ECJ on Collective Redundancies When Company Owners Retire

Jul 26, 2024 Benn-Ibler Rechtsanwälte

The owner of a company went into retirement, leading to collective redundancies. Under Directive 98/59/EC, business owners have an obligation to notify the competent public authorities as well as workers’ representatives of planned collective redundancies. Employers are in breach of their consultation obligation should they fail to do so.

An entrepreneur in Spain went into retirement. This resulted in the 54 employees in the eight companies he owned getting dismissed. The dismissals were challenged as unlawful by eight employees. However, their appeals were rejected by the court. The Spanish court dealing with the appeals will have to rule on the validity of the terminations of the workers’ contracts of employment.

Spanish law provides for a procedure for the consultation of workers’ representatives in the event of collective redundancies. However, this procedure is not applicable if the redundancies are the result of the employer going into retirement (as a natural person). Whether this exclusion is compatible with the EU Directive on Collective Redundancies was doubted by the Spanish court hearing the case. It therefore referred the question to the ECJ for a preliminary ruling.

According to the ECJ, the main aim of the Directive is to ensure that workers’ representatives are consulted and the competent authorities informed prior to collective redundancies taking effect.

Collective redundancies within the meaning of the Directive are those where employment contracts are terminated without the consent of the workers. The ECJ concluded that the Spanish legislation was incompatible with the Directive.

The ECJ also ruled that this particular case cannot be equated with the situation arising when an employer dies. In this case, the Directive does not have any application. After all, there is no longer any possibility of consultation with an employer who is dead.

ECJ C-196/23 (11 July 2024)