This article discusses whether Spanish law's exceptions of retirement on collective redundancy from the required procedures complies with EU law. Further it discusses the horizontal effect of EU directives, in particular questioning whether individuals can rely on directives in national court when domestic laws do not align with European Union standards, highlighting the broader implications for the primacy of EU law over national law as well as the protection of workers and their rights across the member states.
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Context of the case
A Spanish employer took his retirement which resulted into the termination of 54 employment contracts in different establishments in Spain. Eight employees have challenged this dismissal, as the employer did not comply with the procedure of informing and consulting the workers' representatives. The Court of First instance dismissed their action. In appeal, the High Court of Justice of Catalonia acknowledges that the national legislation stating that the termination of an employment contract due to retirement is exempted from prior information and consultation obligations laid down in Spanish law. However, the High Court wonder s whether this exclusion complies with EU Directive 98/59 relating to collective redundancies and if not, whether the eight workers concerned may rely on that directive even though it had not been correctly implemented in domestic law. The High Court has thus issued previous questions to the Court of Justice of the EU for a preliminary ruling.
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Retirement as a foreseeable and voluntary act
As follows from EU Directive 98/59/EC, in an event of collective redundancy, the employer needs to follow a procedure of consultation and information of worker's representatives, as to avoid those terminations, to reduce their number or to mitigate their consequences. .
According to the Spanish national legislation, the termination of employment as a result of "death, retirement in the cases provided for by the applicable social security scheme, or incapacity of the employer or extinction of the legal personality of the contractor" does not classify as a "collective redundancy", which leads to the employer being exempted from the obligation to inform and consult the worker's representatives. The question rose in the case at hand whether this exemption found in Spains national legislation complies with the EU directive 98/59/EC.
As mentioned, the obligation confined in article 2(2) of the Directive in question, the task of consulting the worker's representatives, is necessary to limit the consequences of collective redundancies. The Court of Justice makes a distinction between the death and the retirement of the employer. The Court emphasizes that the procedure of consultation and information needs to take place prior to the employer's decision to terminate employment contracts. The procedure requires the existence of an employer as well as the direct manifestation of the employer's intention to proceed to a collective dismissal. The employer who is expecting to retire is considered to be, in fact, fully able to carry out its obligations embedded in the Directive. The extinction of the employer's legal personality is the result of a voluntary choice. The retirement is a foreseeable event and can be preceded by a consultation and an information of the workers' representatives.
Therefore, according to the CJEU, the Spanish law does not comply with Directive 98/59/EC.
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What if the employer dies?
In contrast, in a prior judgement (RodrÃguez Mayor and Others (C 323/08, EU:C:2009:770), the Court specified that by the event of the death of a natural person as an employer, no voluntary decision to terminate the contracts occurred, which leads to the impossibility of proceeding with the information and consultation obligations.
However, e.g. in the Belgian national law, according to Article 33 of Employment Contracts Act, the death of the employer does not terminate the employment contract. If the death of the natural person does not affect the existence of the employment contract, the legal person, which remains, is not exempted from the obligations prior to a collective redundancy. The successors of the deceased employer would have to carry out these obligations.
But, in two specific cases, the death of the natural person also causes the dissolution of the legal person. This is the case when the death of the employer results in the cessation of the activity for which the employee had been hired or where the contract had been concluded with a view to personal collaboration. There is a close link between the employment contracts and the natural person, which explains why any activity will come to an end.
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Can the Spanish national court set aside the national law based on Directive 98/59/EC?
In this recent case, the Court determined that the Spanish national legislation did not in fact comply with Directive 98/59. When facing such a clash between EU law and national legislation, one has to keep in mind the importance of the principle of primacy of European Union law over national law as well as the importance of the principle of consistent interpretation to ensure uniformity and effectiveness of the community policies.
The question left to answer is whether or not the Directive has a horizontal effect between individuals in a national dispute. Contrary to a regulation, a directive does not have direct effect in member states, they have to be implemented into a national law first.
However, national courts are bound to interpret the national legislation, so far as possible, in the light of the wording and the purpose of the Directive in order to achieve the result sought by the Directive. In the case at hand, the Court declared that directives cannot impose any sort of obligation on individuals since they do not have any horizontal effect, it cannot be invoked as such in a national dispute. One can only use the national rules in which it is transposed.
So, can legal provisions such as those contained in Article 1(1) and Article 2 of Directive 98/59 (information and consultation of workers' representatives in the event of collective redundancies) be recognised as directly applicable? The answer is no. The Court recognises that a directive cannot lead to an interpretation contra legem and does not ask from national courts to disapply a national law in favour of a directive. Therefore, the Spanish employees will need to wait for the Spanish legislation to be amended.
Take aways:
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There is a difference to be made between the foreseeable retirement and the unforeseeable passing of the employer considering the obligations of consultation and information of workers' representatives;
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In case the event is foreseeable, as is the case for a retirement, the information and consultation procedure needs to take place in advance of the retirement (and dismissals).
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National legislation which provides otherwise will need to be modified, in the meanwhile, employees cannot directly rely on the provisions of Directive 98/59 to impose the information and consultation procedure to an employer.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.