Indemnification of workers in a collective redundancy

The Court of Justice of the European Union has released a statement on the judgment in Case C-160/14 on Wednesday, September 9, 2015.

The Portuguese State will have to compensate workers of Atlantis Air company, formerly a subsidiary of TAP. The Portuguese Supreme Court was required to bring an application for a preliminary ruling on the concept of ‘transfer of business’.

A Union directive [1] states that it must be considered as “transfer” when the transfer of an economic unit which retains its identity, with the objective of pursuing an economic activity, whether that activity is central or ancillary. The Directive applies to any transfer of an undertaking, business or part of an undertaking or business to another employer when such transfer is the result of a legal transfer or merger. The Directive establishes the rights and obligations of the transferor arising from a contract of employment or an employment relationship existing on the date of transfer in the event of such transfer, be transferred to the transferee.

In February 1993 Air Atlantis (hereafter “AIA”), a company founded in 1985 and which operates in the charter was dissolved. In this framework, Mr. Ferreira da Silva e Brito and other 96 others were subject to collective redundancies. Since May 1993 TAP, IBA’s main shareholder, began operating some of the snares that AIA had undertaken to carry out in the period from 1 May to 31 October 1993. TAP also made a number charter flight  in a market in which it was not active before, those routes previously served as AIA. To this end, TAP has used a piece of equipment that belonged to AIA. TAP also undertook appropriate due payment rates for these aircraft leases and office equipment belonging to AIA and used it in its units in Lisbon and Faro (Portugal) and other movable property. In addition, TAP has recruited some former employees of AIA.

Mr. Ferreira da Silva e Brito and 96 other workers had applied with the  Trabalho de Lisboa Tribunal (Administrative Court Labour Lisbon, Portugal) against a collective dismissal proceedin that they were subject to. They demanded the TAP reinstatement and payment of their salaries. Trabalho de Lisboa Tribunal decided that there was a transfer of units and ordered reintegration of workers in the corresponding categories and payment of damages. Hearing the appeal, the Tribunal da Relação de Lisboa (Lisbon Court of Appeal) set aside the judgment at first instance. The workers then appealed to the Supremo Tribunal de Justiça (Portuguese Supreme Court) which, by judgment of 25 February 2009, held that the collective dismissal was not vitiated by illegality. That court noted that to note transfer of units is not sufficient  to note “mere continuation” of economic activity, but it is also necessary to preserve the identity of the unit. Some workers have asked Supremo Tribunal de Justiça to the Court of Justice with a request for a preliminary ruling, but the Portuguese Supreme Court held that there was no doubt regarding the interpretation of relevant EU law requiring a preliminary ruling.

Workers then brought before Varas Cíveis de Lisboa (the court of first instance of Lisbon) a civil extracibtractyak action against the Portuguese State, which requested that the latter be required to repair some damage to property that has been suffered. They argue that the judgment of the Supremo Tribunal de Justiça is manifestly unlawful, to the extent that (i) contains an erroneous interpretation of the term ‘transfer of business’ within the meaning of the Directive, and (ii) to the extent that that court has breached its obligation to follow preliminary ruling procedure concerning the interpretation of European Union law. Varas Cíveis de Lisboa asks the Court to determine whether (i) the term “transfer of units” in the Directive includes the situation in this case regarding the workers of the company AIA, (ii) whether the Supremo Tribunal de Justiça was required to proceed with referral to a reference on its interpretation and (iii) whether EU law precludes the Portuguese legislation by requiring prior annulment of the decision causing injury as grounds for claims for damages against the State.

In its judgment, the Court finds that the term ‘transfer of business’ of the directive includes the situation at hand.

The Court recalls that in a situation where the air transport sector, the transfer of materials should be considered an essential element in order to assess the existence of a “transfer of units” under the Directive; it also maintains that the TAP has replaced AIA in its aircraft leasing contracts and has used them effectively latter, which proves indispensable elements assumption of continuing the activity previously carried out by AIA. The Court also states that was taken a number of other equipment. It adds that the functional link of interdependence and complementarity of these factors are relevant to decide on the maintenance unit identity transferred. Thus, maintaining a functional link also allows the transferee to use them even if, after the transfer, the latter are integrated into a new organizational structure different in order to continue an identical or analogous economic activity.

The Court also declared that in order to avoid the risk of an incorrect interpretation of EU law, the Supremo Tribunal de Justiça has the obligation to refer a request for a preliminary ruling on the concept of ‘transfer of business’ within the meaning of the Directive. The Court considers (i) that it is a court whose decisions are not subject to appeal under national law and (ii) that there were divergent decisions of some courts inferior regarding its interpretation and its recurring difficulties in interpretation in different Member States.

The Court finally determined that EU law precludes national legislation which, like the Portuguese legislation requires, as a prerequisite for a finding of State liability, annulment of the decision adversely affecting the conditions under which such cancellation is in practice excluded. The Court states that such a rule of national law may make it excessively difficult to obtain reparation arising from infringement, given that the situations in which Supremo Tribunal de Justiça decisions would not be subject to review are extremely limited.

[1] Directive 2001/23 / EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses (OJ L 82, p. 16 Special Edition 05 / vol. 6, p. 20).

:: The Source:

Dan Alexandru Negru


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