Battling the hydra in EU anti-discrimination law

Can a company refuse to conclude or renew a contract with a self-employed person because he is gay? And may contractual freedom prevail over the prohibition of discrimination in such a situation? The European Court of Justice (ECJ) has recently tackled these questions in case C- 356/21, J.K. v. TP. A short answer stemming from the judgment would be a resounding no. Yet, a further analysis is in order because the judgment also brings a significant shift in the ECJ’s anti-discrimination case law. We argue that by interpreting the scope of the EU anti-discrimination directives as covering the conclusion of contracts by self-employed workers, the ECJ has extended the protection against discrimination to unexpected areas. That raises questions about how the directives will be applied in practice when self-employed workers claim discrimination.

A perfect case for litigation

J.K. worked for TP, a Polish public television company, on the basis of consecutive short-term contracts for specific work within his independent economic activity. Specifically, he prepared various audiovisual materials, while working two one-week shifts per month. His contract was not renewed after he and his male partner published a YouTube video promoting the equality of same-sex couples. In response, he sued TP for discrimination based on sexual orientation.

The referring Polish court requested a preliminary ruling on the interpretation of Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation (Directive). The ECJ was mainly asked to rule whether (i) the applicant’s activity constitutes self-employment falling within the Directive’s scope, and (ii) whether the protection against discrimination applies in relation to refusal to conclude or renew a contract with a self-employed person due to his sexual orientation. If so, the referring court was (iii) interested in whether such refusal could be justified by contractual freedom guaranteed by Polish law.

Strategically, one could hardly find a better case to litigate these issues. After 7 years of working for the company, the applicant’s contract was suddenly not renewed. The facts of the case show quite clearly that this happened because the applicant is gay, as the contractual relationship ended soon after he published the video and although his work had been positively evaluated shortly before. The image of a worker being disadvantaged particularly because of his sexual orientation arouses an instant sense of unfairness, since such unequal treatment is nearly impossible to justify. If the applicant were an employee, the Directive would, without any doubt, apply. Thus, it may seem inappropriate to not afford him protection against discrimination only due to the nature of the contractual relationship which otherwise closely resembles employment. Additionally, the case occurred in Poland, where the lives of homosexuals have become increasingly difficult, and a public television station owned by the state committed the alleged discrimination. Altogether, these circumstances made it relatively easy – almost irresistible – for the ECJ to interpret the Directive broadly, in order to protect the applicant and other people in similar positions.

In the end, that is what the ECJ did. It held that the Directive, according to its Art. 3, protects self-employed workers like the applicant and covers even the conclusion, renewal or termination of their contracts for specific work. Furthermore, under Art. 2(5) of the Directive, contractual freedom cannot justify discriminatory conduct in these situations.

However simple this conclusion may appear at first sight, we argue the case brings noteworthy novelties to EU anti-discrimination law. As we explain below, the ECJ for the first time clarified the Directive’s scope regarding self-employed people, while also creating new uncertainties about the practical application of the Directive.

Extending the scope of the EU anti-discrimination directives

The ECJ mainly had to interpret Art. 3 of the Directive. The key provisions state that the Directive shall apply in relation to “conditions for access to employment, to self-employment or to occupation, including selection criteria and recruitment conditions, whatever the branch of activity and at all levels of the professional hierarchy, including promotion” (Article 3(1)(a) of the Directive) and to “employment and working conditions, including dismissals and pay” (Article 3(1)(c) of the Directive).

It may seem obvious that the Directive protects self-employed people like the applicant, since Art. 3(1)(a) explicitly mentions self-employment. The actual challenge for the ECJ was to explain what falls within the wording of Art. 3(1)(a) and what not. The ECJ decided to interpret the provision broadly.

In the judgment, the ECJ reasoned that the Directive’s scope extends beyond protecting workers as the weaker party in employment relationships and covers all occupational activities regardless of their legal form, including activities carried out by self-employed workers in order to earn their livelihood. Simultaneously, the ECJ distinguished occupational activities from mere provision of goods or services that the Directive does not affect. Additionally, although the national court should assess the facts of the case at hand, the ECJ clearly hinted that the applicant’s situation falls within the Directive’s scope.

Next, the ECJ held that “conditions for access” to self-employment include the conclusion of a contract for specific work (such as the applicant’s contract). This may arguably be considered the most important aspect of the case, although the ECJ downplayed it by devoting it considerably less space in the reasoning than to the other points. The ECJ merely stated that the conclusion of such a contract may be essential for the applicant as a self-employed person to pursue his occupational activity effectively. Such interpretation is certainly possible and reflects the ECJ’s case law on access to employment that the ECJ understands very broadly as well (including e.g. public statements ruling out recruitment of homosexual persons). However, the Polish government argued that “conditions for access to self-employment” only involve general conditions for entering and exercising the profession, not the self-employed worker’s subsequent contractual relationships. In the past, the Czech ombudsman or the UK Supreme Court, for instance, promoted the same view in their decision-making. Therefore, the broader reach of anti-discrimination law in this regard may come as a novelty in some Member States. It is a pity that the ECJ did not elaborate on this point more thoroughly.

Moreover, the ECJ added that Art. 3(1)(c) addressing “employment and working conditions” applies to self-employment, too. Thus, the Directive’s protection extends to the professional relationship in its entirety, including termination or non-renewal of the contract. Again, the ECJ chose the broadest available interpretation, despite Art. 3(1)(c) not referring to self-employment.

In our opinion, the ECJ sufficiently supported its reasoning with textual and teleological arguments, as well as with its previous case law (especially case C-587/20, HK/Danmark and HK/Privat). Nevertheless, it is important to note that the ECJ interpreted the Directive very broadly, as the Directive’s scope is now confirmed to extend to potentially unexpected areas where contractual freedom used to prevail. In addition, the same extensive interpretation should be given to the other EU anti-discrimination directives (prohibiting discrimination based on race, ethnic origin and sex) whose scope is defined by identical wording (see Art. 3 of the Directive 2000/43/EC, Art. 14 of the Directive 2006/54/EC).

Practical consequences

The ECJ’s decision-making often resembles fighting a hydra. Once the ECJ cuts one head off (provides one answer), two more heads (issues) emerge. That has certainly happened in this case. While the ECJ has clarified the Directive’s scope regarding self-employed workers, several new problems consequently arise.

First, the prohibition of discrimination now clearly applies to contracts of self-employed people, who are predominantly entrepreneurs. The ECJ has thus left the safe harbor of standard employer-employee relationships, where the protection of the weaker party rules, and entered the wild entrepreneurial waters of business-to-business (B2B) relationships, where contractual freedom is paramount. Yet, many B2B relationships conceptually differ from other areas falling within the scope of EU anti-discrimination directives, where special interest in regulation exists, typically because essential services (e.g. education, healthcare) or weaker parties (e.g. employment, consumers’ access to goods and services) are involved. On the contrary, it could be argued that entrepreneurship requires self-employed people to handle the tough environment of the free market themselves.

Second, the ECJ has tried to distinguish occupational activities from provision of goods and services, in order to limit the wide range of situations when self-employed people conclude work contracts and could thus claim discrimination. Without any guidance from the Directive’s text, the ECJ made up criteria that specify the occupational activities covered by the Directive. Namely, such occupational activities cannot consist of “mere provision of goods or services to one or more recipients” (para. 44), but need to be “genuine” and pursued within “a legal relationship characterized by a degree of stability” (para. 45). Regarding the applicant, the ECJ emphasized that he engaged in “a genuine and effective occupational activity, pursued on a personal and regular basis for the same recipient, enabling the applicant to earn his livelihood, in whole or in part” (para. 47).

By introducing these limits, the ECJ probably wanted to especially protect self-employed people like the applicant, whose contracts in many ways resemble employment. If that was the intention, however, the ECJ did not manage to fulfill it very effectively. For instance, looking at the criteria (quoted above) that the ECJ used to distinguish self-employment from provision of goods and services, none of them excludes business-to-consumer (B2C) relationships, once a self-employed person serves a particular customer regularly. Even B2C relationships often involve genuine and personal work which is carried out on a stable, long-term basis. Therefore, service-providers could sue their customers for discrimination, which is uncommon in anti-discrimination law, as the protection against discrimination usually works the other way round. It is hard to imagine how every ordinary Joe (likely ignorant of anti-discrimination law intricacies) with a professional cleaner or caretaker visiting every week may face discrimination claims. And, if so, why would discrimination be allowed if the same service providers worked for the customer only once or sent their employee to do the work? Quite possibly, the ECJ have not foreseen the possible consequences for B2C relationships, as neither the judgment nor the Advocate General’s opinion address them at all.

Last but not least, it is not clear how other provisions of the Directive will work in relation to self-employment. For example, Art. 3(1)(c) includes pay among employment and working conditions, but striving for equal pay in entrepreneurial relationships might prove to be very complicated in practice. Also, the shared burden of proof under Art. 10 of the Directive may create problems. Business deal negotiations usually do not look like a transparent recruitment of employees, so proving non-discrimination will probably be extremely challenging for the respondent.

Conclusion

All of this does not necessarily mean that the ECJ was wrong. The judgment could actually be perceived as a step in the right direction because it might help anti-discrimination law react to the digital transformation of the economy, and related changes in society and work relations. Broad protections against discrimination in self-employment make it significantly easier for all gig workers, who perform their jobs under various types of precarious contracts, to defend themselves against discrimination, irrespective of the precise legal nature of their work relationships.

Still, we find it important to point out that the judgment has silently brought a little game-changer into EU anti-discrimination law. Self-employed workers can now file anti-discrimination lawsuits in many situations that may have previously been considered as falling outside the Directive’s scope. And many alleged perpetrators of discrimination might be surprised that the Directive applies to their behavior. How well this will be accepted, particularly in Member States where anti-discrimination law does not exactly flourish, remains to be seen. In the meantime, the ECJ will hopefully have an opportunity to further clarify the newly emerged issues.