Opinion of Advocate General Sharpston delivered on 12 July 2012.
Johann Odar v Baxter Deutschland GmbH.
Reference for a preliminary ruling: Arbeitsgericht München - Germany.
Equal treatment in employment and occupation - Directive 2000/78/EC - Prohibition against any discrimination on grounds of age or disability - Compensation on termination of employment - Social plan providing for a reduction in the amount of redundancy compensation paid to disabled workers.
European Court Reports 2012 Page 00000
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1. In this reference from the Arbeitsgericht München (Employment Court, Munich), the Court is asked whether national measures (2) concerning compensation paid to workers upon redundancy are precluded by Council Directive 2000/78/EC. (3) Under those measures workers close to retirement age (which is lower for those suffering from a disability) may be excluded from (or receive reduced compensation under) a benefits scheme aimed at alleviating the consequences of redundancy.
The Charter of Fundamental Rights of the European Union
2. Article 21 of the Charter of Fundamental Rights of the European Union (4) prohibits discrimination, inter alia, on grounds of age and disability.
3. The following recitals are relevant:
‘(8) The Employment Guidelines for 2000 agreed by the European Council at Helsinki on 10 and 11 December 1999 stress the need to foster a labour market favourable to social integration by formulating a coherent set of policies aimed at combating discrimination against groups such as persons with disability. They also emphasise the need to pay particular attention to supporting older workers, in order to increase their participation in the labour force.
(11) Discrimination based on religion or belief, disability, age or sexual orientation may undermine the achievement of the objectives of the EC Treaty, in particular the attainment of a high level of employment and social protection, raising the standard of living and the quality of life, economic and social cohesion and solidarity, and the free movement of persons.
(12) To this end, any direct or indirect discrimination based on religion or belief, disability, age or sexual orientation as regards the areas covered by this Directive should be prohibited throughout the Community.
(14) This Directive shall be without prejudice to national provisions laying down retirement ages.
(25) The prohibition of age discrimination is an essential part of meeting the aims set out in the Employment Guidelines and encouraging diversity in the workforce. However, differences in treatment in connection with age may be justified under certain circumstances and therefore require specific provisions which may vary in accordance with the situation in Member States. It is therefore essential to distinguish between differences in treatment which are justified, in particular by legitimate employment policy, labour market and vocational training objectives, and discrimination which must be prohibited.’
4. Article 1 provides that the purpose of the Directive ‘is to lay down a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the Member States the principle of equal treatment’.
5. Article 2 states:
‘1. For the purposes of this Directive, the “principle of equal treatment” shall mean that there shall be no direct or indirect discrimination whatsoever on any of the grounds referred to in Article 1.
2. For the purposes of paragraph 1:
(a) direct discrimination shall be taken to occur where one person is treated less favourably than another is, has been or would be treated in a comparable situation, on any of the grounds referred to in Article 1;
(b) indirect discrimination shall be taken to occur where an apparently neutral provision, criterion or practice would put persons having a particular religion or belief, a particular disability, a particular age, or a particular sexual orientation at a particular disadvantage compared with other persons unless:
(i) that provision, criterion or practice is objectively justified by a legitimate aim and the means of achieving that aim are appropriate and necessary …’ (5)
6. Article 3 is entitled ‘Scope’. It provides:
‘1. Within the limits of the areas of competence conferred on the Community, this Directive shall apply to all persons, as regards both the public and private sectors, including public bodies, in relation to:
(c) employment and working conditions, including dismissals and pay
7. Differences in treatment on any of the grounds prohibited under the Directive may be justified if they fall within the specific exceptions laid down in Article 2(5), Article 3(4), Article 4(1) and Article 6(1). (6)
8. Article 6 is entitled ‘Justification of differences of treatment on grounds of age’. Paragraph 1 states:
‘1. Notwithstanding Article 2(2), Member States may provide that differences of treatment on grounds of age shall not constitute discrimination, if, within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary.
Such differences of treatment may include, among others:
(a) the setting of special conditions on access to employment … including dismissal and remuneration conditions, for young people, older workers …’
9. Article 16 states: ‘Member States shall take the necessary measures to ensure that:
(a) any laws, regulations and administrative provisions contrary to the principle of equal treatment are abolished;
(b) any provisions contrary to the principle of equal treatment which are included in contracts or collective agreements, internal rules of undertakings …
are, or may be, declared null and void or are amended.’
10. Article 18 makes provision for the Directive’s implementation: ‘Member States shall adopt the laws, regulations and administrative provisions necessary to comply with this Directive by 2 December 2003 at the latest or may entrust the social partners, at their joint request, with the implementation of this Directive as regards provisions concerning collective agreements. In such cases, Member States shall ensure that, no later than 2 December 2003, the social partners introduce the necessary measures by agreement, the Member States concerned being required to take any necessary measures to enable them at any time to be in a position to guarantee the results imposed by this Directive ...’
11. Paragraphs 111 to 113 of the Betriebsverfassungsgesetz (Law on the organisation of businesses) (‘the BetrVG’) require arrangements to be put in place in order to alleviate the adverse consequences on workers arising from an operation to restructure an undertaking. (7) Thus, employers and works councils are obliged to conclude social plans to that effect. (8)
The Allgemeines Gleichbehandlungsgesetz
12. The Allgemeines Gleichbehandlungsgesetz (General Law on equal treatment) of 14 August 2006 (‘the AGG’ or ‘the national legislation in issue’) transposed the Directive into national law.
13. Paragraph 10 is entitled: ‘Permissible different treatment on grounds of age’. It provides:
‘Paragraph 8 notwithstanding, (9) a difference of treatment on grounds of age is also permissible if it is objectively and reasonably justified by a legitimate aim. The means of achieving that aim must be appropriate and necessary. Such differences of treatment may include in particular the following:
(6) differences in benefits in “social plans” within the meaning of [the BetrVG], if the parties have established a compensation scheme which is graduated according to age or length of service and under which the opportunities on the employment market, which depend essentially on age, have been clearly taken into account by a relatively strong emphasis on age, or if the parties have excluded from the benefits of the social plan workers who are financially secure because they are entitled to a pension, after receiving unemployment benefit where applicable.’
Social security legislation
14. In regard to State pensions, Paragraph 235 of Book VI of the Sozialgesetzbuch (German Social Security Code: ‘SGB Book VI’) provides that (subject to having fulfilled the contributions obligation) a worker is eligible for a full state retirement pension at age 65 (the standard retirement age (10) ). Under Paragraph 236a of SGB Book VI (as it applied at the material time), severely disabled workers were entitled to draw an early pension at 60. (11) In certain other circumstances a worker is able to take a reduced pension before reaching the age of 65. Thus, early retirement can also be taken at 63 subject to sufficient contributions having been made.
15. In order to be eligible for unemployment benefit an unemployed worker must fulfil certain conditions (including a contributions requirement) and he must be registered as actively seeking work. The State pays standard unemployment benefit (Arbeitslosengeld I) (12) of up to 60% of the worker’s previous net salary (the amount rises to 67% if he cares for children under 18). Payment is made for a limited period determined by the worker’s age and the length of time over which contributions were made. (13)
16. The Kündigungsschutzgesetz (Law on protection against dismissal) (‘the KSchG’) lays down rules governing the selection of employees for redundancy. To be lawful a dismissal must be ‘socially justified’ under Paragraph 1(2) of the KSchG. Paragraph 1(3) provides that a dismissal lacks social justification where an employer fails to take into account a worker’s length of service, age, maintenance obligations and/or any serious disability during the process of selection for redundancy.
The social plan
17. On 30 April 2004 Baxter Deutschland GmbH (‘Baxter’) and the relevant works council (14) agreed a Vorsorglichen Sozialplan (contingency social plan – effectively, a redundancy plan), paragraph 6(1) of which is entitled ‘Compensation on termination of employment (except in cases of “early retirement”)’. It states:
‘1.1 Workers … who leave [Baxter] (as a result of redundancy for operational reasons or by mutual agreement), will receive taxable gross compensation in euros in accordance with the following formula:
Compensation = (age factor x length of service (15) x gross monthly pay).’
I shall refer to the sum generated by this calculation as ‘the standard formula compensation’.
Under paragraph 6(1.2) the list of age factors increases gradually from 0.35 at age 18 to 1.75 at age 57, then falls to 1.70 at age 58 before falling more sharply from age 58 onwards to reach 0.30 at age 64.
Paragraph 6(1.5) states: ‘In the case of workers who are more than 54 years old and are made redundant on operational grounds or by mutual agreement, the [standard formula compensation] will be compared with that generated by the following formula:
(Months until earliest possible beginning of pension x 0.85 x gross monthly pay).’
I shall refer to the sum generated by this alternative calculation as ‘the special formula compensation’ and refer to its effects as ‘the cap’.
Paragraph 6(1.5) continues:
‘Should [the standard formula compensation] be greater than [the special formula compensation] the smaller amount will be payable. However, the smaller amount must not be less than one half of [the standard formula compensation].
If the figure given by [the special formula compensation] is nil, one half of [the standard formula compensation] will be payable.’
I shall refer to this arrangement as ‘the correction factor’.
18. A supplementary social plan was agreed on 13 March 2008. (16) Paragraph 7 of that social plan is entitled ‘Compensation’ and states ‘Employees covered by this social plan and whose employment relationship ends as a result of the operational change will receive the following benefits:
‘7.1 Compensation: Employees will receive [the standard formula compensation]
7.2 Clarification: With regard to paragraph 6(1.5) of the contingency social plan, the parties agree on the following clarification: “earliest possible beginning of pension” means the date on which the employee can claim for the first time one of the statutory retirement pensions, including a pension with reductions on the ground that it is drawn early.’
Facts, procedure and questions referred
19. Dr Odar was born on 25 July 1950. He is married with two dependent children. He is recognised as being severely disabled. (17) He was employed by Baxter (and/or its legal predecessors) from 17 April 1979. Dr Odar was Baxter’s marketing director prior to the termination of his employment.
20. Following a decision to move its operations from Heidelberg to München-Unterschleissheim, Baxter informed Dr Odar that he was to be made redundant by letter of 25 April 2008. Baxter offered Dr Odar continued employment at the new office. The arrangements included an extended trial period, during which he could decide whether or not the new arrangements were acceptable. Dr Odar initially accepted that position, but then in turn gave notice to terminate his employment with effect from 31 December 2009.
21. The national court explains that under Paragraph 236a of SGB Book VI Dr Odar is entitled to claim a (reduced) retirement pension for severely disabled persons at the earliest at age 60 (in his case, from 1 August 2010). (18)
22. Following termination of Dr Odar’s employment (19) Baxter paid him compensation of EUR 308 253.31 (gross). According to the national court compensation was calculated under paragraph 6(1.1) to (1.5) of the social plan in the following way. (20) First, under the standard formula compensation was calculated as follows: (compensation = 1.7 (age factor) x 29.71 years (length of service) x 12 210.47 (gross monthly salary)). This generated a figure of EUR 616 506.63. However, since Dr Odar was 58 at the material time he came within paragraph 6(1.5) of the social plan. The special formula compensation was therefore then calculated as follows: 19 (months until earliest possible beginning of pension) x 0.85 x 12 210.47 (gross monthly salary). Applying this formula generated a figure of EUR 197 199.09. Baxter then applied the remaining elements of paragraph 6(1.5) so as to ensure that Dr Odar received at least 50% of the standard formula compensation that would have been due to him, and therefore paid him EUR 308 253.31 gross.
23. Dr Odar instituted proceedings against Baxter on 30 June 2010. He submits that the calculation of the compensation due to him under the social plan discriminates against him because of his age and his disability. Dr Odar therefore claims that he is entitled to further compensation of EUR 271 988.88 (gross), which corresponds to the difference between the compensation actually paid to him and the amount that he would have received if he had been 54 years old (the period of service being the same) on the date of termination of his employment.
24. The Arbeitsgericht München considers that the claim raises issues of EU law and has accordingly stayed proceedings and referred the following questions to the Court for a preliminary ruling:
‘(1) Is a national rule which provides that different treatment on the ground of age may be lawful if, in the framework of an occupational social security scheme, the management and the works council have excluded from social plan benefits workers who are financially secure because they are entitled to a pension, after drawing unemployment benefit where applicable, contrary to the prohibition of discrimination on the ground of age, laid down by Articles 1 and 16 of [the Directive] or is that unequal treatment justified under Article 6[(1)(a)] of [the Directive]?
(2) Is a national rule which provides that different treatment on the ground of age may be lawful if, in the framework of an occupational social security scheme, the management and the works council have excluded from social plan benefits workers who are financially secure because they are entitled to a pension, after drawing unemployment benefit where applicable, contrary to the prohibition of discrimination on the ground of disability laid down by Articles 1 and 16 of [the Directive]?
(3) Is a rule of an occupational social security scheme (21) under which, in the case of workers older than 54 years of age who are made redundant on operational grounds, an alternative calculation will be made of the compensation on the basis of the earliest possible date on which their pension will begin – by comparison with the more normal method of calculation, which takes account in particular of the length of service – and the smaller amount of compensation, though still at least one half of the normal sum in compensation, will be paid, contrary to the prohibition of discrimination on the ground of age laid down by Articles 1 and 16 of [the Directive], or is that unequal treatment justified under Article 6[(1)(a)] of [the Directive]?
(4) Is a rule of an occupational social security scheme under which, in the case of workers older than 54 years of age who are made redundant on operational grounds, an alternative calculation will be made of the compensation on the basis of the earliest possible date on which their pension will begin – by comparison with the more normal method of calculation, which takes account in particular of the length of service – and the smaller amount of compensation, though still at least one half of the normal sum in compensation, will be paid, the alternative method of calculation taking into account a retirement pension on the ground of disability, contrary to the prohibition of discrimination on the ground of disability laid down by Articles 1 and 16 of [the Directive]?’
25. Written observations were submitted on behalf of Dr Odar, Baxter, the German Government and the European Commission. All parties presented oral argument at the hearing on 18 April 2012.
26. The referring court’s questions relate both to a provision of national law (Paragraph 10(6) of the AGG) that may, or may not, be covered by Articles 2(2)(b)(i) and 6(1) of the Directive and to the specific social plan in place at Baxter. It may be helpful, at the outset, to clarify precisely what should, and what should not, form part of the Court’s answer to the questions referred.
27. The Court’s role is, of course, confined to giving an authoritative ruling as to the interpretation of the EU legislation at issue. However, the national legislation derogating from the principle of equal treatment gives a degree of latitude to the social partners. The question as to whether a correct interpretation of EU law precludes such national legislation cannot be answered in the abstract. It must take into account what happens when the social partners agree on a specific social plan which has an effect upon a specific person (here, Dr Odar). It seems to me that the analysis has, therefore, to cover the following issues (not all of which are matters for the Court).
28. First, does the social plan produce consequences that are precluded by Articles 1 and 2(1) of the Directive and are not covered by the derogations in Articles 2(2)(b)(i) and 6(1)? To answer that question, it is necessary to have regard to the specific details of that plan and to the results that it generates. In what follows, I shall therefore examine how that plan operates, look at the results produced by applying that plan to Dr Odar and ask whether those results are precluded by the Directive. The Court is fully competent to reach a conclusion and to answer this question, although there may be certain additional issues of fact that need to be addressed or confirmed by the national court.
29. Second, is Baxter’s social plan permitted by Paragraph 10(6) of the AGG? This is, quintessentially, a question of national law that falls to be answered by the national court. (22)
30. Third, if a social plan of the kind put in place by Baxter is permitted under national law, do the relevant provisions of EU law preclude such national legislation? Here, the final answer necessarily combines components of the answers to the two earlier steps of the analysis. If EU law, correctly interpreted, precludes a social plan that produces certain specific results and if national law treats such a plan as lawful, it follows that a correct interpretation of the Directive precludes national implementing legislation of that kind, because it allows an inappropriate degree of flexibility to the social partners in crafting individual social plans and therefore permits social plans to be agreed that, whilst permitted under national legislation, nevertheless generate results that are precluded by the Directive.
Questions 3 and 4
31. Questions 3 and 4 seek to ascertain whether the Directive’s prohibition against discrimination on grounds of age and/or disability preclude a rule in a social plan which provides that benefits paid to workers aged 54 and over are to be determined on the basis of the earliest possible entitlement to a pension (the special formula calculation).
32. The Directive seeks to provide a general framework for combating discrimination in ‘employment and occupation’ on grounds including age and disability. It follows from Article 3(1)(c) that it applies ‘to all persons, as regards both the public and private sectors … in relation … to employment and working conditions, including dismissals and pay’. I agree with the national court that the social plan falls within the Directive’s scope since it affects workers’ employment conditions, in particular with regard to dismissal and pay.
33. Under Article 2(1) of the Directive, the ‘principle of equal treatment’ means that there is to be no direct or indirect discrimination whatsoever on any of the grounds referred to in Article 1. Article 2(2)(a) states that, for the purposes of paragraph 1, direct discrimination occurs where one person is treated less favourably than another person is, has been or would be treated in a comparable situation. Indirect discrimination is defined in Article 2(2)(b) as covering situations ‘… where an apparently neutral provision, criterion or practice would put persons having … a particular disability, (23) a particular age, … at a particular disadvantage compared with other persons …’.
34. The Directive draws a distinction between direct discrimination and indirect discrimination. Indirect discrimination is taken not to occur if the treatment in question falls within the scope of Article 2(2)(b)(i). Direct discrimination on grounds of age is lawful if it comes within Article 6(1) of the Directive. There is no equivalent provision that serves to justify direct discrimination on grounds of disability. (24)
35. Dr Odar contends that the social plan is directly discriminatory with regard to age and gives rise to indirect discrimination on grounds of disability.
36. As I understand it the social plan is applied to Dr Odar in the following way.
37. Dr Odar’s actual compensation was determined under the social plan by three factors: the standard formula calculation, the special formula calculation and the correction factor. (25)
Discrimination on grounds of age
38. The standard formula calculation leads to direct discrimination on grounds of age. An increasingly higher, but unevenly increasing age factor is attributed to older workers up to (and including) age 57, who in that respect receive more favourable treatment than younger workers. However, that aspect is not at issue in the main proceedings. It is the subsequent diminishing of the age factor that gives rise to the difference in treatment under the social plan as applied to Dr Odar. (26) Where length of service and pay are equal, the compensation payable varies directly and solely according to the worker’s age, because both those elements are multiplied by the age factor. (27)
39. In Dr Odar’s case, his redundancy payment was calculated at age 58 for which the age factor is 1.7. In so far as he was subject to a lower age factor than if he had been 57, Dr Odar was treated less favourably than another worker one year younger (who had the same length of service and salary) would have been treated (all other things being equal).
40. The difference between the age factors of 1.75 and 1.7 is small. The financial disadvantage arising from such a difference is less than it would have been if (for example) Dr Odar had been 59 at the date of redundancy. Nonetheless, there is a difference in treatment based upon age under paragraph 6(1.1) and (1.2) of the social plan.
41. The special formula calculation (the subject of questions 3 and 4) was then applied to Dr Odar’s compensation. The effect was to limit the compensation to 85% of the gross salary which would have been payable to him between the date of redundancy and the earliest possible retirement pension date (assuming that the monthly salary would not have changed during that period).
42. The national court notes that the cap applies only from age 54 and asks whether that may constitute discrimination on grounds of age. Baxter has advanced two explanations. In its written observations, Baxter says the reason that that calculation applies from age 54 is merely that it is mathematically impossible for it to have an eff ect on the amount produced by the standard formula calculation at any earlier age. At the hearing, Baxter explained that the earliest pensionable age was lower (than when Dr Odar was made redundant) at the time that the contingency social plan was concluded. Either explanation may be correct. That will be a matter for the national court to assess. As a matter of mathematics, unless it is possible to start work with Baxter before 18 or to get a retirement pension earlier than 60, Baxter’s first explanation seems correct. If either of those parameters is incorrect (these matters are for the national court to verify), the special formula calculation might affect the amount produced by the standard formula calculation at an earlier point. If so, there would again be direct discrimination on grounds of age.
43. On the (most plausible) assumption that Baxter’s explanation is correct, the specific mention of age 54 in the social plan is irrelevant. The special formula calculation could be applied at any age but it will only generate an effect from age 54. In that event, the mention of ‘age 54’ in the social plan does not introduce any actual differentiation on grounds of age – it is merely, as such, ill-chosen drafting which gives the impression that there is differentiation. Therefore, the special formula calculation, of itself, does not lead to direct discrimination on grounds of age.
Discrimination on grounds of disability
44. Now let us look at the effect of applying the special formula calculation to Dr Odar’s redundancy payment (i) on the basis of pensionable age 65 and (ii) on the basis of pensionable age 60. For the former, the special formula calculation does not affect the amount of the redundancy payment. For the latter, the effect of applying the special formula calculation is drastic, initially reducing the compensation payable by more than two thirds, although the final reduction is limited to one half by applying the correction factor. That is the direct result of applying the pensionable age 60, instead of 65. The fact that the calculation made here was based on the lower pensionable age (60) is the direct result of Dr Odar’s disability.
45. The German Government contends that there is no discrimination under the social plan in relation to disabled workers, since they are eligible for a pension at 60 and are therefore not comparable to non-disabled workers who are entitled to a pension at 65. The difference in minimum pensionable age between those two groups is an objective distinction. The German Government then relies upon Bird’s Eye Walls (28) and Hlozek (29) to conclude that objectively different situations should not be treated the same.
46. I disagree with the German Government’s reasoning.
47. It seems to me that both groups comprise workers who might wish to continue in employment to standard retirement age (65), but who are facing redundancy. In my view, the two categories are therefore comparable.
48. Furthermore, the position in the present matter differs from Bird’s Eye Walls and Hlozek, in so far as the ‘bridging allowance’ at issue in those two cases was paid only to workers close to statutory retirement age. The bridging allowance in Hlozek was paid to workers made redundant following a restructuring of the undertaking that employed them. The allowance was paid to women at age 50 and to men at age 55. Payment of the bridging allowance was linked to retirement age, inasmuch as women were entitled to a retirement pension at 55 whereas men had to wait until 60. The Court held that fixing different ages for granting the bridging allowance provided a neutral mechanism that confirmed the absence of discrimination. Accordingly, men and women were not in identical situations and their respective positions were therefore not considered to be comparable. (30)
49. In the present matter, compensation is awarded in principle to all workers. Proximity to retirement is relevant solely to the application of the special formula calculation. It follows that the correct comparison here is between two workers who are made redundant. Unlike the situation in Bird’s Eye Walls and Hlozek, (31) it is not a comparison based on age that triggers eligibility for the award of a benefit upon redundancy.
50. Here, disabled workers are treated less favourably than non-disabled workers because they are eligible for a pension at 60 rather than 65. For any given age, the first component in the special formula calculation (months to earliest pensionable age) will always be lower for a disabled worker than for a non-disabled worker of the same age.
51. Accordingly, the ostensibly neutral special formula calculation leads to indirect discrimination in respect of disabled workers. The effect of the indirect discrimination on grounds of disability is that (i) a disabled worker made redundant at age 58 receives considerably less than an employee of the same age, with the same salary and with the same length of service, who is not disabled; (ii) the disabled worker may be less likely than his able-bodied counterpart to find new employment and be in greater financial need for the rest of his life if he is obliged to accept a reduced level of pension (32) and (iii) it will be significantly cheaper to make disabled employees redundant than those without a disability, so that disabled workers are potentially more likely to be made redundant. (33)
52. I therefore consider that the social plan leads to indirect discrimination on grounds of disability in so far as an apparently neutral provision (months until earliest possible beginning of pension) in paragraph 6(1.5) of the social plan results in a disadvantage (lower awards of compensation) to disabled workers who are eligible to retire at 60 in comparison with non-disabled employees who are not eligible for a pension until the standard age (65).
53. The referring court explains that it is possible to take early retirement on other grounds, for example at 63. (34) That is not a matter which is at issue in the main proceedings and it requires consideration of issues of national law. It is therefore unnecessary for the Court to take it into account.
Justification for the purposes of the Directive
54. Under Article 2(2)(b)(i) of the Directive, indirect discrimination may be taken not to occur if the treatment in question is objectively justified by a legitimate aim and the means of achieving that aim are appropriate and necessary.
55. Additionally, direct discrimination on grounds of age (but not on other grounds, such as disability) is permissible if it is covered by Article 6(1) of the Directive. That provision affords the Member States a wide margin of discretion in establishing their employment policy and allows them to set particular conditions regarding dismissal where these implement legitimate aims that justify otherwise discriminatory treatment on grounds of age. (35) Recital 25 in the preamble to the Directive nevertheless makes clear that it is ‘essential to distinguish between differences in treatment which are justified, in particular by legitimate employment policy, labour market and vocational training objectives, and discrimination which must be prohibited’.
56. The scope of Article 2(2)(b)(i) and Article 6(1) is not identical. (36) Nevertheless, the Court has stated that although there is a difference in the wording of the two provisions (Article 2(2)(b)(i) states that a ‘… provision … is objectively justified by a legitimate aim …’ whereas Article 6(1) provides that differences in treatment on grounds of age do not constitute discrimination if they ‘… are objectively and reasonably justified by a legitimate aim …’), it is inconceivable that a difference in treatment could be justified by a legitimate aim achieved by appropriate and necessary means, but that the justification would not be reasonable. (37)
– Legitimate aim
57. The right to work and the prohibition against discrimination on grounds of age and/or disability are enshrined as fundamental rights under the Charter. (38) Since justification under Articles 2(2)(b)(i) and 6(1) of the Directive is a derogation from the general principle of non-discrimination, both provisions must be construed strictly. (39) Furthermore, notwithstanding their broad discretion in matters of social policy, Member States bear the burden of establishing to a high standard of proof the legitimacy of any aim (or aims) pursued. (40)
58. Where the national measure in issue does not specify the aim pursued, other elements taken from its general context can be used to identify the underlying objective for the purposes of review by the courts of whether the national rule concerned is legitimate and whether it is proportionate. (41)
59. The national court indicates that the aim of the social plan is to enable the social partners to distribute limited funds amongst workers who have been made redundant. It seeks to ensure that any compensation alleviates the immediate consequences of redundancy by providing a payment to tide workers over to the next secure source of income, and to make more generous provision for younger workers. The latter are considered to be in greater need because, unlike older workers approaching retirement, they have no clearly identifiable future source of income.
60. Given that only limited funds are available to be distributed amongst workers who have been made redundant the objective of making more generous provision for those who are considered to be in greater need is clearly in the general interest rather than being a ‘purely individual reason relating to the employer's situation, such as cost reduction or improving competitiveness’. (42) Therefore, I accept this as a legitimate aim.
61. Given the legitimacy of the aim, is the social plan appropriate and necessary? Put a different way, is the social plan a suitable means of achieving the aims pursued (bridging the period between redundancy and the worker’s next income, making more generous provision for younger workers who (unlike older employees approaching retirement) do not have a clearly identifiable secure future source of income)? And could those objectives be achieved by less discriminatory means?
– Is the social plan a suitable means of achieving those aims?
62. The three factors applied to determine compensation under the standard formula calculation in the social plan (age factor, length of service, gross monthly pay) favour older workers up to age 57. (43) Between age 36 (age factor = 1.00) and age 57 (age factor = 1.75), (44) the age factor operates to increase the amount of compensation received. In general terms, it is likely that length of service and pay will both increase with the worker’s age, (45) likewise increasing the compensation payable.
63. However, the social partners then took into account the fact that older workers approaching retirement are entitled to a pension. Thus, the special formula calculation introduces a cap equivalent to 85% of what the employee would have earned between redundancy and the first point in time at which he becomes entitled to a retirement pension. Absent such a cap, it indeed seems likely that a greater proportion of the limited funds available would be allocated to older workers who will soon be able to access a secure source of income (namely a retirement pension), to the potential detriment of younger workers. (46)
64. In those circumstances, I accept that it is appropriate for the social partners to cap the benefits paid to older workers approaching retirement when they distribute the limited funds available under the social plan. To that extent, the social plan appears to be a suitable means of achieving its legitimate aims.
65. However, because a disabled worker can retire earlier (albeit on a reduced pension) than an able-bodied worker, the special formula calculation places disabled workers at a particular disadvantage. In its assessment of the social plan, it is for the national court to examine whether capping the benefits paid to disabled workers in this way is likely to have a sufficiently beneficial impact on the overall funds available for redundancy payments to make it appropriate to reduce their entitlement. Given that in general the number of disabled employees in an undertaking is relatively small, (47) it seems unlikely that a measure that (whether deliberately or inadvertently) targets disabled workers in this way will be appropriate.
– Could the aims of the social plan be achieved by less discriminatory means?
66. Is it necessary to target disabled workers in order to enable the social partners to make more generous provision to other workers?
67. In my view it is not. (48)
68. In calculating the benefits paid to workers facing redundancy, the special calculation formula takes only one – key – element into account: proximity to pensionable age. As I have indicated, I consider that to be in principle appropriate. On closer inspection, however, the apparent fairness of the cap (namely, the express link to when an alternative secure income becomes available) is misleading. By focusing on a single key element, the cap fails to give weight to other elements that are relevant to disabled workers. In particular, whilst any worker who takes a pension early will receive a reduced rate pension and may have to adjust expenditure patterns accordingly, the special calculation formula has no regard to the possibility that disabled workers may throughout their lives have increased financial requirements arising from their disability and/or that, with advancing age, those financial requirements may increase. They may not be able to adjust their expenditure patterns without making significant sacrifices that would not arise in the case of a non-disabled colleague.
69. It therefore seems to me that the legitimate aims of the social plan could be achieved by less discriminatory means that pay due regard to the particular circumstances of disabled workers when allocating the limited funds available to be paid as compensation upon redundancy. For that reason, I consider that the arrangements put in place by Baxter’s social plan fail to satisfy the proportionality test.
The criteria for selection for redundancy
70. There is a further issue, related to the criteria for selecting workers for redundancy and the costs of making particular types of workers redundant, that I should explore briefly.
71. During the hearing, both Baxter and the German Government emphasised that employers may have regard only to the four criteria for selection for redundancy contained in Paragraph 1(2) and (3) of the KSchG when identifying workers for redundancy. (49)
72. Even where those criteria are applied fairly and objectively, the fact that it is cheaper to make an older worker or a disabled worker redundant may nevertheless, in my view, have a bearing on the outcome as to who is selected for redundancy.
73. To see why that is so, let us look at an example.
74. An enterprise applying the same social plan as Baxter needs to make 30 workers redundant. Applying Paragraph 1(2) and (3) of the KSchG, it ‘scores’ members of its existing workforce by reference to each of the four selection criteria there contained. (50) Workers with a score of 80 or more are safe from redundancy. Looking at the scores, the enterprise selects 29 workers for redundancy without any great difficulty – all have scores well below the threshold. A 30th worker needs to be selected, and there are three candidates (A, B and C). A and B are both married, with 2 dependents. C is single and is sufficiently handicapped to qualify for early retirement as a disabled worker. All three have a score of 79:
75. In C’s absence, the employer would be choosing between A and B. It would be cheaper for him to select A. Once C enters the equation, however, the employer’s choice logically switches to C and he is selected for redundancy. As I understand it, there would have been no breach of the requirements of the KSchG. It is just that, when a tie-breaker has to be found to select between candidates for redundancy with identical scores, the logical choice operates to the disadvantage of the older worker and/or the disabled worker.
76. I therefore consider that the Directive precludes national measures (51) like those contained in paragraph 6(1.1) to 6(1.5) of the social plan. Such provisions lead to indirect discrimination on grounds of disability, since an apparently neutral provision of the social plan results in a disadvantage. Disabled workers, because they are eligible to retire at 60, receive lower awards of compensation than non-disabled employees who are eligible to retire at the standard age of 65.
Questions 1 and 2
77. In questions 1 and 2 the national court asks in essence whether Paragraph 10(6) of the AGG is compatible with the Directive in so far as it permits the social partners to conclude social plans (like that in the present proceedings) that provide for different treatment on grounds of age and/or disability.
78. The referring court explains that Paragraph 10(6) of the AGG allows direct discrimination on grounds of age. However, the national court has not made an express finding as to whether (i) Baxter’s social plan falls within the scope of Paragraph 10(6) of the AGG or (ii) (viewed from the perspective of national law) it complies with the requirements of that provision.
79. According to settled case-law, it is for the referring court alone to interpret provisions of national law and to determine their compatibility with EU law. The Court does however have jurisdiction to provide the national court with the necessary guidance as to the interpretation of the Directive to enable that court to rule on the compatibility of national rules with EU law.
80. Accordingly, I have proposed that the Court should interpret the Directive to the effect that it precludes Baxter’s social plan in so far as that plan discriminates against a disabled worker such as Dr Odar. (52) In the event that the national court considers that Baxter’s social plan is authorised by Paragraph 10(6) of the AGG, it is then for the national court to assess whether that provision of national law can be construed consistently with the Directive so as to prohibit such social plans. If not, it should be disapplied. (53)
81. I would therefore answer Questions 1 and 2 to the effect that it is for the referring court, to the full extent of its discretion under national law, to interpret and apply any relevant national enabling provision (here, Paragraph 10(6) of the AGG) in conformity with Directive 2000/78. If the national court considers that it is impossible to do so, it must disapply that provision.
82. Accordingly, I am of the opinion that the Court should answer the questions raised by the Arbeitsgericht München as follows:
(1) Articles 1, 2(2)(b)(i) and 6(1) of Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation should be interpreted as precluding national measures such as those contained in paragraph 6(1.1) to 6(1.5) of the social plan concluded by Baxter and the works council which lead to indirect discrimination on grounds of disability in so far as an apparently neutral provision results in a disadvantage (lower awards of compensation) to disabled workers who are eligible to retire at 60 in comparison with non-disabled employees who are not eligible for a pension until the standard age of 65.
(2) It is for the referring court, to the full extent of its discretion under national law, to interpret and apply any relevant national enabling provision in conformity with Directive 2000/78. If the national court considers that it is impossible to do so, it must disapply that provision.
(2) – The national measures at issue are Paragraph 10(6) of the Allgemeines Gleichbehandlungsgesetz (General Law on equal treatment: see points 12 and 13 below) and a social plan agreed between the defendant to the main proceedings and the relevant works council: see points 17 and 18 below. That particular plan is structured in a way that reduces the benefits that would otherwise be payable to certain workers, but does not exclude them altogether from receiving compensation.
(3) – Of 27 November 2000 establishing a general framework for equal treatment in employment and occupation (OJ 2000 L 303, p. 16) (‘the Directive’).
(4) – OJ 2010 C 83, p. 389 (‘the Charter’).
(5) – Article 5 requires Member States to ensure that employers take appropriate measures to guarantee compliance with the principle of equal treatment in relation to disabled workers. Thus, employers are required to enable disabled workers to have access to participate in, or advance in employment or to undergo training. Article 2(2)(b)(ii) states that indirect discrimination does not occur when employers comply with national obligations implementing the principles contained in Article 5.
(6) – An exception to the general prohibition against discrimination is permissible under Article 2(5) of the Directive, where Member States introduce measures necessary, inter alia, for public security, the maintenance of public order or for the protection of health. A specific exception to the prohibition against discrimination on grounds of age and disability is provided in Article 3(4) in respect of employment in the armed forces. Under Article 4(1) of the Directive a difference in treatment which is based on, inter alia, age or disability does not constitute discrimination where, by reason of the nature of the particular occupational activities concerned or of the context in which they are carried out, such a characteristic constitutes a genuine and determining occupational requirement, provided that the objective is legitimate and the requirement is proportionate. See, for example, Case C‑229/08 Wolf  ECR I‑1.
(7) – The obligation to consult the works council applies where certain conditions are met: these include conditions relating to the number of workers in the undertaking. The term ‘restructuring’ encompasses (notably) a total cessation of operations, a merger or demerger or a fundamental change in organisation, such as a relocation of the enterprise in question.
(8) – When reaching a decision on the social plan, account must be taken of the interests of workers who face redundancy and their prospects of obtaining new employment, and of those who remain in the restructured enterprise, as well as the continuing financial viability of the undertaking.
(9) – Paragraph 8 provides an exception to the prohibition against discrimination on the grounds of the occupational requirements of the position in question. In that regard see Article 4(1) of the Directive, referred to in point 7 and footnote 6 above.
(10) – From 2012 the statutory retirement age is to be increased incrementally from 65 to 67 for persons born after 31 December 1946.
(11) – From 2012 the age for eligibility to early retirement on grounds of disability is to be increased incrementally from 60 to 62 for those born after 31 December 1951.
(12) – A lower allowance ( Arbeitslosengeld II ) is payable when (inter alia) the period for receipt of full benefit has come to an end.
(13) – Thus, a worker aged 50 who has made contributions for at least 30 months receives benefits for a maximum period of 15 months. If he is 55 and has made contributions for at least 36 months he can receive benefits for a maximum period of 18 months, whilst a worker of 58 who has made contributions for 48 months receives benefits for 24 months.
(14) – In this Opinion I shall also refer to Baxter and the works council as ‘the social partners’.
(15) – Length of service refers to the number of years of employment with Baxter.
(16) – I refer to the contingency social plan and the supplementary social plan together as ‘the social plan’ in this Opinion.
(17) – Under national legislation a degree of disability of 50% is required in order to be classified as severely disabled and thus eligible for early retirement at age 60; see point 14 above.
(18) – Dr Odar was eligible to take early retirement at the earliest at 60 on grounds of disability, with a pension reduced by 10.8%. He is entitled to a full pension from age 63.
(19) – Compensation was calculated from 31 December 2008, the effective date of Dr Odar’s dismissal by Baxter (‘the material time’) set out in the letter of 25 April 2008; see point 20 above.
(20) – All figures are taken from the national court’s order for reference. There are slight differences between the national court’s figures and those set out in the parties’ observations. My own calculations yield slightly different figures: for example, a total of EUR 616 714.20 applying the standard formula. All figures should therefore be treated as approximate.
(21) – I understand the occupational social security scheme in questions 3 and 4 to be references to the social plan mentioned in point 17 above.
(22) – See Case C‑321/07 Schwarz  ECR I‑1113, paragraph 48 and the case-law cited there.
(23) – In the present matter I have interpreted this phrase as ‘having a disability’, since it would otherwise be rendered meaningless. What matters is not the particular disability from which Dr Odar suffers, but the fact that he is recognised as being disabled.
(24) – Certain forms of positive action in respect of persons with a disability, although constituting direct differentiation on that ground, are covered by Article 7(2) of the Directive.
(25) – See point 22 above.
(26) – The age factor rises unevenly from 0.35 at age 18 to the highest possible factor (1.75) at age 57. From that point it declines steeply to the lowest (0.3) at age 64.
(27) – The relevant figures and the manner that the various data are entered into the equations will determine what happens in each particular case. In the standard formula calculation under the social plan (compensation = age factor x length of service x gross monthly salary), the age factor determines the number of months, (or fractions of a month’s) salary taken into account in calculating the compensation. Thus, for a worker aged 36, a month’s salary is treated at face value, (age factor 1). At age 57 it is multiplied by 1.75 and at 64 it is multiplied by 0.3. Therefore at 36 a worker's length of service is multiplied by 0.75 (or ¾) of a month’s salary less than for an employee aged 57. At age 64 it is multiplied by 1.45 (almost 1½) months’ salary less than for a worker aged 57. Therefore, those workers who have a higher age factor and more years of service obtain greater benefits under the social plan.
(28) – Case C‑132/92  ECR I‑5579.
(29) – Case C‑19/02  ECR I‑11491.
(30) – Bird’s Eye Walls , cited in footnote 28 above, concerned a similar situation. The ‘bridging pension’ in that case was paid to a worker obliged to retire due to ill health before attaining standard pensionable age, which was 60 for women and 65 for men. See also Hlozek , cited in footnote 29 above, paragraph 49.
(31) – Cited in footnotes 28 and 29 above.
(32) – Subject to the national rules concerning pensions for disabled workers who initially receive a reduced pension which may subsequently change to a pension at the full rate after three years where the necessary conditions under national law are fulfilled.
(33) – See points 70 to 75 below.
(34) – See point 14 above.
(35) – See recital 25, cited in point 3 above. See also Case C‑388/07 Age Concern England  ECR I‑1569, paragraph 51.
(36) – Age Concern England , cited in footnote 35 above, paragraph 58.
(37) – Age Concern England, cited in footnote 35 above, paragraph 65.
(38) – See Article 21.
(39) – In relation to the interpretation of exceptions in general, see Case C‑227/09 Accardo  ECR I‑0000, paragraph 58, and the case-law cited. Regarding the interpretation of the exception laid down in Article 2(5) of the Directive, see Case C‑341/08 Petersen  ECR I‑47, paragraph 60 and more recently, Case C‑447/09 Prigge  ECR I‑0000, paragraph 56.
(40) – Age Concern England, cited in footnote 35 above, paragraph 65.
(41) – Joined Cases C‑250/09 and C‑268/09 Georgiev  ECR I‑0000, paragraph 40.
(42) – Age Concern England, cited in footnote 35 above, paragraph 46.
(43) – See point 17 above.
(44) – See footnotes 26 and 27 above.
(45) – See point 38 above.
(46) – At the hearing, the German Government emphasised that a worker who takes early retirement retains the right to seek further employment. If he were to find a new job, his pension would be suspended. He might then continue to work until the standard retirement age. At that point his pension would be re-activated and adjusted to reflect his particular circumstances. In so far as such an argument is based upon the assumption that the older worker will find further employment, it was unsupported by any evidence before this court and runs counter to known difficulties encountered by older workers in finding re-employment. Whilst it will be for the national court to verify the position, I am inclined to consider that the argument is flawed. However, it is clearly true that access to a pension (even at a reduced rate) gives a security of income that a younger worker made redundant does not enjoy.
(47) – See ‘Facts on disability in the world of work’ published by the International Labour Office, available at http:www.ilo.org/employment/disability.
(48) – See points 44 to 52 above.
(49) – See point 16 above.
(50) – In Case C‑86/10 Balaban , the Court was asked whether national legislation that allowed the selection of workers for collective dismissal on grounds of age was justified under Article 6(1) of the Directive. The Court was told that a scoring system of the kind that I have used in this example was a common method of applying the four criteria. That case was withdrawn by the national court (the Arbeitsgericht Siegburg (Germany)) after the hearing but before judgment was delivered (OJ 2011 C 252, p. 27).
(51) – See footnote 2 and points 26 to 30 above as to the relationship between the Directive, the AGG and Baxter’s social plan.
(52) – See point 76 above.
(53) – See Case C‑106/89 Marleasing  ECR I‑4135, paragraph 8, and more recently Case C‑109/09 Deutsche Lufthansa  ECR I‑0000, paragraph 51. See also Article 16 of the Directive, cited in point 9 above.