Slipping through our fingers: the CJEU rules on the value of parenthood in EU law

Steve Peers

The vast bulk of EU legislation and case law on sex discrimination aims to facilitate women’s access to employment, and their equal treatment within the workplace. Yesterday’s CJEU ruling in Maistrellis approaches these issues from an unusual angle: the access of a father to parental leave, in a case where the mother of his children was not working or seeking paid work at all. The judgment raises interesting questions about the role that EU employment and discriminaton law plays in family life. 

Background

EU rules on parental leave date from an agreement of social partners in 1996, which was updated in 2010. This case concerns the 1996 version of the agreement, which begins by stating the social partners’ intention: ‘reconciling work and family life and promoting equal opportunities and equal treatment between men and women’. The preamble refers to the work/life balance point (paragraph 4) and the promotion of ‘women’s participation in the labour force’ (paragraph 7). It also states that ‘men should be encouraged to assume an equal share of family responsibilities’. 

  

The main text of the agreement makes clear that it sets out only ‘minimum requirements’. It applies to ‘all workers, men and women’, who have an employment contract or relationship as defined by national law. It gives ‘men and women workers an individual right to parental leave’ on the birth or adoption of a child, for at least three months, up to an age (up to 8) to be defined by Member States or social partners. ‘To promote equal opportunities’, the right should be non-transferable.

Detailed rules on parental leave must be defined by national legislation and/or collective agreements, as long as those rules meet the minimum requirements in the Directive. These rules can: decide if parental leave is granted on a full-time or part-time basis; set out a waiting period of up to one year of employment; adjust the rules to the particular circumstances of adoption; establish notice periods to be given to the employer; define when the employer can postpone parental leave; and ‘authorise special arrangements’ for small businesses.

Furthermore, the agreement specifies that workers who apply for or take parental leave are protected from dismissal on those grounds. They have the right to return to the same job (or a similar job, if that’s not possible) at the end of the parental leave. Parents also retain any rights which they acquired before the parental leave began, although it’s up to national law or employers to determine whether parents are paid during their leave period. All social security issues are left to national law. Finally, workers are also entitled to time off from work for ‘urgent family reasons’, although the details and limits on this right are left to national law and social partners to determine.

Judgment

The father in this case was a Greek judge, who sought to exercise parental leave for a paid period of nine months. In practice Greek law curtailed this benefit in two ways: first of all by limiting it to mothers only; and secondly (in a rather contradictory manner) by attaching strict conditions as regards fathers, which didn’t apply to mothers. If a mother stays at home to look after the child (as in this case), a father could only obtain the leave if the mother was unable to look after the child due to illness or injury. The Greek courts had already ruled that the first limit was inapplicable, and now asked the CJEU if the second limit breached EU law.

According to the CJEU it did, for two reasons. First of all, it breached the parental leave agreement, because that agreement states that parental leave is an ‘individual right’ which is ‘non-transferable’. Therefore (reiterating prior case law) it applied to each parent. The possible limits referred to in the Directive make no provision for denying parental leave based on the employment status of the spouse. This literal interpretation was reinforced by the overall context of the agreement: obtaining a better work/life balance, and encouraging men to take on more family responsibilities. The right to parental leave also appears in the EU Charter of Fundamental Rights.

Secondly, the Greek rule also violated the EU Directive on sex discrimination in employment. That was because parental leave was a working condition, and the position of men and women was ‘comparable’ as regards bringing up children. The Greek law attached a condition to fathers that it did not attach to mothers, so constituted sex discrimination.

Furthermore, this distinction ‘is liable to perpetuate a traditional distribution of the roles of men and women by keeping men’ in a ‘subsidiary’ role as regards parenting. While the Directive does provide that it is ‘without prejudice’ to the parental leave agreement and the pregnant workers’ Directive, the ‘deprivation’ of a father’s parental leave ‘in no way’ helps the health and safety of pregnant workers or new mothers, which is the purpose of the latter Directive.

Comments

First of all, it should be noted that Greek law, for at least some workers, far surpasses the minimum rules in the agreement – nine months’ paid leave, rather than three months’ unpaid leave. Very few parents in the EU will have access to this generous a parental leave – even the two weeks of paid leave which I enjoyed for each child is better than many fathers get. Indeed, the EU’s pregnant workers’ Directive only requires new mothers to get 20 weeks’ maternity leave on sickness pay (not full pay) as a minimum (note that parental leave applies in addition to maternity leave). It’s doubtful that the EU economy as a whole could withstand such generosity, and indeed I wonder if the Greek benefit has since become rather less generous due to the demands of the Troika.

So it’s important to emphasise that the CJEU is not requiring all employers to give fathers nine months’ fully paid leave for each child. Rather, whatever the period of parental leave (which need not even be paid), it cannot be subject (for fathers) to conditions relating to the mother’s employment status.

The judgment has several interesting implications. First of all, while the CJEU has traditionally ruled that EU sex discrimination law cannot apply to same-sex couples (see the Grantjudgment), it’s arguable that the parental leave agreement can. While that agreement does refer to ‘men’ and ‘women’, the Court’s emphasis on parental leave as an individual right, and the EU Charter ban on discrimination on grounds of sexual orientation, points in favour of it applying to same-sex parents. Although it would be possible to use the EU’s framework equality Directive to challenge a limitation on parental leave based on sexual orientation, it’s possible that parental leave is being limited on a basis other than sexual orientation. In any event, a gay or lesbian parent may prefer to invoke rights as a parent. Having said that, it should be noted that the civil status of same-sex couples (ie access to marriage), is, as EU law currently stands, a matter for Member States to decide (for more on this, see Alina Tryfonidou’s recent blog post). This must equally apply to adoption.

Secondly, the ruling is similarly relevant to any family that does not take the form of two married parents. It must follow from the Court’s ruling that it’s irrelevant whether the parents are unmarried, or whether the parental leave right is being claimed by a single parent. Again, it should be pointed out that EU law doesn’t determine who has custody of a child – at most, it determines which court has jurisdiction to rule on this issue where there is a cross-border element. 

  

Thirdly, while the ruling implicitly extends the parental leave agreement to such non-traditional families, it explicitly confirms its application to the most traditional form of all: families with a stay-at-home mother. As noted above, EU sex discrimination law has its own tradition, constantly aiming to encourage mothers to work. Yet in this case, the Court skipped over the many references to this objective in the relevant EU laws, and asserted instead the father’s individual right to parental leave as well as his right to non-discrimination on grounds of sex.

Reading the case more carefully though, the judgment does challenge the traditional family model in a different way: not by encouraging mothers to return to work (although of course this is still relevant in most other cases), but by encouraging fathers to help them at home. Thirty years ago, the Court was concerned (in its Hofmann judgment) that EU law should not 'alter the division of responsibility between parents', as regards gender roles in the household. Now it’s concerned to make sure that those roles are shaken up.

It’s surely true to say that equality between men and women can’t be achieved without challenging those roles. Yet it’s interesting that in this judgment, the Court wants those roles to be challenged even if there’s no link with the mother’s employment. In this vein, the Court’s assertion that equal treatment as regards parental leave will not undermine the health and safety of new mothers is the understatement of the year: what new mother wouldn’t welcome the assistance of the baby’s father for even a short period, never mind nine months? But this approach subtly alters the purpose of the pregnant workers’ Directive, which is about employed mothers, not those who stay at home. Of course, the Court’s interpretation is entirely justified on social grounds: new mothers can use the help of fathers whether the mothers are employed or not.

Finally, the Court’s ruling implicitly emphasises the value of strengthening both parents’ ties with their children, regardless of any link with the mother’s employment. It’s a good time to reaffirm this link, as parents across EU (including the Court’s staff) brace themselves for the start of summer holidays. For parents, this is an unavoidable and poignant reminder that our babies grow up, our little ones get bigger, and the time we spend with them is always slipping through our fingers.

Barnard & Peers: chapter 20

Photo credit: activebabiessmartkids.com.au

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The protection of temporary agency workers according to the CJEU: The AKT judgment

 

 

Alejandra Victoria García Sánchez *

Research and Documentation Department of the Court of Justice of the EU (The opinions expressed in this blog post are solely those of the author)

Last week the Grand Chamber of the Court of Justice of the European Union (CJEU) issued its first ruling on Directive 2008/104/EC on temporary agency work, the judgment in AKT, Case C-533/13. The following blog post sets out the legal context of the Directive, the main points of the judgment and an analysis of the judgment, comparing it to case law on related legislation and commenting on the main issues that it raises.

Legal context of the on temporary agency work Directive

Temporary agency work is regulated by Directive 2008/104, which was adopted under the legal basis provided by Article 153, paragraph 2, of the TFEU. Two other forms of so-called ‘atypical work’, part-time work and fixed-term work, are regulated by Framework Agreements negotiated by the social partners (these Agreements are annexed to Directives 97/81/EC and 1999/70/EC respectively).  The recitals of the Framework Agreement on fixed-term work stated an intention to adopt a similar Agreement on temporary agency work; however, the failure of the social partners to reach such an Agreement led the EU legislators to adopt a Directive instead. The Commission reported on the transposition of the Directive by Member States in 2014.

Field of application of the Directive

The CJEU had previously clarified in its judgment in Della Roccathat fixed-term workers placed by a temporary work agency at the disposition of a user enterprise are not covered by the Framework Agreement on fixed-term work but by the Directive on temporary agency work (paragraph 36).

In order to determine whether a worker is protected by the Framework Agreement or by the Directive, the type of employer prevails over the type of contract that binds that employer to the employee.

The facts and the judgment of the CJEU in AKT

In the AKT judgment, the CJEU clarified the scope of the obligations stated in Article 4(1) of the temporary agency work Directive, entitled “Review of restrictions or prohibitions”. This provision states that “prohibitions or restrictions on the use of temporary agency work shall be justified only on grounds of general interest relating in particular to the protection of temporary agency workers, the requirements of health and safety at work or the need to ensure that the labour market functions properly and abuses are prevented”. Article 4(2) states that Member States shall review restrictions that are not based on general interest grounds.

The undertaking SAF has been employing temporary agency workers for several years. The AKT, a trade union, contended before Finnish courts that SAF was employing temporary agency workers to perform the same tasks as its own workers and required SAF and Öljytuote ry, an employers’ association, to pay a penalty provided by Finnish law punishing improper use of temporary agency workers. The defendants contended that the Finnish provision establishing a penalty for improper use of temporary agency work is contrary to Article 4(1) of Directive 2008/104, since that limitation is not justified on the grounds of general interest. The national court doubted whether Article 4(1) of the Directive obliges national authorities, including the courts, to not enforce or not apply national provisions containing prohibitions or restrictions that are not justified on grounds of general interest.

The CJEU analysed Article 4(1) “in its context”. It highlighted that paragraphs 2, 3 and 5 of the same Article require the Member States to review and verify whether the limitations laid down by their laws are compatible with Article 4(1), that they notify the Commission of the review and that the Member States remain free to either remove or adapt the restrictions and limitations laid down by their laws (paras 26-30). The CJEU stated that the tasks indicated in Article 4 are to be performed by the competent authorities of the Member States, and not by national courts. Furthermore, the CJEU concluded that Article 4(1) does not require the adoption of specific legislation (para.31).

The case law on the part-time work Framework Agreement

It is interesting to compare the treatment of Article 4(1) of the temporary agency work Directive with the case law on the similar provision of the part-time work Framework Agreement.

The latter  Agreement contains a provision that is similar to Articles 4(1) and 4(2) of Directive 2008/104: Clause 5(1)(a) of the Framework Agreement imposes an obligation on Member States to “identify and review obstacles of a legal or administrative nature which may limit the opportunities for part-time work and, where appropriate, eliminate them”.

Clause 4 of the part-time work Framework Agreement, which states the principle of non-discrimination of part-time workers in respect of employment conditions, has been considered by the CJEU as articulating a principle of European Union social law which cannot be interpreted restrictively (Case C-395/08, Bruno e.a., para. 32).

In Case C-395/08, Bruno e.a, paras. 80-81, the CJEU reached the conclusion that, where national legislation is found by a national court to be incompatible with Clause 4, i.e., it discriminates against part-time workers, discouraging the workers from pursuing their occupational activity on such a basis, Clauses 1 and 5(1) of the agreement would have to be interpreted as also precluding such legislation.

An example of a measure that has been found to infringe Clause 5 was identified in case C-55/07, Michaeler a.o., where Italian national law required employers to notify part-time work contracts 30 days after their conclusion, with the possibility to impose fines in case of lack of notification. The measure was found by the CJEU to dissuade employers from using part-time work contracts and thus, to be precluded by Clause 5(1)(a) (paras. 28-20).

This case law provides guidance on the issue of when a measure should be eliminated according to Clause 5(1)(a) and can be applied by analogy to Article 4(1) of the Directive in order to clarify the causes why a Member State is entitled to restrict or prohibit the use of temporary agency work and when is it required to withdraw a restriction or prohibition.  However, this was not at issue in the AKT judgment. The issue is not whenbut who should withdraw an unjustified restriction upon temporary agency work. According to the above mentioned case law, under Clause 5(1)(a), both the Member States and the national courts can perform the task of eliminating unjustified restrictions. This mechanism ensures that, if restrictions persist, a national court can solve the problem by eliminating the obstacles, contributing to the achievement of the objectives of the Agreement.

 Comments

In the AKT judgment, the CJEU entrusted solely the governments of the Member States with the task of complying with the objective of article 4(1). Thus, the case law regarding Clause 5(1)(a) cannot be used by analogy, as it could have been expected, in order to interpret who should review or eliminate a measure not compatible with article 4 of the Directive, since, as it has been interpreted by the CJEU, only the Member States’ competent authorities have the power to review or eliminate national provisions in order to decide when and how to comply with the objectives of the Directive.

The CJEU in this judgment interpreted Article 4(1) in “its context”; however, the “context” was limited to the other paragraphs of Article 4. It is true that looking at those provisions, only governments and social partners (if such restrictions or prohibitions are laid down by collective agreements, according to Article 4(3)) can proceed according to Article 4(1). However, the CJEU did not mention the objective of the Directive settled in Article 2. The Directive aims at recognising temporary work agencies as employers, while taking into account the need to establish a suitable framework for the use of temporary agency work with a view to contributing effectively to the creation of jobs and to the development of flexible forms of working. Thus, from the point of view of social policy, the rationale behind the adoption of the Directive seems clear: to stabilise the situation of temporary work agencies and to settle their legal status as employers, limiting the use of their temporary workers only on grounds of basic work standards such as health, safety or prevention of abuses, which are basic principles of social policy applied in many other fields of labour law. Once this policy step has been taken, from the point of view of legal consistency, the objective of the Directive being clear, the combination of Articles 2 and 4(1) of the Directive should lead to the empowerment of national courts to not apply national laws that restrict temporary agency work further than necessary, which are contrary to EU law (as is the case with Clause 5(1) of the part-term work Agreement).

The exclusion of the competences of the national courts to not apply measures that run counter to Article 4(1) might thus be paradoxical, since, the unjustified restrictions that have not been modified or derogated from by the “competent authorities” will have to be applied by national judges, even if they consider them to be contrary to the Directive.

However, this judgment has been welcomed by trade unions, since it has been considered that it “guarantees the social partners’ autonomy in regulating the use of temporary agency work through collective agreements”. Their joy should be limited, as we should not forget that Article 4(3) states that the review referred to in paragraph 2 may be carried out by the social partners who have negotiated the relevant agreement. Furthermore, the Directive is still clearly in favor of recognising that temporary agency work is a form of employment that should be protected, and only limited on the basis of fundamental work standards. The fact that national courts are not entitled to set aside unjustified restrictions (according to the CJEU) does not mean that the Directive’s objective has changed, but it does mean that the achievement of that objective is delayed and more difficult to reach, since the political will of governments and social partners might not be focused on these aims.

Barnard & Peers: chapter 20

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Rights, remedies and state immunity: the Court of Appeal judgment in Benkharbouche and Janah

Steve Peers

Yesterday’s important judgmentin Benkharbouche v Sudan and Janah v Libya by the Court of Appeal raised important issues of public international law, the ECHR and the EU Charter of Fundamental Rights, and demonstrated the relationship between them in the current state of the British constitution. The case involved two domestic workers bringing employment law complaints against the respective embassies of Sudan and Libya, which responded to the complaints by claiming state immunity, based on a UK Act of Parliament (the State Immunity Act) which transposes a Council of Europe Convention on that issue.

The question is whether invoking state immunity for these employment claims amounted to a breach of human rights law, given that Article 6 of the ECHR (the right to a fair trial) guarantees access to the courts, according to the case law of the European Court of Human Rights (ECtHR). In turn, this raised issues of EU law, given that Article 47 of the EU Charter of Fundamental Rights likewise guarantees the right to a fair trial, and some of the claims concerned EU law issues (the race discrimination and working time Directives). (Other claims, such as for ordinary wages and unfair dismissal, were not linked to EU law). The two cases didn't concern human trafficking or modern slavery, although sometimes embassies are involved in such disputes too. But they would be relevant by analogy to such disputes, and there would also be a link to EU law in such cases, since there is an EU Directive banning human trafficking, which the UK has opted in to. 

The Court of Appeal, essentially following the prior judgment of the Employment Appeal Tribunal, made a careful study of recent ECtHR case law, concluding that state immunity could no longer be invoked against all employment law claims, but only against those claims concerning core embassy staff. This could not apply to domestic workers; Ms. Janah’s tasks did not involve (for instance) shooting any British policewomen.

But what was the remedy for this breach of human rights principles? At lower levels, the tribunals had been powerless to rule on the claims for breach of the ECHR, since the UK’s Human Rights Act awards the power to issue a ‘declaration of incompatibility’ that an Act of Parliament breaches the ECHR to higher courts only. So the Court of Appeal was the first court that could issue such a declaration, and it did so in this case. (The Court concluded that it could not ‘read down’ the relevant clauses in the State Immunity Act to interpret them consistently with the ECHR).

However, as compared to the effect of EU law, even a declaration of incompatibility with the ECHR is relatively weak, given that the potential remedy for a breach of EU law is the disapplication of national law, even Acts of Parliament if necessary, by the national courts. So the Court of Appeal also ruled that the relevant provisions of the State Immunity Act had to be disapplied, to the extent that they were applied as a barrier to the claims based on EU law. On this point, the Court was following the Employment Appeal Tribunal, which had also ruled to disapply the Act, given that any level of national court or tribunal has the power to disapply an act of parliament if necessary to give effect to EU law.

If I had a pound for every law student who has confused the remedies in UK law for the breach of EU law with the remedies for the breach of the ECHR, I would be very rich indeed. Fortunately, the facts of this case easily demonstrate the distinction between them. Only the higher courts could even contemplate issuing a declaration of incompatibility with the ECHR; and the remedy of disapplication of the Act of Parliament is obviously stronger than the declaration of incompatibility, allowing the case to proceed on the merits (as far as it relates to EU law) rather than having to wait for Parliament to change the law in order to do so. And equally, the case shows the importance of the requirement that a case has to be linked to EU law in order for the Charter to apply: only the race discrimination and working time claims benefit from the disapplication of provisions of the Act of Parliament, and so only those claims can proceed to court as things stand.

From an EU law perspective, the most interesting point examined by the Court of Appeal was the application of the ‘horizontal direct effect’ of Charter rights, ie the application of EU law against private parties (since non-EU States aren’t bound by EU law as States, the court assimilated them to private parties). In its judgment last year in AMS (discussed here), the CJEU distinguished between those Charter rights which could give rise to a challenge against national law based on the principle of supremacy of EU law, and those Charter rights which could not, since they were too imprecise to base a free-standing Charter claim upon. The right to non-discrimination on grounds of age fell within the former category, whereas the right of workers to be consulted and informed fell within the latter category. (Note that the CJEU case law classifies this as an application of the principle of supremacy, not horizontal direct effect, although the final outcome is the same no matter how the principle is classified, at least in cases like these).

The Court of Appeal reaches the conclusion that Article 47 of the Charter is also a provision which is precise enough to be used to challenge national legislation. That’s an important point, since Article 47 is a far-reaching and frequently invoked provision, and applies not just to state immunity issues but to many broader issues concerning access to the courts (including legal aid) and effective remedies.  For that reason, this judgment is an important precedent for national courts across the European Union faced with challenges to national laws based on Article 47 of the Charter, although of course it doesn’t formally bind any court besides the lower courts of England and Wales.

The Court didn’t need to rule on whether the substantive Charter rights raised by these cases would have the effect of disapplying national law, since it wasn’t ruling on the merits of the cases, but only on the issue of access to court. If it were ruling on the substantive issues, it would seem obvious that race discrimination claims have the same strong legal effect as age discrimination claims, as both claims are based on the same provision of the Charter (Article 21). However, claims based on breach of Article 31 of the Charter (the working time provision) might not have that strong legal effect. Indeed, an Advocate-General’s opinion in the pending case of Fennoll has concluded as much.

Furthermore, the social rights in the Charter (such as the rights set out in Article 31) are subject to a special rule in the Protocol to the EU Treaties which attempts to limit the effect of the Charter in the UK and Poland. The CJEU ruled in its NS judgment that this Protocol does not generally disapply the Charter in the UK, but it did not then rule if the Protocol might nonetheless affect the enforceability of social rights. Given that yesterday’s judgment was about Article 47 of the Charter, not about a substantive social right, it was not necessary for the Court of Appeal to grasp this nettle either.

Barnard & Peers: chapter 9, chapter 20

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Capping bankers' bonuses: a step too far for the EU?

Steve Peers

Bankers are never going to win a popularity contest. The collapse of international financial markets which started in 2008 and has led to austerity across Europe has been widely blamed on lax regulation of banks and irresponsible behaviour by bankers. It has led to a huge overhaul of EU banking regulation, including the transfer of banking supervision to the European Central Bank, new rules on bank bail-outs, and provision for criminal law sanctions against bankers involved in market abuse (discussed here). EU law has gone further still, and adopted rules which cap the amount of bonuses paid to bankers.

The United Kingdom, home to the biggest financial services industry in the EU, has had reservations about some of these new laws. It has opted out of some of them (the market abuse rules, the banking supervision rules and aspects of the bank bail-out rules), and has challenged others in the CJEU. Earlier this year, its challenge to the ban on ‘short-selling’ failed in the Court (see discussion here), and today’s Advocate-General’s opinion suggests that its challenge to the restrictions on bankers’ bonuses should fail too.

These restrictions are found in the EU’s revised rules on capital requirements and the authorisation to take up banking services, which are set out in a parallel Regulation and Directiveadopted in 2013. In effect, they require that bankers’ bonuses cannot usually be more than the amount of their ordinary annual salary. By way of exception, the bonuses can be double the amount of the banker’s ordinary annual salary, if bank shareholders agree pursuant to a special procedure.

Advocate-General’s Opinion

The UK raised six main complaints against the bonuses rules: lack of competence by the EU to regulate pay; infringement of the principles of subsidiarity and proportionality; violation of the principle of legal certainty; illegal delegation of power to an EU agency (the European Banking Authority); breach of EU rules on data protection and privacy, due to the potential disclosure of the pay received by bankers; and a breach of the principles of customary international law, due to the extraterritorial effect of the rules. Advocate-General Jaaskinen argues that all five complaints be rejected.

First of all, the Advocate-General argues that Article 53 TFEU (the legal base for this measure) is correct, because that legal base can extend to banking regulation generally, not just the promotion of the freedom of establishment for banks. The pay cap does not constitute a ‘social policy’ measure, since it does not regulate the basic salary paid to bankers, which is the basis for calculating any additional bonus.

Secondly, data protection rules are not violated, because the disclosure of bankers’ pay is only discretionary, not mandatory. In the event that Member States make a request for such disclosure, they would then be bound by EU data protection law.

Thirdly, conferring powers upon the EU agency is not illegal, because the powers do not concern the essential elements of the legislation, and the EU Banking Authority does not adopt the measures itself, but merely recommends their adoption to the Commission.  Fourthly, the principle of legal certainty is not infringed by applying the new rules to pre-existing employment contracts. Fifthly, the principles of proportionality and subsidiarity are not violated, because the creation of a uniform system of risk management was better achieved at EU level, rather than national level, and the EU institutions have great discretion to assess how these principles apply. Finally, the UK has not made out its argument that customary international law rules out the extraterritorial application of such limits.

Comments

This case is not about whether limiting bankers’ bonuses is a good idea. Rather it concerns whether it is legal for the EU to limit them. If the EU lacks such power, there would in principle nothing to prevent Member States from limiting bankers’ bonuses individually, if they wished. The argument about whether to do so would then be held at a national level, rather than the EU level.

Some of the UK’s complaints are clearly unconvincing.  As the Advocate-General suggests, the argument about international law is not fully fleshed out or convincing. The legal certainty argument fails to consider that employment law regulation usually impacts upon existing contracts; this is justifiable in light of the public-interest principles underlying the very nature of employment law. Anyway, bonuses are inherently variable. As for the data protection argument, the Opinion largely follows what the CJEU established already in EP v Council (family reunion): if EU law provides for options for Member States, the compatibility of those options with human rights law should be judged when and if Member States exercise those options. In any event, prior case law on data protection and salary disclosure does not set out an absolute ban on release (see Satamedia, for instance).

The UK’s other arguments are rather stronger. While it is true to say that the EU’s banking agency does not actually take the final decision relating to implementation of the bonus cap, it does more than simply provide expert advice on this issue. The Commission must then either act on this advice or do nothing at all: so it does not have full discretion to adopt the delegated acts (see the complex decision-making system set up by the Regulation establishing the Banking Authority). This process is fundamentally questionable because it blurs the accountability for the decision being taken (and moreover, it is too convoluted to be transparent).   

As for proportionality and subsidiarity, certainly the events of the last six years have demonstrably indicated that a more decentralised system of managing banking risks was ineffective. Hopefully the EU-wide measures will be more successful, but in any event the nature of the subject-matter calls for an EU-wide response, in light of the level of integration between European financial markets and the potential cross-border impact of bank failures. But that isn’t the point: the UK is not challenging the entirety of the capital requirements rules, but only some of the handful of provisions which regulate bankers’ bonuses. In fact, it is not challenging those provisions which prevent bankers from receiving bonuses as a consequence of risky behaviour, but only those provisions which regulate bonuses regardless of bankers’ actions. So the opinion should instead have asked whether theseprovisions meet the requirements of the subsidiarity principle. It is hard to see how they do.

This brings us to the biggest problem with the Opinion: the argument that the legal base on freedom of establishment can regulate bankers’ bonuses. The legal base point here can only be understood by viewing the Treaty as a whole. It has separate provisions on social policy, which include a ban on EU regulation of pay (Article 153 TFEU). The general internal market power (Article 114 TFEU) specifically states that it ‘shall not apply to’ measures ‘relating to the rights and interests of employed persons’. The Treaty drafters’ intention was clearly to provide for lex specialis rules relating to regulation of pay.

The ban on EU regulation of pay has been clarified in the case-law of the CJEU. In the Impact judgment, for instance, it ruled that the EU could not regulate the level or components of pay, but it could establish non-discrimination rules relating to pay as regards categories of workers. Similarly, the working time directive provides for holiday pay, but does not regulate the level or components of pay which a worker normally receives (which then constitute the basis on which the holiday pay is calculated).

Following the logic of these precedents, it is true to say that the capital requirements legislation does not set the level of bankers’ pay, on the basis of which the bonuses are capped. But it does regulate the components of pay, by determining how much of the total amount of pay can be variable. The Advocate-General’s reasoning would mean that the EU would be free to regulate at least some aspects of workers’ pay in any area of law subject to special rules in the Treaty, rather than the general internal market legal base. So the EU could regulate aspects of the pay of farmers, fishermen, transport workers and anyone in other service industries.

It could reasonably be argued that aspects of pay in these other fields can exceptionally be regulated by EU law where that is an essential component of the regulatory framework. This could be the case in banking, for instance if the overall amount of pay could damage the existence of the bank or bonuses were linked to risky behaviour. The legislation does have rules on these issues, but the UK has not challenged them. So it follows that the opinion is fundamentally unconvincing on the legal base point.

In light of the financial crisis, there are many good reasons to regulate banks more effectively, and it would not be shocking if Member Stateswanted to react to understandable public anger at the huge cost of bank bail-outs by limiting bankers’ income. But resentment at bankers’ pay, even it is entirely justified, cannot authorise the EU to exercise powers which any reasonable interpretation of the Treaties suggests that it just does not have.


Postscript (November 21st): Like any Advocate-General's opinion, this view is non-binding, although a number of British journalists and politicians forgot this when the opinion was released. In any event, the point is moot since, following publication of the opinion, the UK's Chancellor decided to drop the legal challenge. His official reason was to save taxpayers' money, but this is not convincing since a large majority of the legal fees will surely already have been incurred, and there is still a chance to get them reimbursed if the UK wins the case. A victory for the UK would have not have been improbable, given that the CJEU did not follow this Advocate-General's views in the last major banking law case (concerning the ban on short-selling), and that the analysis of the legal basis point is not very convincing. 

 

Barnard & Peers: chapter 14, chapter 19

 

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Irregular migrants and EU employment law

 

Steve Peers

What rights do irregular migrants have under employment law? It’s a vexed issue, because allowing irregular migrants to enforce employment law in their favour would arguably provide a ‘pull’ factor for them to enter and stay. On the other hand, if ordinary employment law applies to irregular migrants, then they will not be undercutting the legally resident workforce, and employers of irregular migrants will be deterred from employing them since they will not be saving money as a result.

The issue was addressed by the CJEU in today’s judgment in Tumer, concerning the application of the EU’s Directive on insolvency of employers to irregular migrants. In a bid to reduce the ‘pull’ factors of irregular migration, Dutch law specifies that irregular migrants cannot be considered employees for the purpose of the national application of the EU law. The result is that irregular migrants whose employer becomes insolvent cannot obtain the payments for back pay which the EU legislation provides for.

In this case, Mr. Tumer had initially resided legally in the Netherlands due to his marriage, but he was refused a continued residence permit after he got divorced. As a Turkish citizen, he arguably obtained rights based on the EU/Turkey association agreement, but the national court rejected his argument on this point and the CJEU refused to reopen the issue. Non-EU citizens can also obtain rights to stay after five years of lawful residence in accordance with the EU’s long-term residence Directive, but Mr. Tumer was divorced in 1996, well before that Directive had to be implemented (2006).

Despite not holding a residence permit, Mr. Tumer remained on the territory and worked for a Dutch employer. His employer became insolvent and he applied for the back pay which it had owed him from the Dutch fund set up to implement the insolvent employers Directive.

Judgment

The CJEU ruled first of all that the ‘legal base’ for the adoption of the legislation, the previous Article 137(2) EC (now Article 153 TFEU) was not limited to EU citizens only, ‘to the exclusion of third-country nationals’. Next, while the EU’s long-term residence Directive provided for equal treatment of long-term resident third-country nationals, this ‘in no way precludes other EU acts, such as’ the insolvent employers Directive, ‘from conferring, subject to different conditions, rights on third-country nationals with a view to achieving the individual objectives of those acts’.

As to the scope of this Directive in particular, the Court noted that it left it to national law to define the concept of ‘employee’. However, this discretion was circumscribed by provisions which limited the ability of Member States to remove certain categories of employees from the Directive, and specified that atypical workers (part-timers, fixed term workers, agency workers) had to be considered as employees. The Court pointed out that the Directive neither excluded third-country nationals from the scope of the Directive nor ‘expressly permit[ted]’ Member States to exclude them. Dutch civil law classified anyone with a ‘contract of employment’ as an ‘employee’ who was entitled to receive pay.

So, the Court reasoned, national discretion regarding the definition of ‘employee’ was circumscribed by the need to ensure that the ‘social objective’ of the Directive was obtained. So this meant that an ‘employee’ was in effect, defined by EU law, referring to ‘an employment relationship that gives rise to a right, vis-à-vis the employer, to receive payment for work done’. This definition corresponds to Dutch civil law. Denying any employees access to back pay when their employer became insolvent was ‘contrary to the social objectives of the Directive’. It was irrelevant that the person concerned was not entitled to work in the country, and Member States could not refuse to apply the Directive to irregular migrants on the basis that it expressly allows Member States to take measures to combat ‘abuse’.

Comments

This judgment is an important confirmation that EU employment law in principle applies to third-country nationals in general, including (but not limited to) irregular migrants. First of all, the Court stated for the first time that the legal base for EU employment law was not limited in scope to EU citizens only. It did not explain this interpretation in the light of the specific power (never used) in Article 153 TFEU to adopt legislation on the conditions of employment of third-country nationals, but it must be assumed from the judgment that the existence of this specific competence in no way limits the personal scope of any other EU employment legislation.

The impact of the Court’s ruling is clearly not confined to the insolvent employers Directive only. It refers very generally to the prospect of adopting ‘other EU acts, such as’ this Directive, which apply to third-country nationals. Logically, this means that other EU laws, such as consumer law, apply to third-country nationals too, since the Court did not suggest that its approach was limited to employment law.

Having said that, the Court clearly states that EU legislation could subject its application to third-country nationals to ‘different conditions’. What conditions are those? Its approach in this judgment indicates how the personal scope of EU legislation should be interpreted.

In Tumer, it’s crucial that the EU legislation in question doesn’t expressly exclude third-country nationals, or expressly permit Member States to do so. It does leave the definition of ‘employee’ up to national law, but the Court rules that this power is subject to satisfying the ‘social objectives’ of the Directive. Those social objectives don’t go as far as to permit exclusion of third-country nationals.

Applying these rules of interpretation to other EU measures, no EU employment legislation expressly excludes third-country nationals, or expressly permits Member States to do so; and surely it would always contradict the social objective of the legislation concerned to exclude from its scope third-country nationals in general, or irregular migrants in particular. The same could be said of other areas of law, such as EU consumer law. In contrast, the Treaty rules and legislation on EU citizenship and free movement of persons are limited to EU citizens and their family members.

This means that irregular migrants, as well as third-country nationals generally, can invoke any EU employment law, and many measures in other fields of EU law. However, the judgment doesn’t give  them rights to invoke the application of purely national employment law in areas not directly regulated by EU law, such as pay (in the absence of insolvency).

Having said that, equal treatment as regards other aspects of national law might be required by EU immigration or asylum law, depending on the specific rules in that legislation.  The long-term residents’ Directive, referred to by the Court, is not the only EU measure which confers equal treatment rights in that regard. While most of the measures in this area concern legal migrants, it is striking that the Court makes no reference to the 2009 Directive on employers of irregular migrants, which contains specific rules on this issue.

In principle, according to that Directive, irregular migrants are entitled to the normal rates of pay from their employer, and that Directive also requires that effective means must be in place to enforce this. The reason for this rule is to avoid employers gaining a benefit from their exploitation of irregular migrants, and the judgment in Tumeris entirely consistent with this logic. As the Commission recently reported, however, Member States have been fairly lax in enforcing these rules (see the analysis by Elspeth Guild earlier on this blog).  

In the event that the employer becomes insolvent, perhaps due to the various sanctions against employers of irregular migrants that the 2009 Directive provides for, then the employees could rely on the Tumer judgment to get any back pay from the national funds set up to implement the insolvent employers Directive. However, what happens if the insolvent employer of irregular migrants has not been paying them the normal wage, and/or not making payments into the national fund? Today’s judgment does not address that issue, which the Court of Justice will have to address if and when it arises.

 

Barnard & Peers: chapter 20, chapter 26

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Beyond austerity: the future of EU employment law

Professor Catherine Barnard, Trinity College Cambridge

If the critics are right, the EU social model is dead. Those on the right may well be dancing on its grave; those more sympathetic might mourn its passing. My view is more sanguine. Yes, the European social model (ESM) is certainly facing unprecedented challenges. However, I will suggest that these challenges, caused in part by the EU’s response to the crisis but more generally resulting from a growing hostility towards the European Union project as a whole, are not terminal and that there is – and should be - a continued role for the European social model. The EU’s history demonstrates that the ESM has, in fact, a long-standing ability to regenerate and resurrect itself. In this blog post, I would like to consider the future.

Vandenbroucke and Vanhercke argue that ‘Europe needs a Social Union that can support national welfare states on a systemic level in key functions such as macroeconomic stabilisation, and also guide the development of national welfare states on the basis of general social standards and objectives.’ [1] For the eurozone states this may indeed be the best and necessary solution. However, I want to focus on an agenda which might hold some appeal to an EU of 28, or at least a combination of both Eurozone and non-Eurozone states and this inevitably focuses on the narrower domain of employment law. And my discussion is tempered by political reality. 

Social compact

First, I would call for the creation of a European Social Compact to match the Fiscal Compact. This would contain a strong statement of the value and importance of social policy in the EU and would help to address the long-standing concern that, come the crunch, the EU prioritises economic over social interests. This would send a stronger message to the legislature and to the courts of the role and function of social policy, a message that the phrase ‘social market economy’ has failed to send with significant force. So what might go in it?

Apart from general statements that the EU is about improving the living and working conditions of its population, I would like to see express reference being made to other social rights documents, including the European Social Charter of 1961, to create a greater opening of the EU to other international instruments. I would also suggest the need for a clause which explicitly requires the Broad Economic Policy Guidelines to take account of social matters. More radically, I would also like to see the mandate of the European Central Bank (ECB) to be extended, like that of the Federal Reserve in the US and other central banks, to promoting economic growth, as well as high levels of employment and social cohesion, and not just the maintenance of price stability, as specified in Article 127 TFEU.

Ideally any Social Compact would apply to all 28 states and take the form of a Treaty amendment. However, the current political climate makes this seem unlikely (the UK would certainly vote against, as might a number of other Member States worried about the implications of a Treaty amendment on their own national systems). This inevitably means looking at some sort of free standing Treaty, like the Fiscal Compact, which could be signed up to by interested Member States and have force under international law. Another model for flexibility would be to follow the pattern of the Euro Plus Pact, agreed by interested Member States. It is not legally binding but it is taken into account in the various soft-law processes rather in the way of the Stability and Growth Pact Resolution of 1997. 

Medium-term measures

I fully accept that a Social Compact is a long shot and that any reform protocol, while important, is not exciting. So what else could the EU be doing? I would suggest the EU go back to its roots and, as it did in the 1970s, specialise. There are three areas which could be singled out as needing the EU’s attention, where EU level activity might be justified given the transnational dimension, and where action has a direct connection with the European Semester: ageing population, enforcement, and addressing the consequences of privatisation.

The justification for EU involvement with management of an ageing population relates to the key issue of sustainability of public finances which, as the Eurozone crisis has shown, is a matter of common interest. The EU has long had expertise in the discrimination area, starting with sex and then in respect of other protected characteristics. Addressing age discrimination/extending working life initiatives/flexible working fits in with this specialisation while dovetailing with the EU’s social cohesion agenda. On a related issue, developing family friendly policies - which would include elder care as well as child care – would also fit within this theme. The reform of the Parental Leave Directive serves only to highlight other lacuna in EU provision such as the absence of provisions on the right to request reduced hours of working. There may be room for EU intervention here.

Second, there is a growing body of evidence that migrant workers are being mistreated by some employers in certain sectors, particularly meat processing. If these workers cannot, for practical reasons, enforce their rights, there is a role for the EU to consider intervening to require effective remedies. The new Directive 2014/54 on free movement of workers is a step in the right direction. But there is evidence that migrant workers do not enforce their rights through tribunals. This requires more pro-active enforcement. Is there a role for greater coordination at EU level of, for example, labour inspectors? Or even, more radically, some sort of Europol for labour inspections?

If the EU was to devote its attention to the position of (vulnerable) migrant workers, other issues arise for these workers (as well as for nationals). In particular, what sort of contracts do they have? In recent years there has been a proliferation of new types of contracting, including zero hours contracts, internships, crowd employment and employee sharing. To what extent do individuals engaged in this kind of work benefit from employment protection legislation traditionally given only to those defined as ‘employees’? Should the EU envisage legislating for a new type of contract such as Freedland’s contract to provide personal service which would provide a gateway to employment protection?

Third, privatisation of publicly owned industries and services is clearly an important part of the reform agenda for a number of Member States. What are the employment law implications of this? Does the Transfer of Undertakings Directive 2001/23 need revision to provide meaningful rights to transferees in the event of the transfer and for a significant period thereafter? How does the Directive fit into the public procurement process? Is it time for the transfer rules to be re-examined in the light of the new contexts in which they are being invoked? 

Legal basis to act

I have given some examples of what the EU might do to boost the social dimension. The question is how the EU might deliver them. The EU has significant legal competence to act in these fields – whether under Article 153 TFEU (the principal social policy legal basis), Article 21(2) or Article 25 TFEU (the citizenship provisions), Article 26(3) TFEU (on guidelines and conditions necessary for ensuring balanced progress in all sectors of the internal market), Article 46 TFEU (the legal basis on which Directive 2014/54 on measures facilitating the exercise of free movement of workers was adopted), Article 50(1) TFEU on freedom of establishment (the legal basis on which the directive on diversity information is proposed), the internal market legal bases, Articles 114 and 115 TFEU but, following the Monti II debacle, probably not Article 352 TFEU.

The use of any of these legal bases have (de)merits but what is even more important is the political will to act and that seems to be lacking in a number of Member States. So this raises the question of whether enhanced cooperation should be considered in the social policy field ‘to enable and encourage a group of Member States to cooperate inside rather than outside the Union, where it is established that the objectives pursued by that cooperation cannot be achieved by the Union as a whole’ (see the Unitary Patent case).The use of enhanced cooperation is strictly limited by the framework for enhanced cooperation between Member States found in Title IV of the TEU and Title III (Article 20 TEU) of Part Six of the TFEU (Articles 326 to 334 TFEU).  Provided these conditions are satisfied, there seems no good reason why enhanced cooperation cannot be used in the social field. It is far from optimal – but better than nothing. The Unitary Patent case may suggest, too, that it has the Court’s blessing.

Despite the doomsayers, the EU is still intact after the most tumultuous years of its existence. The European Social Model, too, has been battered by the crisis, but it was already in difficulties before that. Reforms were necessary. In the last five years, economic governance and its reform has predominated, often at the expense of the development of the social dimension. The European Employment Strategy has been accommodated – and largely subsumed by - the European semester. This loss of a separate and distinct identity of the EES has been damaging. (Part of) the EU is conscious of this and it maybe that the new European Parliament and the new Commission will recognise the need to raise the profile of social policy. The EU’s regenerative capacity in the field of social policy needs to be shown again. And there are lots of ideas as to what the EU might do.

A full version of these comments has appeared in (2014) 67 Current Legal Problems 1


Barnard & Peers: chapter 20 

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[1]Frank Vandenbroucke and Bart Vanhercke note, European Social Union: Ten Tough Nuts to Crack (Friends of Europe, 2014), 16. See also Commissioner Andor, ‘Social Dimension of the Economic and Monetary Union: what lessons to draw from the European Elections’, 13 June 2014 http://europa.eu/rapid/press-release_SPEECH-14-455_en.htm.

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