The CJEU revises its jurisprudence on equal treatment as regards employment contract termination compensation for employees on permanent and temporary employment contracts
Some may see this as a radical change in opinion while others may view it as the CJEU bringing greater clarity in response to requests by Spain’s courts that are little inclined to apply its 2016 ruling, which would require matching employment contract termination compensation amounts for workers on permanent and temporary employment contracts. Two rulings handed down on 05 June, both for Spanish cases, saw the CJEU update its earlier jurisprudence so that now a distinction is being made between workers on fixed term employment contracts and who have been prepared for their employment terminations and those for whom it is a surprise and as such can explain different compensation levels.
At issue are Spanish « relief fixed-term employment contracts » that allow workers to be hired on a temporary basis to make up for reduced working time by employees who are gradually moving towards retirement and « interinidad » (temporary replacement) contracts that fills in for employee absences or the short periods before an employee is being hired. In terms of relief contracts, Spanish law intends for 12 days compensation per career year in contrast with 20 days for permanent employment contracts. In terms of the interinidad the law requires no compensation whatsoever.
As regards the « interinidad », in 2016 the CJEU declared Spanish law to be in contravention of the Directive 1999/70 on fixed-term employment contracts in so far as it refuses for any interinidad employment contract termination compensation, whereas Spanish law does allow for compensation for comparable permanent employment contract terminations (c.f. Diego Porras case, CJEU 14 September 2016, Case C-596/14 Diego Porras, read the article published on the EELA website here). This ruling triggered a debate in Spain over precarious work , which worried the courts. In seeking more clarity from the CJEU, Spain’s judges were displaying resistance that in fact masked a degree of worry. In fact the ruling notes that the Spanish court decision in the Diego Porras case led the Spanish courts to grant the former category of workers, on expiry of the term for which their temporary replacement contracts had been concluded, compensation equal to that granted, inter alia, to permanent workers on termination of their employment contracts on one of the grounds set out in Article 52 of the Workers’ Statute. That judgment had an impact on the Spanish labor market, which is characterized by endemic unemployment and a large number of temporary contracts.
Spain’s judges are asking themselves if permanent workers can really be compared on an equal footing with those working on interinidad contracts. For the Spanish judges, ‘the parties to a fixed term employment contract by definition are cognizant of the fact it is of a temporary nature,” and that this can “justify separate treatment in terms of employment contract termination compensation when the employment contract is terminated on one of the grounds set out in Article 52 of the Workers’ Statute.” It is precisely on this point that the CJEU has revised its earlier ruling thus “, the termination of a permanent employment contract on one of the grounds set out in Article 52 of the Workers’ Statute, on the initiative of the employer, is the result of circumstances arising which were not foreseen at the date the contract was entered into and which disrupt the normal continuation of the employment relationship. It is precisely in order to compensate for the unforeseen nature of the termination of the employment relationship for such a reason and, accordingly, the frustration of any legitimate expectation the worker may have had at that date as regards the stability of that relationship, that compensation relative to a permanent employment contract (or a fixed term relationship that is terminated for the same reasons) is intended. The CJEU judges argued that when the interinidad contract concludes due to foreseen reasons then the worker is not in the same situation as if the termination had not been foreseen at the outset. It is thus understandable that workers who experience unforeseen disappointment would receive augmented compensation than workers who know in advance that their employment contract will be terminated at a certain time will be less disappointed.
In another case on 05 June (Grupo Norte) the CJEU adopted the same reasoning as for the relief (fixed-term) employment contracts.