European Court of Justice – Reducing severance payments to reflect period of parental or maternity leave constitutes indirect sex discrimination

07-10-2019

Authors: Louise O’Byrne, Hannah O’Farrell and Niamh Fennelly.

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In the recent decision in RE v Praxair MRC SAS, the Court of Justice of the European Union (the “CJEU”) has ruled that the calculation of compensation payments for dismissal and redeployment of an employee on a full-time contract, who was on part-time parental leave (as permitted under French law), must be calculated on the basis of the employee’s full-time salary.

Background

In November 1999, RE commenced employment as a sales assistant with the respondent, under a fixed-term and full-time contract. In August 2000, her employment contract became a full-time contract of indefinite duration.

RE took two periods of maternity leave in 2001 and in 2007/2008. On returning to work, RE reduced her working hours by one fifth and took two periods of parental leave; from September 2001 to September 2003 and in August 2008. This last period of parental leave was supposed to end in January 2011. However on 6 December 2010, RE was made redundant as part of a collective redundancy on economic grounds. She accepted redeployment leave allowance for a period of 9 months, and redundancy pay calculated by reference to her then parental leave-driven part-time status.

In September 2011, RE brought proceedings before the Labour Tribunal in Toulouse contesting her dismissal and claiming that the payments in respect of redundancy pay and redeployment leave allowance were unfairly reduced as a result of her taking maternity and parental leave.

Decisions of the French Courts

RE’s claims were dismissed before both the Toulouse Labour Tribunal and the Toulouse Court of Appeal. RE again appealed to the Court of Cassation, claiming that the Court of Appeal had infringed Clause 2.6 of the Framework Agreement annexed to the Parental Leave Directive. According to Clause 2.6, rights acquired, or in the process of being acquired, by the worker on the date on which parental leave starts are to be maintained as they stand until the end of parental leave and, at the end of parental leave, these rights, including any changes arising from national law, collective agreements or practice, are to apply.

The Court of Cassation in France referred two main questions to the CJEU for a preliminary ruling, namely:

  1. Should the compensation for dismissal and redeployment allowance be calculated on the basis of RE’s full time salary, and without consideration for RE’s reduced pay as a result of her maternity and parental leave; and
  2. If the answer to 1 above is yes, would a failure to do so be a form of indirect discrimination under Article 157 of the Treaty of the Functioning of the European Union, on the basis that a greater number of women than men choose to take parental leave?

Decision of the Court of Justice of the European Union

The CJEU held that calculating payments for dismissal and redeployment based on the reduced payment paid to an employee during part-time parental leave would be contrary to the Framework Agreement. The CJEU ruled that awarding reduced compensation to an employee, as a result of taking such leave, would potentially result in a successful claim for indirect sex discrimination, given that parental leave is taken by overwhelmingly more women than men.

Advice to employers

The ruling confirms that EU law requires that benefits such as redundancy pay be calculated on the basis of the individual’s normal salary, ignoring any periods of parental leave in which pay is reduced or suspended. The same might apply if employees are permitted temporarily to reduce their hours (and pay) for reasons of childcare, before returning to their previous working pattern.

In practice, if an employee is dismissed when in receipt of a reduced salary because of a potentially protected change in circumstances (e.g. parental leave), it is important that the employer calculates any compensation due to the employee on the basis of the normal/non-reduced hours/remuneration to avoid a potential claim of indirect discrimination.

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