(CN) – Europe’s highest court should crack down on Austria, a magistrate advised Tuesday, for requiring one of its citizens to make a security deposit on behalf of the foreign contractor he hired to perform work on his house.
The house here owned Michael Vavti lies in Austria not far from the Slovenian border. After contracting with Slovenia-based Cepelnik in 2016 to post workers at his home for certain renovations, Vavti paid Cepelnik of 7,000 euros in advance with 5,200 euros to be paid once the job ended.
Austrian authorities intervened, however, when an inspection revealed certain labor violations. Skeptical that it could prosecute Cepelnik successfully as a foreign service provider, the Austrian Finance Police ordered Vavti to suspend payments and have him post the 5,200 euro contract balance as a security.
Vavti did just that only to have Cepelnik send him a bill for 5,000 upon completion of the work.
When Vavti refused, arguing that the security he paid to the government extinguished his debt, Cepelnik filed suit.
Cepelnik was also fined 9,000 euros for the labor violations, and its appeal of those judgements was still pending when the District Court in Bleiburg asked the EU’s highest court to weigh in on the legality of Vavti’s security payment.
Advocate General Nils Wahl told the Luxembourg-based court Tuesday that Austria’s actions appear unlawful.
The ruling specifies that member states are within their rights to impose penalties, but such penalties cannot be “so disproportionate to the gravity of the infringement that this becomes an obstacle to the freedoms enshrined in the treaties.”
Indeed the penalties Cepelnik faced here — just for not providing wage documents in German — could have amounted to 90,000.
“In the case at hand, the combination of hefty penalties with a security such as that at issue appears to prejudice substantially the enjoyment of the freedom to provide services guaranteed by the treaties,” Wahl wrote. “In particular, taken together, those measures alter, to a significant degree, the delicate balance between different (and at times competing) interests pursued by Directive 96/71: to promote the transnational provision of services while ensuring fair competition and guaranteeing respect for the rights of workers in both the host and home member state.”
Wahl’s opinion is not binding on the European Court of Justice, which will now begin its own deliberations on the case.