CELEX: 62005CJ0332
Freedom of movement for workers
Calculation of daily sick pay based on net income, itself determined by tax class
Automatic placing of a migrant worker whose spouse is resident in another Member State in an unfavourable tax class
Amendment of the tax class only on application by the migrant worker
Failure to take into account a subsequent amendment of the tax class on the basis of the marital status of that worker
Principle of equal treatment
Infringement

1       This reference for a preliminary ruling concerns the interpretation of Articles 3(1) and 23(3) of Regulation (EEC) No 1408/71
of the Council of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons
and to members of their families moving within the Community, as amended and updated by Council Regulation (EC) No 118/97
of 2 December 1996 (OJ 1997 L 28, p. 1) (‘Regulation No 1408/71’), Article 7(2) of Regulation (EEC) No 1612/68 of the Council
of 15 October 1968 on freedom of movement for workers within the Community (OJ, English Special Edition 1968 (II), p. 475)
and Article 39 EC.
2       The reference was made in the course of proceedings between Mr Celozzi and the Innungskrankenkasse Baden-Württemberg (‘the
Innungskrankenkasse’) on account of the latter’s refusal to take into account retroactively, in calculating the daily sick
pay (‘daily sick pay’) allocated to the applicant in the main proceedings under German legislation, an amendment of the tax
class in which he is placed.

Legal context

Community legislation
3       Article 3(1) of Regulation No 1408/71 provides:
‘Subject to the special provisions of this Regulation, persons resident in the territory of one of the Member States to whom
this Regulation applies shall be subject to the same obligations and enjoy the same benefits under the legislation of any
Member State as the nationals of that State.’
4       Under Article 7(2) of Regulation No 1612/68, a worker who is a national of a Member State is to enjoy, in the territory of
another Member State, ‘the same social and tax advantages as national workers’.

National legislation
5       Paragraph 47 of Book V of the Sozialgesetzbuch (the Code of Social Law; ‘the SGB’) is worded as follows:
‘(1) Sick pay shall amount to 70% of normal remuneration and income earned, in so far as they are subject to the calculation
of contributions (normal remuneration [Regelentgelt]). Sick pay calculated on the basis of remuneration may not exceed 90%
of the net remuneration calculated in accordance with subparagraph 2. Normal remuneration shall be calculated in accordance
with subparagraphs 2, 4 and 6. Sick pay shall be paid in respect of calendar days. Where it is to be paid for an entire calendar
month, it shall be fixed at 30 days.
(2) To calculate normal remuneration, the remuneration earned by the insured person in respect of the final remuneration accounting
period taken into consideration before the incapacity for work commenced, or at least the final four weeks taken into consideration
(assessment period), less any remuneration paid once only, shall be divided by the number of hours for which it was paid.
The result shall be multiplied by the number of weekly hours regularly worked as a result of the employment relationship,
divided by seven. Where remuneration is calculated on a monthly basis or calculation of normal remuneration in accordance
with the first and second sentences of this subparagraph is not possible, one thirtieth of the remuneration earned in respect
of the final calendar month taken into consideration before the incapacity for work commenced, less any remuneration paid
once only, shall be regarded as normal remuneration.
…
(6) Normal remuneration shall be taken into account up to the amount of the contribution assessment ceiling per calendar day.’

The dispute in the main proceedings and the question referred for a preliminary ruling
6       Mr Celozzi, an Italian national who was born in 1942, worked and resided for a long time in Germany while his wife, an Italian
national who is not in employment, continued to reside in Italy with their children.
7       On the basis of his last job as a bricklayer, Mr Celozzi was insured with the Innungskrankenkasse. In May 1997, after in-patient
treatment, he was on long-term sick leave and daily sick pay was paid to him for the periods from 20 June 1997 to 27 January
1998 and from 26 February to 5 November 1998. Thereafter, the applicant in the main proceedings received unemployment benefit.
8       In calculating daily sick pay, the Innungskrankenkasse took as a basis the remuneration paid to Mr Celozzi by his employer
in April 1997, which is the remuneration most recently received by him. At that time, the wage tax card issued each year by
the competent local authority and given by the worker to his employer (‘the tax card’) stated that Mr Celozzi was in tax class
II, namely the tax class which normally applies to a worker with children who is permanently separated from his spouse, and
that he received tax allowances for two children. In those circumstances, the applicant in the main proceedings received net
remuneration of DEM 2 566.22 and daily sick pay of DEM 72.70. If the calculations had been made on the basis of tax class
III, namely that in which a married worker is normally placed where he lives with his spouse but is the only one in paid employment,
the amount of net remuneration would have been DEM 2 903.52 and daily sick pay would have been DEM 82.25.
9       In August 2000, Mr Celozzi requested that the Innungskrankenkasse review its calculation of his daily sick pay on the basis
of his being in tax class III, which is more favourable than that which had been assigned to him and with respect to which
he had satisfied the allocation conditions as from the time when his entitlement to benefits commenced. To that end, he submitted
that his income tax had been subsequently reduced and his unemployment benefit subsequently increased.
10     Although the competent German tax office confirmed that the conditions for joint assessment of Mr Celozzi and his wife had
been satisfied as from 1997, the Innungskrankenkasse refused to pay him daily sick pay at the higher rate retroactively on
the ground that it had been correctly calculated at the time when he was on sick leave and that a retroactive amendment of
the tax class had, in terms of the existing relevant case-law, no effect on the amount of that pay.
11     Having been unsuccessful in the lower courts, Mr Celozzi then brought an appeal on a point of law (‘Revision’) before the
Bundessozialgericht (Federal Social Court) in support of which he alleges infringement of primary and secondary Community
law. He submits that, given that he was in fact in tax class III and not tax class II, which is less favourable and was allocated
to him because his wife resided in Italy, he is the victim of a specific disadvantage which constitutes discrimination against
him related to his status as a migrant worker. Even though an amendment of the tax class allocated to him was possible under
certain conditions and subject to the provision of proof of his marital status and financial circumstances, it would have
required a specific and express application from him. The need for such an application means that migrant workers, whose spouses
often remain in the countries from which those workers come, are initially placed in an incorrect tax class, namely that for
separated spouses, and receive, in the event of incapacity for work, daily sick pay at a rate which is lower than that to
which they would be entitled if they were in the tax class corresponding to their actual circumstances, without the possibility
of that error being subsequently corrected. German law therefore gives rise to indirect discrimination, particularly because
no authority drew Mr Celozzi’s attention to that error or to the possibility of securing an amendment of the tax class which
was allocated to him automatically.
12     In those circumstances, the Bundessozialgericht decided to stay the proceedings and to refer the following question to the
Court for a preliminary ruling:
‘Is it compatible with the primary and/or secondary law of the European Community (in particular Article 39 EC (formerly Article
48 of the EC Treaty), Articles 3(1) and 23(3) of Regulation … No 1408/71, and Article 7(2) of Regulation … No 1612/68) for
a married migrant worker employed in Germany, whose spouse resides in another Member State, to receive sick pay always linked
to net remuneration established on the basis of the wage tax class stated on his wage tax card without account being taken
of a subsequent retroactive amendment, which is favourable to him, of the tax classification relating to his marital status?’

The question referred for a preliminary ruling
13     In order to answer that question, it should be noted at the outset that, as regards freedom of movement for workers, the principle
of non-discrimination laid down in Article 39(2) EC was implemented as far as concerns social security for migrant workers
by Article 3(1) of Regulation No 1408/71.
14     Therefore, it must be considered whether that regulation does not in itself make it possible to provide the national court
with the necessary answers to enable it to resolve the dispute before it.
15     In those circumstances, it is important first to determine whether benefits such as those at issue in the main proceedings
fall within the scope of that regulation.
16     The Court has consistently held that the distinction between benefits excluded from the scope of Regulation No 1408/71 and
those which fall within its scope is based essentially on the constituent elements of each benefit, in particular its purposes
and the conditions on which it is granted, and not on whether it is classified as a social security benefit by national legislation
(see, inter alia, Case 249/83
Hoeckx
[1985] ECR 973, paragraph 11; Case C-111/91
Commission
v
Luxembourg
[1993] ECR I-817, paragraph 28; Case C-66/92
Acciardi
[1993] ECR I-4567, paragraph 13; and Case C-57/96
Meints
[1997] ECR I-6689, paragraph 23).
17     The Court has also stated on numerous occasions that a benefit may be regarded as a social security benefit in so far as it
is granted, without any individual and discretionary assessment of personal needs, to recipients on the basis of a legally
defined position and provided that it relates to one of the risks expressly listed in Article 4(1) of Regulation No 1408/71
(see, inter alia,
Hoeckx
, paragraphs 12 to 14;
Commission
v
Luxembourg
, paragraph 29;
Acciardi
, paragraph 14; and
Meints
, paragraph 24).
18     It is not disputed that those conditions are satisfied in the main proceedings.
19     Firstly, provisions such as those provided for by Paragraph 47 of Book V of the SGB confer on the recipient, in the event
of incapacity for work due to sickness, a right to daily sick pay, without any individual and discretionary assessment of
his personal needs, and, secondly, benefits of that kind are expressly mentioned in Article 4(1)(a) of Regulation No 1408/71.
20     Moreover, the Court has already held, regarding the payment of benefits by an employer by way of maintenance of wages, that
those benefits, as well as daily sickness benefits the payment of which is suspended for a period of up to six weeks as a
result, are benefits which fall within the scope of Regulation No 1408/71 (see Case C-45/90
Paletta
[1992] ECR I-3423, paragraph 17).
21     Thus the question referred by the national court must be examined in the light of Regulation No 1408/1, in particular Article
3(1) thereof.
22     It must be borne in mind, as the Court has repeatedly held, that the object of Article 3(1) of Regulation No 1408/71 is to
ensure, in accordance with Article 39 EC, equal treatment in matters of social security, without distinction based on nationality,
for the persons to whom that regulation applies by abolishing all discrimination in that regard deriving from the national
legislation of the Member States (Case C-131/96
Mora Romero
[1997] ECR I-3659, paragraph 29, and Case C-124/99
Borawitz
[2000] ECR I-7293, paragraph 23).
23     It is settled case-law that the principle of equal treatment, as laid down in Article 3(1) of Regulation No 1408/71, prohibits
not only overt discrimination based on the nationality of the beneficiaries of social security schemes but also all covert
forms of discrimination which, through the application of other distinguishing criteria, lead in fact to the same result (
Mora Romero
, paragraph 32, and
Borawitz
, paragraph 24).
24     Accordingly, conditions imposed by national law must be regarded as indirectly discriminatory where, although applicable irrespective
of nationality, they affect essentially migrant workers or the great majority of those affected are migrant workers, where
they are applicable without distinction but can more easily be satisfied by national workers than by migrant workers or where
there is a risk that they may operate to the particular detriment of the latter (Case C‑237/94
O’Flynn
[1996] ECR I-2617, paragraph 18, and
Borawitz
, paragraph 25).
25     It is otherwise only if those provisions are both justified by objective considerations independent of the nationality of
the workers concerned and proportionate to the legitimate aim pursued by the national law (
O'Flynn
, paragraph 19, and
Borawitz
, paragraph 26).
26     It is clear from that body of case-law that, unless objectively justified and proportionate to its aim, a provision of national
law must be regarded as indirectly discriminatory if it is intrinsically liable to affect the nationals of other Member States
more than the nationals of the State whose legislation is at issue and if there is a consequent risk that it will place the
former at a particular disadvantage (see, to that effect,
O’Flynn
, paragraph 20;
Meints
, paragraph 45; and
Borawitz
, paragraph 27).
27     It is not necessary in this respect to establish that the provision in question does in practice affect a substantially higher
proportion of migrant workers. It is sufficient that it is liable to have such an effect (see, to that effect,
O'Flynn
, paragraph 21, and Case C-373/02
Öztürk
[2004] ECR I-3605, paragraph 57).
28     It is common ground that provisions such as those at issue in the main proceedings apply regardless of the nationality of
the workers concerned.
29     Paragraph 47 of Book V of the SGB does not in itself lay down, for the purposes of the calculation of the amount of daily
sick pay, any formal difference in treatment between national workers and those from another Member State.
30     The fact remains that that provision cannot be viewed in isolation, but must, on the contrary, be assessed within the wider
context in which it is to be applied.
31     In that regard, it must be borne in mind first that, in a situation such as that in the main proceedings, the amount of daily
sick pay varies according to the net wages received, which are themselves determined by the tax class stated on the worker’s
tax card, and that, as a matter of administrative practice, a migrant worker, whose spouse often continues to reside in the
Member State of origin, is automatically placed in a tax class which is unfavourable to him, namely that applicable to workers
who are married but permanently separated from their spouses, instead of, like national workers, having allocated to him the
more favourable tax class which is applicable to married workers living with spouses who are not in paid employment.
32     Secondly, any correction of the tax class stated on the tax card is dependent on, firstly, an express application by the migrant
worker, even though he is at no point informed by the competent authorities of the existence of such a possibility of correction
or of the requirement to make a specific application to secure an amendment of that tax class and, secondly, the production
of a certificate from the tax authorities of the Member State of which the worker is a national and a detailed examination
of the marital status and financial circumstances of the person concerned.
33     Lastly, a correction of the tax class allocated to the person concerned has no effect on the amount of daily sick pay granted
to him. As is apparent from the case-file sent to the Court by the national court, the case-law regarding the application
of Paragraph 47 of Book V of the SGB precludes, in the great majority of cases, a retroactive amendment of the amount of that
pay and allows it only where the employer has unlawfully withheld remuneration from the insured person, but nevertheless subsequently
fulfils that obligation in the course of the performance of the contract.
34     In the light of all those factors, there is therefore no doubt that the application of a national scheme such as that at issue
in the main proceedings is such as to place a migrant worker in a legal or factual position which is less favourable than
that in which a national worker, in the same circumstances, would find himself.
35     Consequently, a scheme such as that at issue in the main proceedings constitutes a difference in treatment to the detriment
of migrant workers.
36     It is therefore necessary to examine whether that difference in treatment may be justified by objective considerations and
whether it is proportionate to the legitimate aim pursued by that scheme. In that regard, the Innungskrankenkasse relies on
arguments relating to the administrative simplification of the procedures for allocating daily sick pay and to the function
given to that pay by the national legislature, namely that of ensuring that the workers concerned receive an income which
allows them to meet their subsistence needs. According to that line of argument, in calculating the amount of sick pay owed
by applying pre-established tax law criteria, without having to verify the accuracy of those criteria beforehand, social security
bodies are able to effect rapid payment of sick pay allowing the workers concerned to receive a guaranteed income. Furthermore,
the possibility of a subsequent correction of the tax class would result in a substantial retroactive alteration of the amount
of that sick pay and would require both those bodies and the recipients to carry out long and complex calculations.
37     Without it being necessary to examine to what extent aims relating to administrative simplification, the guarantee of a subsistence
income and the complexity of the calculations to be made with respect to the payment of daily sick pay may constitute legitimate
aims, it is sufficient, in the circumstances of this case, to state that the measures in question go beyond what is necessary
to attain those aims.
38     As the national court itself observes, such aims do not preclude subsequent correction of the amount of sick pay, inter alia
by the introduction of a mechanism whereby the amount of that pay is retroactively adjusted to take account of the actual
position of the migrant worker concerned.
39     That finding is also borne out by the fact that German case-law has itself allowed, at least in one case, a retroactive alteration
to daily sick pay, the implementation of which, as counsel for the Innungskrankenkasse admitted at the hearing, did not give
rise to any particular difficulty.
40     In the light of all the foregoing considerations, the answer to the question referred must be that Article 3(1) of Regulation
No 1408/71 precludes the application of a daily sick pay scheme implemented by a Member State, such as that at issue in the
main proceedings:
–       under which a migrant worker, whose spouse resides in another Member State, is automatically placed in a tax class which is
less favourable than that of a married national worker whose spouse resides in the Member State concerned and is not in paid
employment, and
–       which does not allow account to be taken retroactively, as regards the amount of that sick pay, which is calculated according
to net income, itself determined by tax class, of a subsequent correction of that class following an express application by
the migrant worker based on his actual marital status.

Costs
41     Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court,
the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs
of those parties, are not recoverable.
On those grounds, the Court (Second Chamber) hereby rules:
Article 3(1) of Regulation (EEC) No 1408/71 of the Council of 14 June 1971 on the application of social security schemes to
employed persons, to self-employed persons and to members of their families moving within the Community, as amended and updated
by Council Regulation (EC) No 118/97 of 2 December 1996, precludes the application of a daily sick pay scheme implemented
by a Member State, such as that at issue in the main proceedings:
–
under which a migrant worker, whose spouse resides in another Member State, is automatically placed in a tax class which is
less favourable than that of a married national worker whose spouse resides in the Member State concerned and is not in paid
employment, and
–
which does not allow account to be taken retroactively, as regards the amount of that sick pay, which is calculated according
to net income, itself determined by tax class, of a subsequent correction of that class following an express application by
the migrant worker based on his actual marital status.
[Signatures]
*
Language of the case: German.