Application of EU labour acquis principles in Albanian employment contracts

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1 International In-house Counsel Journal Vol. 7, No. 28, Summer 2014, 1 Application of EU labour acquis principles in Albanian employment contracts ENIK POGACE Legal expert, Bank of Albania, Albania Introduction The article shall provide a thorough analysis of the employment contract in comparing EU law and Albanian private law. It argues that many concepts of EU employment contract law have not been fully transposed and implemented in Albania. In that respect, the broad interpretation which has been given to the term worker and its application in EU law could be a basis for adoption of an autonomous concept of the employment contract in EU and Albanian law as well, to cover areas that have not been properly covered by the national legislation. The Albanian approach to employment relationships In this article, through a comparative study of the classification of contracts of employment, it is worth pointing out that the regulatory framework in this field in both Albania and EU law is organized around the key concepts of employee and employment contract. Indeed, it is my argument that these two central notions define the scope of the relevant substantive law. The terms are not, however, restricted to employment law. Apart from specific aspects of the general body of law, there are whole areas of law of equal importance that relate to employment contracts, namely social security, tax, and private international law. Taking that into account, not only does the terminology differ, but there can also be a considerable variation between the relevant substantive laws. It should be noted that the labour legalisation in Albania is fairly extensive. Indeed its major sources are: The Constitution of the Republic of Albania; Law no.7961 dated 12 July 1995 "On the Labour Code of the Republic of Albania", as amended (hereinafter the labour code ); Law no.7703 dated 11 May 1993 On Social Security as amended; Law no dated 4 April 2001 On the Ratification of ILO Convention no. 131 on Minimum Wages. Law no.9634 dated 30 October 2006 On Labour Inspection by the State Labour Inspectorate ; Law no.152/2013 On the Civil Servant ; Law no.10237, dated 18 February 2010 On Security and Health at Work ; Law no.7995 dated 20 September 1995 On the Promotion of Employment, as amended; Law no.10383, dated 24 February 2011 On Obligatory Health Care Insurance in the Republic of Albania as amended; Law no.8856 dated 2 July 2002 On the Ratification of ILO Convention no.154 on Collective Bargaining ; Law no.108, dated 28 March 2013 On Foreigners ; International In-house Counsel Journal ISSN print/issn online

2 2 Enik Pogace Of the entire regulatory framework listed above, the Albanian Labour Code provides an extensive safeguard to employees within the framework of the employment relationship. It provides for, but is not limited to, the establishment of key rights and obligations of employer and employees and key features that the employment contract should include, with a view to specifying them and ensuring their presence in the framework of the employment relationship and for establishing the working conditions to be offered to the employee. The Albanian regulatory framework indeed is based on concepts of employee and the employment contract to such an extent that not only are contractual matters key to such a relationship, but they aim at the synchronization and not mere coordination of the legal provisions. However, the application of differing criteria in the legislation, to describe an employment contract may be duly reconciled with different laws and legal contexts applied to employment in Albania. The various characterisations of an employment contract within the labour code are very diverse. The reason for such a characterisation is that the term employee generally determines the scope of a legal text, namely the set of laws governing the employment contract. Indeed, depending on the purpose of the text, the meaning of the term may vary in accordance with the purpose and structure of the employment relationship. On the other hand, as will be clarified later in the paper, EU law, in both the primary and secondary legislative texts, uses also both the concept of worker and employee, and adopts the notion of the work relationship in preference to that of the employment contract. To what extent are these different concepts of worker/employee and employment contract/work relationship in effect identical remains to be seen! By carefully exploring the labour code it can be inferred that it protects all workers, unless their employment is not regulated by any special law. The labour code provides for a number of different contractual relations, following these types of engagements: part-time employment agreement; home-based work agreement; commercial agent agreement; and agreement for learning a specific profession. According to the labour code, the parties entering into such engagements are also subject to the provisions of the Albanian labour code, thus making the contractual arrangements defined in it regulated primarily by the labour code, rather than any other private law provision. 1 On the other hand, the employment of civil servants is regulated by a special law, namely law no.152/2013 On the Civil Servant, thus setting a clear departure from the set principles above. Another departure from the provisions in the labour code, provided for in the broader legal framework, provides that a service agreement is another type of engagement. This is frequently used in practice in Albania. Nonetheless, this type of agreement can only be entered into with a physical person registered for commercial purposes, as established by the civil code of Albania. Indeed, the service agreement is a sui generis agreement, and such agreement is regulated by the provisions of the Albanian Civil Code, thus setting another departure from the above-mentioned principles. Both exceptions provide a clear example that employment relations are not completely within the ambit of employment relations, but also other private law provisions, i.e. civil code. Indeed, as such, employment contracts carry a great deal of importance in the form they should be concluded. Thus the labour code stipulates that such contracts may be agreed 1 Article 6 of the Albanian labour code stipulates that: The provisions of this Code are applicable for all the contracts of employment, which will be bound after its entering into force.

3 Application of EU labour acquis principles 3 orally or in writing. 2 In the event that the employment contract is agreed orally, the employer must produce a written employment contract following the verbal agreement, bearing the signature of the employer and that of the employee and containing all mandatory legal elements as duly provided in the labour code. Failure to conclude the employment contract in written form will not affect the validity of the agreed contract, but the employer is subject to a fine. A few terms and conditions of such employment relationships are implied into employment contracts e.g. payment of social insurance and health contribution, the right to the minimum notice period, non-discrimination, duty of the employer and employee for confidence and trust, the right of the employee to not work during public holidays, the employees duty to obey any reasonable instructions given by the employer, etc 3. The labour code provides also that collective bargaining can be negotiated and all employment terms and conditions thus taken into account, providing that these provisions are not less favourable for the employees than the provisions defined in the existing laws and secondary legislation. Typically, collective bargaining takes place between the employer and one or more trade unions of the company, whereas according to law no.10237, dated 18 February 2010 On Security and Health at Work, employers are obliged to establish a Council of Safety and Health at Work. Indeed, the mission of the council is to contribute to the protection of the health and security of employees, and its authority is properly established in the employment contract. 4 In addition, the employment relationship and the relevant contract play a major role in the prevention of discrimination of employees. In Albania, discrimination against employees is prohibited under the Constitution of the Republic of Albania, and conventions ratified by Albania. The labour code, and law no.9773, dated 12 July 2007 On the Ratification of the ILO Convention, 1958 On Discrimination and article 1 of law no dated 4 February 2010 On Protection from Discrimination provide that, inter alia, people cannot be discriminated against because of gender; race; colour; sexual orientation; disability; ethnic background; nationality; religion or belief; age; educational or social origin; family relation; pregnancy and maternity leave; economic condition; residence; or belonging to a particular group. Any differentiation, exclusion or preference based on the above-mentioned specifications, which violates the rights of an individual to equal treatment and employment, are considered unlawful. However, it should be noted that differentiation required by a specific job position is not considered as discrimination in light of the above provisions. Furthermore, according to article 115 of the labour code, the employer provides the same amount of salary to employees carrying out the same jobs, and in cases where an employee obtains a different salary for the same job, this may be considered as discrimination. In such circumstances, employers may defend themselves against discrimination claims by proving in court proceedings that they had reasonable cause or a legitimate non-discriminatory reason for dismissing or taking other actions against the employee. 2 Article 21 of the labour code stipulates that: The contract of employment may be concluded or changed either orally or in a written form. It may be changed only if the parties agree to do so. Any change of the written contract to the detriment of the employee must be executed in a written form. 3 The labour code provides an extensive array of legal provisions concerning the rights of employees. To name but a few, is article 8, on the prohibition against compulsory labour, article 10 on trade union liberty and collective bargaining, as well as article 12 that the contract of employment should include, among others, the labour relations, and the rights and obligations of both parties. 4 Most aspects related to employment and movement of workers issues, are clearly stipulated in provisions of the Stabilisation and Association Agreement between the European Communities and their Member States, of the one part, and the Republic of Albania, of the other part, namely articles 46 and 47.

4 4 Enik Pogace In the event of the transfer of an enterprise or part of it, all rights and obligations arising from a contract of employment valid until the moment of transfer, shall dully pass on to the person, who due to such transfer, will inherit the rights and obligations of the employer. So once more the cornerstone of the employment relationship, from a private law perspective is solely based on the employment contract. The labour code provides that any employee refusing to change employer in this event remains bound by the employment contract until the expiration of the termination notice. In a business sale, all rights and obligations, as well as liabilities under the employee s employment contract are transferred to the transferee. In addition, liabilities arising before the transfer such as unpaid wages, etc., are excluded from the applicability of the general rule; such liabilities remain with the employer. Indeed such stipulation is clearly provided in Article 139 of the labour code which sets up an information and consultation procedure in the event of a transfer of enterprise. The transferor and the transferee are obliged to inform the trade union of its role in the capacity of the representative of employees, or, in the absence of a trade union, the employees are informed and explained of the reason for the transfer, its legal, economic and social effects on the employees, and the measures to be undertaken in respect thereof. Besides, they are obliged to engage in consultations concerning the essential measures prior to the completion of the transfer. In the event that an employer terminates the contract without following the above-mentioned procedures of information and consultation, each employee is entitled to compensation in addition to the salary he/she would have received during the prior notice period. An employer failing to comply with the above-mentioned procedures may be punished with a fine. It should be noted that the labour code also stipulates that an employee cannot be dismissed because of a business sale. Exceptions to this rule are dismissals that are due to economic, technical or organisational reasons that impose changes to the organisational structure of the company. Even in such cases, due to the enforceability of the employment contract within the scope of the labour code provisions, the employer is obliged to notify on the termination of the employment relationship. The notification period for the termination of the employment contract is defined in the individual employment contract. In the event that the parties have not defined the notice term in the employment contract, reference is made to the provisions of the labour code. In addition the labour code provides for mandatory minimum notice periods to be applied in the case of termination of an indefinite term employment contract by either the employer or the employee. In such cases the employee is obliged to work during the notice period, however, as the employee still remains on the payroll, it is at the discretion of the employer to decide whether the employee may work or leave the place of work throughout the notice period. On the other hand, restrictions on dismissal may be imposed by collective agreement and by individual employment contracts. Certain examples when an employee is considered dismissed are if: the employer terminates the employment contract with notice or without notice; when the employer offers the employee a choice to either resign or to be dismissed; and when the employer refuses to engage the employee in work for any reason that is not related to the employee and the employer does not pay the salary to the employee during this period. Nevertheless, the labour code clearly specifies that the employer may not terminate the employment contract when, according to the existing legislation, the employee is completing his/her military service, benefits payment for temporary disability to work for the employer. Furthermore, the employer may terminate the employment contract for any other cause which is not mentioned in the labour code or the employment contracts; but in such cases there should be dismissal compensation.

5 Application of EU labour acquis principles 5 The aforementioned provisions, certainly demonstrate that the labour code, as well as other related Albanian legislation, centre the role of the employment relationship on the employment contract, rather than specific definitions established in the law. The facts put forward above explain why there is no mandatory conciliation procedure prior to a complaint being submitted to an Albanian court. However, after a lawsuit is submitted to the competent court, the provisions of the Albanian Civil Procedure Code apply to the employment-related complaints in a similar way and to the same extent as with other civil disputes. This conflicts with aspects of the self-regulatory nature of labour law, by deferring part of the role of dispute resolution to civil courts and private law. With regard to such civil disputes, a conciliation mandatory hearing is held by the court before such court proceeds to carry on with the lawsuit. However, in order to submit a claim to the court, an employee is obliged to pay a pre-trial court fee of 1 per cent of the claimed amount. The Constitutional Court, 5 has ruled that it is at the judgment of the pertinent court to examine the evidence provided by the employee regarding his/her lack of financial means, and to assess, making reference to the civil procedural legislation, whether the employee must be exempted or not, from payment of such court fee. The EU law approach to employment relations It is important to recognise that not only is the EU law notion of worker not equivalent to that of employee such as it is implied in the domestic law of the different Member States, but that also the EU law concept of worker is not consistent even within the different EU law texts. In order to demonstrate this, a division may be drawn between the notions originating in EU law and those purely of domestic law, but this formal distinction does not capture all of EU law covering this field. Whether the EU law interpretation of worker is of any relevance in clarifying a definition of the concept of an employment contract in EU private law, would require a benchmark concerning the term of employment contract in EU law. 6 5 For more information please see Albanian Constitutional Court Decision no. 7 of 27 February EU acquis on employment relations is fairly extensive. Some of the most important legislative acts in this field are listed as follows: Directive 91/533/EEC of 14 October 1991 on an employer's obligation to inform employees of the conditions applicable to the contract or employment relationship. Directive 2000/78/EC, which establishes a general framework for equal treatment in employment and occupation, which forbids discrimination based on religion, belief, disability, age and sexual orientation. The general principle of antidiscrimination is safeguarded at the EU level by Directive 2000/43/EC implementing the principle of equal treatment between persons irrespective of racial or ethnic origin. Directive 75/117/EC on the approximation of the laws of the Member States relating to the application of the principle of equal pay for men and women. Directive 76/207/EC on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and working conditions. Directive 86/378/EEC on the implementation of the principle of equal treatment for men and women in occupational social security schemes. Directive 2003/88/EC of the European Parliament and of the Council of 4 November 2003 concerning certain aspects of the organisation of working time. Directive 2003/88/EC consolidates the original Working Time Directive 93/104/EC of 23 November 1993 and its amending Directive 2000/34/EC of 22 June Directive 1999/70/EC of 28 June 1999 concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP. Directive 97/81/EC of 15 December 1997 concerning the Framework Agreement on part-time work concluded by UNICE, CEEP and the ETUC - Annex: Framework agreement on part-time work. Directive 92/85/EEC of 19 October 1992 concerns the implementation of measures to encourage improvements in the health and safety of pregnant workers, women workers who have recently given birth and women who are breast-feeding. Directive 96/34/EEC of 3 June 1996 on the framework agreement on parental leave concluded by UNICE, CEEP and the ETUC. Directive 79/7/EC on the progressive implementation of the principle of equal treatment between men and women in matters of social security. Directive 86/378/EEC of 24 July 1986 on the implementation of the principle of equal treatment for men and women in occupational social security schemes. Directive 98/49/EC safeguards the supplementary pension rights of employed and self-employed persons moving within the Community. Regulation (EEC) No 1408/71 deals with the application of social security schemes to employed persons and their families moving within the Community.

6 6 Enik Pogace It is not unreasonable to suggest that it may be useful to reflect on the examination of the concepts of worker in EU law that are consistent. It is noteworthy that a reason for the lack of definite and consolidated concepts, since EU law leaves it to domestic law to clarify the use of exact definitions and terms. On the other hand, there is more to it than meets the eye, since in certain cases EU law adopts an autonomous meaning which could be a basis for a definition in terms of EU s private law. It might be argued that a review of EU law would give the impression that the concept of worker is identical to the domestic notion of the employee applied in many Members States. Indeed, the position is rather more complex than that. In many cases for example, the English versions of directives refer to employees; in others, they refer to workers. 7 Indeed, it can be argued that in most cases EU Directives using the term worker are transposed into domestic law of Member States using the term employee except where the term salaried worker is used as it is in France (but not in English law). In the United Kingdom, the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002, which brings into effect the EU Directive of 1999 on Fixed Term Contracts, are a typical example since they use the term employee to translate the term worker. 8 Mention should also be made of the legislation implementing the Part-time Workers Directive and the Working Time Directive, which both stipulate they are applied to workers. In any sense it seems clear that there is little uniformity to be found in the approach of EU law, especially when it leaves the definition of the term of worker to the domestic law of Member States; so one of the most important elements of employment contracts is blurred. For one thing it could be argued that directives are inclined to leave it to the domestic law of the Member States to define the term worker, or the work relationship and eventually the employment contact. Thus, the 1996 Parental Leave Directive 9 applies to all workers, despite their gender, who have an employment contract or employment relationship as defined by the law, any collective agreement or related practices in Member State. In addition, the 1996 Directive on the posting of workers 10 stipulates that the definition of worker depends on the law of the Member State to whose territory the worker is posted. It should also be emphasised that one of the few directives in this field to apply to employees as opposed to workers is the 1991 Directive on the information to be supplied to employees 11, which stipulates that it applies to every employee based on a contract or employment relationship defined by the law in a Member State. The English version implementing the directive uses the word employees 12. In addition, the Acquired Rights Directive, which defines employee as a person in a Member State who is protected as an employee under national employment law An example is the implementation of the acquis in UK by the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000, SI No 1551 and the Maternity and Parental Leave (Amendment) Regulations 2002, SI No The Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002, SI No 2034, which came into force on 1 October 2002, have introduced new rights for employees on fixed term contracts such as being entitled to the same pay and benefits, sick and holiday entitlements as comparable permanent employees. 9 Directive 96/34/EEC of 3 June 1996 on the framework agreement on parental leave concluded by UNICE, CEEP and the ETUC. 10 Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services. 11 Directive 91/533/EEC of 14 October 1991 on an employer's obligation to inform employees of the conditions applicable to the contract or employment relationship. 12 The Working Time Regulations 1998 No.1833 which came into force on 30 October 1998 and The Working Time (Amendment) Regulations 2003, SI No 1684 which came into force on 1 August Smaller amendments to the Working Time Regulations 1998 were also made in 1999, 2001, 2002 and Directive 98/49/EC which safeguards the supplementary pension rights of employed and self-employed persons moving within the Community.

7 Application of EU labour acquis principles 7 It is evident that the lack of an accurate definition in EU employment acquis, would open the door to the case law of the Court of Justice (ECJ) with a view to decide and attribute a clear definition of EU concepts. 14 Thus, in several cases it is the ECJ which has provided the right definition in cases where an ambiguity of terms has existed in employment contracts or relations. It is worth pointing out that in their domestic legislation, Member States do not have the same definition of the term employee, which means that the EU law term worker may be duly interpreted differently according to the Member State to which the interpretation is left by the EU law. Therefore, the role of ECJ by providing an autonomous notion of worker, and therefore of employment contract is needed in EU law as well as by any Member State implementing these directives. It is important to note that not all of EU law provisions in the field leave the definition of employee or worker to be decided by the Member States. In cases where the text does not provide a clue, there is an additional feasible approach, that an autonomous EU definition could be adopted. An important example of this approach is the Health and Safety Directive of The Directive applies to both the public and private sectors and appears to allow no leeway of definition to the Member States. Article 3 of the directive defines worker as any person employed by an employer, including trainees and apprentices but excluding domestic servants. Unlike other EU legal texts above-mentioned, it leaves no room for manoeuvre to the Members States, which provides a hint that an EU definition has been anticipated by the EU legislator. Taking into consideration that the 1989 Directive, unlike other EU laws considered above, opts for an integrated definition, it can be argued that at least in the field of legislation aimed at harmonising the law relating to health and safety, there is a common position that there should be a definition which would apply on an EU-wide basis. Nor is it entirely fanciful to suggest that the rest of EU law in this field, which is related to matters of private law, allows a national rather than an EU interpretation. It is difficult to escape the conclusion that there could be a limit to the harmonisation of EU law, whereas the ECJ drew attention to these aspects of harmonisation that may impact on Member States. Nonetheless, it should be noted that in the case of EU legislation that may broaden its scope beyond coordination and aiming for harmonisation, these EU instruments demand the adoption of a standard definition to use. Judged by these criteria, alongside the EU legislation referred earlier, there is an EU law concept of the term employee which reveals, if the need arises, the complexity of the notion. In other words, when it is no longer a case of a simple coordination between regulations among Member States, there is no prerequisite for harmonisation, however, where there is a clear case of harmonisation of regulations, and then an EU notion of the employment contract is required. Conclusion In view of the above, it can be concluded that the definition of employment contract is a contract whereby a person performs services of some economic value for and under the direction of another person in return for which he receives remuneration. Both the Albanian legislation and the EU acquis, present the same aspect, but in both cases employment appears to be packed with uncertain definitions of employee (worker) and the nature of services to be carried out, as referred in the civil law. 14 ECJ case C-221/95 EJM de Jaeck v Staatssecretaris van Financiën et Institut national d assurances sociales pour travailleurs indépendants v C Hervein et Hervillier SA (30 Jan 1997) 2 decisions. 15 Framework Directive 89/391/EEC on the introduction of measures to encourage improvements in the safety and health of workers at work in general.

8 8 Enik Pogace Although an employment contract can be taken as a sound basis for its application within the principles of private law, I suggest a broad interpretation should be given to the notion of the employment contract in the Albanian private law in an effort to promote a similar way of interpretation of EU law when construing the freedom of movement of workers, as well as different forms of regulations pertaining to employment. There is a degree of truth in the view that that EU private law concerning employment contracts are very protective of employees; such protection could be impaired if a narrow definition, or a definition left to the Member States, is adopted. So to avoid this, Albanian labour legislation should strive to follow, and closely align the concept of the employment contract and its elements with that established in EU private law and EU acquis in the field. *** Enik Pogace currently works as head of employee relations division at the Human Resources Department at the Bank of Albania. He was formerly a legal expert at the Bank where he embarked on a wide array of legal issues related to banking, payment systems as well as prevention of money laundering and terrorist financing. Mr.Pogace began his career working for international organisations i.e. UNDP, IOM and then in the International Relations Department of the Ministry of Justice. Prior to joining the Bank he worked at a European Commission programme on justice reform in Albania. He has carried out academic studies at the Universities of Georgetown, Freiburg and Marmara as well as postgraduate legal research at the University of London. Mr. Pogace s recent work and research has been particularly focused on the approximation of banking legislation to the EU acquis. The Bank of Albania is the central bank of Albania. The economical-political and social developments since its establishment and thus far, have enriched the functions carried out by the Bank (they have augmented and enlarged its functions). The Bank of Albania, within the competences defined by the Law, is independent in the accomplishment of its main objectives and in exercising the tasks assigned.