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Recent Judicial Developments in the European Union

By Clayton J. Joffrion

Court of Justice Delivers Judgments Via Internet

International attorneys, exporters, and future exporters have recently been given a gift of immeasurable value. The Court of Justice of the European Communities and the Court of First Instance has broken new ground in that full text judgments will be available in 11 languages on the Internet as soon as they are delivered. Now U.S. attorneys have access to case law as fast as Europeans. There is also a search engine so attorneys can look for specific cases and issues. The Court's website URL is: www.curia.eu.int

Employee Rights in Transfer of Contractual Obligations

The Court decides a wide variety of cases which should be of interest. Labor law is one such type of such legal issue. Consider the case of Ayse Suzen v. Zehnacker Gebauderreinigung GmbH Krankenhausservice, Court of Justice Case C-13/95. Mrs. Suzen was employed by Zehnacker which had a contract to provide cleaning services for a school. The school terminated the contract with Zehnacker, which dismissed all its employees. The school then entered into a contract with Lefahrt, GmbH which did not offer to re-employ the dismissed employees. Mrs. Suzen then brought an action before the Labor Court in Bonn for a declaration that the notice of dismissal had not brought an end to her employment. To Americans more familiar with the doctrine of employment at will this might seem to be an irrational suit, but there was a valid legal question.

European Directive Safeguards Rights of Employees

Council Directive 77/187/EEC of 14 February 1977 safeguards the rights of employees in the event of transfers of obligations, businesses or parts of businesses. Article 1(1) provided that it would apply to the transfer of undertakings, businesses, or parts of a businesses as a result of a legal transfer or merger. The Labor Court in Bonn decided that the cases depended on an interpretation of the Directive and stayed the proceedings pending a preliminary ruling from the Court of Justice.

Change of Service Contractor vs. Transfer of an Entity

The issue before the Court was whether the Directive applied to a situation where the first contract had been terminated and a second contract entered into without any transfer of tangible or intangible business assets. The aim of the Directive, according to the Court, was to ensure the continuity of employment within an economic entity irrespective of any change of ownership and irrespective of the detailed arrangements for that change. Thus, a transfer within the meaning of the directive takes place if the economic entity maintains its identity. To determine when a "transfer of an entity" has taken place, the Court cited in particular the transfer of substantial assets and whether or not the new owner has taken over a major part of the workforce in terms of numbers and skills. The mere loss of a service contract to a competitor cannot, by itself, constitute a transfer within the meaning of the Directive.

Still Different from American Experience

We can infer that if Zehnacker had transferred its rights under the original contract to Lefahrt, a transfer would have occurred and Mrs. Suzen would have been entitled to judgment in her favor. Even this result is foreign to most if not all American jurisdictions except perhaps where a union contract would be involved. U.S. companies must, therefore, thoroughly investigate whether they are taking on employees of businesses which they intend to purchase or from which they intend to obtain substantial business assets.

Freedom of Movement of Workers

Another labor related matter is Recep Tetik v. Land Berlin, Court of Justice Case C-171/95. Tetik, a Turkish national, was employed as a seaman on various German sea-going vessels. He obtained successive temporary residence permits from German authorities. His last authorization was to expire of August 4, 1988. On July 20, 1988, he voluntarily quit his employment as a seaman and on August 1, 1988 moved to Berlin to obtain employment on land. He applied for an unlimited residence permit which was refused. He appealed several times until the German court requested the Court of Justice issue a preliminary ruling on Council Decision 64/732/EEC of 23 December 1963. This Council Decision included an Agreement establishing freedom of movement of workers among the signatories.

Agreement via European Community v. German National Law

The Court found that the Council Decision does not give full freedom of movement within the Community to Turkish nationals and that the Member States may establish conditions under which they may allow the initial employment for workers. However, once Turkish workers are duly registered in an EU country, they enjoy free access to any paid employment. The Court also added that a worker who has left his work to seek other employment cannot be automatically treated as having left the labor force as long as he continues to be duly registered as a member of the labor force. This is also different from the American experience as nonimmigrant employment visas are for the benefit of U.S. employers and aliens cannot obtain permanent residence status by some notion of acquisitive prescription or even change employers without INS approval.

Further Information Available via Internet Sites

Council Directives and Council Directives can be obtained from the European Union's website at http://www.europa.eu.int or http://www.europa.org

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