Germany: ECJ rules against age-based notice periods

In a judgment issued on 19 January 2010, the European Court of Justice (ECJ) ruled that German legislation on notice periods, under which service before the age of 25 is not counted when calculating notice of dismissal, infringes EU law.

The judgment confirms the Advocate General's opinion on the case (C-555/07, Seda Kücükdeveci v Swedex GmbH & Co KG), issued in July 2009. The ECJ also ruled that national courts should "disapply" any national provision that would result in a detriment to a party, if the provision infringes EU law. National courts may apply to the ECJ for a preliminary ruling on such an issue, but are not required to do so.

The case was referred to the ECJ from the regional (Land) Labour Court in Düsseldorf for a preliminary ruling on whether German law was consistent with the EU framework employment equality Directive (2000/78/EC), which prohibits discrimination in employment and occupation on grounds including age.

In 2005, the ECJ ruled in the Mangold case (C-144/04) that a German statute that permitted workers aged over 52 to be treated differently in the requirements for concluding a fixed-term contract was incompatible with EU law as it went "beyond what is appropriate and necessary to attain the legitimate objective pursued". This judgment also made it clear that the principle of non-discrimination derives from primary EU law (the Treaty and the Charter of Fundamental Rights). Directive 2000/78/EC aims to create a framework for combating discrimination, and is not the source of individuals' rights.

The Kücükdeveci case also raised the question as to whether or not a national provision that infringes EU law can be applied in a dispute between two private parties. The Düsseldorf court sought confirmation from the ECJ that the provision in question was incompatible with the law, so that it could disapply it.

The German Civil Code grants employees a basic notice period of termination of their employment contract of four weeks, rising in stages - in line with length of service - to seven months for employees with 20 years' service. Only service completed after the employee's 25th birthday counts towards the longer notice period.

Based on the scope offered by Directive 2000/78/EC for unequal treatment on grounds of age in certain circumstances, Germany's 2006 General Equal Treatment Law (which transposed the Directive) allows such differential treatment where this is intended to promote "vocational integration" and "ensure protection" for older workers or young people. The 2006 legislation retained existing provisions on employment protection, which include age-related selection for redundancy, and also allowed unequal treatment on grounds of age "if objective, necessary and in pursuit of a legitimate objective ... including termination of employment".

The case involved Seda Kücükdeveci, who had worked for Swedex since her 18th birthday in 1996. On 19 December 2006, she was given notice of termination to take effect on 31 January 2007, in line with the statutory provisions. She argued that after more than 10 years' service she was entitled to four months' notice. The local labour court ruled in her favour, but on appeal by Swedex, the Land Labour Court referred the issue to the ECJ for a preliminary ruling on whether or not:

• the German statute infringed EU law;
• the differential treatment could be justified;
• a national court can disapply a national provision which it considers incompatible with EU law.

The ECJ rejected the German Government's argument that the law on service-related notice periods had a legitimate aim to "afford employers greater flexibility in personnel management by alleviating the burden on them" when terminating the employment of young workers, who could be expected to have greater individual or occupational flexibility. The ECJ held that this argument was unsustainable as it applied to all employees regardless of their age when dismissed. Moreover, the overall aim of the law - to protect workers with longer service - was also not met as it subtracted service from all employees, including those with long tenures. Since the provision also treated younger workers unequally by discounting service by individuals who enter employment "after little or no vocational training", the ECJ also rejected the claim that the provision encouraged the recruitment of younger workers. As such, the German provision infringes EU law and is not justified by an "appropriate and necessary" social policy aim.

On the issue of whether or not national courts should disapply a national provision that contravenes EU law, the ECJ ruled that the obligation on member states to ensure that the aims of a Directive are met applies to "all the authorities of the member states, including, for matters within their jurisdiction, the courts". This implies that, when applying national law, a national court must interpret a national provision "in the light of the wording and purpose of the Directive in question". In this case, the obligation on the national court derives not only from Directive 2000/78/EC but also from non-discrimination as a "general principle of European law". A national court may seek a preliminary ruling from the ECJ, but is not required to do so in order to disapply a national provision.

The ruling, which will have a number of implications for employment law and collective agreements in Germany, has provoked considerable controversy.

First, the judgment is seen as subverting existing German constitutional arrangements, under which a national court may disapply a national provision only once it has been declared unconstitutional by the Federal Constitutional Court. The decision has alarmed employer representatives, who have argued that opening the door to the direct application of EU law and principles will undermine legal certainty. Some clarification on this issue is expected because a German employer has an appeal pending at the Federal Constitutional Court following a Federal Labour Court judgment that upheld the prohibition of age-related exemptions on fixed-term contracts, based on the Mangold judgment.

Second, the ruling implies that all German employees in service before their 25th birthday will need to have this period of service added to the calculation of their notice period in the event of termination by the employer. For a 27-year-old who joined a firm at the age of 20, this would mean statutory notice of three months instead of one month. In principle, new legislation will be required to comply with the judgment, which could also nullify the provisions of collective agreements, which have directly transposed statute law on this issue.

European employment policy, practice and law, February 2010