Reform of family allowances framework impacts cross-border workers

In response to changes to family allowances adopted in July 2010, trade unions in Luxembourg have accused the government of implementing measures with discriminatory effects, particularly towards cross-border workers. A large demonstration organised by five trade unions on 16 September attracted several thousand people. Two complaints against the Grand Duchy have been lodged with the European Commission, with threats of proceedings before the Luxembourg courts.

Background

Formerly, article 271 of the Luxembourg social security code (in French) (CSS) granted family allowances for children over 18 years of age and children in higher education until a maximum age of 27. Under article 269(b), the payment of family allowances can be awarded to anyone who:

  • is subject to Luxembourg social security legislation;
  • falls under the scope of European regulations or bi- or multilateral social security agreements concluded by the Grand Duchy of Luxembourg and which provide for the payment of family allowances in the country of employment.

Therefore, children of cross-border employees in Luxembourg also benefited from public support for higher education paid to them in the form of family allowances. Other possible forms of public support for higher education can be accessed under the amended act on state financial aid of 22 June 2000 in the form of grants and fundable and non-refundable loans for students, but only on condition of having a registered domicile in Luxembourg.

Controversial changes in public financing for higher education

The law of 26 July 2010 (in French) on state financial aid for higher education includes amendments to a number of regulations such as those regarding social security and taxes. One of the most controversial measures is the abolishment of allowances for children over 18 years of age attending higher education.

The method for calculating the amount of public financial aid for education is also overhauled, as the parents’ social and financial situation ceases to be one of the things determining the form of payment. The financial aid is divided into a non-refundable grant and a refundable loan, and the ratio of these two forms of support in the total payment is partly conditioned by the student’s social and financial situation. Moreover, the entitlement to public financial aid from now on is subject to a residence requirement; see articles 2 and 4 of the new law (in French, 57Kb PDF).

The law, adopted by the Chamber of Deputies on 13 July 2010, dramatically revises the existing concept of family allowances, as it excludes the financing of education for children over 18 years of age from the basket of family care measures likely to be compensated by family benefits. It also excludes the children of cross-border workers who are no longer eligible for state aid for higher education simply because they are living in Luxembourg.

What the government considers a mere ‘change of paradigm’ is interpreted by trade unions as a discriminatory treatment, rendering the law inconsistent with European regulations.

Conflict over reform

The Confederation of Independent Trade Unions of Luxembourg (OGB-L) has lodged a complaint with the European Commission, putting forward arguments that essentially rely on two legal premises, namely:

Regulation (EEC) No 1612/68 mandates non-discriminatory treatment of nationals of Member States equal to those of the national workers, by providing for systematic application of the rule of national treatment as far as conditions of employment and work are concerned.

OGB-L believes that cross-border workers are in reality more penalised by the reform than others because, for them, the elimination of family allowances for children aged over 18 is not cushioned by state financial aid for higher education since the latter is provided under domicile or residence requirements. The trade union sees in this an actual discrimination between resident and non-resident workers which might be challenged by European law.

Prime Minister Jean-Claude Juncker has rejected this argument and denounced the previous system which was, according to him, actually discriminatory towards resident students, whose higher education grants were deducted from family allowances, whereas the children of cross-border workers would be entitled to all the family allowances paid in Luxembourg regardless of whether or not they received grants or financial support for studying from their residing country. Accordingly, the Prime Minister believes that, since the residence requirement is indistinctively applicable to Luxembourg residents and nationals of other Member States, the law of 26 July 2010 fully complies with European law.

It appears that this argument was not persuasive enough as another complaint was lodged with the European Commission on 23 September 2010 by a European Economic Interest Grouping (EEIG) of European cross-borders workers in Luxembourg, Frontaliers Européens au Luxembourg (GEIE-FEL), which was recently founded specifically in response to this issue. In a statement (in French), the group also announced that further legal action would be undertaken before Luxembourg’s courts.

Luxembourg legislation: sparking debate on the European scale?

No communication from the European Commission has so far been issued, but Prime Minister Juncker has said the legislation would be adjusted if Luxembourg loses the case before the European Court of Justice. In the meantime, he says, the case highlights an issue he would like to see addressed on the European level.

Pointing to Luxembourg’s innovative and so far unchallenged approach of maintaining financial aid entitlements for students studying abroad, he denounced the failure of other Member States to adopt similar provisions. He maintains that the law of July 2010 reflects perfectly the Grand Duchy’s commitment to fulfil the objectives of the European Strategy 2020, among which is for 40% of new generations of students to complete higher education.

Although there is no official response so far to the complaints on Luxembourg’s legislation, the trade unions are determined to keep up the pressure. On 16 September a large demonstration took place at Place Clairefontaine in the heart of the Government District. According to trade unions, 5,000 participants (2,000 according to the police) joined the event organised by the country’s five biggest trade unions (news report (in French)) to express disapproval of the government’s reform. For Luxembourg, which rarely experiences large-scale marches, the protest is a significant event. The unions that organised the protest were:

  • OGB-L;
  • National Federation of Luxembourg Railway and Transport Workers and Civil Servants (FNCTTFEL);
  • Luxembourg Confederation of Christian Trade Unions (LCGB);
  • Christian Transport Workers’ Trade Union (Syprolux);
  • Luxembourg Association of Bank and Insurance Employees (ALEBA).

In a press release (in French, 167Kb PDF), OGB-L also announced that it will meet European Parliament deputies from the Greater Region (in German) in November to draw their attention to the situation of the cross-border workers. In anticipation of a response from the European Commission, OGB-L sees this meeting as an opportunity to get the case addressed in European Parliament debates that are coming up.

Guy Castegnaro and Ariane Claverie, Castegnaro Cabinet d’Avocats

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