Compensation

Compensation is a form of reparation to offset damage sustained as a result of an infringement of EU legal rights which may be available to the claimant. The availability of compensation is an important factor in the effectiveness of EU policies on employment and industrial relations. Compensation is a question to be decided when national courts hear complaints of such violations. However, the answer is determined by principles established by the European Court of Justice.

The Court seeks to balance the EU principle that there must be an effective remedy, so compensation must be adequate and full, against the recognition of some Member State autonomy to determine remedies appropriate to the national context. However, there has been only a relatively narrow range of cases involving employment and industrial relations in which the question of compensation has come before the European Court of Justice.

Infringements of collective rights

The issue of the adequacy of compensation provided by national law for the enforcement of EC law arises also in the context of collective rights in the field of industrial relations.

For example, Council Directive 75/129/EEC on Collective Dismissals, consolidated in Council Directive 98/59/EC of 20 July 1998 and Council Directive 77/187/EEC on Acquired Rights, consolidated in Directive 2001/23 of 12 March 2001 both require employers to inform and consult employee representatives. The question arises of the compensation payable in the event that employers violate their obligation to inform and consult employee representatives. The penalty should be ‘effective, proportionate, dissuasive’, as the ECJ established in Commission of the EC v. UK, Case C-382/92, [1994] ECR I-2435.

Regulations implementing the Acquired Rights Directive 77/187/EEC in the United Kingdom provided that an employer who failed to consult employee representatives may be ordered to pay appropriate compensation to employees affected. The compensation payable (called a ‘protective award’) was subject to a maximum of two weeks’ pay. In addition, the Regulations allowed for compensation awarded to be set off against other compensation which might be awarded to the employee. The Commission complained that these sanctions were inadequate, and the ECJ upheld the complaint and ruled that the United Kingdom legislation did not comply on this point with the requirements of Article 5 of the Treaty.

These cases raise the general question of the principle of financial compensation as a remedy in the case of the exercise of collective rights, such as information and consultation. The award of compensation to individual employees affected by the employer’s failure to inform or consult employee representatives may be insufficient to secure respect for the collective rights of the employee representatives.

Infringements of individual rights

Claims for compensation for damage sustained when individual rights guaranteed by EC law have been violated are most common in the case of discrimination and equal treatment. In such cases, the European Court of Justice has emphasised the need for adequate compensation, so that the EU rights are effectively protected.

A case illustrating the Court’s critical scrutiny of compensation arose in a claim arising from sex discrimination in Germany contravening Directive 76/207 EEC – Von Colson and Kamann v. Land Nordrhein-Westfalen, Case 14/83, [1984] ECR 1891.

The ECJ demonstrates awareness of the need for equilibrium between the effectiveness of EC law and respect for national autonomy in determining appropriate levels of compensation. The principle of the adequacy of compensation is now part of the anti-discrimination legislative framework, established by Council Directives 2000/78/EC of 27 November 2000, 2000/43/EC and 2002/73/EC.

Social security claims

In claims for compensation when entitlements were lost due to discrimination in national social security provisions, the Court appears to retreat from the principle of adequate and effective compensation. Instead, the financial implications for the social security system and respect for national autonomy appear to take priority. An example is a case where the Court allowed disability entitlements lost over several years to be limited by national limits on retroactive claims (Steenhorst-Neerings v. Bestuur van de Bedrijfsvereniging voor Detailhandel, Ambachten en Huisvrouwen, Case C-338/91, [1993] ECR I-5475).

See also: direct effect; Francovich Principle; enforcement of EC law; national labour courts; remedies for infringements of EC law; sanctions; state liability.