Author Archives: Helga Hejny

Article 21 of the Charter of Fundamental Rights vs the national public interest in prohibiting age discrimination (Directive 2000/78): Hütter and Schmitzer cases

Introduction

Article 21 of the Charter of Fundamental Rights (CFR) on “Non-discrimination” embraces a positive task for the Member States to eliminate anything which produces unlawful distinctions in society or concrete hurdles towards achieving equality. [1] In 2009, after the entry into force of the Lisbon Treaty, the Charter became a legally binding catalogue of fundamental rights within the EU legal order.[2] The Preamble of Directive 2000/78, at point 6, cites the Charter as a legitimating source for combating discrimination against elderly people. Thus, the relationship between the Charter and Directive 2000/78 on “Equal Treatment in Employment and Occupation” has been understood as a link between ‘legitimacy’ and ‘potency’[3], and it became particularly relevant by virtue of the Charter’s new legal status.

The equality approach embedded in article 21 CFR, which prohibited any discrimination on the basis of the listed grounds, is recalled in article 2 of Directive 2000/78, which defines how the “principle of equal treatment” needs to be interpreted within the boundaries of the Directive and particularly in accordance with article 1.[4] The Directive, however, at article 6 incorporates a contradiction. In fact, article 6 allows certain age discriminations, by considering ‘lawful’ both direct discrimination (when one person is treated less favourably than the other in a comparable situation) and indirect discrimination (an apparently neutral practice which can create disadvantages). According to article 6, such differences can be objectively justified only by a legitimate aim and the means of achieving that aim needs to be appropriate and necessary. Thus, while Article 21 provides a broad but unequivocal legal framework for prohibiting discriminations, articles 2 and 6 of the Directive 2000/78 respectively provide  both the grounds on which discrimination is prohibited and the grounds on which age discrimination can be justified.  Such duality means, Member States often face the uncertainty of what can objectively justify age discrimination.

Two notable Austrian cases, decided by the European Court of Justice (hereinafter: the Court), demonstrate how article 21 CFR and article 6 of Directive 2000/78 should be mitigate by the principle of proportionality, which requires an adequate balance between a rights provision and a state or public interest. The cases are: David Hütter v Technische Universität Graz[5] and Schmitzer v Bundesministerin für Inneres.[6]

Case law

1) The Hütter case and article 6 of Directive 2000/78

According to article 6 of Directive 2000/78, a justification for difference of treatment must be “objective”. This means that it should be supported by a legitimate aim within the context of national law and the means to achieve such legitimate aim must be “appropriate and necessary”. The legitimate aims listed under Article 6 include: legitimate employment policies, labour market and vocational training objectives. Indeed, under article 6, differences of treatment may include “minimum conditions of age… for access to employment or to certain advantages linked to employment”.

Mr Hütter, who worked as a public servant under Austrian law, was entitled to be paid in accordance with the length of his service. However, the law prescribed that the time he had spent working or training before the age of 18 was not to be included in the calculus. Consequently when, Mr Hütter, completed a period of apprenticeship as a laboratory technician with Technische Universität Graz (TUG), he was recruited at a lower incremental pay point compared to a female colleague in materially similar circumstances, but only 22 months older. The age limit imposed by Austrian law (Vertragsbedienstetengesetz ‘the VBG’) determined an unlawful direct discrimination. The TUG argued that the discrimination was justified by legitimate aims: to ensure that those who had pursued a general secondary education would not be treated less favourably than those who had pursued vocational qualifications; and to promote entry into the labour market for young people.

Mr Hütter brought a claim before the Landesgericht für Zivilrechtssachen Graz (Graz Regional Court for Civil Matters). He sought the payment of compensation equivalent to the difference in treatment he had received due to his age. He considered the difference in treatment to be unjustified and in breach of both Austrian Law and Directive 2000/78. That difference in treatment corresponded to a sum of EUR 69.60.  On the possibility to justify the discrimination suffered by Mr Hütter the ECJ (but he took the claim to Graz) expressed the following opinion:

National legislation which…excludes periods of employment completed before the age of 18 from being taken into account for the purpose of determining the incremental step at which contractual public servants of a Member State are graded, is incompatible with Articles 1, 2 and 6 of Directive 2000/78”.

This declaration motivated a subsequent amendment on Austrian law.

2) The Schmitzer case

The Amending Law apparently solved the incompatibility with Directive 2000/78, by modifying with retroactive effect the wording of Paragraphs 8 and 12 of the GehG (the Law on Salaries of 1956, Gehaltsgesetz) and acknowledging as full work experience the work period before the age of 18. Since then this is now taken into account for the purpose of determining the advancement reference date. Clearly, after the ECJ’s decision in Hütter the financial impact was considerably relevant for the Austrian State. In order to mitigate the financial impact, the Amended Law stated that those who suffered discrimination under the previous system could make an application to switch to the new system. However, in Schmitzer case it was argued that national legislation neutralises the advantage resulting from the inclusion of periods before the age of 18, also placing at a disadvantage only the civil servants disadvantaged by the previous system. In fact, the extension to the periods for the advancement reference date is likely to apply to them alone. Consequently, the adverse effects of the system existing prior to the Amending Law have not ceased entirely for civil servants.

Mr Schmitzer brought an action before the Verwaltungsgerichtshof (Administrative Court), challenging the decision of the Bundesministerin für Inneres which turned down his request for a review of his remuneration status under Paragraph 8 of the GehG, in the version prior to the Amending Law. The Schmitzer case was brought before the ECJ for a Preliminary Ruling which clarified how the “submission of a request by each interested party, as well as those relating to the extension of advancement periods” served “objectives of procedural economy, of respect for acquired rights and of the protection of legitimate expectations”. Mr Schmitzer, had  worked as a civil servant before turning 18,  claimed that the Amending law was still contrary to Directive 2000/78/EC, as it ingrained the effect of the original law. Thus, the ECJ focused on whether this difference in treatment could be justified in the light of article 6.

The Austrian government argued that the legitimate aim pursued by the Amending law was a “budgetary consideration”. The ECJ considered that although budgetary consideration could underpin a social policy of a Member State, it cannot constitute a self-standing legitimate aim within the meaning of article 6. For this reason, such age-based difference in treatment is not objectively justified as appropriate and necessary.

Conclusion

In the Hütter case, the Court recognized Member States’ freedom to determine public measures to promote the integration of young apprentices into the labour market. This freedom is somewhat ambivalent, as it is subjected to the interpretation of the Court. The Austrian policy that did not consider the work experience before the age of 18 was not objectively justified in relation to article 6. The ECJ decision had serious financial consequences for the State, compared to a trivial monetary detriment for Mr Hütter. In the subsequent Schmitzer case, the amendment of Austrian law was still considered to be unlawfully discriminatory as  ‘budgetary considerations’  cannot justify a measure that maintains indefinitely an age-based difference in treatment which was supposed to be eliminated. For this reason, it was not considered “a proportionate means of achieving a legitimate aim”, as required by article 6 of the Directive, although considering “budgetary considerations” as transitional arrangements for age discrimination could instead require a closer consideration by the Court.

[1]     Article 21 of the Charter of Fundamental Rights prohibits any discriminations based on “sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation”, reinforcing in this way the link to fundamental or human rights.

[2]                 Francesca Ferraro, Jesús Carmona, “Fundamental Rights in the European Union. The role of the Charter after the Lisbon Treaty”, (2015) EPRS European Parliamentary Research Service. Available online: <http://www.europarl.europa.eu/RegData/etudes/IDAN/2015/554168/EPRS_IDA%282015%29554168_EN.pdf > accessed 21.05.2015

[3]     This is confirmed by the case Kücükdeveci v Swedex GmbH & Co KG [2010] IRLR 346  (concerning employment discrimination) where the Court noted that the Charter have the same legal value as the Treaties, including the horizontal effect

[4]     Article 1 (Purpose) “The purpose of this Directive is to lay down a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the Member States the principle of equal treatment.”; Article 2 (Concept of discrimination) “ 1. For the purposes of this Directive, the ‘principle of equal treatment’ shall mean that there shall be no direct or indirect discrimination whatsoever on any of the grounds referred to in Article 1”.

[5]               Hütter v Technische Universität Graz [2009] ECR I- 5325 (C-88/08). Judgment of June 18, 2009

[6]                Leopold Schmitzer v Bundesministerin für Inneres [2014] ECR,  Case C-530/13

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Corporate Social Responsibility & Human Rights. A critical review of the Guiding Principles on Business and Human Rights for implementing the UN “Protect, Respect and Remedy” Framework

Introduction

Over the recent decades, corporations have impressively increased their potential. Their exponential growth and enlarged powers, due to a privatization process, has impacted economic, political and social affairs around the globe. While the primary responsibility for the fulfilment, protection and respect of international human rights standards is still in the hands of sovereign states, there is a growing acceptance that corporations hold some level of responsibility as well. Accordingly, the emerged concept of Corporate Social Responsibility (CSR) [1]streamlines their responsibilities and duties on environment and social welfare. Nevertheless, their impact on human rights can be analysed in how corporations manage their human resources[2], especially within developed countries where often their production is relocated. In fact, “human resource systems affect corporate performance through the management and control of employee behaviours”.[3] As a consequence, international development goals such as poverty alleviation and health improvements[4]  can be related both to a positive management of employees (directly) and workers of suppliers (indirectly).  In addition to meet CSR objectives, managers exercise their discretion on intra-organizational stakeholder relationships, and in producing effective social outcomes involving extra-organizational stakeholders. Then, appropriate international regulations in defence of human rights appear even more meaningful in respect to such decisional power.

Guiding Principles on Business and Human Rights for implementing the UN “Protect, Respect and Remedy” Framework

In 2005, the UN Secretary-General Kofi Annan appointed Professor John Ruggie as UN Special Representative on business and human rights. Secretary General Ban Ki Moon has confirmed the assignment. One of Professor Ruggie’s main tasks is to “identify and clarify standards of corporate responsibility and accountability for transnational corporations and other business enterprises with regard to human rights”.[5] Accordingly, in June 2008 Professor Ruggie presented the UN “Protect, Respect and Remedy” Framework to the Human Rights Council. His intention was to enhance the following three points: first the state obligation to protect against human rights abuses by third parties, including business, through appropriate policies, regulation, and adjudication; second the corporate responsibility to respect human rights, i.e. to act with due diligence to avoid infringing on the rights of others and to address adverse impacts that occur; and third greater access by victims to effective remedy both judicial and non-judicial. On 16 June 2011, the Human Rights Council adopted resolution 17/4 endorsing the Guiding Principles on Business and Human Rights for implementing the UN ‘Protect, Respect and Remedy’ (hereinafter the Guiding Principles). The principles represent the first and unique global standards for preventing and addressing the risk of adverse impacts on human rights linked to business activity. Their overall aim is to combat human rights violations in those countries where corporations usually relocate their production and in states where there is a combination of weak governance and little respect for human rights. However, they were not aimed at creating new regulations or filling any legal gaps, being an interpretation of existing international human rights instruments, codes of conduct and best practices.

The Guiding Principles make explicit reference to a “duty to protect” which means that states have legal obligation to protect their own population from human right abuses. In international law this concept has been broadly used in other contexts, such as the crime of genocide[6].  It is therefore meaningful to observe how this precautionary effect is now directed also to enterprises activities.

The core of the doctrinal discussion is whether companies are subject to any direct international legal obligation to respect human rights. Some authors convincingly provide a positive answer[7] while others sustain the opposite. The Guiding Principles prescribe that states (where the company is headquartered) should force companies to report on their social impacts and on those of their subsidiaries abroad.[8]However, while strongly encouraged, corporations cannot be compelled as the Principles are not legally binding. Authoritative doctrine argues that, as a consequence, a way to prevent and redress violations of human rights committed by companies outside their registration country is to adopt measures with extraterritorial implications or to assert direct extraterritorial jurisdiction in specific instances[9]. To some extent, it can be critically argued that the Guiding Principles open to series of alternative approaches instead of addressing the problem by themselves.

Corporate and human rights:  implications from the Bhopal case

Involvements of multinational corporations in human rights abuses obtains an international echo as they often reveal dramatic workers’ conditions (e.g. Nike in Asia, Shell in Nigeria, Union Carbide in India and Yahoo! in China). These cases are a testimony of how large multinational corporations (MNCs) are responsible for gross violations of human rights occurring within countries characterised by weak legal systems.[10] The issue is linked to a legal scenario which consequently underlines a lack of international law remedies, while criminal law is subsequently recalled to assess corporate’s responsibility. The Bhopal case (1984) has been the worst industrial accident in history. In December 1984 at the Union Carbide plant (an American corporation) in the city of Bhopal (India) 27 tonnes of methyl isocyanate (a deadly gas) was released, spreading throughout the city. As a result, it have been estimated 2,000 deaths and more than 200,000 people with injuries. The environmental consequences persisted over the years after the Union Carbide negligence, continuing causing respiratory problems, disabilities and unhealthy living conditions for the population. The case predates the Guideline Principles, but it is of great significant as it highlights both the problems in assessing the causes/responsibilities of such disaster and the procedural problems that occurred during the prosecution. The cause of the disaster remains under debate, thus the responsibility has changed over the years. On one side the Indian government and local activists argue that a lack of adequate management and deferred maintenance caused a backflow of water into a methyl isocyanate tank resulting in the disaster. On the other side, Union Carbide Corporation states that this was an act of sabotage, and not in any way related to its bad management. In establishing the guilt in such as corporate manslaughter case further difficulties were emerged. They included: the required mens rea of senior officers of the company involved; the access to internal corporate documents; extradition; debates on the doctrine of the forum non convenience[11]; class action lawsuits; the required political will from the country’s government to go after big companies despite the fear of investment backlash.[12] However, it should to be questioned if the dangerousness of Union Carbide’s plant would have been limited by following the Guiding Principle. Would they have been a strong enough determent[13] or the prospective of a lawsuit against a weak government like India would still have played an important role for respecting human rights?

Conclusions: respect of human rights as an investment?

Generally, companies recognise the importance of the rule of law in the context of their investments and operations around the world. The importance of a transparent, well-functioning and just legal system has been taken in consideration for attracting investments. The Guiding Principles are certainly a necessary legal resource in the International law scenario. States and companies are asked to operationalise their responsibility for human rights. Nevertheless, the lack of direct enforceability plus the wide decisional autonomy left to the states raise doubts on their effectiveness. Nowadays, several provisions of the Constitution of India are horizontally applicable against companies, for preventing abuses by business enterprises. However, the degree of fault required for a company’s responsibility could just as easily be a negligence or strict liability standard. Compare to that, the due diligence required by the Guiding Principle is still a vague concept. Certainly, it would not be enough to fix corporates’ misbehaviours. On contrary, ‘due diligence’ from the perspective of human rights could became a parameter for attracting investors and consumers towards more responsible realities of corporate managements.

[1] CSR is thought of as ‘‘corporate choices and behaviours that go beyond firm-specific economic benefit or focus’’ Berry, G. R. (2010). Improving organisational decision-making: Reframing social, moral and political stakeholder concerns. The Journal of Corporate Citizenship, 38, 33–48.

[2] Fisher, S. L., M. E. Graham, S. Vachon and A. Vereecke (2010). “Don’t miss the boat: Research on HRM and supply chains.” Human Resource Mangement 49(5): 813-828.

[3] Jackson, S. E., Schuler, R. S., & Rivero, J. C. (1989). Organizational characteristics as predictors of personnel practices. Personnel Psychology, 42, 727–786.

[4] Human Rights Watch (2002), The Enron Corporation: Corporate Complicity in Human Rights Violation , 23 January, available at: http://www.hrw.org/reports/1999/enron/

[5] The UN Commission on Human Rights adopted resolution E/CN.4/RES/2005/69 requesting “Secretary-General to appoint a special representative on the issue of human rights and transnational corporations and other business enterprises”

[6] See, for example, Articles 1, 5 and 6 of the Convention on the Prevention and Punishment of the Crime of Genocide, GA Res 260 A (III), 9 December 1948; Articles 2 and 9 of the International Covenant on Civil and Political Rights, GA Res 2200A (XXI), 16 December 1966, 999 UNTS 171; and Articles 1, 2 and 5 of the European Convention for the Protection of Human Rights and Fundamental Freedoms 1950, 213 UNTS 222; ETS 5.

[7] Clapham, A. (2006). Human rights obligations of non-state actors. Oxford: Oxford University Press

[8] Article 1 (obligation to respect human rights) of the European Convention on Human Rights (ECHR):

“The High Contracting Parties shall secure to everyone within their jurisdiction the rights and freedoms defined in Section I of this Convention”.

[9] Bernaz, N. (2013), “Enhancing Corporate Accountability for Human Rights Violations: Is Extraterritoriality the Magic Potion?” Journal of Business Ethics, 117(3), pp. 493-511.

[10] Grear, A. (2007), “Challenging corporate ‘humanity’: legal disembodiment, embodiment and human rights”, Human Rights Law Review, Vol. 7 No. 3, pp. 511-543

[11] Janis M.W. (1987). The Doctrine of Forum Non Conveniens and the Bhopal Case. Netherlands International Law Review, 34, pp 192-204.

[12] International Commission of Jurists (2011), Access to Justice: Human Rights Abuses Involving Corporations: India: A Project of the International Commission of Jurists, p. 48, available at: http://www.icj.org/dwn/database/AccesstoJustice-India-ElecDist-July2011.pdf

[13] Fasterling, B., Demuijnck G. (2013), “Human Rights in the Void? Due Diligence in the UN Guiding Principles on Business and Human Rights”

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Justifying age discrimination in the recruitment of police officers: Mario Vital Pérez v. Ayuntamiento de Oviedo (Case C 416/13)

European and national legislation often disagree when a legitimate objective is relied upon to justify a situation of direct age discrimination. The Employment Equality Framework Directive 2000/78 prohibits discrimination on grounds of age in the fields of employment, occupation and vocational training. According to art. 2, equal treatment means “that there shall be no direct or indirect discrimination whatsoever on the ground of age”. The legislation sets out minimum requirements, which need to be respected by Member States in their national legislations. However, articles 4 and 6 of the Directive introduce a number of exceptions to the Principle of Equal Treatment. Under articles 4 and 6 Member States can introduce special national provisions that allow differences of treatment on the basis of particular occupational requirements, while article 6 sets out justified differences of treatment when pursuing a legitimate aim. [1] This post examines the interrelation between the exceptions found in art. 4 and 6 of the Directive and the general principle of equal treatment, by critically addressing the interpretation followed by the European Court of Justice in justifying certain cases of age discrimination within the scope of the Directive. The Court’s position on this topic has raised debates as to the effectiveness of a legislative protection against age discrimination.

In the recent case of Mario Vital Pérez v Ayuntamiento de Oviedo (Case C‑416/13), the local Spanish Court, the Juzgado de lo Contencioso-Administrativo No 4 de Oviedo (Spain), requested a preliminary ruling by the European Court of Justice. Mr. Pérez challenged the Spanish law, and in particular the law of the Principality of Asturias, on the coordination of local police forces (BOE No 169 of 16 July 2007). Indeed, he challenged Point 3.2 of the notice of competition (which is the official document in which the details and conditions for the police officers’ recruitment are provided), on the basis that it violates the fundamental right of access, on equal terms, to public office, as affirmed in the Spanish Constitution and in Directive 2000/78. Consequently, he sought annulment of that provision on the ground that an age barrier is not justified, inasmuch as physical fitness is ensured through the physical tests specified in the notice of the competition.  In addition, Mr Pérez observed that the laws enacted by the Autonomous Communities either do not set a maximum age (Andalusia, Aragon, the Balearic Islands, the Canary Islands, Castilla-La Mancha, Catalonia and Extremadura) or set it at 35 years of age (the Basque Country) or 36 (Valencia and Galicia); indicating a lack of consistency, on the part of the Principality of Asturias, when compared to the other Communities. Article 32(b) of the Spanish law specifies that one of the conditions for entry into the local police force is for the person to be at least 18 years of age and no more than 30 years of age.  Relying on Article 6 of Directive 2000/78, such an age limit has been justified by the Spanish law in the light of the objective of ensuring that local police officers possess a particular level of physical fitness for the performance of their professional duties. Art. 6(1)(c) provides that “the fixing of a maximum age for recruitment…is based on the training requirements of the post in question…or the need for a reasonable period of employment before retirement”. According to this provision, the rationale of the Principality of Asturias is that the maximum age of 30 could be justified on the basis of a physical requirement for the police officer position. On this point, prohibiting age discrimination oscillates between employment policies considerations on the one hand and the general principles of anti-discrimination law on the other.[2]

Two main questions arise when one examines the Pérez case; firstly, why direct age discrimination against police officers over the age of 30 should be justified on the basis of a required level of physical fitness intended as legitimate aim; and secondly, in what instances would the physical requirements ground relied upon be considered as “appropriate and necessary”.  The problem is whether the age at which a police officer can be recruited allows enough time to justify the training given and enough time to do the job before the physical demands become too much. A previous case, Colin Wolf v Stadt Frankfurt am Main, deals with the same employment policies. Consequently, it requires a separate analysis in order to see how the court has interpreted the age limit in Pérez case.

In Wolf case (c-229/08)[3] a preliminary ruling was requested from the ECJ to ensure a long career for officials, or at least to ensure a minimum period of service before retirement as a legitimate aim (Article 6(1)). Mr Wolf applied for an intermediate career post in the fire service (which involved physically demanding tasks such as fighting fires and rescuing people). The City of Frankfurt am Main replied to Mr Wolf that his application could not be considered, because he was older than the age limit of 30 years. The referring Court considered that it should be ascertained whether the difference of treatment on grounds of age could be justified by the German law.  The German General Law on equal treatment[4] at Paragraph 10.3 transposed art. 6(1)(c), in the same terms of the Spanish law in article 32(b), as seen above. The Court considered that the physical fitness of an applicant for an intermediate career post in the fire service is assessed in a separate selection procedure, to which Mr Wolf was not admitted because of his age. Following this, the Court limited its question to the interpretation of Article 6(1) of the Directive, in particular focusing on a possible justification of the difference of treatment resulting from the application of the national legislation at issue in the main proceedings[5]. In this particular case, the age barrier was held to be an appropriate objective for ensuring the operational capacity and proper functioning of the professional fire service, without going beyond what was necessary to achieve that objective. The Grand Chamber considered the physical requirements needed for the performance of fire-fighting and rescue duties which, according to the Court, are such that can only be performed by younger officials. This requirement has been justified as a “genuine and determining occupational requirement” on the basis of art. 4(1) of Directive 2000/78 alone. According to the Court, it does not constitute a discrimination on the ground of art. 1, without the need to further consider art. 6. In this way, the Court gave a very broad interpretation of the genuine occupational defence by finding that a maximum recruitment age, as well as physical fitness, was a genuine occupational requirement related to age.

On the contrary, in Pérez case the Court took the view that the level of physical fitness required to work as a local police officer cannot be compared to the “exceptionally high physical capacities” required in the case of fire fighters and therefore the age barrier was not justifiable. Hence, despite in Wolf the Court gave a broad interpretation of the genuine occupational defence for the purpose of art. 4(1), in Pérez the Court used the different nature and level of duties required as the core element for its interpretation and judgment. In Wolf case the maximum requirement age set in German national legislation has been regarded, first, as appropriate to the objective of ensuring the operational capacity and proper functioning of the professional fire service and, second, as not going beyond what is necessary to achieve that objective.

At the first instance, to justify an age barrier on the basis of physical capacity considerations deriving from a determined chronological age, seems to contradict the well-established principle of non-discrimination (Mangold case[6]). However, in both cases, the Court focused on interpreting the exceptions under art.4 and art. 6 of Directive 2000/78.  According to the Court’s approach in Pérez, the difference between justifiable treatment and prohibited age discrimination depends merely on a consideration of the physical duties of each post. Then, in Wolf case the Court considered the age limit as a means to protect the time allowed for a normal career as fire fighters. The same age limit has been instead considered as a discriminatory barrier for police officers career. The focus on the operational capacity and proper functioning of police officers and fire fighters, leads to an oversimplification of the situation, with the chronological age of the person concerned becoming the mere consideration of the Court.

In conclusion, in Wolf case the age barrier is “appropriate and necessary” for “the training requirements or the need for a reasonable period of employment before retirement” and has been both positively accepted and broadly defined by the Court. Despite the similarity, the Pérez case has been considered as a case of age discrimination. The situation of Mr. Pérez sparks reflections on the important economic consequences deriving from recruiting and training police officers characterised by short terms of employability. Ensuring more consistency from the European Court of Justice, especially when examining age discrimination exceptions, would encourage equality and an economic upturn from part of the national legislation. Particular attention at national careers management, especially when a European case has determined a precedent, would encourage a higher economic stability within each country and an overall legal reliability across Europe.

[1] Sargeant , M. Distinguishing between justifiable treatment and prohibited discrimination in respect of age, Journal of Business Law 2013

[2] Schiek, Dagmar, “Age discrimination before the ecj – conceptual and theoretical issues“ [2011] 48 Common Market Law Review, Issue 3, pp. 777–799

[3] Colin Wolf v Stadt Frankfurt am Main (2010) ECR, Case C‑229/08

[4] “Allgemeines Gleichbehandlungsgesetz“ of 14 August 2006 (BGBl. 2006 I, p. 1897, ‘the AGG’)

[5] see, inter alia, Case C‑321/03 Dyson [2007] ECR I‑687, paragraph 24; Case C‑392/05 Alevizos [2007] ECR I‑3505, paragraph 64 and the case-law cited; and Case C‑532/06 Lianakis and Others [2008] ECR I‑251, paragraph 23

[6] Werner Mangold v Rüdiger Helm, (2005) ECR I-9981, Case C-144/04

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Vulnerable workers in Central and East Europe: between European economic growth targets and offshoring

Introduction

The financial crisis that started when Europe slipped into recession in 2008/2009 raised a host of questions regarding productivity and employment. Potential problems deriving from the economic crisis, such as the decline of competitiveness, have been managed both through austerity policies and European programmes of loans to Central and European Countries (CEE).
As part of these measures, the EU, empowered by the EU Treaty and the principle of mutual assistance, adopted borrowing programmes, such as the Balance-of-Payments (BoP), specifically addressed to non-Eurozone Member States.). At the same time, because of austerity policies, taxes increased in the whole of Europe and the economic position of the most vulnerable Member States was made worse since this decreased their competitiveness and attractiveness to Foreign Direct Investment (FDI). Simultaneously, economies of developing countries, such as those in CEE, which were characterised by lower corporate taxes and limited wages, increasingly attracted FDI.
European stability, as promoted by the programmes of loans, seems to contrast with austerity policies which led to an increase in offshoring. In particular, because of higher taxes and increasing expenses in vulnerable Member States, many firms moved part of their production abroad, thereby exploiting the different levels of competitiveness between Member States. In this way, offshoring became a popular practice, since companies choose to outsource their production on the basis of lower labour costs and higher profitability. However, it can be argued that competitive edge and flexibility negatively impact worker protection, especially in those countries with lower social security standards. In fact, there is a correlation between vulnerability in working conditions and lower labour costs; in the host countries where enterprises relocate their productivity, the vulnerability of workers tends to be high. At the same time, within those European Member States which are outsourcing production, offshoring creates more job insecurity and precariousness.
It is suggested that it is only through European policies directed to ensure a minimum wage and adequate social protection to vulnerable workers that tangible levels of unemployment, job insecurity and unacceptable working conditions can be addressed. Moreover, these variations can, in fact, be the turning point for an improvement in the EU’s economy.

The Balance-of-Payments Facility (BoPF) and austerity policies

In the wake of 2008/2009 financial crisis austerity measures were announced in many EU Member States. Governments were called to implement credible adjustments in order to correct budget deficits and achieve the long term goals of ‘smart, sustainable and inclusive growth’ set out in the Europe 2020 Strategy . The States worst hit by the crisis were Latvia, Romania, and Hungary, which, as indicated above, received financial assistance from the European Union. Other European countries, within the Eurozone, had to undertake austerity policies, thereby encountering significant problems. In particular, the vulnerable states faced a large trade deficit and became unable to combat their substantial trade imbalances. This is aggravated by the fact that, since they are part of the Eurozone, they were unable to restore their competitiveness by devaluating their currency which is a typical measure adopted in these cases.
Art. 143 TFEU introduces a Balance-of-Payments (BoP) assistance programme aimed at strengthening the macroeconomic, fiscal and financial stability of non-Eurozone Member States and increasing the resilience and growth potential of their economies. As outlined in the Commission Work Programme 2014 and more widely in the Europe 2020 Strategy, the EU’s priority is to promote growth and job creation, particularly in small businesses. In line with this Strategy, medium-term financial assistance, established by Council Regulation (EC) No 332/2002 under the terms of specific legal duties of cooperation, has been provided to countries outside the Eurozone, even if the content and the legal implications of these duties are vague. Recently, €16 billion have been disbursed to Hungary (until 2010), Romania (until 2015), and Latvia (until 2012 before it adopted the euro).
However, the ongoing negotiations on the BoP show contrasting views on the actual effectiveness of these measures. There is an acknowledgement that loans programmes usually result in a general improvement in the overall economic situation. On the other hand, the financial stability and the growth perspectives of CEE countries remains an issue. In fact, the Commission criticised Hungary and Romania for their lack of political will to implement structural reforms. The last precautionary financial assistance programme for Romania was formally agreed upon in October 2013 (following two previous ones in 2009 and 2011 respectively). It is planned to extend until September 2015 providing general structural reforms largely related to improvements of equality, transparency in fiscal governance, public debit, monetary policies and FDI for innovations.
However, this EU programme fails to address the problem of labour exploitation. Probably, this lack of clarity creates a grey zone currently used by companies to take advantage of the differences in labour costs between Member States. In turn, this also affected the rights of workers in vulnerable states significantly, since they were pushed to review their policies on expenditure and taxes, to detriment of companies and workers. The political debates on the austerity measures focused mainly on the effects of the fiscal adjustments and the recession, while protecting the labour force has not been sufficiently taken into consideration, especially in terms of preventing their vulnerability

Offshoring to Central and Eastern Europe (CEE) and workers’ vulnerability

A strategy adopted by European companies to achieve competitiveness has been offshoring, that is, the relocation of production outside their own country. As noted above, this has allowed them to take advantage of lower taxes and less protective labour laws in order to reduce costs. In fact, the higher cost of doing business and the inflexibility of the labour market as a consequence of austerity policies encouraged companies to go abroad to manufacture (entirely or in part) their goods. The CEE countries are outside the euro zone and are close enough for the transport conditions to be favourable. These elements allow offshoring companies to exploit the differences in unit labour costs (ULCs) and labour productivity. Indeed, during the last decade CEE countries have received a significant amount of capital inflow to invest in productivity processes, especially in the manufacturing sector.
At the same time, in CEE countries the job quality has been measured as low and characterised as vulnerable. Indeed, according to the Organisation for Economic Co-operation and Development (OECD), workers’ vulnerability is a condition that is often simultaneously present with a certain level of poverty. Leschke et al. confirm this, reporting that there is a higher probability of low paid, unhealthy working conditions and unfair dismissal in the countries with the least adequate social protection systems. Offshoring seems to take advantage of the less favourable conditions of workers in CEE countries, thereby increasing their vulnerability. This practice is not illegal and part of the economic literature considers that, in the long term, it could be advantageous for both the offshoring and the target countries. However, when offshoring is driven by a cheaper labour force its intrinsic vulnerability becomes the main reason behind this choice of production.
Therefore, the European Union should be called to intervene on this point. The European Union has provided financial assistance to CEE countries, focusing on structural changes and political commitments, but it has not dealt with their working conditions. In particular, within the BoP framework, the Memorandum of Understanding concluded between the Commission and the Member States only mentions the ‘Economic policy conditions’, which include structural reform measures to improve business environment and support growth. Unfortunately, economic growth is not sustainable when it is based on poor and unsafe working conditions which encourage working poverty and inequalities. Accordingly, the ILO has provided evidence on how good quality jobs and social protection can in fact support economic growth.

Conclusion

Offshoring seems to take advantage of those conditions which are unfavourable to vulnerable workers. In order to protect these workers, a commitment to establishing a minimum wage and basic health, safety and welfare requirements should be written into contracts with providers, and measured and audited periodically. Interestingly, although the European Commission is highly committed to measuring competitiveness across Member States and the CEE countries, working conditions which generate this competitiveness seem to be largely ignored. Leaving aside any political considerations, the measures dealing with relocation should not be shaped around less favourable working conditions. Therefore, in promoting competitiveness the EU should seek to address specific policies to specific problems, rather than merely providing a service of strict economic surveillance over at risk countries or simply supporting non -Eurozone countries with loans.

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