ANALYSIS: Ryanair faces European court showdown

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When Ryanair was fined €8 million ($10.9 million) by a French court in October 2013 for underpaying social security contributions for staff based at Marseille between 2007 and 2010, the Irish budget carrier was typically bullish in its response.

It argued that the fine contravened European regulations covering mobile transport workers, which allows Ryanair to employ staff under Irish contracts, thereby sidestepping France’s more expensive contributions system.

"Ryanair believes there is a clear contradiction between current EU employment regulations under which these Irish workers paid their taxes and social taxes in Ireland, and the 2006 French decree, which seeks to require airline crews operating in Ireland to pay social taxes and pension contributions in France," it said.

EasyJet has also fallen afoul of the French decree, having been fined €1.6 million in 2010 for employing staff at Orly airport under a UK contract.

Ryanair now intends to appeal the decision against it and take its case "all the way to the European Courts",

This is not the first time Ryanair’s employment practices have been challenged. In 2012, investigators in the Italian city of Bergamo launched a probe into the carrier’s work practices, allegedly for underpayment of social security contributions. Meanwhile, a central bone of contention in the case of an ex-Ryanair worker in Norway claiming unfair dismissal has been whether the case should be heard in the Norwegian or Irish courts.

Ryanair won in another case involving six former crewmembers based in Charleroi, Belgium, who were claiming entitlements to bonuses and social payments under Belgium law. Their case was dismissed on the grounds that as the contract was Irish, the case should be heard in Ireland.

Belgian trade union CNE, which represents that worker, has appealed that decision and says it would be willing to take the case all the way to the European Court of Justice (ECJ).

What unites all of these very different cases is that they related to Ryanair seeking social-security and employment-law advantages by making contracts subject to Irish law.

Article 19 of the Rome Convention says an employee can bring a claim either in the courts of the member state where the employer is domiciled or in the place where the employee "habitually works". By having Irish employment contracts, Ryanair can argue that employees work habitually in Ireland rather than the member state in which they live.

If successful, this strategy can compel employees to bring employment claims in Ireland rather than in their member states of residence, and may even prevent them from being able to bring claims for certain statutory employment rights at all, as Irish courts are not competent to give rulings on the application of statutory rights in another member state.

Ryanair use a similar strategy to reduce social security costs. Under the EU social security regulations (883/2004/EC) which came into force on 1 May 2010, where an employee works in two member states tie-breaker rules determine which social security rules apply. If the employee's activity in the member state where they reside is not "substantial", then, by default, the social security rules of the member state in which the sole employer has its registered office or place of business apply.

Colin Kendon, partner at aviation law firm Bird & Bird, explains: "Rates of social security in the UK and Ireland are typically much lower than in other EU member states, so by having Irish or UK employment contracts the tie-breaker rules often mean Irish or UK social security rates apply. Substantial is taken to mean more than 25%, so Ryanair needs to show the employees spend no more than 25% of their activity in the state in which they live in order to save significantly employer's social security costs".

Kendon points out that the Marseilles case and France’s 2006 decree are based on previous EU social security regulations. "Critically, courts across Europe place great emphasis on precedents set out by previous judgments in the ECJ, so a decision that went against Ryanair could have serious repercussions for them and other airlines that pursue such practices," he says.

So what is the likelihood that Ryanair could face a serious threat to its working practice from European lawmakers? EU employment commissioner Laszlo Andor sees little basis for such a challenge.

"The Commission has no evidence that Ryanair has contravened regulations on social security co-ordination," he says. "The Commission has no indication of any systematic legal problems in the application of legislation concerning the social security of aircrew. There have only been a few individual complaints which could be solved."

While it is impossible to pre-empt what decision the ECJ could come to, it seems likely Ryanair stands a very good chance of securing its working practices against any further legal challenges should it take its appeal all the way to the top.