Collective redundancies

Under Council Directive 98/59/ EC of July 20, 1998, the EU regulates the procedure to be adopted by companies intending to make collective redundancies of their employees by affording the latter, protection in the form of consultation through employees' representatives before the termination of their employment.

The main purpose of Directive 98/59 is to lay down a number of constraints of a procedural nature in cases of collective redundancy but does not fetter the manner in which businesses choose to conduct their affairs. In particular, the directive does not affect the freedom of companies to make redundancies which may be needed either due to insolvency, liquidation, or the closure of the business of the company for other reasons.

This directive has been the subject of a recent European Court of Justice decision brought by Mono Car Styling SA (Mono Car), a company in liquidation, against certain of its former employees in regard to their collective redundancy.

Mono Car, a Belgian subsidiary of Mono International, manufactured parts, decorative accessories and interior trim for various vehicle manufacturers. In 2004, following large losses, the board of directors of Mono Car informed the works council of the financial situation and of the possibility of collective redundancies.

Later, it signed a draft written agreement concerning a social plan with all the union representatives, subsequently ratified by a collective labour agreement. This agreement stated that the procedure for information and consultation in cases of collective dismissal had been observed by Mono Car.

Mono Car then sent to the competent public authority the list of the 30 workers made redundant and the criteria used to select them, and eventually made those workers redundant. The staff representatives on the works council raised no objection concerning observance of the conditions laid down under the domestic law transposing the EU Directive.

However, 21 of the employees challenged the regularity of the procedure adopted by Mono Car and applied, first, for reinstatement in the company and payment of earnings lost from the date on which their contracts were terminated and secondly, compensation for the material and non-material loss suffered.

The main issue in this particular case was whether the EU Directive confers rights directly on workers and, if so, whether those rights are individual or collective. It was also considered whether the directive allows national rules to limit the cases in which collective redundancies may be challenged when there has been a breach of a requirement laid down by the directive itself.

The Advocate-General in an "Opinion" delivered in January concluded that the directive permits national rules which restrict to the workers' representatives alone the right to challenge collective redundancies, or which make the right of an individual worker to challenge collective redundancies conditional upon the workers' representatives having made an objection.

The recent judgment of the European Court of Justice was in line with the "Opinion" of the Advocate General. The Court held that under the directive, the right to consultation is intended for workers' representatives and not for workers individually. The directive is intended to benefit workers as a collective group and consequently limits these rights to be exercised through workers' representatives.

The Court concluded that the employees under this particular procedure may be limited from acting individually if, for instance, the workers' representatives failed to raise any objections with the employer during the consultation procedure.

This notwithstanding, it must be stated that the individual right of workers in the case of improper dismissal remains unaffected and employees have the right to fight against their dismissal should they consider it to have been improper or unjust.

Dr Grech is an associate with Guido de Marco & Associates and heads its European law division.