Commission of the European Communities v United Kingdom of Great Britain and Northern Ireland.
Date: 1994-06-08
28 Admittedly, the directive achieves only partial harmonization of the rules for the protection of employees in the event of a change of employer (see, in particular, the judgments in Case 105/84 Foreningen af Arbejdsledere i Danmark v Danmols Inventar [1985] ECR 2639, paragraph 26, and in Case 324/86 Foreningen af Arbejdsledere i Danmark v Daddy' s Dance Hall [1988] ECR 739, paragraph 16) and is for that reason not designed to bring about full harmonization of national systems for the representation of employees in an undertaking. However, the limited character of such harmonization cannot deprive the provisions of the directive, and especially Article 6, of their effectiveness. In particular, it cannot prevent Member States from being required to take all appropriate measures to ensure that employee representatives are designated with a view to the provision of information and consultations provided for by Article 6.
32 In its second complaint, the Commission argues that the UK Regulations, as interpreted by courts and tribunals in the United Kingdom, do not apply to transfers which do not involve the transfer of the property of an undertaking, contrary to Article 1(1) of the directive, as interpreted by the Court. The Commission refers on this point to the judgment in Case 287/86 Landsorganisationen i Danmark for Tjenerforbundet i Danmark v Ny Moelle Kro [1987] ECR 5465 and to the judgment in Daddy' s Dance Hall, cited above.
36 Moreover, the scope of national laws, regulations or administrative provisions must be assessed in the light of the interpretation given to them by national courts (see the judgment in Joined Cases C-132/91, C-138/91 and C-139/91 Katsikas and Others v Konstantinidis and Others [1992] ECR I-6577, paragraph 39).
37 The decisions of United Kingdom courts and tribunals relied on by the Commission in support of its second complaint predate the judgment of the House of Lords cited by the United Kingdom, which was delivered on 16 March 1989 and which, as the Commission concedes, holds that the UK Regulations must, as far as possible, be interpreted in accordance with the wording and objectives of the directive and with the Court' s interpretation thereof. The Commission does not cite any judicial decision which is later than that judgment and incompatible with Article 1(1) of the directive, as interpreted by the Court.
40 The Commission argues in its third complaint that the UK Regulations, as interpreted by courts and tribunals in the United Kingdom, do not apply to non-profit-making undertakings, contrary to Article 1(1) of the directive, as interpreted by the Court. The Commission refers in this connection to the judgment in Case C-29/91 Dr Sophie Redmond Stichting v Bartol and Others [1992] ECR I-3189.
44 The Court has already accepted, at least implicitly, in the context of competition law (judgment in Case C-41/90 Hoefner and Elser v Macrotron [1991] ECR I-1979) or social law (see, in fact, for the application of the directive, the judgment in Redmond Stichting, cited above), that a body might be engaged in economic activities and be regarded as an "undertaking" for the purposes of Community law even though it did not operate with a view to profit.
45 It follows from those judgments that the fact that an undertaking is engaged in non-profit-making activities is not in itself sufficient to deprive such activities of their economic character or to remove the undertaking from the scope of the directive.
46 Accordingly, the scope of the directive cannot, as the United Kingdom contends, be limited to undertakings which operate with a view to profit.
55 Where a Community directive does not specifically provide any penalty for an infringement or refers for that purpose to national laws, regulations and administrative provisions, Article 5 of the Treaty requires the Member States to take all measures necessary to guarantee the application and effectiveness of Community law. For that purpose, while the choice of penalties remains within their discretion, they must ensure in particular that infringements of Community law are penalized under conditions, both procedural and substantive, which are analogous to those applicable to infringements of national law of a similar nature and importance and which, in any event, make the penalty effective, proportionate and dissuasive (see, with regard to Community regulations, the judgments in Case 68/88 Commission v Greece [1989] ECR 2965, paragraphs 23 and 24, and in Case C-7/90 Vandevenne and Others [1991] ECR I-4371, paragraph 11).
56 Regulation 11(4) provides that an employer who fails to consult employee representatives at the time of the transfer of an undertaking may be ordered to pay appropriate compensation to employees affected by the transfer. Under Regulation 11(11), the amount of compensation may not exceed a maximum amount which was increased from two weeks' pay for the employee in question to four weeks' pay by the Trade Union Reform and Employment Rights Act 1993. However, according to Regulation 11(7), where an employer also dismisses employees on grounds of redundancy and fails to consult employee representatives, contrary to section 99 of the EPA, any compensation may be set off against a "protective award" which the employer may later be ordered to make to the employee under the EPA and, conversely, a "protective award" may be set off against any compensation which the employer may subsequently be ordered to pay to the employee.
57 Thus, when employees in a transferred undertaking are made redundant and the employer is ordered to make a "protective award" to them for failure to comply with the obligations to consult and inform employee representatives in accordance with section 99 of the EPA, the employer will be penalized financially pursuant to the UK Regulations only to the extent that the amount of the penalty exceeds the amount of the "protective award". The financial penalty is accordingly weakened, if not entirely removed. In addition, the imposition of a ceiling on the amount which an employer may be ordered to pay by way of compensation under the UK Regulations, particularly at the level at which it was fixed prior to the coming into force of the Trade Union Reform and Employment Rights Act 1993, places a limit on the number of cases in which the "protective award" may be exceeded.
58 It follows that if an employer is also found to be at fault on the basis of the EPA, the penalty is not truly deterrent. Accordingly, the United Kingdom legislation does not comply on this point with the requirements of Article 5 of the Treaty.