to tual work of determining the net wages of explain this difference in treatment. The each employee, in accordance with the argument that the differentiation is relevant legislation, it is necessary to con- explained by a concern 'to protect compe- sider the legislation in greater depth. tition in the context of the liberalisation of the market in accordance with the Euro- pean directives' appears to me to be 24 — See Case C-76/90 Säger [1991] ECR1-4221, paragraph 18. extremely obscure and most unconvincing.

Far from seeking the liberalisation of the 65. The other arguments relied upon by the market, that segmentation gives rise, on the Italian Government meet with the same contrary, to the suspicion that its purpose is objections. Thus, the 'overriding principle to preserve an area of competence reserved of the personal nature of the services for Italian employment consultants. provided by liberal professions and of directness in the relationship between the professional and the client', even if it were such as to justify in principle the obligation to use employment consultants, which has still to be established, cannot on any view find expression in different requirements 63. The argument founded on the necessity depending on whether the number of staff of the intervention of the professionals which the undertakings concerned employ concerned in order to assure the protection is more or less than 250. of the employees is also contradicted by the fact that, as Payroll points out, whatever the number of staff the undertaking employs, and so even if it is fewer than 250, the employer is always entitled to carry out the work concerned himself, without any assistance from those profes- 66. It could be added, lastly, if it were sionals. necessary, that the above considerations apply a fortiori as regards the freedom to provide services. The requirement that a DPC established in another Member State which wishes to engage from time to time in calculating operations and the printing of pay slips for an Italian undertaking must be 'established and staffed exclusively by' 64. Even assuming, none the less, that persons registered in one of the Italian justification by an objective of worker professional registers would clearly make protection were permissible, it seems to the provision of such services impossible. me that that objective could also be attained, with respect to the services pro- vided to undertakings with fewer than 250 employees, by a less stringent obligation and that the contested national measure would therefore in any event be contrary to the principle of proportionality. Thus, it 67. I am therefore led to the conclusion must be observed that the requirements of that Article 43 EC and, so far as may be the Italian legislation are met where assist- relevant, Article 49 EC preclude the appli- ance is provided by one or more employ- cation by the national court of the Italian ment consultants in the case of undertak- legislation prohibiting external service pro- ings with more than 250 employees which viders not staffed exclusively by employ- use external DPCs. However, as the ment consultants or persons with equival- national court correctly points out, it is ent status from offering their services of not clear why the tasks in question are less calculation and the printing of pay slips to complex when the number of employees undertakings with fewer than 250 increases. employees.