OPINION OF ADVOCATE GENERAL
MISCHO
delivered on 24 September 2002 (1)
Case C-125/01
Peter Pflücke
v
Bundesanstalt für Arbeit
(Reference for a preliminary ruling from the Sozialgericht Leipzig (Germany))
((Council Directive 80/987/EEC – Article 9 – Guarantees in respect of claims for unpaid wages – National provision imposing a time-limit of two months for bringing claims for payment and the possibility of extending this time-limit))
1. Council Directive 80/987/EEC of 20 October 1980 on the approximation of the laws of Member States relating to the protection of employees in the event of the insolvency of their employer (2) (hereinafter the Directive) was adopted pursuant to Article 100 of the EC Treaty (now Article 94 EC). According to the Court's settled case-law (see, for example, Case C-125/97 Regeling [1998] ECR I-4493, paragraph 3), the object of the Directive is to guarantee employees a minimum level of protection in the event of their employer's insolvency.
2. The degree of harmonisation required by the Directive varies according to the circumstances. In some cases, for example the definition of a state of insolvency and the categories of employees which a Member State may, by way of exception, exclude from its scope, the Directive is very clear. In others, it is much less so. For example, it does not seek to affect national law as regards the definition of certain terms such as employee, employer and pay, and it allows Member States to exclude social security contributions due under both national and supplementary schemes from the scope of the guarantee.
3. Its object, namely the obligation of guarantee institutions whose creation it requires to stand in the place of a defaulting employer in order to provide employees with an assured source of payment of their salaries, while at the same time giving Member States the option to limit the payment obligation of the guarantee institutions, is reflected in Article 4. This provides for a minimum amount to be paid by guarantee institutions, subject to the possibility of allowing a ceiling to the liability for employees' outstanding claims to be imposed, in order to avoid sums being paid out which exceed the social objectives of the Directive. This minimum is set by reference to the length of the period for which the salary unpaid by the employer requires to be reimbursed by guarantee institutions.
4. The restricted aims of the Community legislature are further reflected in Article 9 of the Directive, which states that [t]his Directive shall not affect the option of Member States to apply or introduce laws, regulations or administrative provisions which are more favourable to employees.
5. As regards the question of how guarantee institutions are to comply with the requirements imposed on them, the Directive is laconic. Article 5 merely provides that: Member States shall lay down detailed rules for the organisation, financing and operation of the guarantee institutions, complying with the following principles in particular:
(a) the assets of the institutions shall be independent of the employer's operating capital and be inaccessible to proceedings for insolvency;
(b) employers shall contribute to financing, unless it is fully covered by the public authorities;
(c) the institutions' liabilities shall not depend on whether or not obligations to contribute to financing have been fulfilled.
6. There is however nothing out of the ordinary in this approach, bearing in mind that the first paragraph of Article 189 of the EC Treaty (now the third paragraph of Article 249 EC) states that [a] directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods.
7. In the present case, this is precisely what the Community legislature has done, as the Directive states the result to be achieved, namely the intervention, in substitution for the insolvent employer, of a guarantee institution providing workers with a stipulated minimum level of protection relative to their entitlement to be paid, while leaving Member States free, provided that they respect the principles laid down in Article 5 of the Directive, to decide upon the way in which guarantee institutions are to be organised, financed and managed.
8. If the extent of the discretion given to Member States accordingly appears very wide, it none the less remains the case that it cannot exceed the limits imposed by the overriding obligation to achieve the specified aim, namely that employees covered by the scope of the Directive should be granted effective rights to a minimum level of payments.
9. Any method of organising or managing a guarantee institution which prevents this aim being achieved is, bearing in mind that Member States are given no discretion in this regard, unacceptable in principle.
10. That point made, it none the less remains the case that a paying institution, which is by its nature under a duty owed to all who are required to provide it with funds to manage them properly, could not achieve its objectives without laying down detailed and binding rules requiring to be observed by employees who intend to rely on their right to payment, and which if not observed will lead to a claim being declared void.
11. A guarantee institution cannot avoid laying down accounting rules and procedures for submitting requests for payment, as well as procedures for establishing their validity and the payment of funds to beneficiaries once their identity has been established and their rights determined.
12. It goes without saying that while it is essential that Member States be permitted to regulate these activities, this freedom does not allow them to impose rules that conflict directly with the requirements of the Directive in relation to the creation of a right to a guaranteed payment, the persons entitled to benefit from it and the amounts to be guaranteed.
13. The real difficulty in ensuring that the requirements of the Directive are not breached by procedural rules governing the operation of guarantee institutions arises in the case of rules that do not in any way directly contravene a rule laid down in the Directive, but non-compliance with which will lead to a guaranteed benefit being refused, and which accordingly have the result of removing from the scope of the guaranteed minimum level of protection a worker who is, in terms of the Directive, entitled to claim under it.
14. It then becomes necessary to determine whether the rule in question, which may appear justified having regard to the need for the efficient operation of the guarantee institution and may come within the scope of the autonomy given by the Community legislature to Member States to regulate these operations, should be held to be lawful having regard to the requirements of the Directive or, on the contrary, whether it should be found to be in breach of the Directive, and accordingly disregarded by the national court, on the grounds that it deprives an employee having an entitlement under the Directive from benefiting from the minimum level of protection without any acceptable justification.
15. This was the issue facing the Sozialgericht Leipzig (Germany), in the dispute brought before it by Mr Pflücke against the Bundesansalt für Arbeit (Federal Labour Office, hereinafter Bundesanstalt), which is responsible in Germany for operating the guarantee system provided for by the Directive.
The main proceedings and the questions referred for a preliminary ruling
16. Mr Pflücke was employed until 30 June 1997, when he resigned, by an undertaking which ceased trading on 31 December 1997, and in relation to which bankruptcy proceedings commenced on 2 January 1998.
17. Mr Pflücke claims that he is entitled to demand outstanding pay from his former employer in respect of the month of June 1997, amounting to the gross sum of DEM 3 502.80. He filed his claim with the receiver in bankruptcy on 2 February 1998.
18. The latter initially contested the claim, but subsequently, after Mr Pflücke had raised proceedings before the Arbeitsgericht München (Germany), and obtained judgment by default against him, admitted it, initially in part in a certificate sent to the plaintiff on 10 March 1999, but thereafter in full by letter of 11 May 1999.
19. Mr Pflücke forwarded the certificate to the Bundesanstalt on 9 April 1999, and on 9 (or 17 ─ the order for reference is somewhat unclear on the point) June 1999 he expressly applied for payment of wages unpaid on his employer's insolvency pursuant to Paragraph 141(b) of the Arbeitsförderungsgesetz (German Law on the promotion of employment) which states that:(1) An employee is entitled to an award of wages unpaid on account of his employer's insolvency where, as at the commencement of the bankruptcy proceedings relating to the assets of his employer, he still has claims for such unpaid wages in respect of the three months immediately preceding the commencement of those proceedings.
20. This application was rejected by decision of 14 July 1999.
21. In support of this decision, the Bundesanstalt held that the application submitted to it was out of time. It based its decision in this regard on Paragraph 141(e) of the Arbeitsförderungsgesetz which states at subparagraph 1 that:The compensation payment is to be awarded, upon application, by the competent employment office. The application must be made within two months from the commencement of insolvency proceedings. Where the employee has failed to comply with the time-limit for reasons for which he is not responsible, a compensation payment on account of insolvency shall nevertheless be made, provided his application is made within two months of the impediment ceasing. The employee is responsible for a failure to comply with the time-limit where he has failed to show the degree of diligence appropriate to the assertion of his rights.
22. The Bundesanstalt took the view that this provision had the effect of extending the time-limit from 3 January to 2 March 1998. Mr Pflücke's application was accordingly considerably out of time and an extension of the time-limit could not be granted since the filing of the wage claims in the bankruptcy court in February 1998 showed that he was at that time fully aware of the insolvency of his former employer.
23. The Sozialgericht, which is required to decide on Mr Pflücke's application challenging the rejection of the objection made by him to the refusal of his application, asks whether the provisions of Paragraph 141(e) of the Arbeitsförderungsgesetz have the effect of depriving Mr Pflücke of the minimum level of protection laid down by the Directive, in light of the fact that the Directive does not give Member States the option of imposing a time-limit. If the answer to that question is in the affirmative, it also asks whether it is obliged to refrain from applying the provisions of its national law to this extent.
24. By order lodged with the Court Registry on 19 March 2001, numbered C-125/01, that court accordingly sought a preliminary ruling on the following questions:
1. Is a time-limit for lodging applications for payment by the guarantee institution of outstanding wage claims compatible with Article 9 of Council Directive 80/987/EEC of 20 October 1980 on the approximation of the laws of Member States relating to the protection of employees in the event of insolvency of their employer?
2. Does the Court of Justice share the Chamber's view that such a time-limit for lodging applications does not constitute a legal provision which is more favourable to employees within the meaning of Article 9 of Directive 80/987/EEC?
3. Is the Chamber obliged, pursuant to the case-law of the Court of Justice, to refrain from applying the provision concerning the time-limit for lodging applications?
25. Written observations were lodged by the German, Danish and Finnish Governments and by the Commission.
26. Before addressing these questions, it is appropriate to record that, as the Commission points out, Article 9 of the Directive, which is referred to in the first two questions, is not relevant. Clearly, a time-limit which may prevent an employee from claiming against a guarantee institution cannot be a provision which is more favourable to employees than the Directive requires. The reasoning underlying its order shows that the real question put by the national court is whether the German legislature was entitled to impose a time-limit when the Directive is completely silent on this point, without depriving an employee who falls within the scope of the Directive of the minimum level of protection which it aims to provide him with.
27. That is why I would adopt without hesitation the Commission's proposal that the two first questions should be grouped together and reformulated.
28. As far as that reformulation is concerned, in my opinion the wording which best addresses the questions put by the national court is as follows: should the Directive be interpreted as meaning that it prohibits the laying down of a period of time, such as that specified in subparagraph 1 of Paragraph 141(e) of the Arbeitsförderungsgesetz, during which rights arising under the Directive must be exercised?
The first two questions
29. In order to answer these questions, one must first reject the argument that the simple fact that the Directive does not at any point refer to a time-limit leads one of necessity to conclude that it is unlawful to impose such a time-limit. I am in agreement on this point with the Commission, whose observations I shall adopt in large measure, as they are in my opinion carefully argued and complete, in the sense that they do not fail to address any aspect of the issues raised by the Sozialgericht.
30. As mentioned above, in the case of a directive Member States retain by definition a choice as to the methods to be adopted to achieve the required result. It is clear that the notion of methods includes the adoption of procedures requiring to be followed to obtain payment from a guarantee institution of outstanding wages.
31. Furthermore, such arrangements are necessary, as without a set of procedures it is not possible to see how the guarantee conferred by the Directive could be implemented.
32. Article 5 of the Directive (see paragraph 5 above) may be said to represent, should this be necessary, a sufficient legal basis for the enactment by Member States of procedural rules applying to employees seeking to claim the benefit of the guarantee.
33. It is also wrong to consider, as the national court appears to do, that the imposition of a time-limit, which will inevitably lead to certain employees losing the benefit of the guarantee provided by the Directive in the event that they fail to bring claims timeously, is in itself incompatible with the will of the Community legislature, referred to in the Court's case-law, to grant a minimum level of guarantee to workers faced with their employer's insolvency.
34. What the minimum guaranteed level of protection provides an employee with is a guaranteed amount. It should not be seen as being equivalent to an unconditional right to be paid. This is reflected in Article 10 of the Directive, which allows Member States to take measures necessary to avoid abuses.
35. Having made this necessary point of clarification, I shall start by referring, as the Danish Government and the Commission also do, to the judgment of the Court in Case 33/76 Rewe [1976] ECR 1989, at paragraph 5, which states that: ... in the absence of Community rules on this subject, it is for the domestic legal system of each Member State to designate the courts having jurisdiction and to determine the procedural conditions governing actions at law intended to ensure the protection of the rights which citizens have from the direct effect of Community law, it being understood that such conditions cannot be less favourable than those relating to similar actions of a domestic nature....... [t]he position would be different only if the conditions and time-limits made it impossible in practice to exercise the rights which the national courts are obliged to protect.
36. The power which the Rewe judgment recognises and which is often termed procedural autonomy clearly extends to the specification of time-limits which require to be respected by those seeking to claim rights deriving from Community law before the national courts.
37. If support is needed for this view, it may be found in the Court's judgment in Joined Cases C-52/99 and C-53/99 Camarotto and Vignone [2001] ECR I-1395, where it is stated at paragraph 28 that:The Court has always accepted that it is compatible with Community law for reasonable limitation periods for bringing proceedings to be laid down in the interests of legal certainty (Case 33/76 Rewe [1976] ECR 1989, paragraph 5, Case 45/76 Comet [1976] ECR 2043, paragraphs 17 and 18, and Case 61/79 Denkavit Italiana [1980] ECR 1205, paragraph 23).
38. However, stating the principle that time-limits may be imposed does not amount to saying that a particular period, such as the one under consideration by the national court, is lawful in all circumstances.
39. In order to find that such a period is lawful, it is necessary to be satisfied that the requirements of Community law, as reflected in the case-law of the Court, are met.
40. I shall first consider whether the period in question is justified. In this context, it cannot be denied that it is clearly desirable that a guarantee institution should be in a position swiftly to address the problem of unpaid wages which insolvency may give rise to.
41. Moreover, not only is speed in the interests of the employees concerned, but it is also clear that a demand for payment filed months or years after the onset of insolvency will usually mean that a guarantee institution is faced with difficult problems.
42. As the German, Danish and Finnish Governments observe, the insolvency of an undertaking is often accompanied by the eradication of its memory, in the sense that its workforce will be dispersed and its records may be destroyed. This may make it very difficult to provide the necessary evidence of outstanding wage claims, which may in turn give rise to a risk of wrongful claims being filed, which, as mentioned above, Article 10 authorises Member States to prevent.
43. One may conclude from this that the effectiveness of the guarantee system and of legal certainty could be prejudiced by the filing of late claims.
44. Above all, however, as the same governments point out, the imposition of time-limits would appear necessary from the point of view of the financing of guarantee institutions.
45. As the rights of a guarantee institution are subrogated to those of the employees it has paid out, it requires to comply with time-limits imposed under bankruptcy law on creditors seeking to have their claims accepted if it is to exercise its own rights as a creditor.
46. Were an institution to be required to pay arrears of wages in response to claims filed with it at a time when it was no longer able to take steps to make its claim against the assets of the bankrupt party effective by exercising its right of subrogation, this would result in access to one of its sources of finance being withheld.
47. It is important to state the point clearly. It is plain that precisely because it is required to make up for the defaults of insolvent undertakings, a guarantee institution has no certainty of recovering from one party what it has paid out to another. It therefore requires of necessity to have access to other sources of finance, be they contributions from employers and the workforce or public funds.
48. But even if the financing of guarantee institutions through the use of subrogation may not lead to a full recovery of sums outlaid, this does not justify jeopardising this source of funds, with the result that other sources require all the more to make up the shortfall.
49. In my view, there should on the contrary be maximum use of this source of funds, and in this regard the imposition of a time-limit appears almost inevitable, and in any event justified.
50. As far as its length is concerned, in my opinion, it is for the national court to establish whether it is reasonable having regard to the fact mentioned above that a guarantee institution requires itself to observe the time-limits applying to the filing of creditors' claims with the bankruptcy administrator, although the Commission suggests that this would in fact be the case in Germany.
51. The next question is whether the time-limit specified in subparagraph 1 of Paragraph 141(e) of the Arbeitsförderungsgesetz is realistic, in the sense that it does not make the effective use by an employee of the rights conferred on him by the Directive impossible in practical terms.
52. A reading of subparagraph 1 of Paragraph 141(e) of the Arbeitsförderungsgesetz suggests that German law is not unduly strict in this regard.
53. This is because the time-limit does not start to run against an employee who has not filed a claim because he was prevented from doing so, that is to say he did not act for reasons which were not his responsibility.
54. It may be assumed that an employee such as Mr Pflücke who left the undertaking before it ceased trading, and who was accordingly not necessarily aware of its insolvency, would not automatically be held to be out of time if he did not file his claim within two months following the opening of the bankruptcy proceedings.
55. Furthermore, the Commission has stated that the filing of a claim under German law is not subject to any strict formal requirements and may validly be done on a protective basis where an employee does not have to hand all the evidence and documents necessary for his claim to be processed, as was the case with Mr Pflücke, whose claim for wages was subject to judicial proceedings. Once again, however, it is for the national court to reach a conclusion on this matter.
56. If the specification of a time-limit is based on legitimate concerns and does not have the practical effect of making the exercise of a right to payment under the Directive impossible, the Court's case-law then requires that the question of its proportionality be addressed.
57. Does the penalty of invalidity faced by an employee who would have been in a position to file a claim for payment within the time-limit of two months following the establishment of insolvency, but who has failed to do so, exceed the requirements laid down by the doctrine of proportionality?
58. If one weighs the significant interest mentioned above which a guarantee institution has in being alerted as quickly as possible of all claims for payment relating to the insolvency of an employer, in the context of legal certainty, of the effective operation of the system and of the maintenance of its funds, against the disadvantages faced by an employee who has not taken steps to file his claim within a period of two months, I am of the view, as is the Commission, that bearing in mind that the provisions of subparagraph 1 of Paragraph 141(e) of the Arbeitsförderungsgesetz incorporate a measure of flexibility, a time-limit of two months is not disproportionate. It is clear that the beneficiary of a guarantee relating to such an important matter as that of payment for work done may be expected to show at least a minimum degree of haste.
59. As the Commission observes, the case of Mr Pflücke is somewhat unusual in as much as while he did not file his claim with the guarantee institution within the required period, he took the precaution of registering his claim in the bankruptcy proceedings, and cannot therefore be said to have clearly failed to take steps to protect his interests.
60. But as the Commission also points out, the fact that the receiver in bankruptcy was informed of the existence of a claim for wages does not of itself remove the need for the guarantee institution to take steps properly to carry out its task, even if the risk of losing the claim against the assets of the insolvent estate is removed. It is easy to envisage all the problems, not to say chaos, with which an institution would be faced if employees had a choice between filing their claims in the insolvency and with the institution to which they turn for reimbursement of unpaid wages.
61. For these reasons, a requirement that a claim be filed directly with the guarantee institution in the prescribed period does not in my view display an excessive regard for formalities.
62. The final condition to be met in order for the specification of a time-limit to be acceptable under Community law is that the period laid down should not be any stricter than those requiring to be observed in order to enforce rights arising only under national law.
63. I agree with the Commission that the appropriate comparison is with the time-limits applying under the rules relating to comparable schemes for social protection laid down solely by the provisions of national law.
64. According to the Commission, which undertook a study of this comparison, there is no evidence of more disadvantageous treatment under the Directive, either as regards the length of the period or the sanction for failure to comply with the time-limit.
65. Once again, however, and as the Commission freely accepts, it is for the national court to reach a conclusion on this matter.
66. It follows from all the above that the answer to the first and second questions asked by the national court should be that the Directive should be interpreted as meaning that it does not preclude the imposition of a time-limit for the exercise of rights arising under it for the benefit of employees in the case of the insolvency of their employer, such as the time-limit laid down by subparagraph 1 of Paragraph 141(e) of the Arbeitsförderungsgesetz, provided that the requirement to observe such a time-limit does not make the exercise of those rights impossible from a practical point of view or excessively difficult, that the time-limit in question is no less favourable than those applying to similar cases arising under national law and that the time-limit is not disproportionate, and that it is for the national court to reach a conclusion on these matters in accordance with the requirements of national law and having regard to all the circumstances of the case.
The third question
67. The third question asked by the national court does not require a lengthy analysis, as the answer to it is clear.
68. If the national court were to find that the time-limit specified under subparagraph 1 of Paragraph 141(e) of the Arbeitsförderungsgesetz is unacceptable for the purposes of the Directive, it is the settled case-law of the Court reflected in its judgments in Case 106/77 Simmenthal [1978] ECR 629 and Case C-91/92 Faccini Dori [1994] ECR I-3325 that it is the duty of the national court to seek to overcome any inconsistency through its interpretation of the national law, and, if that cannot be achieved, it is its duty simply to refrain from applying the national rule which inhibits the exercise of the right conferred by Community law.
69. This question may therefore be answered by stating that the national court has a duty to disregard a provision of the national law which is incompatible with the provisions of Community law and which cannot be made compatible with it by the use of interpretative techniques.
Conclusion
70. Taking the foregoing provisions as a whole, I consider that the reply to the questions put by the Sozialgericht Leipzig should be as follows:
─ Council Directive 89/187/EEC of 20 October 1980 on the approximation of the laws of the Member States relating to the protection of employees in the event of the insolvency of their employer should be interpreted as meaning that it does not preclude the imposition of a time-limit for the exercise of rights arising under it for the benefit of employees in the case of the insolvency of their employer such as the time-limit laid down by subparagraph 1 of Paragraph 141(e) of the Arbeitsförderungsgesetz ( German Law to promote employment), provided that the requirement to observe such a time-limit does not make the exercise of those rights impossible from a practical point of view or excessively difficult, that the time-limit in question is no less favourable than those applying to similar cases arising under national law and that the time-limit is not disproportionate, and that it is for the national court to reach a conclusion on these matters in accordance with the requirements of national law and having regard to all the circumstances of the case. Council Directive 89/187/EEC of 20 October 1980 on the approximation of the laws of the Member States relating to the protection of employees in the event of the insolvency of their employer should be interpreted as meaning that it does not preclude the imposition of a time-limit for the exercise of rights arising under it for the benefit of employees in the case of the insolvency of their employer such as the time-limit laid down by subparagraph 1 of Paragraph 141(e) of the Arbeitsförderungsgesetz ( German Law to promote employment), provided that the requirement to observe such a time-limit does not make the exercise of those rights impossible from a practical point of view or excessively difficult, that the time-limit in question is no less favourable than those applying to similar cases arising under national law and that the time-limit is not disproportionate, and that it is for the national court to reach a conclusion on these matters in accordance with the requirements of national law and having regard to all the circumstances of the case.
─ The national court has a duty to disregard a provision of the national law which is incompatible with the provisions of Community law and which cannot be made compatible with it by the use of interpretative techniques. The national court has a duty to disregard a provision of the national law which is incompatible with the provisions of Community law and which cannot be made compatible with it by the use of interpretative techniques.
1 – Original language: French.
2 – OJ 1980 L 283, p. 23.
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