The termination of an employment contract following an employee’s refusal to accept detrimental changes to such contract constitutes a redundancy for the purpose of EU law regulating collective redundancies, the Court of Justice of the EU recently concluded.
Establishing that a collective redundancy has taken place is important due to the obligations imposed by EU and national law on employers to abide by certain procedures and to consult with employees in all such cases.
The EU directive regulating collective redundancies makes provision for criteria whereby it can be determined that a collective redundancy has in fact taken place. It leaves it up to the member states to decide as to what ought constitute a collective redundancy in terms of their law by opting for any of the following scenarios. The number of redundancies is:
• either, over a period of 30 days: at least 10 in establishments normally employing more than 20 and less than 100 workers; at least 10 per cent of the number of workers in establishments normally employing at least 100 but less than 300 workers; at least 30 in establishments normally employing 300 workers or more;
• or, over a period of 90 days: at least 20, whatever the number of workers normally employed in the establishments in question.
This law also provides that, when calculating the number of redundancies, terminations of an employment contract which occur on the employer’s initiative for reasons not related to the individual workers concerned are to be considered as redundancies, provided that there are at least five redundancies.
In terms of Spanish law, for undertakings employing between 100 and 300 workers, ‘collective redundancy’ refers to the termination of employment contracts on objective grounds where, over a period of 90 days, the termination affects at least 10 per cent of the workers.
A company employed 126 persons, of whom 114 were employed on a permanent basis and 12 on fixed-term contracts. Itcarried out 10 individual redundancies on objective grounds.
During the 90-day period provided for by law, it also carried out 27 contract terminations for various reasons, such as the expiry of the agreed contract term or the voluntary redundancy of the workers concerned.
These terminations included that of an employee who agreed to terminate her employment contract after being informed of a change to her working conditions, namely a 25 per cent reduction of her salary on the basis of the same objective grounds relied on in the other contract terminations.
One of the employees affected by the collective redundancy brought proceedings before the national courts alleging that the company should have applied the collective redundancy procedure because the numerical threshold laid down in Spanish law for a collective redundancy had been reached.
The national court made a preliminary reference to the Court of Justice of the EU, requesting guidance as to how the provisions of the directive dealing with collective redundancies ought to be interpreted.
The CJEU observed that individuals employed under a fixed-term contract or for a specific task must be considered as part of the normal workforce. However, workers whose contracts are terminated because they had been engaged for a fixed term are not to be taken into account in determining whether the numerical threshold for there to be a ‘collective redundancy’ has been reached, once such contracts are terminated upon their expiry.
On the other hand, the court pointed out that instances where the employer, unilaterally and to the detriment of the employee, makes significant changes to essential elements of the employee’s employment contract for reasons not related to the employee, fall within the definition of ‘redundancy’.
The court noted that redundancies are characterised by the lack of the worker’s consent. It also emphasised that the concept of redundancy ought not to be given a narrow definition in order to ensure that the objective of the directive – to afford greater protection to workers in cases of collective redundancies – is achieved.
Such clarifications provided by the CJEU greatly assist both employers and employees in ascertaining their rights and obligations in terms of law and also serve to ensure that EUlaw is applied uniformly across all the member states.
mariosa@vellacardona.com
Mariosa Vella Cardona is a freelance legal consultant specialising in European law, competition law, consumer law and intellectual property law.