Written by
Supreme Court: No employment, no coverage by LG
The Supreme Court has established that a pilot who had worked for an airline through employment with another company could not have his claim for unpaid salary covered by the Employees’ Guarantee Fund (LG) when the airline went into bankruptcy.
Written by
Dorthea Bisgaard Vase
Forfattere
When a company goes into bankruptcy, the company’s employees are entitled to have their claim for unpaid salary covered by LG. However, it is a requirement that the claim for salary has arisen as part of work for the bankrupt company. In this case, the Supreme Court had to decide whether a pilot who carried out flights for a bankrupt airline through another company could have his claim for unpaid salary covered by LG.
The pilot had originally applied for employment with the airline and was invited for an interview, but was subsequently offered employment with Flight Crew Solutions (FCS), which hires out employees to airlines. The pilot did not perform work for other airlines.
When the airline went into bankruptcy, the pilot was given notice of termination by FCS. The pilot then filed a claim for unpaid salary during the notice period to LG, which rejected the claim on the grounds that the pilot was not employed by the airline.
The pilot’s trade union then brought an action against LG claiming that the pilot should be considered as an employee of the airline. The trade union argued that the concept of ”employee” in the Act on the Employees’ Guarantee Fund (LG) must be interpreted broadly. It was a condition on the part of the airline that the pilot entered into an employment contract with FCS in order to fly for the airline. In addition, it was the airline that planned the pilot’s working hours and arranged for continuing training.
LG referred to the fact that it was only FCS that was a party to the employment contract with the pilot and that it was only FCS that could terminate the pilot’s employment. This meant that the pilot should be considered to be employed by FCS, not by the airline.
Being the court of first instance, the Eastern High Court heard the case and found in favour of LG, but the trade union appealed the ruling to the Supreme Court. With its judgment, the Supreme Court decided on the fundamental question of how the concept of employee in the EU Insolvency Directive (implemented by the Act on the Employees’ Guarantee Fund (LG)) should be understood.
No employment contract with the airline
The Supreme Court established that according to the case law of the ECJ, the concept of employee in the Directive must be interpreted in accordance with the Directive’s social objective of ensuring that all employees enjoy a minimum level of protection under EU law in the event of an employer’s bankruptcy. Member States must therefore apply the usual concepts of employer and employee without limiting them in a way that jeopardises that objective.
In other words, the specific employment relationship had to be assessed according to the same criteria as those usually applied in Danish law. In this assessment, the Supreme Court attached importance to the fact that the pilot had not produced an employment contract between him and the airline. Further, it was FCS that paid the pilot’s salary, and there were no other circumstances indicating that the pilot’s employment with FCS was pro forma.
The Supreme Court upheld the ruling by the high court and found in favour of LG.
Norrbom Vinding notes:
The judgment illustrates that in the event of the employer’s bankruptcy, a claim for pay guarantee from LG requires sufficient proof that an employment relationship exists in the bankrupt company, and it is for the employee to prove this, for example in the form of an employment contract.
With the judgment, the Supreme Court also establishes that it is the general concept of employee in Danish law that must be applied under the Act on the Employees’ Guarantee Fund (LG).
The content of the above is not, and should not be a substitute for legal advice.
Forfattere