EU law is directly applicable between private parties
21 April 2016
The European Court of Justice has established that EU law is directly applicable between private parties and thus paves the way for claims for back-pay of severance allowances.
BackgroundOn 19 April 2016, the European Court of Justice (ECJ) delivered judgment in the so-called "Ajos-case" (C-441/14). The judgment is part of a large group action regarding the former Danish rule of Section 2a (3) of the Danish Salaried Employees Act about lapse of severance allowance.
Pursuant to Section 2a (1) of the Salaried Employees Act, an employee who has been employed in the same undertaking for 12 years or more is upon termination of employment entitled to a severance allowance. However, pursuant to the then-current Section 2a (3), the right to severance allowance would lapse if the employee qualified for retirement pension in accordance with a pension scheme entered into by the employee prior to reaching the age of 50.
In 2010 in the so-called "Ole Andersen-case" (C-449/08), the ECJ found that the then-current Section 2a (3) of the Salaried Employees Act was in violation of the prohibition in the Employment Equality Directive against discrimination due to age, for which reason this part of the provision was removed from the act. The Ole Andersen-case involved the relationship between an employee and a public employer.
In the recent judgment in the group action, the Ajos-case, the ECJ was to make a decision on whether the EU law constituted an obstacle in terms of upholding the then-current Danish rule on the loss of severance allowance in the relationship between an employee and a private employer.
The Facts of the CaseThe Ajos-case involved an employee who at the age of 60 was dismissed by his employer, Ajos. Pursuant to the then-current Section 2a (3) of the Salaried Employees Act, the employee had lost his claim for severance allowance. Based on the judgment in the Ole Andersen-case, the employee's union raised a claim for payment of the severance allowance against the private employer. Without request from the parties, the Danish Supreme Court decided to submit two preliminary questions to the ECJ.
The General EU Law Principle of Prohibition against Discrimination due to AgeThe ECJ found that the general EU principle of prohibition against discrimination due to age applies with direct effect to private parties and that the principle may thus be used as legal base for ordering a private employer to pay out severance allowance, even if the employer, pursuant to the then-current Clause 2a (3) of the Salaried Employees Act, indisputably was exempted from this obligation.
The Consequences of the JudgmentConsequently, the ECJ has clearly established that the general principle of prohibition against discrimination due to age applies unconditionally, also in cases between private parties.
Specifically, the judgment will imply that all terminated employees who have not received severance allowance due to the fact that they qualified for retirement pension upon termination of the employment may now make a claim against their employer for back-pay of severance allowance. However, the claims are limited by the Danish legislation's statute of limitations, pursuant to which the limitation period for claims arising during an employment relationship is 5 years from the making of the claim, i.e. 5 years after the expiry of the employment relationship.