European Court ruling on collective redundancies threshold

Employers are obliged to inform and consult workers when proposing collective dismissals for redundancy. In a ruling delivered on 18 January 2007, the European Court of Justice (ECJ) held it contrary to EU law for a state to exclude certain workers from the calculation of collective redundancy thresholds, even in cases where the objective is to encourage the employment of younger workers or if the exclusion is only temporary. The ECJ ruling concerned a 2005 amendment introduced into French legislation, which was challenged by trade unions in France.

Collective redundancy regulations

Under EU law, workers have the right to be informed and consulted in cases involving collective redundancies. Council Directive 98/59/EC on the approximation of the laws of the Member States relating to collective redundancies defines collective redundancies as the minimum number of workers (the threshold) dismissed for one or more reasons not related to the individuals concerned. The threshold is dependent on the size of the workforce and on the number of proposed redundancies. A collective redundancy occurs where it is proposed that either:

• over a period of 30 days, at least 10 dismissals in establishments normally employing more than 20 and less than 100 workers may occur;

• at least 10% of workers in establishments normally employing at least 100 but less than 300 workers are to be dismissed;

• at least 30 workers in establishments normally employing 300 workers or more are to be dismissed;

• over a period of 90 days, at least 20 dismissals are proposed, regardless of the size of the establishment.

Articles 2 and 3 of the directive also set out the employer’s obligations in relation to consultation and in relation to notification of the redundancies. Council Directive 2002/14/EC, which came into force four years later, aimed to strengthen the social dialogue provisions of the 1998 directive, in particular in relation to the promotion of information and consultation. Although the directive left it up to the Member States to determine the practical arrangements for exercising these rights, it also stipulated that all of the necessary steps had to be taken to guarantee the results imposed by the directive at all times.

Challenge to French legislation

In CGT v PM and Ministre de L’Emploi, de la Cohesion sociale et du Logement, Case C- 385/05, four French trade unions came together to challenge and seek nullification of an amendment introduced into French law in 2005. The four trade unions concerned were the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT), the French Confederation of Professional and Managerial Staff – General Confederation of Professional and Managerial Staff (Confédération française de l’encadrement – confédération générale des cadres, CFE-CGC), the French Christian Workers’ Confederation (Confédération française des travailleurs chrétiens, CFTC) and the General Confederation of Labour – Force ouvrière (Confédération générale du travail – Force ouvrière, CGT-FO). Prior to the new amendment, all employees on full-time permanent employment contracts, together with all those on home-worker contracts, had been included within the calculations for collective redundancy thresholds. The 2005 amendment introduced changes in relation to the methods used for calculating collective redundancy thresholds with regard to the employment of young people, by excluding all those under the age of 26 years. The aim of the amendment was to encourage the employment of young people, as it was believed that employers would be more willing to hire young workers in cases where they did not as a result have to comply with the information and consultation procedures should redundancies be required. The exclusion clause could be upheld regardless of the nature of these younger employees’ contracts.

The case was first brought before the French court (Conseil d’État). However, the court subsequently decided to refer the case to the European Court of Justice (ECJ), requesting that the ECJ apply an accelerated procedure to allow for the speedy determination of the issues raised.

ECJ ruling

In its judgement, the ECJ accepted that the encouragement of recruitment constitutes a legitimate aim of social policy and that Member States have a broad margin of discretion in determining what these measures might be. However, it also ruled that, under French law, it was clear that those under 26 years of age were nevertheless employees and that under the terms of the EU directive, they should thus be included in the calculation of collective redundancy thresholds. The ECJ therefore held that while the Member States could determine the method for the calculation of thresholds, this did not allow them to define the concept of an employee so as to exclude a particular category of workers, as the French state had done in relation to younger workers.

However, the French state argued that the amendment to the law was not in breach of the directives, since the exclusion was intended as a temporary measure only, as part of an effort to increase youth employment. Nonetheless, the ECJ ruled that this reason was not sufficient to allow the state to avoid the requirements of the directives. Even as a temporary measure, the 2005 law still undermined the protection set out by the directive and was therefore deemed as being in breach of EU law.

Sonia McKay, Working Lives Research Institute for AWWW GmbH ArbeitsWelt – Working World