Compensation on termination of employment

The European Court of Justice has ruled that it is not contrary to the principle of free movement of workers (Article 39 EC) for national provisions to deny a worker entitlement to compensation on termination of employment if he terminates his contract of employment himself in order to take up employment in another Member State, when those provisions grant him entitlement to such compensation if the contract ends without the termination being at his own initiative or attributable to him.

This preliminary ruling arose from the following facts in the main proceedings: having worked in Austria for over four years, Mr Graf, a German national, resigned in order to take up employment in Germany. Relying on an Austrian law, Mr Graf claimed compensation for termination of employment. His employers refused to pay.

The Court ruled that the law at issue does not affect migrant workers to a greater extent than national workers as it applies irrespective of the nationality of the worker concerned. Furthermore, there is nothing to indicate that it operates to the disadvantage of a particular group of workers wishing to take up new employment in another Member State.

The Court further stated that the law at issue is not such as to preclude or deter a worker from ending his contract of employment in order to take a job with another employer, because the entitlement to compensation on termination of employment is not dependent on the worker’s choosing whether or not to stay with his current employer but on a future and hypothetical event, namely the subsequent termination of his contract without such termination being attributable to him. As such, the disputed law was held to have no bearing on the freedom of movement of the worker.

This case is of importance to employers because where a migrant worker triggers the effect of EC law by working in a Member State other than that where he is a national, and then resigns, he is still subject to the provisions of his employment contract and cannot demand compensation if he himself sought to terminate the contract. (Volker Graf v Filzmoser Maschinenbau, Case C 190/98, judgment of 27/1/00)