C-189/91

Mr President, 3. Where it appears that the dismissal is Members of the Court, socially unjustified, ' the worker must be reintegrated into the undertaking. 2 Never- theless, reintegration, which is the rule, may be replaced, if, in the view of both the 1. With this decision requesting a prelimi- employer and the worker, the employment nary ruling, the Arbeitsgericht, Reutlingen, relationship cannot be continued, by pay- puts to the Court, in turn, two questions ment of compensation which may take one stemming from the exclusion of small busi- of two forms. It may be fixed either by the nesses from the ambit of a system of protec- court itself,3 or by agreement between the tion against unfair dismissal. Having applied two parties, who avoid thereby proceedings national law, the national court notes the before a court which may sometimes be long lack of judicial review of the grounds for dis- and costly. In the latter case, and according missal and wishes to know whether the to the national court, the compensation exemption from the system of protection '[ranges] between one-half and one month's from which small businesses benefit can be salary [...] for each year of employment'. 4 described as aid within the meaning of Arti- cle 92(1) of the EEC Treaty and, should the Court not agree with that description, the national court asks that the Court determine whether it might not constitute indirect dis- crimination against women. 4. The two questions before the Court are based on the fact that the second and third sentences of Paragraph 23(1) of the Law on unfair dismissal exempts from judicial review 2. In order to give an account of the dispute, as described above undertakings which I will it is necessary to recall the national legisla- describe as 'small' for the purposes of this tion in force as regards unfair dismissal. account and which are those 'which nor- Those provisions of labour law, consolidated mally employ no more than five employees in the Kündigungsschutzgesetz (hereinafter (...). In determining the number of persons 'the Law on unfair dismissal'), presented in employed (...) account is to be taken only of the report for the hearing to which I refer the Court for the wording of the relevant texts, are characterized by the opportunity given in general to the dismissed worker to 1 — Paragraph 1 of the Law on unfair dismissal defines a dis- missal as socially unjustified where it is not based 'cither on bring an action before the labour tribunal in grounds relating to the person or behaviour of the employee order to test the justification of that dis- or on overriding needs of the undertaking which preclude the further employment of the worker by that undertaking'. missal. 2 — Sec the concept of 'protection of acquired rights' developed by the Commission at paragraph 4 of its written observa- tions. 3 — Paragraphs 9 and 10 of the Law on unfair dismissal. 4 — Page 12 of the order for reference for a preliminary ruling a (English translation) Original language: French.

those employees whose normal period of Council Directive 76/207/EEC of 9 Febru- work exceeds 10 hours per week or 45 hours ary 1976 on the implementation of the prin- per month'. 5 ciple of equal treatment for men and women as regards access to employment, vocational training and promotion, and working condi- 5. Before she was dismissed, the applicant in tions, 7 hereinafter 'the Directive'. the main proceedings, Mrs Kirsammer-Hack, had been working for a year as an assistant at a dental practice which was staffed by two full-time workers, two workers (including 7. Article 92(1) of the Treaty provides that the applicant) who worked in excess of ten '[s] ave as otherwise provided in this Treaty, hours per week or 45 hours per month, and any aid granted by a Member State or finally by four workers who worked fewer through State resources in any form whatso- than 10 hours per week or 45 hours per ever which distorts or threatens to distort month. Thus, by employing fewer than five competition by favouring certain undertak- workers responding to the criteria above, 6 ings or the production of certain goods shall, the undertaking came under the provisions in so far as it affects trade between Member of Paragraph 23(1) of the Law on unfair dis- States, be incompatible with the common missal and the employer was only bound, on market'. dismissal of staff, to give the usual notice, as was the case here. Mrs Kirsammer-Hack claimed nevertheless, despite the lack of applicable national provisions, that her dis- 8. It is customary to emphasise that that missal was socially unjustified. article gives no detailed definition of aid, it merely determines its effects (aid which distorts competition) and its origin (aid 6. Since the application could not succeed at is granted by a State or through State national level, since the applicant did not resources). belong to a class of protected workers and could not avail herself of abuse of rights, the national judge decided to submit the provi- sions of the second and third sentences of 9. Nevertheless, the case-law of the Court Paragraph 23(1) of the Law on unfair dis- has given the concept of aid a more precise missal to a test for compatibility with Com- definition. munity law. It therefore asks the Court to assess the conformity of that Paragraph, in particular the second sentence of Paragraph 23(1), with Article 92(1) of the EEC Treaty 10. In a judgment of 23 February 1961, 8 and, should the concept of aid not appear to which related to the ECSC Treaty but whose the Court sustainable, to further examine the criteria apply equally to the EEC Treaty, question on the basis of Articles 2 and 5 of after having noted the lack of precision given to the concept of aid, the Court continued by widening the boundaries of a definition 5 — Second and third sentences of Paragraph 23(1) of the Law on unfair dismissal. 6 — Contrary to the calculation of the national court at pages 3 and 5 of the reference for a preliminary ruling, the number of workers must be four and not three before being taken 7 — OJ 1976 L 39, p. 40. into account by virtue of Paragraph 23(1) of the Law on 8 — Case 30/59 Steenkolenmijnen v High Authority [1961] unfair dismissal. ECR1.

'The parties concerned cannot (...), on the 15. In the judgment cited above the Court basis of Article 92 alone, challenge the com- gave a very clear answer on that question, patibility of an aid with Community law stating that: before national courts or ask them to decide as to any compatibility which may be the main issue in actions before them or may arise as a subsidiary issue'. '(...) a national court may have cause to inter- pret and apply the concept of aid contained in Article 92 in order to determine whether 13. There is no doubt that the role of the State aid introduced without observance of Commission as regards aid is definitive and the preliminary examination procedure pro- that a finding of incompatibility cannot vided for in Article 93(3) ought to have been result from a procedure other than those subject to this procedure. In any case under

9 — ECR 19 ibid. 12 — Judgment in Case 77/72 Capolongo v Maya [1973] 10 — Page 3 of its observations. ECR 611, paragraph 6; sec also Üle last part of para- 11 — Case 78/76 [1977] ECR 595. graph lOin the judgment in Steinike and Weinlig.

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O P I N I O N O F MR D A I I M O N — CASE C-189/91

17. The case-law of the Court refers in that 21. Secondly, I referred, in the question of respect to the three concepts of origin, subsidies, both to the position of principle nature and effects of aid. taken by the Commission in its decision of 18 April 1985, 19 as well as to the case-law in Fediol v Commission 20 in which the concept of subsidy was held to imply a burden on 18. During the deliberations I dedicated a the Treasury. large part of my Opinion on the Sloman Neptun case 14 to the question of origin of aid. 15 — Judgment in Case 290/83 Commission v France [1985] ECR 439; sec also the judgment in Case 78/76 Steinike and Weinlig [1977] ECR 595; the judgment in Case 57/86 Greece v Commission [1988] ECR 2855, paragraph 19. I do not think it necessary to repeat 12; the judgment in Cases 67, 68 and 70/85 Van der Kooy v Commission [1988] ECR 219, paragraph 35. them entirely and, without limiting myself to 16 — Case 82/77 [1978] ECR 25. referring the Court to it, I will resume part 17 — Paragraph 25. of it in outline. 18 — Paragraph 24. 19 — Commission Decision 85/239/EEC of 18 April 1985 termi- nating the anti-subsidy proceeding concerning imports of soya meal originating in Argentina (OJ L 108, p. 28); see also Commission Decision 85/233/EEC of 16 April 1985 terminating the anti-subsidy proceeding concerning 13 — Paragraphs 14 and 15 op. cit.. imports of soya meal originating in Brazil (OJ L 106, p. 19, 14 — Cases C-72/91 and C-73/91, Opinion delivered on paragraph 12.3). 17 March 1992 (sec in particular paragraphs 12 to 47). 20 — Judgment of 14 July 1988 in Case 187/85 [1988] ECR 4155.

26. In the absence therefore of any financial 'sacrifice' on the part of the public authority, 23. I also pointed out that in my opinion the the Court should consider that the measure public nature of aid inherent in Article 92(1) in question does not constitute aid and it relates more to the authority which adopted should proceed to reply to the second ques- the measure — the State and its agencies — tion referred by the national court. than to the body or the person financing the aid. I drew the conclusion that there was no special need to lake account of the origin of the funds, since 'regard must primarily be had to the effects of the aid on the undertak- 27. Nevertheless, I continue to believe that ings or producers favoured ...'. 21 the absence of financing through State resources does not suffice to preclude a measure adopted by the State or its agencies from being classified as aid. I will therefore continue to examine in the rest of this expo- 24. If the case-law of the Court is strictly sition dedicated to the nature of the aid the adhered to, in particular the position the case-law of the Court which considers that Court took in the judgment in Van Tiggele, measures which may be justified by 'the and the Court refuses to follow the line I nature or general scheme of (the) system' 22 proposed, in other words, if the financing do not fall under the prohibition of Article through State resources appears to the Court 92(1). to be a constitutive clement of aid, it will state that the measure at issue is not aid within the meaning of Article 92 of the treaty.

29. As discussed above, 23 the purpose of the include it in the obligatory system of protec- disputed measure is to confer on a particular tion and promote, in cases of unjustified dis- class of undertakings, namely those which missal, payment of compensation with inter- employ five or fewer workers within the est, since reintegration into a close working meaning of national legislation, the benefit of environment may prove difficult. exemption from the ordinary law of dis- missal on the basis of a review of the grounds for dismissal based either on consid- eration of the conduct or the professional 35. Luxembourg law also recognizes that aptitude of the worker, or on the needs of concept, but, as regards dismissal, confers on the undertaking. it minimal importance. An employer who employs fewer than 20 workers may, in his 30. That class of 'small' undertakings is notice of dismissal, opt either to pay a dis- understood differently in that regard in each missal allowance or extend the period of of the Member States. notice. 25

31. Where it is taken into account as regards dismissal, the concept of 'small' undertaking 36. Portuguese law applies a general system is heterogenous since in the Federal Republic of protection against 'unlawful' unfair dis- of Germany it relates to undertakings with missal to 'small' undertakings. However, in five or fewer workers and in France to those order to simplify the procedure, it provides with fewer than eleven workers. in undertakings which employ fewer than 20 workers, first of all the option not to con- sult staff representatives, and secondly, the 32. Furthermore, certain states, such as Den- possibility for the worker to opt for an oral mark, the Hellenic Republic and the Nether- or written hearing. 26 lands, make no distinction based on the size of the undertaking.

43. The measure referred to in the second sentence of Paragraph 23(1) of the Law on 39. While German legislation envisages, as unfair dismissal applies generally to the the Court has seen, as regards dismissal from 'small' businesses sector, regardless of their a 'small' undertaking, recourse solely to production or their geographical location. abuse of rights, French legislation is more complex.

44. That type of measure, which is not explicitly referred to in the Treaty as an 40. The French system which applies to exception, is classified by legal literature in undertakings which employ more than the category of aid which may be authorized 10 workers who have at least two years of by the Commission, has been assessed by the employment 2? is as follows: where the court Commission with realism and flexibility. finds that the ground of dismissal is not gen- uine and serious and that reintegration is not possible, the worker may claim compensa- tion at least equal to the salary for the last six months. 45. As regards the precise position of the Commission with regard to aid to small and medium-sized businesses, it should be pointed out that, owing to their important contribution to the solidity of the industry 41. However, 'small' undertakings in France and the maintenance of a certain level of do not altogether avoid judicial review of the employment, they are highly regarded. grounds of dismissal. Workers employed in undertakings with fewer than eleven workers may, on unfair dismissal, regardless of their years of service, claim compensation calcu- lated in relation to the damage suffered;28 46. Accordingly, the Commission, in an there is no fixed minimum amount of com- investigation report on 'Labour Law and pensation. It is then for the worker to prove Industrial Relations in Small and Medium- the extent of the material and non-material sized Enterprises in the EEC Countries', 29 damage suffered. That compensation may be clearly demonstrates their leading role from added to that penalizing abuse of rights. an economic, social and employment point of view.

The so-called "threshold effect" applies also in the case of redundancies, in such a way that the employees of smaller firms some- 51. The privileged position in which they are times have less protection than those of the placed, as pointed out moreover by the Ger- biggest companies or sometimes are not even man Government, 35 is reaffirmed in the sec- protected against arbitrary dismissal by the ond paragraph of Article 118a(2) of the employer.' Treaty which provides that '[s] uch directives

shall avoid imposing administrative, financial abolish a legislative measure which, in the and legal constraints in a way which would reduction in employers' contributions to the' hold back the creation and development of sickness insurance scheme (which may be small and medium-sized undertakings'. considered a general measure of aid), differ- entiated between the reduction granted for male employees (four percentage points) and 52. Promoting the creation and the develop- that for female employees (ten percentage ment of such undertakings may, therefore, be points). The dispute centred above all on the considered a Community objective. 36 failure to abolish the disputed measure. Nev- ertheless, in her Opinion in that Case, Advo- cate General Simone Rozès pointed out that: 53. In order to answer the question referred by the national court, it should be consid- ered, first of all, whether the disputed provi- sion conceals a specific factor which finds expression in the fact that 'certain undertak- ings or the production of certain goods' are 'The Commission has however admitted that favoured by shielding them from the general the system established by Law No 33 of scheme of the system and disturbing its equi- 23 February 1980 constituted only a first librium. stage in the extension of the taking over by the State of employers' contributions to the sickness insurance scheme to the whole 39 of 54. On the first point, namely, the selectivity the Italian economy and it is of a sufficiently of aid, 37 it should be determined whether general nature not to fall within the scope of the measure at issue contributes to favouring Article 92(1) except on one point relating to directly or indirectly a particular category of the greater reduction for female employees. traders. That reduction had the effect of favouring certain sectors which were particularly active in trade between Member States and which 55. The Court has already been asked to rule employ a largely female workforce and it on the validity of a 'general' measure of aid thereby constituted an aid incompatible with which entailed discrimination with regard to the common market.' 40 a certain category of workers.

58. Nevertheless, the Court has not so far 63. Let me remind the Court that the con- developed criteria which allow a general cept of justification for an exemption on the measure of economic policy to be differenti- basis of the nature or general scheme of the ated from a general aid. According to C. system, which is the basis of the Commis- Quiqley, to whom I refer in my Opinion in sion's written observations, appeared in the the Sloman Neptun case, 43 'the dividing line judgment of the Court in Italy v Commis- between general aids and general measures of sion, above. 44 The Court ruled then on the economic policy may be rather obscure'. The validity of a provision which established for dividing line in this case is, in fact, difficult to the benefit of undertakings in the textile draw, since the criterion which determines industry, for a period of three years, a reduc- whether a measure is general or 'normal' tion in their rate of contribution to the social may be placed at different points. charges from 15 to 10%. The Court stated that:

employment relationships in 'small' under- 'Such a parafiscal charge may, depending on takings; secondly, the material impossibility the purpose to which the revenue it produces of being able to offer the worker another is put, constitute State aid incompatible with post within the same structure. the Common Market if the conditions for the application of Article 92 of the Treaty are met; whether those conditions are satisfied must he determined hy means of the pro- 65. As the Commission points out, 4 6 the cedure provided for that purpose in Article general scheme of the system established as 93 of the Treaty'. "8 regards socially unjustified dismissal is to encourage the reintegration of the worker, while compensation laid down by a court or agreed out of court is only paid where the employment relationship cannot be main- 70. Should the Court reply in the negative tained. to the first question — which is what I pro- pose — the national court asks the Court to indicate whether the third sentence of Article 23(1) of the Law on unfair dismissal entails 66. In 'small' undertakings, that 'protection indirect discrimination against women, in of acquired rights' very quickly collides with breach of Articles 2 and 5 of Directive the limits described above which justify the 76/207/EEC. derogatory nature of the measure.

treatment shall mean that there shall be no '...with regard to the question whether the discrimination whatsoever on grounds of sex provision contained in Article 5(1) of Direc- either directly or indirectly by reference in tive 76/207, which implements the principle particular to marital or family status'. of equality of treatment set out in Article 2(1) of the Directive, may be considered, as far as its contents are concerned, to be unconditional and sufficiently precise to be 73. First of all, and as the Commission relied upon by an individual as against the points out in its written observations, 49 the State, it must be stated that the provision, possibility should be envisaged of an individ- taken by itself, prohibits any discrimination ual, in the present case Mrs Kirsammer- on grounds of sex with regard to working Hack, being able to avail him-or herself of conditions, including the conditions govern- obligations contained in a directive with ing dismissal, in a general manner and in regard to another individual, his employer. unequivocal terms. The provision is there- fore sufficiently precise to be relied on by an individual and to be applied by the national 74. The question whether the Directive has courts.' 51 been transposed within the time-limit pro- vided in Article 9 has never been raised in the course of either written or oral proceed- ings. 78. The Court also recalled that

74. That omission could, at first sight, 'a directive may not of itself impose obliga- appear awkward. Most of the Court's deci- tions on an individual and that a provision of sions with regard to whether an individual a directive may not be relied upon as such may rely on the provisions of a directive in against such a person'. 52 respect of another individual concerned cases where non-transposition had been proven.

81. The effects of that principle are never- theless mitigated by the concept developed The Court has accordingly held that provi- in the case-law of interpretation of national sions of a directive could be relied on against law in conformity with Community law. tax authorities (the judgments in Case 8/81 Becker, cited above, and in Case C-221/88 ECSC v Acciaierie e Ferriere Buss- em (in liquidation) [1990] ECR 1-495), local 82. That concept appeared for the first time or regional authorities (judgment in Case in the judgment of the Court in Von Colson 103/88 Fratelli Costanzo v Comune di Mil- and Kamann v Land Nordrhein-Westfalen. 55 ano [1989] ECR 1839), constitutionally inde- The question which the national court had pendent authorities responsible for the main- referred to the Court consisted in knowing tenance of public order and safety (judgment whether the provisions of national law limit- in Case 222/84 Johnston v Chief Constable ing rights to compensation of individuals of the Royal Ulster Constabulary [1986] who have been discriminated against to ECR 1651), and public authorities providing merely nominal damages were in conformity public health services (judgment in Case with the requirements of the Directive. The 152/84 Marshall, cited above). Court ruled that

'The obligation to interpret a provision of national law in conformity with a directive 83, The Court then confirmed that position, arises whenever the provision in question is leaving the national court, as far as possible, to any extent open to interpretation.' 62 to apply the spirit and the purpose of a directive in interpreting the wording of national legislation intended to implement it. 5 8 85. The Court then proceeded to hold in the judgment that, where there had been no transposition of Council Directive 68/151/EEC and consequently there was no 84. Advocate General Van Gerven went fur- national provision which applied and which ther, in the Barber59 case, where he sug- could serve as a basis for interpretation, gested that the Court should not limit the interpretation in conformity with Commu- nity law solely to the national law intended 'in applying national law, whether the provi- to implement Community legislation. He sions in question were adopted before or pointed out in particular that after the directive, the national court called upon to interpret it is required to do so, as far as possible, in the light of the wording and the purpose of the directive in order to '[i] n those circumstances we are concerned achieve the result pursued by the latter and not with the direct effect of the directive in thereby comply with the third paragraph of question as between individuals but with the Article 19 of the Treaty. 63 natural effect of national law as interpreted by the courts in accordance with Commu- nity law (...). This means, in my view, that such an interpretation in conformity with (...) the requirement that national law must the Directive may not be restricted to the be interpreted in conformity with Article interpretation of national legislation subse- 11 of Directive 68/151 precludes the inter- quent to the adoption of the directive pretation of provisions of national law relat- ing to public limited companies in such a

'(...) Article 4(1) of Council Directive '[t] he answer to the question submitted 79/7/EEC of 19 December 1978 must be must therefore be that a national court hear- interpreted as precluding a provision from ing a case which falls within the scope of creating, within the framework of national Directive 68/151 is required to interpret its legislation which guarantees a minimum sub- national law in the light of the wording and sistence income to insured persons suffering the purpose of that directive in order to pre- from incapacity for work, an exception to clude a declaration of nullity of a public lim- that principle in respect of insured persons ited company on a ground other than those who had previously worked on a part-time listed in Article 11 of the directive.' 65 basis and from limiting the amount of the allowance to the wage previously received, where that measure affects a much larger number of women than men, unless that leg- islation is justified by objective factors unre- 86. The Court, going beyond the case-law in lated to any discrimination on grounds of Von Colson, has accordingly extended to sex'. 6S national provisions as a whole, even those preceding or unrelated to the Directive, the scope of application of the principle of inter- pretation in conformity with Community 90. Accordingly, the Court should consider law. that its case-law on indirect discrimination on the basis of Article 119 extends to direc- tives enacted in order to apply that provi- sion. The same should therefore apply to Directive 76/207/EEC. 87. The Court should confirm that position.

92. That provision, which provides a specific has, on several occasions, stated that that ele- method of calculation, does not entail, ment of fact comes within the jurisdiction of directly, any discrimination on grounds of the national court. Accordingly, in the judg- sex. Its wording is, in fact, neutral. ment in Jenkins, supra, in which the remu- neration of part-time workers at a clothing manufacturing undertaking was at issue, the 93. Accordingly, the Court should examine hourly pay being 10% lower than that appli- whether for 'small' undertakings, the fact of cable to full-time work the Court held that not taking into account employees who work less than ten hours per week or 45 hours per month is in the nature of indi- rect discrimination against women. It should again be clarified that the method of calcula- '[w] here the hourly rate of pay differs tion itself is only discriminatory as a result according to whether the work is part-time of the fact that the undertaking in question is or full-time it is for the national courts to classified under the category of 'small' decide in each individual case whether, undertaking. Indeed, Mrs Kirsammer-Hack regard being had to the facts of the case, its is squarely included among the undertaking's history and the employer's intention, a pay staff and is not one of those who, working policy such as that which is at issue in the fewer than ten hours per week or 45 hours main proceedings although represented as a per month, is not taken into account in cal- difference based on weekly working hours is culating the number of staff. Therefore she or is not in reality discrimination based on may not rely on the general scheme of pro- the sex of the worker.' 70 tection against unfair dismissal.

forward any figures relating to the propor- during six weeks of a worker in the case of tion of women who work in 'small' under- illness could not be applied to employees takings (including those of whom no account whose working time did not exceed ten is taken owing to the fact that they work hours per week or 45 hours per month, the fewer than ten hours per week or 45 hours Court stated, on the bases of Article 119, per month). The statistics based on the num- that ber of undertakings for 1987 show a much larger proportion of men (75%) than of women (25%) in undertakings employing between one and 4 employees. '[i] t is for the national court, which has sole jurisdiction to assess the facts and interpret the national legislation, to determine whether 100. O n the second point — possible justifi- and to what extent a legislative provision, cation of the measure by objective factors which, though applying independendy of the unrelated to any discrimination — it is for sex of the worker, actually affects a greater the national court again, if it is established number of women than men, is justified by that there has been discrimination, to make reasons which are objective and unrelated to findings of fact. The Court nevertheless laid any discrimination on grounds of sex'. 75 down in its judgment in Bilka 71 principles of interpretation as regards examination of grounds put forward to justify the measure, holding that 102. In the present case, the parties have, in both their written and oral observations, referred broadly to the motivation of the leg- islature as regards aid to 'small' undertak- '[i] f the national court finds that the mea- ings. Accordingly, favouring the promotion sures chosen by Bilka correspond to a real of employment, and concentrating efforts in need on the part of the undertaking, are a sector of industry most able to adapt to appropriate with a view to achieving the economic changes figured among the objec- objective pursued and are necessary to that tives sought. end, the fact that the measures affect a far greater number of women than men is not sufficient to show that they constitute an infringement of Article 119.' 7i 103. Consequently, I suggest that, in reply to the second question, the Court should state that it is for the national court to assess 101. Finally, in the judgment in Rinner- whether there has been any actual indirect Kühn, 74 relating to a similar provision to discrimination and, should the national court that of the present case which was find sufficient elements pointing to its exist- denounced since the obligation for the ence, to determine whether or not the dis- employer to continue to pay the wages puted measure is justified by objective fac- tors unrelated to any discrimination based on sex. 72 — Bilka v Weber von Hanz Casc 170/84 [1986] ECR 1607. 73 — Paragraph 36. 74 — Rinner-Kühn v FWW SpeziaJ-Gebäudereinigung Casc 171/88 [1889] ECR 2743. 75 — Paragraph 15.

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