Atypical work and residence in cross-border situations: The coordination of unemployment benefits

Abstract

This article analyses the potential challenges related to the coordination of unemployment benefits under European Union law for persons whose employment or other economic activities and living arrangements are, in one way or another, dispersed across the territories of several EU Member States. Starting from the traditional cases of frontier workers and other cross-border (or mobile) workers, on the one hand, and remote work or telework, on the other, the article looks at the potential future of free movement in the EU under Regulation (EC) No. 883/2004 and its implementing regulation, Regulation (EC) No. 987/2009. New forms of work and work organisation, alongside new mobility and residency patterns, challenge the basic rules of lex loci laboris (the country of employment is competent) and lex loci domicilii (the country of residence is competent), especially when they collide in a single case. At the same time, unemployment benefits, which are at the heart of this debate, still remain subject to specific coordination (e.g. competence) rules that depart from the general legislation, possibly making effective provision in such cases even more difficult. The article gives a diverse collection of theoretical examples in which cross-border situations are either in themselves atypical and complex, or accompanied and made possible by new forms of work or work organisation, causing specific problems for the adequate and appropriate provision of unemployment benefits.

Introduction

Free movement of workers and other economically active persons, such as the self-employed, is one of the cornerstones of the European Union (EU). Laid down in Articles 45 (free movement of workers), 49 (right of establishment and free movement of self-employed persons) and 56 (freedom to provide services) of the Treaty on the Functioning of the EU (TFEU), and intended to facilitate the effective functioning of the European single market by better matching supply and demand, it is one of the basic principles of EU law. Additionally, the cross-border provision of services, a seemingly timeless topic in both social security and labour law, generally furthers market competition and lowers consumer prices in the EU, also contributing to the efficacy of the single market. However, free movement of either workers or services always comes at the price of opening the borders of once closed national welfare states and their social and economic institutions to ‘foreigners’. Whenever outer social boundaries are abolished – for example by the introduction of EU citizenship and its associated non-discrimination principle, together with free movement rights – then internal administrative or political, even judge-made boundaries may be established so as to set considerable limits to social sharing and cross-border activities (Martinsen and Vollaard, 2014: 684). This applies, for example, to the field of family benefits (Marhold and Ludvik, 2020), unemployment benefits (Mišič, 2021) or, most notably, social assistance (Vonk, 2020). In the latter case, it is the case law of the Court of Justice of the EU (CJEU) which first expanded access to social rights on grounds of European citizenship as a special legal status, but later limited access to special non-contributory benefits. Although these benefits had a special status under social security coordination rules, it treated them as social assistance under free movement rules (Vonk, 2020). ¹ However, the basic rules of social security coordination are coming under pressure not only from the demands of the national welfare states and their exclusive social policies but, even more so, from the new ways of work and work organisation and associated living arrangements that challenge the basic lex loci laboris and lex loci domicilii competence rules. New working practices can mean, for example, that persons work in one Member State (MS) but reside in another, work in several MSs simultaneously for either a single or several employers or as self-employed persons, or are employed in one MS but work from another by means of information and communication technologies (ICT). In the latter case, they do not necessarily reside in either of the two countries. These various combinations, however, all raise the same question – with which MS is their professional or other relevant link the closest, and which MS should thus be competent for social security, thus also regarding unemployment?

The answer to this question is especially difficult in respect to the provision of unemployment benefits and the associated competence rules, since there are at least two major issues related to their supranational regulation. First, the search for work leads to movement of persons that is not symmetrical, but predominantly goes from poorer to richer MSs and from the East to the West. Second, in order to become entitled to receive unemployment benefits, the person has to be actively seeking work; this is a difficult condition to check, especially in respect to the export of these benefits, as supervision of the work-seeking activities of the beneficiary has to be carried out by the MS other than the one financing the benefits (Pennings, 2020: 103).

Concerning the export of unemployment benefits, which is not the only policy issue with these benefits, policymakers fear not only negative financial effects on their state budgets but also the moral hazard of (non)active jobseekers resulting from a lack of effective control in the host MS (Grabbe, 2023: 24, 30). For these reasons, several rules on the coordination of unemployment benefits deviate from the general provisions of Regulation (EC) No. 883/2004 (hereinafter: the Regulation), although, for example, in 2019, only around 32,000 Portable Documents (PDs) U2 ² were issued in 31 reporting countries bound by the Regulation. This indicates that intra-EU mobility of jobseekers is a rather limited phenomenon. 79% of PDs U2 were issued by EU-15 MSs, whilst only 4% were issued by EU-13 MSs and 17% by the remaining EFTA countries. On average, 210 PDs U2 are issued by a single MS, with fewer than 100 issued by Bulgaria, Estonia, Croatia, Cyprus, Hungary, Poland, Slovenia and Slovakia (De Wispelaere et al., 2020: 13). Interestingly enough, higher numbers of issued PDs U2 would generally be expected for lower-income MSs bordering higher-income MSs. In 2016 however, 64% of unemployment benefits were exported from Germany, the Netherlands, France and Denmark, whilst 8756 out of 24,906 benefits were exported to Poland. It appears that the majority of benefits are actually exported to the home country of their recipients (Pennings, 2022: 345), indicating that these are cases of persons who became unemployed in a cross-border situation. The situation remains very similar a few years later. In 2020, most authorisations were issued by Germany (8219), Switzerland (3296), the Netherlands (3052), Denmark (2415) and Iceland (2061), making up almost 70% of the total authorisations issued (De Wispelaere et al., 2022: 12).

This article looks at the coordination of unemployment benefits for economically active persons whose professional activities and living arrangements are complex and spread across several MSs. Similarly, their situation may also involve new or atypical forms of work or work organisation (e.g. remote work) that make such living arrangements possible in the first place. Atypical or non-standard forms of work, however, more often refer to temporary jobs, part-time work and solo self-employment (Tamayo and Tumino, 2021: 535) in a national context only, and are generally presented as the opposite to a standard or core model of an employment relationship, i.e. full-time work under an open-ended employment contract (Schoukens and Barrio, 2017: 306). Persons performing economic activities in atypical or non-standard forms commonly enjoy a lower level of social protection against unemployment, due to possible shorter insurance records, limited income, etc. Just to provide an example, in some MSs, persons earning below the minimum wage, such as part-time workers, are not entitled to receive unemployment benefits, whilst qualifying conditions generally disadvantage those on temporary contracts due to the abovementioned shorter insurance records (Matsaganis et al., 2016: 13). Self-employed persons are fully excluded from unemployment insurance schemes in some MSs, with no means of an opt-in. They may, depending on domestic legislation, be entitled to unemployment assistance (Matsaganis et al., 2016: 14). Nevertheless, for unemployed persons or jobseekers who lack the right skill set or are in atypical work, such as part-time jobs, temporary contracts, or agency work, this activity may actually help to develop the necessary expertise, meet potential new employers, and eventually succeed in having a temporary position converted into a permanent contract (Auray and Lepage-Saucier, 2021). Recently, some steps have been taken to extend the coverage for some groups of atypical workers. Article 4 of the Proposal for a Directive of the European Parliament and of the Council on improving working conditions in platform work (hereinafter: the Proposal) ³ provides a legal presumption according to which a contractual relationship between a digital labour platform and platform worker counts, under certain conditions set out in the Proposal, as an employment relationship. According to the reasons for and objectives of the Proposal, platform workers should be entitled, among other things, to improved access to social protection against work accidents, unemployment, sickness and old age. Additionally, the Council Recommendation on access to social protection for workers and the self-employed ⁴ promotes unemployment insurance coverage for self-employed persons. This article departs from the common discussion on atypical forms of work and work organisation and unemployment insurance coverage or, better still, a lack thereof, focusing rather on the abovementioned cross-border situations and the challenges that are accompanied or made possible by such new forms. This angle has been less explored in literature to date.

The coordination of unemployment benefits

Since they are considered a special type of social security benefit in the context of social security coordination, unemployment benefits are regulated in their own chapter of the Regulation. Current rules mirror the nexus between MSs’ payment obligations and unemployed persons’ availability in several ways (De Cortázar et al., 2012: 6). Because the separation of payment and availability is tolerated as an exception only (De Cortázar et al., 2012: 6), special provisions limit the exportability of unemployment benefits. Moreover, the Regulation contains specific rules on the aggregation of periods, on the calculation of benefits, and specific competence rules for frontier and other cross-border (or mobile) workers ⁵ that depart from the generally applicable lex loci laboris principle. Additionally, Article 65a contains special provisions for wholly unemployed self-employed frontier workers, who would, under general rules found in Article 65, have to return to a MS of residence where self-employed persons do not enjoy unemployment insurance coverage. In such cases, they may apply for unemployment benefits in the MS of last self-employment, whilst, as a supplementary step, making themselves available to the employment services of the MS of residence.

Provisions that depart from the Regulation's general principles applicable to most other kinds of social security benefits reflect, as mentioned, the somewhat sensitive political nature of unemployment benefits, caught between the job-seeking opportunities and obligations of the unemployed person, and the labour market-oriented and fiscal interests of different MSs (Mišič, 2021). These provisions generally favour the economically developed MSs of (last) employment hosting frontier workers and other cross-border workers in large numbers (Mišič, 2021; Pennings, 2020). With increased mobility and new forms of work and work organisation and living arrangements, spread across numerous MSs simultaneously, the already complicated rules on the coordination of unemployment benefits may become even more difficult to implement in practice. This is particularly true of cases of ICT-supported mobility. In this chapter, we discuss the rules in place for the aggregation of periods in unemployment, the calculation of unemployment benefits and the export of unemployment benefits. In Chapter 3, we focus on the situation of persons working and residing in different EU Member States.

Aggregation of periods

Rules on the aggregation of periods of insurance, employment or self-employment, stipulated in Article 61 of the Regulation, protect social rights in the course of acquisition. They are also closely linked to the rules that determine the competent MS. These rules represent a restriction in comparison to the general aggregation rules in Article 6 of the Regulation (Fuchs et al., 2015: 14). Nevertheless, without these provisions, insured persons, workers, or self-employed persons who became unemployed after having fulfilled different periods in different MSs could experience a reduction or even a loss of their social security entitlements in the MS of last employment, if they have only worked there for brief periods. However, according to Article 61(2), the unemployed person ⁶ is entitled to claim unemployment benefits in the MS of last employment, having most recently completed the said periods there, without taking into consideration the actual duration of the last period of insurance, employment or self-employment. Put differently, the MS of last employment has to aggregate, when competent and whenever necessary, some or even all of the previous insurance or other records and provide unemployment benefits accordingly. This applies even in cases when the last considered economic activity was very short, either as such or in comparison to the previous economic activities in other MSs. The fact that a special rule on the abovementioned aggregation of periods was set in Article 61 is due to the peculiarities of the unemployment schemes of individual MS (Fuchs, 2015: 375): such peculiarities may persist or even expand in the future.

Looking in more detail at Article 61(2) of the Regulation, the competent institutions have to consider, to the extent necessary, ⁷ periods of insurance, employment and self-employment completed under the legislation of another MS as though they were completed under its legislation, when the said legislation makes the acquisition, retention, recovery, or duration of the right to unemployment benefits conditional upon the completion of either periods of insurance, employment or self-employment. Hence, we have to distinguish between two possible scenarios: either periods of insurance or periods of work are considered in the unemployment scheme. If, according to Article 61(2), the applicable legislation considers periods of insurance, then periods of employment or self-employment completed under the legislation of another MS have to be taken into consideration only insofar as they would have counted as periods of insurance had they been completed under the applicable legislation. Put differently, if a person becomes unemployed in MS A, where they were self-employed or, for example, marginally employed (e.g. a mini job in Germany) and thus are not covered by unemployment insurance in that MS, such periods will have to be considered in the competent MS B, where they would have counted as periods of insurance since the applicable legislation offers unemployment insurance coverage to self-employed or, for example, marginally employed persons (e.g. in Slovenia, where every type of employment, regardless of the working hours, leads to unemployment insurance coverage). Unlike periods of work, periods of insurance are understood as all periods which are relevant in respect to acquiring a right under an unemployment benefit scheme. This may even lead to situations in which a mobile worker opts out of a voluntary unemployment insurance scheme during a period of employment in one MS but nevertheless receives unemployment benefits on the basis of that period in another MS. In the Warmerdam-Steggerda case, ⁸ it was namely deemed sufficient that the period of employment, completed in another MS, is considered as a period of insurance under the applicable law (Fuchs et al., 2015: 15), without being considered such by the legislation under which it was actually completed. According to the proposed Article 60a, put forward as part of the on-going discussion on the revision of the Regulation, only periods that are relevant according to the legislation of the MS under which they were completed would have to be aggregated by the competent MS (Pennings, 2022: 328–329). On the one hand, the Warmerdam-Steggerda case is not applied consistently; on the other hand, some MSs are of the view that the broad interpretation offered by the CJEU leads to unjustified results (Pennings, 2020: 150).

An unemployed person is, in principle, only entitled to claim unemployment benefits in the MS in the territory of which they became unemployed in accordance with the applicable national legislation. The Regulation, however, does not specify when a period of insurance, employment or self-employment is considered to be completed. However, the restriction to periods most recently completed in the said MS has to be interpreted in conjunction with Article 48 TFEU, which guarantees the protection of migrant workers’ social security rights. In this respect, it should be noted that a migrant worker becomes subject to the legislation of a MS as soon as they start to work there (De Cortázar et al., 2012: 9), meaning that a single day of employment (Pennings, 2020: 151) would suffice. Even so, it is difficult to imagine how a person would become unemployed after just a single day due to an objective business-related or other reason that cannot be associated with their fault or volition, reasons for which unemployment benefits are as a general rule not granted. It could be the case, for example, if even a very short probation period revealed that the worker does not have a good command of the language or other necessary skills to carry out the job. On the other hand, the provision allows persons to take the chance but also the risk to take up work in another MS, with often no or very little employment protection, at least during the probation period (Pennings, 2022: 329). In this context, Article 61 of the Regulation importantly encourages free movement of workers and their job-seeking opportunities in MSs other than the MS of residence. This is particularly true when high-income MSs are concerned, since they are obliged to aggregate the relevant periods from abroad but consider, as further discussed below, the last obtained salary or professional income only. Needless to say, some MSs are concerned as to whether their unemployment benefit schemes are protected from claims by mobile workers who have not in any substantial way contributed to the financing of the scheme (Pennings, 2022: 331).

Special rules on the aggregation of periods do not in themselves become more complex once applied to work-life arrangements or economic activities that are spread across several MSs. However, with increased mobility furthered by the use of ICT and the conclusion of short-term fixed contracts of employment, self-employment, etc., the need to aggregate periods of insurance, employment or self-employment becomes greater. This is due to the fact that economically active persons in theory no longer fulfil their full or sufficient insurance and other records in a single MS, even if the Regulation stems from the initial presumption that sufficient records were fulfilled in the MS of last employment. The latter only has to aggregate the relevant periods from abroad when necessary, meaning that once minimum periods were fulfilled in its territory, the competent institutions do not have the obligation to aggregate additional periods completed elsewhere, even if this would increase the unemployed person's overall period of entitlement. These rules might however become difficult to apply in practice if the single day rule is replaced by a month-long or even longer insurance or other record in the MS of last employment, especially if an option is added to fall back on the penultimate and other MSs of employment if the basic condition is not met (Pennings, 2020: 152–153). One the one hand, a unified application of competence rules is needed throughout the EU in order to guarantee equal access to social rights. This may however become harder and harder with the rising complexities in contemporary work-life arrangements. On the other hand, the search for the (penultimate) MS, where sufficient insurance records were completed, adds to the complexities of the regulatory framework itself and potentially hampers high- or hyper-mobility.

According to the position of the EU Commission on the amendment of the 2016 Regulation, the preferred option for the aggregation of periods is to require a minimum qualifying period of three months in the MS of last employment before obtaining a right to aggregate past periods; this would ensure a stronger link with the competent institutions and possibly lead to € 41 million in savings and a redistribution of costs. This is preferred to other options such as permitting, as under current rules, aggregation after only a single day or, for example, after a single month of insurance. ⁹ Various options concerning (non)recognition of past earnings were also included in the Proposal. Under the current rules, the integration principle applies to unemployment benefits, and the person concerned cannot apply for benefits from MSs where they have worked before (Pennings, 2022: 362), even if they completed long insurance or other records there and even if this would have been to their greatest financial benefit, as when theoretically losing employment in a low-income MS after having worked in another, high-income MS. There is, however, a fine line between furthering the best possible socio-economic position of a once highly mobile worker or self-employed and now unemployed person, and allowing social cherry-picking.

Without yet another complex cost reimbursement system in place, the proposal by the EU Commission would lead to disproportionate financial burdens placed on high-income MSs of previous employment. On the other hand, a system of cost-sharing, as in the case of old-age pensions, makes little sense in respect to any type of short-term cash benefits, due to disproportionate administrative burdens placed on several competent institutions, especially if, for example, the unemployed person is able to find new employment soon (Rataj, 2021: 156). Since 1998, there have been discussions on amendments to competence rules and, effectively, provisions on the aggregation periods, with options reaching from the exclusive competence of the MS of last employment, to optional competence, all the way to exclusive competence after a certain period of employment – such as three, six or twelve months – has been fulfilled (Rataj, 2021: 153). Under the current (complex) system of cost reimbursement, set out in Articles 65(6) and 65(7) of the Regulation, the MS of last employment reimburses the costs of unemployment benefits provided by the competent MS up to the amounts it would have paid itself if it were competent. The reimbursements are provided for either three or five months, depending on the person's (self-)employment records. Special competence rules apply to wholly unemployed frontier workers, and other cross-border workers, who continue to reside or return to the MS of residence. For them, the MS of residence and not the MS of last employment is competent, which represents a politically motivated departure from the general lex loci laboris principle. The Regulation namely allows high-income MSs of last employment to benefit from its provisions whenever a low-income MS of residence is (made) competent, since unemployment benefits are financed from their public funds, however only in the form of reimbursements and not in the form of direct provisions under its legislation. Even if social security contributions were paid in the MS of last employment, generally from a higher salary, the benefits are provided under the legislation of the competent MS, thus generally in lower amounts than would have been paid if the MS of last employment were competent. The principle of integration and the single day rule that is now in place may also encourage the MS of last employment, when competent, to disregard insurance and other relevant periods fulfilled in other MSs in order not to provide related unemployment benefits, since no or very little social security contributions were paid under their competence; this would be true especially in respect to cross-border workers employed in one but resident in another MS, whilst not simultaneously possessing the status of a frontier worker. Under the grammatically illusive Article 65(2) of the Regulation, these workers may register, when fully unemployed, either with the employment services of the MS of last employment or with the MS of residence, if returning or continuing to reside there, thus indirectly choosing the competent MS in line with either the lex loci laboris or lex loci domicilii principle (Mišič et al., 2020: 45).

Furthermore, with an increase in teleworking or other new forms of work and work organisation, it may in theory become more difficult to determine all of the past competent MSs to potentially fall back on (the proposed penultimate state rule), or to aggregate all of the relevant periods of (self-)employment or insurance records. From this perspective, any new rules on social security coordination may require strong anchoring provisions establishing competence, for example, following the place in which the employment contract has been concluded, the place of the principal office, etc., whilst at the same time preventing abuse, as in the cases of letterbox companies, false intragroup postings, etc.

Similar complexities may arise when determining the MSs in which a person actually became unemployed and the type of unemployment itself: i.e, is it a case of full or only partial or intermittent unemployment, terms used in national legal systems but not determined further either by the Regulation or in Regulation (EC) No. 987/2009 (hereinafter: the Implementing Regulation). According to the principle of equal recognition of facts and events, full unemployment in one MS should be treated as partial unemployment under the applicable legislation if the person is partially employed in another MS. This of course depends on the timely and accurate provision of facts by the beneficiary or the competent institutions. If, as another example, the lex loci laboris principle – or any other competence rule – in the future follows only the place where the employment contract was concluded and where work is thus presumably exercised, all contracts from all MSs, even zero-hour contracts, will have to be considered, applying equal recognition of facts and events. Imagine an unemployed person who concludes a number of different contracts in a number of different MSs. Generally, he would have to make any source of income known to the competent authorities, which could possibly question his (full) unemployment and thus the need to actually aggregate periods of insurance, employment or self-employment in the first place. Of course, this is already the case now, whenever workers work part time in more than one MS at once. However, new digital and/or mobility solutions bring new opportunities for increased and more diverse arrangements, with different forms of income (transferred to various types of accounts or in different currencies) remaining under the radar of the social insurance institution that is providing unemployment benefits.

In the future, the principle of good administrative cooperation, enshrined in Article 76 of the Regulation, might unexpectedly become the key principle of social security coordination, alongside an increasing burden of proof placed on the unemployed person, who might become the sole holder of all the relevant information on different economic activities from different MSs. The situation may become even more difficult when non-EU countries are involved. Imagine, for example, a Slovenian IT engineer, employed in Austria full time, who almost exclusively teleworks from Slovenia or his summer home in Croatia or, whilst on workcation, from anywhere else in the world. The worker may be regularly posted to the richest EU MSs, such as Denmark or Sweden, where he works for a single client, and has registered as a self-employed person in Belgrade. He may be providing additional services for the same Danish or Swedish clients whilst also registering with a foreign crowdsourcing platform. To add to the textbook-only equation, he may be employed part time at the University of Ljubljana, where he works as a teaching assistant, conducting a semester-long seminar course in programming, whilst renting an Airbnb apartment in downtown Trieste with this income invested in online platforms, while at the same time sharing his knowledge on a commercially successful YouTube channel. In social security, determining the (main) employer is key in order to identify who is responsible for paying contributions (financing), deciding on redundancy (unemployment) and for granting the income replacement (work incapacity), which is not always straightforward in the case of non-standard forms of work (Schoukens, 2020: 441). The straightforward answer is that Austria is the MS competent for social security, since the worker is fully employed there, with all passive income disregarded as occasional or marginal and thus irrelevant for social security and relevant only for income-tax purposes. However, special rules apply to unemployment provision, which are difficult to apply when one's economic activities, which do count as salaried work, are spread throughout the territory of the EU, involving potentially a number of different employers or clients and with the place of residence not matching the place of work. With no good administrative cooperation in place and with a disregarded burden of proof, it could very well happen that unemployment benefits, following the loss of employment in Austria, would be unduly paid, possibly by the non-competent MS if, for example, the worker were assumed to have the status of frontier worker, if his status as self-employed were disregarded or if his residency status were ignored, etc.

In real-life scenarios, identifying the person's employer generally leads to the determination of the competent MS and the applicable legislation. The latter then determines the material and personal scope of coverage. In this regard, the second paragraph of Article 61(1) of the Regulation may also become problematic in the future if the number of economic activities that do not lead to insurance coverage in the MS in which they were exercised (currently, the German mini jobs are the textbook example) increase significantly. According to the current Regulation, such types of economic activities may have to be considered by the competent MS when aggregating periods, since they would have led to insurance coverage had they been performed in the territory of that MS. Imagine a MS granting unemployment benefits to all workers employed on civil law contracts, such as platform or student workers, etc., who are not self-employed. Any similar activities in any other MS should thus be considered when aggregating the relevant periods. Although this may be seen as a domestic legal issue only, it may have negative effects on free movement if it leads to exclusionary practices by the competent MS in which no social security contributions were paid.

Calculation of benefits

According to Article 62(1) of the Regulation, the competent institution of the MS whose legislation provides for the calculation of unemployment benefits on the basis of the amount of the previous salary or professional income shall consider exclusively the salary or professional income received by the unemployed person in respect of their last economic activity. It is common for national legislation to require the salary to be considered within a specific reference period. In the event that the unemployed person received income under the legislation of another MS during a part of this period, account is nevertheless only taken of the income received in the MS of last (self-)employment (Fuchs, 2015: 381). Not surprisingly, some MSs are of the opinion that, if a person has been employed in the first MS on a rather low salary and subsequently takes up a job in another MS in which the salary level is relatively high, the unemployment benefits should be calculated on the basis of the average of the salaries which the person concerned received in both MSs (De Cortázar et al., 2012: 23). However, such a calculation would not be supported by low-income MSs of last employment.

When applying the general rules set out in the previous paragraph to highly mobile workers, who might have worked for several employers in several MSs in a considered or even aggregated period, their unemployment benefits would have to be made up of and proportionate to several salaries or professional incomes. This is generally difficult to determine in practice. Current rules, however, also encourage the competent institutions in high-income MSs, when cases concern unemployment benefits for cross-border workers, to simply point unemployed persons in the direction of their commonly low-income MS of residence, to claim unemployment benefits there. By doing so, they trigger the competence of that MS. In this case, any attempts to calculate average unemployment benefits, proportionate to previously earned salaries or professional incomes over a longer period, become irrelevant since unemployment benefits are paid under the national legislation of a socially and economically less developed MS, as a general rule with much lower ceilings placed on the amount of these benefits. In theory, complex cross-border situations with several employers involved may, among other things, also lead to situations in which it is unclear to determine the last salary or professional income or its exact amount. This could happen in cases of simultaneous dismissals, when a person was employed by two branches of a single company in two MSs, or when a valid reason associated with the worker becomes relevant in respect to several employers or clients from different countries at the same time.

Next, if the competent MS, for example, grants unemployment benefits to workers employed on civil law contracts (e.g. service contracts, copyright contracts), such as the aforementioned platform or student workers, this would generally favour its financial situation, since benefits would commonly be paid from a lower professional income than for salaried workers. However, there is little financial interest in national legislators granting access to unemployment benefits for persons who are economically active on civil and not labour law contracts, nor would their provision always make much sense. On the one hand, such economic activities are generally considered occasional or marginal and thus irrelevant for social security purposes. Generally, social security benefits correspond to persons’ steady income, from which they make a living, e. g. a wage. On the other hand, it might be difficult for the beneficiaries to fulfil the legislative requirements concerning insurance records, or to give a valid reason behind their unemployment, since no contract of employment was concluded under this flexible working arrangement.

Export of benefits

Article 64 of the Regulation provides special rules for the export of unemployment benefits, which deviate from the general principle of waiving residence conditions, enshrined in Article 7 of the Regulation (De Cortázar et al., 2012: 10). Unemployed persons are generally entitled to receive unemployment benefits in the host MS for up to three months (with a possible extension to six months), whilst they have to remain available to the employment services in the MS of last employment for at least four weeks. Additionally, they have to register with the employment services in the host MS within seven days of leaving the competent MS, with return obligations in place. A person who returns too late loses all entitlement to benefits, unless the provisions of that legislation are more favourable than the Regulation (Pennings, 2022: 350). Special rules that apply to frontier workers are discussed in more detail below.

Article 64 regulates situations in which unemployed persons leave the territory of the competent MS and register as jobseekers in the territory of the host MS. One would expect benefits to be exported from low- to high-income MSs. However, the numbers discussed above reveal that they are commonly exported to beneficiaries’ home countries. With a rise in the use of ICT in everyday life and the digitalisation of social security, physical job-search in another MS may no longer be required in the future in order to, at least theoretically, export unemployment benefits. Online job-searches or on-line interviews could be carried out under the oversight of one or even several host MSs and their competent institutions. Similarly, the European Employment Services network could take on the role of a fully-fledged employment service, no longer acting as a cooperation network of national employment services only. Nevertheless, this may not become an issue at all if unemployed persons keep fulfilling their legislative obligations in the competent MS whilst using private services to seek employment in any other MS, not as socially insured persons or beneficiaries but as platform clients. After all, for the state authorities, the way in which the person becomes re-employed is irrelevant as long as re-employment is swift and effective. They may be interested in keeping the sought-after professionals in their labour markets, based on the four-week period after which the export is made possible. Nonetheless, there is very little that the competent authorities may do to prevent unemployed persons from taking their private, consumer-based job-seeking activities to the EU or global market whilst receiving unemployment benefits. Additionally, some national legislations allow a person to perform part-time contract-based work up to certain professional income thresholds alongside traditional job-seeking activities. With emerging new forms of work and work organisation, it might be difficult to identify, let alone oversee, such activities and associated amounts of professional income, especially when the beneficiary does not comply with their reporting obligations. It could be achieved mostly following tax authorities’ income-tax decisions, with unduly paid unemployment benefits returned at the end of the tax year. Nevertheless, in 2016, only around 10% of the persons who exported their benefit found work abroad, with large differences between the MSs. Interestingly enough, only 10% returned to the competent MS after the export period expired (Pennings, 2022: 345). The same was true in the year 2020, when only 10.6% of unemployed persons returned to the competent MS, which does not necessarily mean that they found employment there. On the contrary, large numbers of unemployed persons do not find employment abroad, whilst a significant number of persons in possession of a PD U2 are unaccounted for (De Wispelaere et al., 2022: 29).

These and other questions are not directly associated with the challenges of atypical work and work organisation and cross-border work-life arrangements. However, they may surface following the same phenomenon of digitalisation, which has led to an increase in teleworking, especially in the post-pandemic era. Article 64 of the Regulation, regulating the case of an unemployed person going from one MS to another in order to seek work, may no longer be up to date. Unemployed persons may want to use their special legal status in order to seek work in several MSs simultaneously, either while physically present there (e.g. in border regions) or, as mentioned, from elsewhere, whilst, for example, performing platform or other type of contract-based work in the meantime so as to further their socio-economic position. In this way, they are economically active but not (self-)employed. In such cases it is up to the competent tax and other authorities to determine the legal nature of these activities in order to prevent the misuse of (exported) unemployment benefits. As discussed, in cases of partial or intermittent (un)employment, facts that have to be considered by every competent institution may also become more common and complex. The same applies to the changing notion of suitable employment or any type of employment that the jobseeker is obliged to accept. For example, the distance between their residence and their employer's premises, which they once would have had to cover on a daily basis, making employment unsuitable, may now become smaller or non-existent due to remote work.

The main question is, how (a)typical must one's job-search activities be in order to still be recognised and accommodated, even supported, or, conversely, overlooked or even suppressed by social security legislation? From a statistical (Rataj, 2021: 161–162), free movement and, at least theoretically, proprietary protection perspective, all unemployment benefits should be exported immediately and throughout the course of one's period of entitlement. As discussed, the principle of good administrative cooperation should enable mutual recognition of facts and events and the timely provision of such information to the competent authorities in the competent MS. Additionally, the potential future challenge of e-mobility or e-export of benefits should also be addressed, softening the requirements of physical presence in the territory of the MS in which benefit-supported job-search is carried out. This, however, becomes irrelevant in cases where no unemployment benefits are granted, since, for example, unemployment benefits may be foreseen only in cases of full unemployment, or, more commonly, social protection against unemployment may be afforded to employees only. The latter situation, for instance, is reflected in Article 65a of the Regulation, which bridges the gap in coverage for frontier self-employed workers who would, by virtue of Article 65, fall under the competence of a MS with no unemployment insurance scheme in place for the self-employed, such as France, Italy, Belgium (see Bruynseraede, De Becker in this volume), the Netherlands, Greece, Cyprus, Malta and the Baltic States (Fuchs, 2015: 400). The future case law of the CJEU, if confronted by new types of hyper-mobility, could reveal whether additional limitations to free movement, such as those discussed in Testa (late return and loss of unemployment benefits) ¹⁰ or Gray (need to claim unemployment benefits in the MS of last employment), ¹¹ or rather not discussed at all in Pinna (family benefits) ¹² (see Fuchs et al., 2015: pp. 28 ff.), are justifiable. Interestingly enough, the CJEU stated in Vougioukas (equal recognition of working periods from different MSs; see Van Leeuwen, 2023: 12) that ‘technical difficulties’ following ‘profound differences between national schemes’, once deemed insurmountable when trying to coordinate these schemes, cannot indefinitely justify the lack of any coordination. ¹³ In Rydergård, ¹⁴ (Pennings, 2022: 344) the CJEU for example determined that competent authorities are not allowed to introduce additional waiting periods preceding the export of benefits in addition to that stipulated by EU law. As mentioned, judge-made law can either build or demolish national welfare states’ boundaries.

In a future of increased combinations of work and residence patterns, such boundaries may become irrelevant if more and more highly mobile professionals begin to rely on private income protection schemes instead of social security, or if minimum periods of insurance, employment, residence and, for example, job-search in the competent MS are no longer met due to (extremely) high mobility. In the latter case, persons may be left without the necessary social protection, which is critical in cases not concerning high earners seemingly drifting from one MS to the other, but rather affecting average and low earners.

Persons working and residing in different Member States

Article 65 of the Regulation sets out special rules on the provision of unemployment benefits for frontier workers and other cross-border workers. Wholly (or fully) unemployed frontier workers fall, as mentioned, under the competence of the MS of residence, whilst other cross-border workers have the possibility to claim unemployment benefits either in the MS of last employment or in the MS of residence. In this way they indirectly choose the MS competent for social security, not only for unemployment benefits. Since the decision in Jeltes, ¹⁵ frontier workers, even if they have both personal and professional connections in the MS of last employment and therefore stand the best chance of finding work again there (see the decision in Miethe), ¹⁶ can no longer choose, as a first step, to claim unemployment benefits in that MS (Pennings, 2022: 336; De Cortázar et al., 2012: 21). The question is not whether the presumption that they have the best chance of finding employment in the MS of residence is true in all cases, but whether it is even true in most of the cases (Rataj, 2021: 152). Nevertheless, the Regulation has not changed, even if frontier workers commonly wish to become reemployed in the MS of last employment, generally a high-income MS, after having possibly worked there their larger parts of their careers or even if they are nationals of that MS. This is due to the fact that the cost reimbursement mechanism, resulting from special rules set in Article 65, commonly favours the high-income MSs (on the case of Austria and Slovenia, for example, see Mišič, 2021). The latter generally reimburse lower levels of unemployment benefits, paid under the applicable legislation of the competent low-income MS of residence, than they would have paid under their own applicable legislation had they been competent. As mentioned, these MSs may also tend to either encourage cross-border workers who became wholly unemployed to claim unemployment benefits in their MS of residence, or even falsely treat them as frontier workers in order to automatically trigger the competence of a low-income MS (Mišič and Bagari, 2021: 92). As a result, frontier workers may only register with the employment services in the MS of last employment as a second step. Such practices, which are more likely between neighbouring MSs, should be considered unlawful. By imposing competence of a particular MS, they limit the unemployed person’s rights granted by EU law, both from the perspective of the Regulation's basic principles, and because non-frontier workers may now, following a de facto reversed burden of proof, be required to prove that they actually do not return to the MS of residence on a weekly basis. In such cases, the competent institutions in the MS of last employment should be those having to prove the opposite. These and other factors (Mišič, 2021) suggest that the Regulation should be amended so as to apply the lex loci laboris principle to all types of unemployed persons. This is supported not only by the principle of free movement, but also by the fact that contributions were paid in the MS of last employment. Any reduction in benefits, following from special competence rules, is an infringement of unemployed persons’ property rights.

If, following the Administrative Commission's 2022 Guidance Note on telework, the 25% criterion used under Article 13 of the Regulation and Article 14 of the Implementing Regulation were to become exclusively applicable to teleworking, then employers from high-income MSs might become tempted, following the example set in the area of unemployment regarding cross-border and frontier workers, to make remote work mandatory for, say, at least eight days per month or 90 days per year. By doing so, they might trigger a shift in competence for social security, from the high-income MS of employment to the low-income MS of residence, where at least 25% of activities as an employed person now have to be carried out. The application of this conflict rule means that for frontier workers who spent 25% or more of their working time teleworking from home, the legislation of their MS of residence becomes fully applicable. This means that the worker is subject to the contribution duty of the MS of residence. Since the contributions are generally withheld from a worker’s wage, the level of contributions may have either a positive or a negative impact on workers’ net wages, depending on the applicable legislation (Verschueren, 2022: 82). The same applies to the employer's contributions, which could affect their total labour costs. Nevertheless, the employer would in such cases have to join the social security system of the MS of residence for that employee, which in itself involves a number of extra administrative obligations (Verschueren, 2022: 82); this might not be worth the effort in respect to the potential financial gains of such arrangements. This also seems less likely under the recent Framework Agreement on social security for cross-border telework, which concerns persons who telework from the MS of residence for their employer established in another MS. According to the agreement, they remain insured in the MS of establishment if they work less than 50% of the time in the MS of residence.

Even so, such theoretically possible but in reality less likely practices may lead to what we consider reverse social dumping. We describe the phenomenon as an act by the State of protecting public funds at the expense of workers’ social protection by means of competence ‘shopping’. As mentioned, this might occur in the field of unemployment benefits, where special competence rules are in place for frontier or other cross-border workers. Nevertheless, it seems that teleworking might remain under the scope of the so-called flexibility clause in Article 16 of the Regulation (and not fall under Article 12 on posting or Article 13 on ‘pluri-activity’), ¹⁷ allowing for exception agreements to be concluded in respect of the generally applicable Article 11 of the Regulation, according to which the place where work is performed is the main determinant of competence in the field of social security. Moreover, a multilateral agreement under Article 16 of the Regulation is not only envisaged but has already been signed by almost 20 countries. ¹⁸ However, since it appears that remote work is here to stay, the challenges it brings should not be addressed by flexibility clauses as exceptions to the general rule, but by an amendment of the Regulation itself.

Ways forward

The world that we work and live in is becoming increasingly complex. Peoples’ work-life arrangements are more often than ever spread across several MSs, and new forms of work and work organisation enable us to lead more flexible and well-balanced lifestyles whilst obtaining active or passive income from a variety of different sources. Digitalisation, increased and ever changing mobility patterns and other phenomena, such as the recent pandemic in which sui generis social rights were instantly provided across Europe, however, challenge not only the competence rules and other provisions in the field of EU social security coordination. They also have the power to reshape the very notion of unemployment as a traditional social risk. As mentioned, several MSs still have no unemployment insurance schemes in place for the self-employed, generally because it is difficult to determine whether they have lost their job due to an objective reason. As business owners, they are the sole bearers of their economic risks. By refusing coverage, however, these MSs deviate from the principle of universality and solidarity in the field of social protection and make social security coordination just a tiny bit more difficult.

Should, for example, all economically active persons, regardless of the basis on which their work is performed, enjoy unemployment insurance coverage in the future? How would it be possible to administer a scheme that would accommodate a vast variety of activities and types of income from different MSs or from different employers and clients? These are some of the pending questions in modern social security law. Nevertheless, they first and foremost have to be answered by national legislators, since any harmonisation in the field is excluded by primary EU law. On the one hand, the seemingly obvious answer lies in the privatisation of social security, where tailor-made unemployment insurance, even if most likely attracting mostly bad risks (for the risk of adverse selection and moral hazard see, for example, Barr, 2001: 33 ff.), could be offered or even become compulsory for all persons performing non-standard work. This would however ignore the very foundations of public income protection schemes, which have survived major socio-economic transformations, and the fundamental principles underpinning them. On the other hand, as early as the 1970s, several scholars proposed a pan-European system of insurance against unemployment, arguing that European transfers to Member States more threatened by unemployment could act as an automatic stabiliser with respect to idiosyncratic shocks (Bologna, 2017: 12). One of the recent common EU actions against unemployment was the SURE programme, an instrument that facilitated borrowing of money by affected MSs in order to cover the costs of their short-time work and other policies aimed at preventing unemployment during the Covid-19 pandemic (Elia and Bekker, 2023: 41). However, the challenges discussed here do not yet seem to be as important from a Union-wide macro-economic viewpoint, as from a purely social policy oriented perspective, in terms of the closing and opening of national welfare states to foreigners, and regarding the theoretical foundations of social security law – the material and personal scope of coverage in respect to its basic principles. The clash between free movement rights and national labour-market and fiscal policy considerations may become even more serious due to facilitated mobility and ever changing work-life arrangements.

In light of the above, the question is, should the Regulation, dating back almost 20 years whilst stemming from even older basic principles of social security coordination, be adapted (and how) to new forms of work and working patterns? The same could be asked about national administrative procedure rules, which may become difficult to apply in complex employment and/or cross-border situations. It should not be forgotten that EU law, just like national legal orders, is a living organism. It should adjust to the environment of which it is a part, especially as there is generally a common understanding among the professional community that several provisions on the coordination of unemployment benefits could or should be amended (see, for example, De Cortázar et al., 2012; Fuchs et al., 2015; Pennings, 2020). It seems, however, that the integration-protection nexus, found in EU social benefits law [social assistance law] (Rennuy, 2019: 1555), is here to stay in the field of unemployment as well. Unemployed persons who find themselves in cross-border situations seem to belong not to the in- but rather to the out-group when it comes to the bounded understanding of the notion of solidarity (Rennuy, 2019: 1553). This is the case even if they had contributed to the public finances of the host MS in taxes and social security contributions over long periods of time (e.g. frontier workers).

It is hard to predict how new forms of work and work organisation, coupled with new mobility patterns, will fit into the said discourse in the field of EU social law and social policy. On the one hand, they may draw attention to new challenges linked to health and safety, data protection, work-life balance, etc. On the other hand, they may make national legislators even more vigilant in respect to exclusionary practices aimed at protecting national welfare states and labour markets, now accessible by a single click. This may lead to the introduction of longer insurance records, further limitations concerning the export of benefits, an increased burden of proof placed on the unemployed person, or other practices, such the imposition of part-time telework for frontier workers, which could protect MSs’ public finances.

Theoretically, new e-supported ways of working and living may also lead to a full removal of free movement constraints concerning unemployment benefits, such as time limits placed on their export, mandatory return to the MS of residence. However, this seems most possible with the establishment of a European unemployment benefit scheme which could overcome national differences concerning both personal (e.g. self-employed persons, mini jobs) and material coverage (e.g. the percentage amount of unemployment benefits, period of entitlement, reason for becoming unemployed), as well as the current exclusion of harmonisation in the field of social security law.