Commercial Law for Employers: Age Discrimination; TUPE; Pensions and Part-Timers

Posted in : Commercial Law for Employers on 9 August 2017
Kevin McVeigh
Elliott Duffy Garrett

In this month’s ‘Commercial Law for Employers’ article Kevin McVeigh, Partner and Head of the Corporate and Commercial Department in EDG Solicitors, reviews three very interesting cases.

In Luís Manuel Piscarreta Ricardo v Portimão Urbis, E.M, SA, in liquidation the CJEU considered two important issues arising from a decision by a local council to wind up its trading company and continue its activities by other means. The Court was asked to consider whether the action was a transfer of undertaking within the meaning of the EU Acquired Rights Directive; whether Mr Ricardo, who was on unpaid leave and not actually carrying out any duties at the time, was deemed an “employee” within the meaning of the ARD and whether his contract of employment could be transferred to either of the transferees.

In Ute Kleinsteuber v Mars GmbH a number of questions were referred to the CJEU for a preliminary ruling on occupational pension schemes and part-time workers.

And finally, Abercrombie & Fitch Italia Srl v Antonino Bordonaro concerned an age discrimination claim where the claimant was dismissed on his 25th birthday as, from that date, ‘the age requirement was no longer satisfied’. The CJEU had to determine whether such a policy was objectively and reasonably justified by a legitimate aim and whether the means of achieving such aims were appropriate and necessary.

Luís Manuel Piscarreta Ricardo v Portimão Urbis, E.M., SA, in liquidation [2017]

Key Issues: Social Policy – TUPE – Concept of “employee”
Case:  Luís Manuel Piscarreta Ricardo v Portimão Urbis, E.M., SA, in liquidation
Reference: Case C-416/16, CJEU (Eighth Chamber), 20 July 2017
Legislation: Directive 2001/23/EC

Mr Piscarreta Ricardo performed duties as an administrator, and later as director, of Portimão Urbis. In September 2011, Mr Piscarreta Ricardo requested –– and was granted –– unpaid leave for a period of two years. In July 2013, that leave was renewed, at his request, for a further two-year period. In October 2014, the Municipality of Portimão decided to wind up Portimão Urbis, of which it was the sole shareholder. Some of the activities of that undertaking were taken over by the Municipality of Portimão and the remaining activities were outsourced to Emarp, of which the Municipality of Portimão was also the sole shareholder. In accordance with those decisions, part of the workforce of Portimão Urbis was the subject of a ‘public-interest transfer agreement’ and was thus taken on directly by the Municipality of Portimão. The other part of the workforce was the subject of a ‘transfer of contractual position’ and was taken on by Emarp. As Mr Piscarreta Ricardo was not covered by either of those plans, namely either bringing activities in-house or outsourcing them, he was informed that his employment contract had come to an end following the definitive closure of Portimão Urbis.

Mr Piscarreta Ricardo brought an action before the District Court, Faro, Portugal for a declaration that his dismissal was unlawful, arguing that there had been a transfer of a business from Portimão Urbis to the Municipality of Portimão and Emarp. The other parties rejected that argument and they maintained that, as Mr Piscarreta Ricardo was on unpaid leave, in other words was not actually carrying out any duties, his employment contract could not be transferred to either of the transferees. They also submitted that there was no transfer of a business, since Portimão Urbis had been wound up as required by law and had ceased to carry on business.

The District Court, Faro, decided to stay the proceedings and to refer a number of questions to the Court of Justice of the EU (CJEU).

Consideration by CJEU

The CJEU has already held that the fact that the transferee is a public-law body cannot be a ground for excluding the existence of a transfer within the scope of Directive 2001/23, whether that body is a public undertaking responsible for a public service or a municipal authority. Activities which fall within the exercise of public powers are excluded as a matter of principle from classification as economic activity. However, services which are carried out in the public interest and without a profit motive and are in competition with those offered by operators who seek to make a profit may be classified as economic activities for the purposes of Article 1(1)(c) of Directive 2001/23

It should be noted that, under Article 2(1) (d) of Directive 2001/23, any person who, in the Member State concerned, is protected as an employee under national employment law is considered to be an ‘employee’. As is clear from the very wording of the first subparagraph of Article 3(1) of Directive 2001/23, the protection that the directive is intended to provide concerns only workers who have an employment contract or employment relationship existing at the date of the transfer. However, while the employment contract is suspended, the national law of Portugal provides that the rights, obligations and safeguards of parties who are not required to be in active service are maintained.

The CJEU held that:

1. Article 1(1) of Council Directive 2001/23/EC must be interpreted to the effect that, where a municipal undertaking, whose sole shareholder is a municipality, is wound up by a decision of the municipality’s executive body and its activities are transferred in part to the municipality to be carried on directly by it and in part to another municipal undertaking re-formed for that purpose, whose sole shareholder is also that same municipality, that situation falls within the scope of the directive, provided that the identity of the undertaking in question is preserved after the transfer, which is a matter for the referring court to determine.

2.      A person such as the applicant in the main proceedings who, because his employment contract is suspended, is not actually performing his duties, is covered by the concept of ‘employee’ within the meaning of Article 2(1) (d) of Directive 2001/23 in so far as that person is protected as an employee under the national law concerned, which is, however, a matter for the referring court to verify. Subject to that verification, in circumstances such as those at issue in the main proceedings, the rights and obligations arising from that person’s employment contract must be considered to have been transferred to the transferee, in accordance with Article 3(1) of the directive.

Why is this decision important?

When an undertaking is to be transferred and the TUPE Regulations apply, the parties should include all employees, including those who may be on long-term unpaid leave, in the list of transferring employees.
The TUPE Regulations will often apply to transfers involving public and municipal bodies.

Ute Kleinsteuber v Mars GmbH [2017]

Key Issues: Social Policy – Equal Treatment – Method for calculating acquired pension rights – Part Time Workers
Case:  Ute Kleinsteuber v Mars GmbH
Reference:
 Case C-354/16, CJEU (First Chamber), 13 July 2017
Legislation:
 Directive 2000/78/EC

Ms Kleinsteuber, born on 3 April 1965, was employed by Mars and its predecessor in law between 1 October 1990 and 31 May 2014, in various positions. She worked both full-time and part-time, with rates of activity of between 50% and 75% of the activity of a full-time employee. Mrs Kleinsteuber enjoys, in relation to Mars and after having reached the age of 55, the right to an occupational pension.

According to the pension plan, in the case of a worker who is not employed full-time, first of all, the relevant annual salary of the worker who is entitled to a pension is calculated. Then, that salary is reduced by the average rate of activity during the whole of the period of employment. Finally, the different rates relating to the salary’s components are applied to the resulting amount. The amount of the occupational pension is thus calculated using a so-called ‘split pension’ formula. A distinction is thus drawn between the income earned falling below the ceiling for calculating contributions to the statutory pension scheme and income exceeding that ceiling. The ceiling for calculating contributions is, in German social security law, the amount up to which the salary of a person benefiting from statutory cover is used for social insurance. The salary components above the contributions calculation ceiling were valued, during the calculation of Ms Kleinsteuber’s occupational pension, at 2% whereas the salary components under that limit were valued at 0.6%. Mars’ pension scheme lays down, in addition, a ceiling for the years of service which can be taken into account, set at 35 years.

Ms Kleinsteuber challenged before the Arbeitsgericht Verden (Labour Court, Verden) Mars’ calculation of the amount of her occupational pension and considered that she is entitled to a larger pension than that calculated by Mars. The Bundesarbeitsgericht (Federal Labour Court, Germany) has already indicated in that respect that the rules in Paragraph 2 of the German Law on Pensions are appropriate and necessary for achieving a legitimate aim.

The Verden Labour Court decided to stay the proceedings and referred a number of questions to the Court of Justice of the EU (CJUE) for a preliminary ruling.

Consideration by CJEU

It was apparent to the CJEU, from the documents before the Court, that the full occupational pension complements, on a voluntary basis by the employer, the benefits received from the statutory pension scheme. Thus, the objective of Mars’ pension scheme is to reflect at the age of retirement, if possible in a full and proportionate way, the standard of living which the employee enjoyed during his employment. The split formula aims, for its part, to take into account the different cover needs for remuneration bands below and above the ceiling for the calculation of contributions, the latter not being taken into account during the calculation of the pension paid by the statutory pension scheme.

It must be considered that such objectives, which aim to establish a balance between the interests at issue, in the context of concerns falling within employment policy and social protection, in order to guarantee the provision of an occupational pension, may be considered public interest objectives.

The CJEU held that:

1. Clause 4.1 and 4.2 of the Framework Agreement on part-time work annexed to Council Directive 97/81/EC of 15 December 1997 must be interpreted as not precluding national legislation which, in calculating the amount of an occupational pension, distinguishes between employment income falling below the ceiling for the calculation of contributions to the statutory pension scheme and employment income above that ceiling, and which does not treat income from part-time employment by calculating first the income payable in respect of corresponding full-time employment, then determining the proportion above and below the contribution assessment ceiling and finally applying that proportion to the reduced income from part-time employment.

2. Clause 4.1 and 4.2 of the Framework Agreement and Article 4 of Directive 2006/54 must be interpreted as not precluding national legislation which, in calculating the amount of the occupational pension of an employee who has accumulated full-time and part-time employment periods, determines a uniform rate of activity for the total duration of the employment relationship, in so far as that calculation method of the pension does not violate the pro rata temporis rule. It is for the national court to satisfy itself that this is the case.

3. Articles 1 and 2 and Article 6(1) of Council Directive 2000/78/EC must be interpreted as not precluding national legislation which provides for an occupational pension in the amount corresponding to the ratio between (i) the employee’s length of service and (ii) the length of the period between taking up employment in the undertaking and the normal retirement age under the statutory pension scheme, and in so doing applies a maximum limit of reckonable years of service.

Why is this decision important?

The rules on pensions and part-time workers are complex and employers will often commit an inadvertent breach. This case demonstrates that, as long as the employer’s calculations are based on legitimate objectives in accordance with the relevant legislation, the distinctions made for part-time workers can still be upheld.

Abercrombie & Fitch Italia Srl v Antonino Bordonaro [2017]

Key Issues: Social Policy – Equal Treatment – Age Discrimination
Case: Abercrombie & Fitch Italia Srl v Antonino Bordonaro
Reference: Case C-143/16, CJEU (First Chamber), 19 July 2017
Legislation: Directive 2000/78/EC

Mr Bordonaro was employed by Abercrombie from 14 December 2010 on a ‘fixed-term employment contract’, which was converted on 1 January 2012 into a contract for an indefinite period, in order to perform night warehouseman tasks. The contract provided that he must, on an on-call basis, upon each request to that effect from the undertaking, ‘provide assistance to clients and operate a till’. Mr Bordonaro worked at night four to five times per week for the first months of his employment then, from 2011, between three and four times per week. The working shifts were allocated among all the staff in accordance with a two-monthly work schedule. After realising that his name was no longer included in the work schedule following that which ended on 16 July 2012 and not having received any fresh requests to carry out work, Mr Bordonaro contacted the Human Resources department of Abercrombie. By email of 30 July 2012, the head of that department informed him that his employment contract with Abercrombie had ended on 26 July 2012, the day of his 25th birthday, since, from that date, ‘the age requirement [was] no longer satisfied’.

Mr Bordonaro brought an action before the Tribunale di Milano (District Court, Milan, Italy) seeking a ruling that his on-call, fixed term contract and his dismissal were unlawful as a result of age discrimination. Since the Tribunale di Milano (District Court, Milan) declared the action inadmissible, Mr Bordonaro appealed to the Corte d’appello di Milano (Court of Appeal, Milan, Italy) which, by judgment of 3 July 2014, held that there was an employment relationship of an unlimited duration and ordered Abercrombie to reinstate him in his post and to compensate him for the loss suffered.

Abercrombie appealed on a point of law against that judgment to the Corte suprema di cassazione (Supreme Court of Cassation, Italy) which decided to stay the proceedings and to refer a question to the Court of Justice EU (CJEU) for a preliminary ruling.

Consideration by CJEU

The CJEU noted that Mr Bordonaro was employed on 14 December 2010 on the basis of an on-call, fixed-term employment contract in order to perform, at each request to that effect from Abercrombie, the work of a night warehouseman. As is clear from the file before the Court, he worked at night four to five times per week for the first months of his employment then, as from 2011, between three and four times per week. Furthermore, at the hearing before the Court, Mr Bordonaro stated that he was in the same situation as 400 other Abercrombie employees, whose contract was governed by collective agreements. It is thus clear that, having regard to the conditions under which it was performed, the accuracy of which it is for the referring court to ascertain, Mr Bordonaro’s work cannot be regarded as being purely marginal and ancillary. It is therefore probable that the employment contract held by Mr Bordonaro is such as to allow him to assume the status of ‘worker’ within the meaning of Article 45 TFEU. It is for the national court, which is the only court with detailed and direct knowledge of the dispute in the main proceedings, to assess whether that is the case.

According to the CJEU, it must be held that the provision of national law at issue in the main proceedings creates a difference of treatment on grounds of age, for the purposes of Article 2(2) (a) of Directive 2000/78. The CJEU than examined whether that difference in treatment can be justified. The first subparagraph of Article 6(1) of Directive 2000/78 provides that Member States may provide that differences of treatment on grounds of age shall not constitute discrimination, if, within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary.

Abercrombie submitted that, in a context of a persistent economic crisis and weak growth, the situation of a worker aged under 25 years who, thanks to a flexible and temporary employment contract, can access the labour market is preferable to the situation of someone who does not have such a possibility and who, as a result, is unemployed. Moreover, the Italian Government explained at the hearing that those forms of flexible work are necessary to facilitate workers’ mobility, increase the adaptability of employees to the labour market and give access to that market to persons in danger of social exclusion, while eliminating forms of illegal work.

The CJEU held that

Article 21 of the Charter of Fundamental Rights of the European Union and Article 2(1), Article 2(2)(a) and Article 6(1) of Council Directive 2000/78/EC of 27 November 2000 must be interpreted as not precluding a provision, such as that at issue in the main proceedings, which authorises an employer to conclude an on-call contract with a worker of under 25 years of age, whatever the nature of the services to be provided, and to dismiss that worker as soon as he reaches the age of 25 years, since that provision pursues a legitimate aim of employment and labour market policy and the means laid down for the attainment of that objective are appropriate and necessary.

Why is this decision important?

It is clear that the prevailing economic circumstances were fundamental to the CJEU deciding that the employer was justified in terminating a contract when the worker reaches 25 years of age. Employers should be wary of a universal application of such employment policies when the economy improves as the justification may no longer be available. 

This article is correct at 09/08/2017
Disclaimer:

The information in this article is provided as part of Legal-Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article.

Kevin McVeigh
Elliott Duffy Garrett

The main content of this article was provided by Kevin McVeigh. Contact telephone number is 028 9024 5034 or email kevin.mcveigh@edglegal.com

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