Employment Protection Legislation
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EUROPEAN SEMESTER THEMATIC FACTSHEET EMPLOYMENT PROTECTION LEGISLATION 1. INTRODUCTION latter countries courts have ample judi- cial discretion while in the former Employment protection legislation legislation plays a greater role. consists of rules and procedures concerning the faculty of companies Non-compliance with the terms of to hire or dismiss workers. the legislation or with those agreed in collective contracts renders Employment protection legislation dismissal unlawful or invalid. This deals with: has implications for the obligations of the employer and the rights of the worker the lawfulness of probationary periods, that vary between countries. mandated notice periods and seve- rance payments (payments to workers As a general rule, dismissal motivated by for early contract termination); discriminatory reasons is considered procedural requirements to be unlawful, while protection to employees followed for individual dismissals or is usually not provided when dismissals collective redundancies; are justified by major disciplinary sanctions for unfair dismissal; and reasons. Sanctions are generally also conditions for using temporary or envisaged for the unlawful use of fixed- fixed-term contracts. term contracts, i.e. outside the conditions established by legislation. Such rules and procedures may be enshrined in law or in collective or The rationale for employment individual labour contracts. The effective- protection legislation is to protect ness of employment protection also workers from arbitrary action by depends on additional factors including employers through a series of court interpretations of legislative and requirements the latter must contractual provisions. comply with when dismissing workers. These reflect the social Employment protection legislation is costs of dismissal to some extent. A not granted uniformly in all Member dismissed worker loses income, tenure- States. Apart from the common mini- related benefits and, potentially, mum requirements stemming from EU accumulated job-specific skills and legislation and other international obliga- experience. If it takes a long time to tions (see below), the characteristics of find another job, some workers may employment protection legislation mostly also suffer negative social and health reflect different legal and institutional effects. traditions. In countries with civil law traditions such legislation is usually Society also bears the costs of workers regulated by law, while in common law losing their jobs as the financing of countries it relies more on private unemployment benefits and active contracts and dispute resolution. In the labour market policies falls largely on Page 1 | taxpayers. Protection against dismissal rates. These may contribute to higher is recognised by the International unemployment rates and longer periods Labour Organisation (ILO) Conven- out of work for weaker groups such as tions1, the EU Charter of Fundamental young and/or low-skilled workers. On Rights2, the EU Treaty3 and EU the other hand, there is no conclusive Directives setting minimum require- evidence that the strictness of employ- ments for collective redundancies, ment protection legislation affects information and consultation, and overall unemployment rates. fixed-term and temporary work4. These directives provide a common minimum Employment protection legislation level of protection for workers in all is usually the result of complex Member States. legislative and non-legislative frameworks. As such, there is no Unbalanced or excessively rigid 'one-size-fits-all' approach and the employment protection legislation policy response to challenges in this may have undesirable effects on area should be tailored to each the labour market. In particular, country's specificities. Moreover strict protection against dismissal for employment protection legislation employees on open-ended contracts, should be considered as part of a coupled with loose regulation on broader institutional framework which temporary or other non-standard includes social protection systems, contracts, is likely to induce labour active labour market policies and market segmentation5. This is because access to lifelong learning. these factors may create incentives for employers to hire workers under Reforms of employment protection temporary contracts in order to avoid legislation should be seen in relation to high firing costs. Moreover, strict these institutional features and should regulation against dismissals is usually be consistent with a 'flexicurity' 6 associated with low hiring and firing approach . Recent evidence shows that Member States that pursued comprehensive labour market reforms 1 Termination of Employment Convention, encompassing flexible and reliable 1982 (No 158). contractual arrangements, 2 According to Article 30, 'every worker has comprehensive lifelong learning the right to protection against unjustified strategies, effective active labour dismissal, in accordance with Union law and market policies, and modern social national laws and practices'. protection systems, have better able to 3 Article 153 of the Treaty on the maintain employment and preserve Functioning of the European Union provides for the possibility for the EU to support fairness during the economic downturn. Member States in ensuring the protection of workers when their employment contract is The European Pillar of Social Rights terminated, and to adopt directives laying aims to prevent labour market down minimum standards. 4 EU Directives 91/533/EEC on written statement, 1999/70/EC on individual employment conditions, 98/59/EC on collec- tive redundancies, 2001/23/EC on transfer of 6 EU Employment Guideline No 7 recom- undertakings, 1999/70/EC on fixed-term work, mends that Member States should 'take into 2008/104/EC on temporary agency work. account the flexicurity principles' (Council 5 Labour market segmentation means the Decision on guidelines for the employment coexistence in the labour market of different policies of the Member States, 13 October categories ('segments') of workers, 2016). Flexicurity can be defined as an inte- characterised by different levels of job grated approach including four components: security and/or access to social security and i) flexible and secure contractual arrange- other benefits and by low transition rates ments; ii) lifelong learning strategies; from less secure to more secure categories. iii) effective active labour market policies in The main distinction is typically, but not order to facilitate transitions to new jobs; exclusively, between workers with temporary iv) modern social security systems providing contracts and those with permanent ones. adequate income support during transitions. Page 2 | segmentation while making employ- 2. POLICY CHALLENGES: AN ment secure and adaptable. This is OVERVIEW OF PERFORMANCE IN EU envisaged, in particular, by Principle 5 COUNTRIES ('Secure and adaptable employment'7) and Principle 7 ('Information about As discussed in the introduction, high employment conditions and protection in segmentation and low dynamism of case of dismissals'8). Both of these fall the labour market are the most under the area 'Fair working conditions'. common challenges where employment protection legislation is excessively strict The structure of this factsheet is as or imbalanced in favour of protecting follows. permanent workers. Moreover, unde- clared work may occur as a result of Section 2 provides an identification of excessive costs for firing regular the main challenges commonly related to workers, in addition to other causes such dysfunctional employment protection as excessive taxation on labour. (Unde- legislation systems. These are high clared work is discussed in a separate segmentation and low dynamism of the thematic factsheet). labour market. The concept of labour market Section 3 describes policy levers related segmentation implies that (at least) to the different challenges and aspects of two 'segments' coexist in the labour employment protection legislation. market. One segment of the workforce comprises workers with stable employ- Section 4 presents an overview of the ment relationships, protection against state of play across Member States. dismissal and full access to social protection. Another segment is charac- Finally, detailed definitions and statistics terised by workers with one or more of are presented in the Annex. the following: This factsheet is related to those on 9 non-standard employment contracts active labour market policies, unem- providing limited or no protection ployment benefits, undeclared work, and against dismissal; skills for the labour market. unstable employment relationships and poor career prospects; and (frequently) limited access to social protection because they have paid social contributions for shorter periods. 7 Principle 5 states among other things that 'the transition towards open-ended forms of employment shall be fostered' that 'in accordance with legislation and collective agreements, the necessary flexibility for employers to adapt swiftly to changes in the economic context shall be ensured' and that 'employment relationships that lead to precarious working conditions shall be 9 Beyond the traditional distinction between prevented, including by prohibiting abuse of employees and self-employed workers, there atypical contracts'. exist 'atypical' forms of employment such as 8 Principle 7 states among other things that on-demand, on-call, casual, intermittent or 'prior to any