The judgment of the Court of Justice of the European Union (CJEU) of 14 September 2016, in resolution of a preliminary question raised by the High Court of Justice of Madrid on the interpretation of the European Council Directive (1999/70/EC, of 28 June 1999) on fixed-term work, declares contrary to European Union law the Spanish rule that denies compensation to temporary workers upon termination of their employment contract contained in article 49.1.c of the Workers' Statute.
The aforementioned ruling has received considerable media attention, although it is by no means as significant as some sensationalist headlines have suggested, such as: “European Union Court orders compensation for temporary workers as for permanent ones.” As has unfortunately been the case with preliminary rulings submitted to the CJEU, the Court, far from resolving them quickly, in most instances generates more confusion and uncertainty than anything else, leading to conflicting opinions and discrepancies between domestic and EU law in the member state where the case originates.
In the proceedings in question, for whose specific application the preliminary question was raised by the Spanish judicial body, the plaintiff was a temporary worker hired by the Ministry of Defense to replace another worker whose employment contract was suspended due to the exercise of trade union functions and as a result of the application of Royal Decree Law 20/2012, which ordered the reduction of the number of union representatives released in the state public sector, the replaced worker returned to her job, which –in turn– led to the termination of the temporary employment contract due to the disappearance of the cause of substitution that constituted its object. The temporary worker challenged her dismissal, alleging in the lawsuit that her employment contract had been entered into fraudulently and the High Court of Justice of Madrid, before resolving her appeal against the judgment of the Social Court that had dismissed her claim at first instance, raised before the CJEU the preliminary question of whether the Spanish rule that excludes compensation for termination of the temporary employment contract (Article 49.1.c ET), while it does recognize the right to receive compensation in the event of termination of an ordinary employment contract for objective reasons (Article 52 ET), is in accordance with Community law.
To answer this preliminary question, the CJEU relies on Article 4 of the Framework Agreement on fixed-term work, concluded between the European employers' and trade unions' organizations and annexed to Directive 1999/70/EC of 28 June 1999, which establishes "a prohibition, with regard to working conditions, on treating fixed-term workers less favourably than comparable permanent workers solely because they have a fixed-term contract, unless different treatment is justified on objective grounds." Therefore, the question centers on whether the difference in treatment afforded by the Spanish legislature to temporary workers, who are not entitled to compensation upon termination of their contract, compared to permanent workers, who are entitled to such compensation when their contract is terminated for objective reasons, is compatible with the principle of non-discrimination mandated by Article 4 of the aforementioned Framework Agreement.
And in this regard, the CJEU's ruling has been as follows:
First, it has established that possible differences in treatment between certain types of staff with fixed-term contracts are not subject to the principle of non-discrimination within the meaning of the Community Directive on fixed-term work, which excludes the need for the compensation for termination of contract to be the same for all types of fixed-term contracts.
Secondly, the principle of non-discrimination prohibits differences in treatment between workers with fixed-term contracts and workers with permanent contracts who are in comparable situations, unless there are objective circumstances that justify a difference in treatment. At this point, the judgment addresses the substance of the preliminary question raised, which is whether the situation of the temporary worker (with a fixed-term contract) is comparable to that of other workers with permanent contracts, and if so, whether there are any objective circumstances that justify different treatment compared to such comparable situations.
In the judgment in question, the CJEU concluded that the situation of the worker with a temporary contract was comparable to that of a worker with a permanent contract because she "performed work analogous or identical to that of a permanent worker." To reach this conclusion, the CJEU considered that for seven years she had held the same position previously occupied by the worker she replaced with a permanent contract. Given that both situations were comparable, the CJEU determined that there were no objective reasons justifying the difference in treatment afforded by Spanish domestic law. The CJEU held that such objective reasons must necessarily be based on elements originating "in the special nature of the tasks for which fixed-term contracts are concluded and in the characteristics inherent to those tasks or, where applicable, in the pursuit of a legitimate social policy objective by a Member State." And in the case resolved, the CJEU finds no speciality in the tasks nor any legitimate social policy objective, and the temporary nature of the employment relationship, in itself, is not sufficient objective justification for such difference in treatment, because this “would deprive the objectives of the Directive of content… and would amount to perpetuating the maintenance of an unfavorable situation for workers with fixed-term contracts”.
Therefore, the key to the ruling lies in the requirement, for domestic law to be compatible with the Directive's principle of non-discrimination, that the difference in treatment be based on elements such as "the special nature of the tasks for which fixed-term contracts are concluded... or the pursuit of a legitimate social policy objective by a Member State." In other words, it is not mandatory in every case that the compensation for the termination of all temporary contracts be equal to the compensation for the termination of a permanent contract, but it is required that any difference in compensation be related to the type of tasks performed or to legitimate social policy objectives, and not merely to the fact that the contract's duration is subject to a specific expiry date, the completion of a specific project or service, or the reinstatement of the replaced worker.
It is obvious that the CJEU judgment of 14 September 2016 is a momentous ruling that obliges the Spanish legislator to take it into consideration in order to reform domestic legislation to adapt it to EU law. This will entail the need to identify the cases in which, due to the type of tasks performed or other legitimate social policy objectives (for example, promoting the employability of groups with special difficulties in finding employment), a difference in treatment may be justified in the existence or amount of compensation for the termination of a fixed-term contract compared to the termination for objective reasons of an open-ended contract. The compensation for contract termination must be equalized between temporary and open-ended workers when such objective reasons do not exist, for which purpose the legislator has a wide margin of discretion to establish the compensation scale it deems appropriate.
Therefore, to have full legal certainty in this regard, it will be necessary to wait for the intervention of the legislator to adapt the internal regulations to the interpretation of the Community Directive on fixed-term work, since the possibility of invoking the primacy of Community law for the direct application, and beyond the specific case judged, of the CJEU doctrine of equating the compensation for the termination of temporary contracts to that established for termination for objective reasons when it is found that there is no difference between the tasks performed with respect to those of a worker with a comparable permanent contract, is very controversial and will undoubtedly require some pronouncement from the Supreme Court in unifying the doctrine.
Martí Milán Romera,
Labor Law Area
Àmbit Assesor
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