A recent judgment of the CJEU extends the liability of the Wage Guarantee Fund to the severance pay for termination of a contract arising from a transfer.

In a judgment of June 28, 2018 (case C-57/2017), the Court of Justice of the European Union (CJEU) has held that the severance pay provided in Article 40 of the Workers’ Statute for the case where the worker who is notified of a transfer of a work center for objective reasons, chooses termination, must be included within the protection of the Wage Guarantee Fund (Fogasa).

In principle, the coverage of Fogasa applies to dismissals for objective reasons, collective and individual, and to the indemnified termination of the employment contract for just causes. This meant that the Fogasa did not pay the severance pay arising from other legal formulas for the termination of the employment relationship for a reason not attributable to the worker, as may be those which arise from the choice by the worker to terminate the contract in the event of a transfer of the work center or of a substantial modification of his conditions.

The Superior Court of Justice of Valencia Autonomous Community asked the CJEU whether the exclusion of the liability of Fogasa for the severance pay owed by law to the worker if he chooses to terminate his employment relationship, as a consequence of notification of geographical mobility, is contrary to European Union Law (to be specific, Article 3 of Directive 2008/94/EC of the European Parliament and the Council).

The CJEU adopts the interpretation that the severance pay arising from the termination of the employment contract by the worker for a reason not attributable to him, in this case due to the transfer of the work center, must be included within the concept of “severance pay on termination of employment relationships” provided in Article 3 of Directive 2008/94/EC, on the protection of employees in the event of the insolvency of their employer.

Therefore, applying the general principle of equality and nondiscrimination, it treats alike the severance pay legally provided in the different cases of termination of the employment relationship for reasons not attributable to the worker, extending in this case the protection of Fogasa for the employer’s insolvency to the severance pay arising from the transfer.

Furthermore, in the light of the judgment of November 11, 2015 (case C-422/2014), in which the que CJEU treated the termination of the employment relationship arising from substantial modification of employment conditions in the same way as dismissal for objective reasons, the question may also be raised whether the protection of Fogasa can be extended not only to the employer’s insolvency in the event of termination due to transfer, but also to the severance pay provided for cases of termination arising from substantial modification. Future judgments will undoubtedly resolve this question.

Esther Segura

Garrigues Labor and Employment Law Department