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6 May 2020

EELC Law Review 2019: Fixed-term contracts

By: Francesca Maffei (Università degli studi della Campania Luigi Vanvitelli)

An analysis of the most recent ECJ judgments or national judgments concerning the consistency of national legislation with different key clauses of the Council Directive on the Framework Agreement on fixed-term contracts (Directive 1999/70) led to two important discoveries:

  1. most of the judgments concern the respect of the principle of equal treatment and the dissuasive force of the penalties provided in case of abusive successive fixed- term contracts; and
  2. more and more frequently the consistency between national law and the European Directive is explored directly by internal judges and not by the ECJ, especially in sectors or with regard to specific clauses on which the interpretative work carried out by the Court of Justice is copious.

With regard to the principle of equal treatment, Clause 4(1) of the Framework Agreement stipulates that, as regards employment conditions, employees with a fixed-term contract are not to be treated less favourably than employees on an indefinite contract, unless this is justified on objective grounds. This is a principle whose importance is testified by the number of occasions on which national legislation has been brought before the ECJ to verify its compliance with the mentioned Clause 4(1). In particular, the principal task of the ECJ is to verify the existence of ‘objective grounds’ which could justify different treatment provided for in national legislation between fixed-term and permanent workers. In recent years the interpretation of the concept of objective grounds which legitimate different treatments has extended a lot.

This was the case in Cobra Servicios Auxiliares (ECJ 11 April 2019, joined cases C-29/18, C-30/18 and C-44/18), in which the ECJ was required to assess the consistency with Clause 4(1) of Spanish legislation that provides for a lower level of compensation in case of termination of a fixed-term contract in comparison to the compensation given in case of termination of the permanent contracts of comparable workers under a collective redundancy. In order to fully understand the Court’s ruling, it is necessary to start with a brief summary of the facts that led to this decision. In Spain, the law concerning fixed-term contracts provides that when fixed-term contracts are concluded for the duration of a project or a service and the project or service ends (so the contract ends), the employee is then entitled to compensation of 12 days’ salary per year of service. This specific law could be considered in contrast with the European principle of equal treatment because in the same national legislation it is provided that if indefinite contracts end for a reason considered to be fair, as for collective redundancy, an employee in principle is entitled to compensation of 20 days’ salary per year of service and not just 12 days as for fixed-term contracts. In this way it seems clear that in Spanish law the treatment provided for with respect to fixed-term employees is less favourable than that for open-ended employees. Once the existence of an unequal difference is recognised, the ‘legal investigation’ that the ECJ is called upon to do, according to settled case law, is to determine whether there is an objective justification for this difference in treatment, or rather if the unequal treatment provided for in the Spanish legislation could be justified by the presence of precise and specific factors, characterising the employment condition to which it relates, in the specific context in which it occurs and, on the basis of objective and transparent criteria, in order to ensure that that unequal treatment in fact responds to a genuine need, is appropriate for the purpose of attaining the objective pursued and is necessary for that purpose. Therefore, in this case, the ECJ ruled that there existed objective grounds that legitimates different amounts of severance compensation between fixed-term employees and open-ended employees. Indeed, according to the ECJ ruling, the compensation for indefinite term workers amounts to compensation for an unforeseen situation, while for fixed-term workers it was apparent from the beginning that it was envisaged the employment contract would end at a certain point.

As for the measures to avoid abusive successive fixed-term contracts, more and more frequently the ECJ and national courts are asked to verify the persuasive force of the penalties provided by the law to achieve this goal.

For example, on 8 May 2019, the ECJ delivered an important judgment in the case C-494/17 (Rossato and Conservatorio di Musica F.A. Bonporti), deciding on the compliance with Clause 5(1) of the Framework Agreement of Italian legislation regarding penalties in case of successive fixed-term employment contracts for public sector teachers.

In particular, the ECJ decided that it is not contrary to Clause 5(1) that a national regulation which, as applied by the national supreme courts, precludes any entitlement to financial compensation on account of the misuse of successive fixed-term employment contracts for public sector teachers, if their employment relationship has been converted from a fixed-term relationship into one of indefinite duration, with limited retroactive effect. That is because such conversion is certain and predictable and the limited account taken of the period of service completed under those successive fixed-term employment contracts constitutes a measure that is proportionate for the purpose of punishing that misuse, which is a matter for the national court to determine.

Returning to what was already stated at the beginning of this review, the penetration of the European legal system into internal ones, both as regards the founding Euro-Community principles and with regard to specific law, such as that on fixed-term contracts, is demonstrated by the growing number of cases in which the compatibility between an internal rule and the European legislation is directly analysed by the national judges. This is above all because the interpretive material of the Directive in the matter of fixed-term contracts provided by the Court of Justice that the national courts can use is now particularly abundant and therefore their autonomy in managing the decision is certainly much more accentuated.

 

This is the case, for example, of the judgment of the Constitutional Court of Latvia in which the latter pronounced on the unconstitutionality of an internal rule on fixed-term contracts for professors in universities, insofar as it did not ensure protection against consecutive abuse of the conclusion of fixed-term employment contracts, as provided in the European Directive on fixed-term contracts.

 

Indeed, referring directly to the ECJ judgments in cases C-494/16 Giuseppa Santoro, C-16/15 María Elena Pérez López and in joined cases C-22/13, from C-61/13 to C-63/13 and C-418/13 Raffaella Mascolo and Others, the Constitutional Court of Latvia concluded that the content of Clause 5(1) of the Framework Agreement is sufficiently clear and it was not obliged to submit to the ECJ a request for a preliminary ruling. According to its decision, the first sentence of Article 106 of the Latvian Constitution provides that everyone has the right to freely choose their employment and workplace according to their abilities and qualifications. The Court admitted that although in principle this right can be restricted, in this particular case such restriction cannot be regarded as proportionate, since the legislator with respect to professors has not implemented the requirements of the Framework Agreement, i.e., legal acts do not contain limits for renewals of fixed-term employment contracts and maximum limits for the periods professors can be employed on the basis of fixed-term employment contracts. The Court referred to the ECJ judgment in case C-190/13 (Antonio Márquez Samohano) and concluded that in principle concluding fixed-term employment contracts with professors is allowed, however, in Latvia successive fixed-term employment contracts with professors are concluded to satisfy permanent and long-term needs for the employers. Notwithstanding this, the Law on Higher Education Institutions does not contain any measures which could protect employees against the risk of successive abuses of the conclusion of fixed-term employment contracts.

 

Another important case in which a national court – here, the German Federal Labour Court (Bundesarbeitsgericht, the ‘BAG’) – could have decided directly on the basis of the interpretation established by the Court of Justice in other cases, is the case concerning a public broadcaster. In Germany, employers can enter into fixed-term contracts lasting more than two years only if one of the objective reasons stated in the German Act on part-time and temporary work (Teilzeit- und Befristungsgesetz) exists. Subsequently, public service broadcasters can enter into fixed-term contracts with producers due to the character of the work pursuant to Section 14(1), second sentence of this Act. In the case decided by the Court, the claimant was an employee who had been employed since 1992 for the defendant, a public broadcaster, at the beginning as a freelancer and successively as an employee based on two consecutive fixed-term employment contracts. Subsequently, the claimant filed an action, as he claimed that the last contract had converted into one for indefinite time, as the reason for entering into a fixed-term contract was invalid. The BAG found that long-term pre-employment as a freelancer actually could indicate that there was no objective reason to offer a fixed-term contract. Indeed the claimant’s duties had been very much the same for a very long time, both as an employee and as a freelancer, and for a very long time in an almost full-time capacity. This indicated that offering a fixed-term contract might have been inappropriate, as apparently the work and, particularly, the actual person in charge of this broadcast programming protected by Article 5(1), second sentence, of the German Constitution (Grundgesetz) had been needed for a very long time. Therefore, an indefinite term contract probably would have been the way to proceed. The national Court’s decision should have been based on European law. Indeed with regard to former Article 141(1) of the Treaty of Rome, which is now Article 157(1) TFEU, there is long-established case law that an employee is someone who, during a certain period of time, performs services for another person in accordance with the other person’s instructions for which they receive compensation in return (for example, case C-256/01, Allonby). Applying this concept of employment, it would be irrelevant whether the employment relationship is set up in the form of freelancing or regular employment, because a freelancer in that sense can in fact be working full-time under their employer’s instructions and must be regarded as an employee instead of self-employed following the national law. Following that notion, the claimant might have been working as an employee from the beginning.