Playing fair

The European Court of Justice is Europe’s supreme legal body that ensures legislation is consistent in each member state. Its decisions can have a huge impact on employers.

Human resources managers may well consider the European Court of Justice (ECJ) a somewhat austere body, constantly engaged in arcane institutional and corporate matters. Think again. Arguably, the ECJ has had a more direct impact on the lives and work of the European Union’s 380 million citizens than any other single organisation.

Created in 1972, the Court is the Union’s supreme legal body, charged with ensuring that EU legislation is interpreted and applied in the same way in each member state – in other words that it is identical for all parties and in all circumstances.

Its rulings allow no appeal to another institution and take precedence over the courts of any of the 25 member countries. It is composed of one judge per member state with findings being decided by a simple majority and no dissenting opinion published.

The ECJ’s prime loyalty is to the EU’s founding treaties that speak of the “ever closer union of the peoples”. It is this that gives its rulings a distinctive federalist character. And while the court does not always side with the European Commission (the main litigant) in disputes with individual member states, for instance, time and time again its judgements have upheld the primacy of EU over national law.

Interpreting the law

Stefan Martin, a partner in the law firm of Allen and Overy, says: “ECJ judgements have affected the UK massively, they all have an impact in interpretation of UK law, and particularly UK law that is derived from European directives.” He identifies rulings on transfer of undertakings (TUPE) and on working time as recent examples where UK employment law and practice has had to be changed following ECJ rulings.

Elizabeth Stevens, employment lawyer at Eversheds, says: “The ECJ has had a big impact on many areas of UK employment law, most notably in the areas of equal pay and sex discrimination, business transfers and working time legislation.”

Moreover, she says: “New directives mean we can expect Europe’s role to extend in the coming years to disability and age discrimination, works councils, race and religious issues.”

Stevens says that ECJ decisions in cases of sex discrimination have had a huge impact on the law in this country, including many elements of the law that are now very much taken for granted.

One example arises from various decisions of the ECJ confirming that the dismissal of a female worker on account of her pregnancy amounts to direct discrimination on the grounds of sex, in contravention of the Equal Treatment Directive.

“This is now provided for expressly in the Employment Rights Act 1996 (s99), as a result of the EC Pregnant Workers Directive,” she says.

Earlier judgements by the ECJ have provided for equal treatment for men and women over pensions, have ensured that the dependants of EU citizens may live and work in the country of their choosing, and have significantly improved employment conditions for part-time and temporary workers.

Financial compensation

In 1993, the ECJ ruled that financial compensation awarded to an employee must be adequate to enable the loss and damage actually suffered to be made good in full, forcing the UK government to remove the limit of £11,000 for awards under the Sex Discrimination Act 1975 and the Equal Pay Act 1970 and introduce unlimited compensation.

An ECJ ruling that has pleased trade unions in the UK is the holiday provisions of the EU’s Working Time Directive, which gave an increase in holiday entitlement to six million workers in the UK.

Paul Sellers, at the TUC’s economic and social affairs department, says:  “Employment law is increasingly being framed by Brussels, and that’s to some extent a good thing.”

But Sellers adds: “The EU is not the only forum since one of the biggest employment innovations of recent years has been the national minimum wage and that has nothing to do with the EU.”

A number of rulings made by the ECJ over the past year or so are nevertheless singled out by lawyers as being of special significance for UK employment law:

Martin v South Bank University and Beckmann and Dynamco Wicheloe MacFarlane Ltd concerned the rights applying on a TUPE deal.

Essentially the ECJ ended part of the exclusions for occupational pension arrangements from regulations providing that the terms and conditions of employment would remain the same on transfer. The Court said exclusion did not cover certain benefits provided on anything other than retirement at normal retirement age, like special redundancy benefits or ill health and early retirement.

“That’s had a significant impact on UK employers law,” says Martin.

In the case of Landeshauptstadt Kiel v Jaeger last September the ruling considered whether time spent resting, or indeed sleeping, by on-call workers who were required to be at their workplace counted as ‘working time’.

The Court found that under the Working Time Directive, on-call duty performed by a doctor where he was required to be physically present in the hospital had to be regarded as constituting in its totality ‘working time’, even where he or she was permitted to rest at the place of work, adding that these periods of inactivity could not count towards satisfying the employer’s obligation under working time legislation to provide workers with a certain amount of rest provision.

Eversheds says that as a result, UK employers with a significant on-call workforce may need to review their working arrangements to ensure they comply with the 48-hour average working week limit or one of the exceptions.

In particular, the firm says: “The Jaeger decision may impact upon the NHS, when from 1 August 2004, junior doctors will be subject to the Working Time Regulations 1998 and in particular, a initial limit of a 58-hour average working week.” 

Supplying services

In Abler & Ors v Sodexho MM Catering Betriebsgesellschaft in November 2003, another TUPE case, the ECJ ruled that where there was a change of contractor supplying catering services, the Directive applied where the second contractor used substantial parts of the tangible assets previously used by the first contractor, even where the company did not take on the employees.

Eversheds says this suggested that the provision of catering services was generally to be seen as ‘asset-reliant’ meaning that TUPE regulations would apply even where employees were not taken on. But the firm says it remains uncertain however whether the provision of other services (such as cleaning), could also be regarded as ‘asset reliant’.

In the equal pay case of Allonby v Accrington & Rosendale College (ECJ; C-256/01), in January this year, the plaintiff was a female college lecturer initially employed under a series of fixed-term contracts and subsequently engaged as an independent sub-contractor though an employment agency, who was then paid at a lower rate and lost membership of the teacher’s superannuation scheme.

The ECJ found that she could not claim equal pay using a male comparator who continued to be employed and paid as a full-time lecturer at the college under conditions determined by the college. The ruling said: “This strengthens the principle that a claimant in an equal pay claim cannot use another individual as a comparator if they are not both employed directly by the same employer, even though both individuals may be employed to do comparable work in the same establishment.” This will have repercussions for employers that re-engage former employees as self-employed contractors through the services of an agency.

Also in January this year, the Court ruled on European Works Councils in the case of Gesamtbetriebsrat der Kuhne & Nagel AG & Co KG v Kuhne & Nagel AG & Co. The German Federal Labour Court had sought interpretation of Directive 94/95 and in particular how to set up an EWC where the central management of a Community-scale group of undertakings was based outside the EU – in this case in Switzerland – and did not provide all the necessary information.

The ECJ ruled that in such an event responsibility for providing the necessary information to employees’ representatives lay with the central management’s representative agent within an EU member state and if no such agent existed then responsibility would fall on the management employing the greatest number of workers in any single member state.

Eversheds says: “This offered a wide interpretation of what information must be provided by management for the establishment of a European Works Council,” adding that it was likely to reflect the approach of the ECJ in the future to similar issues.

Maternity leave

In another recent judgement, the ECJ said workers on maternity leave should not lose annual holiday entitlements, even when holidays were fixed for certain dates by collective agreement. It determined that the directive covering pregnant workers protected employment contract rights during maternity leave: including the right to paid annual leave.

Cases coming up for rulings by the ECJ include the question of rolled-up holiday pay where UK employers pay a wages allowance in lieu of paid holidays. This practice, now outlawed by the courts in Scotland, is favoured by construction industry employers since it encourages workers to avoid taking leave, but is strongly disliked by the TUC, which says many employers are seeking to avoid their responsibility for paid holidays. This matter, which will have important repercussions in the UK, will probably now be settled once and for all by the ECJ.

Opt-out options

The ECJ may also be called on at some stage to decide on Britain’s opt-out from certain provisions of the working time directive, mainly the 48-hour working week limit. The European Commission is keen to end the UK exemption that it claims gives British employers the ability to force workers to work longer hours.

More rulings are also likely on the EU’s data protection directives where a recent ECJ judgement in a Swedish case has been interpreted as widening the legislation’s control over the publication of ‘medical’ information, forcing companies to seek more explicit personal consent before publication on the internet.

There is speculation that the Commission may seek an entirely new directive covering data protection in view of recent developments in this area.

European Court of Justice procedure and how it is used

The ECJ may be used by national courts to clarify aspects of EU legislation or it may determine cases brought by individuals, governments or European institutions against each other.

What all rulings have in common, however, is that they are binding in all EU member countries, take precedence over all legal decisions, are directly applicable to individuals and are not subject to appeal.

In practice, says Elizabeth Stevens, employment lawyer at Eversheds, UK courts and tribunals must interpret UK legislation that implements EC directives by adopting what is referred to as a ‘purposive approach’. This means, she says: “That they must construct any provision of the UK regulations in accordance with the overall purpose of the Directive and how the Directive is interpreted by the ECJ.”

UK courts and tribunals have the ability under the EC Treaty to make references to the ECJ for guidance on legislation implementing any directive.

For example, a number of cases involving working time have been referred to the ECJ since the EU directive on this subject was approved in 1998, including a charge by the Broadcasting, Entertainment, Cinematographic and Theatre Union that the UK Government had wrongly implemented the right to four weeks paid holiday by making it only available to workers continuously employed for 13 weeks. The ECJ found against the UK and the law was changed.

“Unlike, as a rule, EU directives and regulations, however, ECJ case law can be extremely unpredictable and decisions can often suddenly result in previously acceptable employment practices being questioned,” says Nicola Fenny, senior policy adviser in the Human Resources Directorate of the Confederation of British Industry.

“Business believes this demonstrates the importance of framework directives remaining flexible to enable solutions to ECJ judgements to be found at short notice and at a national level,” she says.

Useful web sites

The DTI:

Acas also runs regional employment law seminars.

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