Business Law

EU member states may adopt national legislation to counter collective redundancies

The European Court of Justice has recently decided (Judgement of 21 December 2016, C-201/15) that member states of the European Union may introduce national provisions in order to limit or prohibit collective redundancies by companies.

EU Member States May Adopt National Legislation to Counter Collective Redundancies ©-cirquedesprit-Fotolia

Collective redundancies planed in Greece

A cement producer from Greece was planning mass redundancies. According to the active Greek legislation, companies and the competent public authority must reach a consensus in case of planned mass redundancies. If a consensual solution cannot be found, the authority may partially or entirely prohibit such redundancies.

A violation of the Freedom of Establishment

The cement producer filed a law suit against the authority’s decision to prohibit the planned measures. It claimed such ban would limit its freedom of establishment as laid down in Art. 49 of the Treaty on the Functioning of the European Union (TFEU) and would ultimately constitute a violation of European Union law.

Are such national provisions in conformity with EU law?

The competent Greek court referred the matter to the ECJ for a preliminary ruling, specifically in regards to the question whether a national legislation allowing in effect the partial or entire prohibition of collective redundancies by companies can be conform with EU law.

Decision must be based on the individual case

According to ECJ’s Grand Chamber, such national legislation limiting collective redundancies can, in principle, be in conformity with the relevant EU Directive (98/59/EC of 20 July 1998). The decisive aspect is however that the competent national authority must always make the decision as to whether mass redundancies are admissible or should be prohibited based on the circumstances of the specific, individual case.

Companies’ freedom to conduct a business and take independent decisions must remain intact

Competencies of national authorities may not lead to a full scale limitation of companies’ freedom to make decisions. Companies must always have the general option to take measures such as redundancies.

Greek provisions too imprecise

While the ECJ stressed the general admissibility of such national legislation, it also stated that the Greek provisions in the case concerned were “formulated in very general and imprecise terms”.  This would make it difficult for companies to determine under what specific circumstances the state may prohibit mass redundancies.

Conclusion

Even though the Greek provisions were deemed imprecise, the ECJ’s ruling makes it clear that EU member states may introduce national legislation, enabling them to prohibit collective redundancies under specific circumstances. It is of major importance to strike a balance between the interests of concerned employees and the business interests of companies. Furthermore, such national provisions must be formulated in a sufficiently transparent, precise manner.

Christian Solmecke is a partner at the law firm WILDE BEUGER SOLMECKE. He is the author of numerous legal publications in the area of internet and IT law. He is also an associate lecturer for social media law at the Cologne University of Applied Sciences.

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