1. Insolvency of the
employer. Provisions to guarantee payment of employees’ outstanding
claims
Directive 2008/94/EC of the European Parliament and of the Council
of 22 October 2008 repeals Directive 80/897/EC of 20 October 1980 and
introduces new provisions regarding the protection of employees in the
event of their employer’s insolvency (Official Journal of the European
Union of 28 October 2008)
Directive 2008/94/EC of the European Parliament and of the Council of
22 October 2008 (“Directive”), which repeals Directive 80/987/EEC of
the same title (substantially amended on several occasions), establishes
a new set of guidelines in order to provide protection to
employees in the event of their employer’s insolvency and specifically,
to guarantee payment of outstanding claims.
In this regard, the Directive will be applicable to employees
outstanding claims arising from employment contracts or labour relations
in the event of the employer’s insolvency. The Directive makes an
important clarification in this regard, establishing that if a company
carrying out activities in at least two different Member States becomes
insolvent, the appropriate institution for payment of the outstanding
claims will be that of the Member State in which the employees usually
perform their duties.
Moreover, the Directive establishes that all Member States will adopt
the necessary measures so that the guarantee institutions are able to
ensure payment of such outstanding claims, including any severance
payments due, under the domestic law. The forms of organisation,
financing and operation of the guarantee institutions will be
established by each Member State.
With regard to social security provisions, the Directive establishes
that Member States must adopt the necessary measures to protect
employees or any other individual when the insolvency takes place. This
protection encompasses acquired rights, or rights in the process of
being acquired, retirement pensions, including benefits for survivors,
which derive from supplementary professional or inter-professional
pension funds, and is independent from the social security regime.
2. Transfer of undertaking
or mere assignment of employees
Decision of the Labour Chamber of the Supreme Court dated 29 May
2008
In this judgment, the Supreme Court analyses a possible transfer of
undertaking between a foundation that decided to assign the cleaning
service which it had performed until that moment, to another company
which corporate purpose was to perform cleaning services in buildings
and other commercial places, maintaining the employment relations in
force with the transferor company and subrogating the new company in the
rights and duties as established in article 44 of the Statute of Workers
(“SW”).
The Supreme Court held that in order to demonstrate the existence of
a transfer of undertaking under the terms of article 44 SW, it is not
sufficient to assign employees from one business organisation to a
different company. It is also necessary to transfer the assets
comprising the infrastructure and basic business organisation of the
operation. In the case at issue there was no evidence of the transfer of
assets to the transferee company to demonstrate the transfer of the
activity and workforce.
Moreover, the Supreme Court held that the company’s decision to
transfer its workforce to another company was not equivalent to taking
over the workforce, an event considered under the European Community
doctrine to be a transfer of undertaking, provided it is effective, non-imposed
and real. This was not the case here. The decision was made by the
employer and was called into question by a large number of employees.
Therefore, the Supreme Court concluded that if there was no transfer
of material elements and if there was no taking over of the workforce it
could not be held that there was a transfer of undertaking under the
terms of article 44 SW.
3. Improper joinder of
actions: claim for dismissal and length of service for an illegally
transferred employee
Decision of the Labour Chamber of the Supreme Court, dated 12
February 2008
In this decision, the Supreme Court analysed whether in a claim for
dismissal proceeding it was possible to obtain a pronouncement on the
illegal transfer of employees, or whether such request would be an
improper joinder of actions as established in article 27.2 of the Labour
Procedure Law (“LPL”).
The claimant argued that the judgment should contain, at least as far
as the proven facts, the length of services since the beginning of the
transfer, including the length of the illegal transfer as established in
article 43.3 of the SW. On these grounds, the claimant requested the
recognition of a benefit in consideration of the length of services.
In this regard, the Supreme Court analysed the clear and direct
connection that might exist between a dismissal and an illegal transfer
of employees. In the first case, when the employer is dismissed while
the transfer is in force, the sole claim is that related to the
dismissal, and even though a pronouncement on the transfer relationship
is necessary, this does not mean an analysis of two different claims
which would be contrary to article 27.2 of the LPL. On the other hand,
in the event there was a dismissal by the transferor company following
the end of the transfer relationship, the argument of illegal transfer
could not prosper due to the lack of a direct link between the two
claims.
Moreover, the Supreme Court declared that in dismissal proceedings
the analysis of the illegal transfer was a preliminary or “internal
preliminary” issue, which according to article 4.2. LPL must be analysed
in order to identify - for example - the identity of the real and
effective employer who dismissed the employee, the consequences of the
dismissal being established pursuant to the terms of articles 43 and 56
of SW. Nevertheless, the Supreme Court pointed out that this analysis
should be limited to relevant issues concerning the judgment, such as
the amount of the salary, the real length of services, the temporary or
permanent status of the employment relationship, the existence of a
previous concealed transfer of undertaking, or the existence of a group
of companies, without this involving the filing of claims other than
that of dismissal or an improper joinder to the dismissal claim.
The Supreme Court concluded that although it was possible to analyse
the existence of an illegal transfer of employees and its consequences
in a dismissal claim, such analysis should be limited to reviewing any
matters relevant to the dismissal. The analysis should avoid unnecessary
pronouncements which, even if they did arise from the illegal transfer
of undertaking, are irrelevant to the dismissal judgment. In the case in
question, the claim filed by the employee regarding the effective length
of services and the recognition of the benefit, was not related to the
dismissal claim.
4. Transfer of undertaking.
Continuity of workers’ representatives
Decision of the Labour Chamber of the High Court of Justice of
Madrid dated 30 June 2008
In this judgment, the High Court of Justice of Madrid (“HCJ”)
analysed on appeal a judgment issued by the labour court, which
partially upheld a claim filed by an employee, declaring that the
dismissal was unfair and that because he was an employee representative
the worker was offered the alternatives of being indemnified or
reinstated to their post, as established in article 56.4 of the SW. The
main ground was that the labour court declared that the employee was
appointed as an employee representative prior to the date of transfer
and therefore, in accordance to article 44.5 of the SW and Community
Directive 2001/23, the transfer did not terminate the representative’s
appointment.
The HCJ reversed the labour court’s judgment and held that the
appointment as employee representative ended on the date of transfer and
as a result, the dismissal would not lead to the consequences set out in
article 56.4 SW.
In this regard, the HCJ declared that article 44.5 SW - which refers
to the continuity of employee representatives in their role even if
there is a change of employer when the workplace maintains its
independence - implicitly states that the closure of the workplace means
the end of the appointment as representative. In this scenario, the
removal of the workplace in which the employee was rendering services
prior to the transfer date led to the end of the appointment as
representative as a member of the works council. The continuity of the
appointment is accepted and imposed only if the transferred workplace or
economic unit maintains its independence; otherwise, the appointment
will end.
The judgment finally refers to the Community Directive which, in
order to maintain employee representation in the event of a transfer of
undertakings, obliges Member States to adopt the necessary measures to
provide proper protection. In this regard, the HCJ stated that the
purpose of this Directive was to ensure protection for transferred
employees when their previous company lost its independence, the loss
would not mean that the employee representatives of the former company
or work centre maintained their appointment in both situations, that is,
regardless of whether or not there are representative bodies at the
transferee company. In both cases, the “disappearance” of the company
has the same consequences for the representatives’ appointment from the
effective date of the transfer.
5. Transfer of undertaking.
Guidelines to determine if there has been a transfer of undertaking.
Services companies
Decision of the Labour Chamber of the High Court of Justice of
Madrid dated 27 May 2008
In this judgment, the HCJ analysed whether an oil company (“main
company”) should be obliged to take over a group of employees from a
services company (“outsourcer”) which were performing electrical
maintenance services for the main company. In this scenario, and after
the main company decided to carry out the electrical maintenance
services activity directly and thus, to terminate the services agreement,
the outsourcer decided to terminate the labour relationship with its
employees based on the termination of the outsourcing agreement.
The employees brought a claim against both companies (main company
and outsourcer) seeking a declaration of unfair dismissal. For most of
the employees, the labour court declared the dismissal unfair,
exonerating the outsourcing company, and requesting the main company to
decide between the reinstatement of the dismissed employees or the
payment of the severance payment due. In this case, the labour court
found that the main company had committed fraud in law by using several
outsourcing agreements in order to carry out permanent activities.
Moreover, the labour court stated that for services companies, which
mainly focus on workforce activity, a group of employees that are
permanently rendering a common activity might be considered an economic
unit which would preserve its identity even after the transfer, if the
new employer not only continued the transferred activity, but also took
over an essential part - in terms of number and competences - of the
personnel the predecessor was using in order to perform this activity.
In this case, the labour court held that there was no transfer of
undertaking under the terms of article 44 of the SW and considered that
the workforce itself (the employees) should not be considered an
economic unit: this is understood to be a group of people and elements
that enable the performance of an economic activity with a specific
objective. The fact that the electrical maintenance services were now
performed by the main company did not represent a transfer of said
entity.
6. Collective
dismissal procedure. Limits on the works council competences
Decision of the Labour Chamber of the High Court of Justice of
Valencia dated 25 April 2008
In this judgment, the Tribunal analysed whether the works council’s
decision regarding the recruitment of attorneys who were providing legal
and technical advice during a collective dismissal procedure obliged the
employees to consider them as their representative during the
negotiation period of the collective dismissal procedure.
In this case, the agreement approved by the works council was reached
in order to cover the expenses incurred for advice during the
negotiation period of the collective dismissal procedure. A discount on
the amount exceeding that of the legal severance payment was agreed.
This discount was variable and depended on the employees’ trade union
membership.
The Court stated that this decision was not representative or
indicative of the employees’ acceptance, since the decision was
beneficial to the majority (trade union members). Moreover, the Court
declared that the decision would lead to a type of “compulsory financing”
of trade union organisations by employees who were not trade union
members, and that this situation would require the express authorisation
of the employees affected according to article 11 of the Freedom of
Association Law.
In this regard, the Court held that article 64 of the SW provides the
duties of the works council. Among these, nothing was provided in
relation to expenses for advice during a collective dismissal procedure.
