Joined Cases C‑674/18 and C‑675/18
EM
v
TMD Friction GmbH
and
FL
v
TMD Friction EsCo GmbH
(Requests for a preliminary ruling from the Bundesarbeitsgericht)
Judgment of the Court (Fifth Chamber), 9 September 2020
(Reference for a preliminary ruling – Social policy – Transfers of undertakings – Directive 2001/23/EC – Articles 3 and 5 – Safeguarding of employees’ rights – Protection of employees in the event of the insolvency of their employer – Transfer made by the insolvency administrator of the transferring undertaking subject to insolvency proceedings – Occupational old-age pension benefits – Restriction on the obligations of the transferee – Amount of the benefit payable under the supplementary occupational pension scheme calculated on the basis of the employee’s pay when insolvency proceedings were opened – Directive 2008/94/EC – Article 8 – Direct effect – Conditions)
1. Social policy – Approximation of laws – Transfers of undertakings – Safeguarding of employees’ rights – Directive 2001/23 – Exceptions – Transfer in the course of insolvency proceedings –Procedure for judicial reorganisation by transfer under judicial supervision for the continuation in whole or part of the transferor or of its activities – Not included
(Council Directive 2001/23, art. 3 to 5)
(see paragraphs 48-51, 54-57, 60-62)
2. Social policy – Approximation of laws – Transfers of undertakings – Safeguarding of employees’ rights – Directive 2001/23 – Exceptions – Transfer in the course of insolvency proceedings –Obligation to give effect to employees’ rights to a retirement pension under a supplementary occupational pension scheme – Partial transfer to the transferee – Whether permissible
(Council Directive 2001/23, art. 3, § 4, and 5, § 2, a))
(see paragraphs 63-68)
3. Social policy – Approximation of laws – Transfers of undertakings – Safeguarding of employees’ rights – Directive 2001/23 – Exceptions – Transfer in the course of insolvency proceedings – Occurrence, after the opening of insolvency proceedings, of the event conferring eligibility to a retirement pension under a supplementary occupational pension scheme – Subrogation of the transferee to the rights and obligations arising from employment relationships existing at the time of the transfer – Exclusion of rights conferring prospective entitlement to a retirement pension under a supplementary occupational pension scheme relating to periods of employment before the opening of insolvency proceedings – Whether permissible – Condition – Minimum level of protection required
(Council Directive 2001/23, art. 3, § 4, and 5, § 2, a))
(see paragraphs 70-75, operative part 1)
4. Social policy – Approximation of laws – Protection of employees in the event of the insolvency of their employer – Directive 2008/94 – Supplementary occupational pension schemes – Protection of rights to old-age benefits – Minimum level of protection required – Occurrence, after the opening of insolvency proceedings, of the event conferring eligibility for a retirement pension under a supplementary occupational pension scheme – Benefits for which the transferee is not liable –Intervention of the pension guarantee body limited to rights conferring prospective entitlement to old-age benefits that are already definitive when those insolvency proceedings are opened – Basis for determination of the amount relating to the portion of those benefits for which that body is liable – Non-compliance with minimum level of protection required – Not permissible
(Directive of the European Parliament and of the Council 2008/94, art. 8; Council Directive 2001/23, art. 3, § 4, b))
(see paragraphs 77-80, 85, 86, 91-93, operative part 2)
5. Social policy – Approximation of laws – Protection of employees in the event of the insolvency of their employer – Directive 2008/94 – Supplementary occupational pension schemes – Protection of rights to old-age benefits – External insurance body – Whether an employee can rely on the direct effect of Article 8 of that directive against that body – Conditions
(Directive of the European Parliament and of the Council 2008/94, art. 8)
(see paragraphs 95, 96, operative part 3)
Résumé
In the cases pending before the referring court, two German citizens had been employed by a company incorporated under German law since 1996 and 1968, respectively. That company granted to its employees a pension under a supplementary occupational pension scheme. When the business activities of that company were transferred, the employment contracts of the appellants in the main proceedings were transferred to another company, TMD Friction. Insolvency proceedings relating to the assets of that company were opened, but its business activity was maintained. Thereafter, the insolvency administrator transferred some business activities of TMD Friction to an entity which was subsequently itself renamed TMD Friction, other business activities being transferred to another company, TMD Friction EsCo.
Pensions-Sicherungs-Verein (the occupational pension guarantee association), a body governed by private law which ensures payment of occupational pensions in the event of an employer’s insolvency in Germany, informed one of the appellants in the main proceedings that, due to his age, namely his being 29 years old at the time when the insolvency proceedings were opened, he had not yet acquired any definitive right to old‑age pension benefits. Consequently, he brought an action against TMD Friction claiming that that company should be ordered, in the future, when he will have reached the retirement age at which he will qualify for those pension benefits, to pay him an old-age pension the amount of which will take into consideration the periods of employment that he completed before the opening of insolvency proceedings. The second applicant in the main proceedings, for his part, has received, since 1 August 2015, a retirement pension of EUR 145.03 per month paid by TMD Friction EsCo under the supplementary occupational pension scheme. He brought an action against that company, claiming that it should be ordered to pay him a higher occupational retirement pension. The two transferee companies contested the actions, arguing that, in the event of a transfer of an undertaking after the opening of insolvency proceedings concerning the assets of the transferor, the transferee is liable only for the portion of the old‑age pension that is based on periods of service carried out after the opening of insolvency proceedings. The actions having been dismissed both at first instance and on appeal, the appellants in the main proceedings brought an appeal before the referring court, the Bundesarbeitsgericht (Federal Labour Court, Germany), on a point of law.
A request for a preliminary ruling having been made by that national court, the Court, in a judgment delivered on 9 September 2020, gave a ruling on accrued rights to the retirement pensions in question, under the supplementary occupational pension scheme, in the context of transfers of undertakings subject to insolvency proceedings, in the light of Articles 3 and 5 of Directive 2001/23 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfer of undertakings, businesses or parts of undertakings or businesses, (1) and of Article 8 of Directive 2008/94 on the protection of employees in the event of the insolvency of their employer. (2)
The Court, first, stated that the objective of Directive 2001/23 is to protect employees by ensuring the safeguarding of their rights in the event of a change of employer to ensure, as far as possible, that contracts of employment or employment relationships continue unchanged with the transferee, but that that directive does not provide for complete harmonisation of national legislation in this area. The Court stated, further, that that directive also seeks to ensure a fair balance between the interests of employees, on the one hand, and those of the transferee, on the other. As regards the provisions of that directive specifically relating to transfers of an undertaking after the opening of insolvency proceedings, the Court held that Article 5(1) of Directive 2001/23 is not applicable to the insolvency proceedings at issue in the main proceedings, which, since their objective is the continuation of the transferor’s business activities following their transfer, do not constitute proceedings instituted with a view to the liquidation of the assets of the transferor. As regards Article 5(2)(a) of that directive, the Court held that the national legislation at issue in the main proceeding does not fall within the scope of that provision, given that that national legislation cannot be regarded as concerning obligations owed by the transferor before the date of the transfer or before the opening of insolvency proceedings. While the rights to a retirement pension under a supplementary occupational pension scheme had already conferred prospective entitlement before the opening of insolvency proceedings, the benefit of the retirement pension will be realised only on the occurrence, after the opening of those insolvency proceedings, of the pensionable event.
The Court emphasises, however, that the Member States, in the event of a transfer of an undertaking after the opening of insolvency proceedings, may always take advantage of the derogations provided for in Article 3(4) of the directive. The Court states that that provision does not prohibit bringing about a partial transfer to the transferee of the obligation to give effect to the rights of the employees to a retirement pension under a supplementary occupational pension scheme. The protection of employees with respect to their rights conferring immediate or prospective entitlement must, in any event, be at a level that is at least equivalent to the level of protection required by Article 8 of Directive 2008/94.
Consequently, the Court held that Directive 2001/23, in the light of, inter alia, Article 3(4)(a) and (b), does not preclude, in the event of the transfer of an undertaking subject to insolvency proceedings, national legislation which provides that, on the occurrence, after the opening of insolvency proceedings, of the pensionable event conferring eligibility for a retirement pension under a supplementary occupational pension scheme, the transferee is not liable for an employee’s rights conferring prospective entitlement to that retirement pension where those rights have accrued in respect of periods of employment that pre-dated the opening of the insolvency proceedings. That conclusion is, however, subject to the condition that, with respect to the portion of the amount for which the transferee is not liable, the measures adopted to protect the interests of the employees are at a level that is at least equivalent to the level of protection required under Article 8 of Directive 2008/94.
The Court, second, examined the extent of the obligation on the occupational pension guarantee association according to whether or not rights conferring prospective entitlement to old-age benefits were definitive at the time of the opening of insolvency proceedings and the basis of the calculation of the amount with respect to the portion of the benefits for which that body is liable. In that regard, the Court stated, in the first place, that, having regard to the minimum protection required by Article 8 of Directive 2008/94, that provision requires that a former employee receives, in the event of the insolvency of his or her employer, at least half of the old‑age benefits deriving from accrued pension rights under a supplementary occupational pension scheme, and that provision obliges Member States to guarantee, in that event, to each former employee compensation corresponding to at least one half of the value of his or her rights acquired under such a scheme. Similarly, that minimum protection precludes a manifestly disproportionate reduction of an employee’s occupational old‑age benefits that seriously affects the ability of the person concerned to meet his or her needs. That would be the case if a reduction in old-age benefits were suffered by a former employee who, as a result of the reduction, is living, or would have to live, below the at-risk-of-poverty threshold determined by the European Statistical Office (Eurostat) for the Member State concerned. Accordingly, that minimum protection requires a Member State to guarantee, to a former employee who is subject to such a reduction of his or her old‑age benefits, compensation in an amount which, without necessarily covering all the losses suffered, is such as to prevent their being manifestly disproportionate. The Court also stated that Article 8 of Directive 2008/94 is intended to ensure that the long-term interests of employees are protected.
Next, the Court concluded that it follows from that article that the calculation of the amount of the benefit, of which at least 50% must be granted to the former employee, must take proper account of the periods of employment completed in the employ of the transferor, during which the rights to old-age benefits were accrued, and of the employee’s gross remuneration at the time when such rights could be exercised. Moreover, the Court held that any other interpretation would render it impossible to determine whether there is any need to mitigate the consequences of a reduction in those benefits suffered by a former employee who, as a result of that reduction, is living, or would have to live, below the at-risk-of-poverty threshold determined in the Member State concerned.
The Court concluded that Article 3(4)(b) of Directive 2001/23, read together with Article 8 of Directive 2008/94, must be interpreted as precluding national legislation which provides that, on the occurrence of an event that confers eligibility to old‑age benefits under a supplementary occupational pension scheme after the opening of insolvency proceedings in the course of which a transfer of an undertaking has been made, with respect to the portion of those benefits for which the transferee is not liable, the insolvency guarantee body established under national law is not required to intervene where the rights conferring prospective entitlement to old‑age benefits had not already become definitive at the time when those insolvency proceedings were opened, if the consequence of that legislation is that the employees are deprived of the minimum protection guaranteed by that article. In the same context, Article 3(4)(b) precludes legislation which provides that, for the purposes of determining the amount relating to the portion of those benefits liability for which falls on that body, the calculation of that amount is to be based on the gross monthly remuneration earned by the employee concerned at the time when those insolvency proceedings were opened.
Third, as regards the direct effect of Article 8 of Directive 2008/94, the Court recalled its recent case-law (3) and held that that article is capable of having direct effect and can be relied upon in proceedings against a body governed by private law, designated by the Member State concerned as the body that guarantees occupational pensions against the risk of insolvency of employers. That effect is, however, subject to the condition that (i) in the light of the task of guarantor with which that body has been charged and the circumstances in which it performs that task, that body can be treated as equivalent to the State and (ii) that task does actually cover the types of old‑age benefits for which the minimum protection prescribed in Article 8 is sought. The Court adds that it is for the referring court to determine whether that applies to the cases in the main proceedings.