Bank on its knees

13 Apr 2011

as a general rule, undertakings must comply with the collective redundancies directive even if they are being wound up. so held the eu court in a recent judgment.

As a general rule, undertakings must comply with the Collective Redundancies Directive even if they are being wound up. So held the EU Court in a recent judgment.
The Collective Redundancies Directive provides among other things that employers must consult with their employees before carrying out collective redundancies. The employees must be given an opportunity to suggest how to avoid the planned redundancies or mitigate their effects. In Denmark, the Directive is implemented by the Danish Collective Dismissals Act.
A bank in Luxembourg was hard hit by the economic crisis. The bank’s authorisation was revoked and the process of winding up the bank began. Under Luxembourg law, this meant that the employees had to be dismissed with immediate effect, including a pregnant woman and a number of employee representatives.
But the employee representatives and the pregnant employee believed that they enjoyed special dismissal protection. They also believed that the bank had not complied with the requirements of the Collective Redundancies Directive. The Luxembourg court was in doubt whether undertakings must still comply with the Directive when they are being wound up. It therefore turned to the EU Court.
The Directive applied
The Court noted that the Directive specifically states that a few of its provisions do not apply to undertakings which are being wound up. One of these provisions describes the obligation to notify the relevant authorities of collective redundancies. But this does not mean that the other provisions of the Directive do not apply – on the contrary.
Accordingly, the Court emphasised, the Directive also applies to undertakings which are being wound up. In addition, the Court ruled that undertakings must continue to comply with the Directive until they no longer exist as a legal entity. And an undertaking being wound up is only dying – not dead.


Norrbom Vinding notes

  • that the ruling illustrates that the Collective Redundancies Directive generally applies to undertakings which are being wound up; and

  • that an undertaking will not cease to exist until it has been dissolved and is no longer a legal entity.
The ruling will most likely have no immediate implications for Danish law and is not likely to lead to an amendment of the Danish Collective Dismissals Act, either.