remedies and sanctions – era seminar 15 march 2010

Prof Dr Alenfelder – Lawyer specialised in Labour Law and Anti-Discriminination Law 1Professor of Business Law, FH Nordhessen www.alenfelder.de – President, German Society for Anti-Discrimination Law

Remedies and Sanctions – ERA Seminar 15 March 2010

Remedies and Sanctions

Prof Dr Klaus Michael Alenfelder, BonnProfessor of Business Law, Lawyer specialised in Labour Law and Anti-Discrimination LawPresident, German Society for Anti-Discrimination Law, www.dgadr.orgPermanent Representative in Germany, European Anti-Discrimination Council, www.eacih.euwww.alenfelder.de - [email protected]



• Requirements of the EU Directives

– “The sanctions, which may comprise the payment of compensation to the victim, must be effective, proportionate and dissuasive.”

• Art 15 Race Directive, 2000/43/EU• Art 17 Framework Directive, 2000/78/EU



• Requirements of the EU Directives– European Court of Justice:

• Von Colson v Land Nordrhein-Westfalen, Case No. 14/83 Re. 23:

– “Although ... full implementation of the directive does not require any specific form of sanction for unlawful discrimination, it does entail that the sanction be such as to guarantee real and effective judicial protection. Moreover it must also have a real deterrent effect on the employer”.

• Marshall v Southampton and South West Hampshire Area Health Authority Case No. 271/91 Re. 24

– “those measures must be such as to guarantee real and effective judicial protection and have a real deterrent effect on the employer”



• Requirements of UN– Basic Principles and Guidelines on the Right to a Remedy and Reparation

for Victims of Gross Violations of International Human Rights Law and Serious Violations of International Humanitarian Law:

18: „full and effective reparation … which include the following forms: restitution, compensation, rehabilitation, satisfaction and guarantees of non-repetition.“

“20. Compensation should be provided for any economically assessable damage, as appropriate and proportional to the gravity of the violation and the circumstances of each case, resulting from gross violations of international human rights law and serious violations of international humanitarian law, such as:(a) Physical or mental harm;(b) Lost opportunities, including employment, education and social benefits;(c) Material damages and loss of earnings, including loss of earning potential;(d) Moral damage;(e) Costs required for legal or expert assistance, medicine and medical services, and psychological and social services”.



Why are these sanctions necessary?



• Requirements of the EU Directives

– Aim: a Europe free from discrimination

• Hence in the workplace:

– Employees MUST BE hired, paid and promoted based on facts only - and not based on bias



Eliminating discrimination is efficient:– Improved recruitment of employees– Higher qualification of employees:

• Selection based on performance instead of prejudice• Example:

– 100 applications for a management position– discriminating employers may reject:

» 50 women

» 10 migrants

» 10 disabled people

» 15 applicants with an age above 50

» And then they will start applying facts to their decision making

– Chances are they will reject the best applicant



Eliminating discrimination is efficient:– Significantly reduced employee turnover:– Sick days reduction– Dedication instead of doing just enough

– Estimated costs of discrimination and bullying (so-called „mobbing“ and „straining“) for employers in Germany exceeding € 100 bn each year.

– Even higher costs for social services.



Summary:

Discrimination is immoral and highly inefficient



Remedies and Sanctions

- Criminal sanctions (penal law):

- are possible

- But one big disadvantage: - Convictions require high legal threshold

- Therefore: only few convictions can be expected

- Civil Law:

- Compensation



Material Compensation



• Material Compensation: – Material losses have to be fully compensated for– Especially:

• Loss of wages • Legal costs• Loss of work efficiency



• Material Compensation:– No time limit for loss of wages

• Example:– Tony is fired on reaching his 45th birthday because he is

„too old“. He wanted to retire at 65. – His annual wage was € 60,000. – Maximum material loss:

» 20 years = € 1,200,000

» Problem: what if Tony finds another job? The money he earns there has to be taken into account

– Tony can sue for € 60,000 each year or € 5,000 every month for the next 20 years minus his earnings elsewhere or

– Estimation of the losses and one-off payment



Material Compensation:

– Reasonable solution: Estimation and one-off payment instead of 20 years in court

• In Vento v. Chief Constable of West Yorkshire (2003) IRLR 102 the judges estimated the probability of working until pension age was 75 percent. They awarded 75 percent of the wages until pension age (165,829 GBP)

Short report on the case: www.cre.gov.uk/legal/remedies/case_015vento3.html

• In Germany the Kattenstein Formula is a means to estimate losses:

– Based on 14 million data sets

– Considering for example normal labour turn-over rate, deduction of accrued interest, lost promotions

See: ZfAD, Alenfelder, 2/2007, www.dgadr.org/024cc1993f1325c0d/index.html



Example:

Estimation by using the Kattenstein Formula:

In the case of Tony: almost four year‘s wages

Monthly wage (€): 5,000

Age: 45

Retirement age: 65

Interest rate p.a.: 2.50 %

Estimated salary increase p.a.: 3.60 %

Lost pension claims p.a.: 0.27 %

Raise of salary due to promotion p.a.: 0.47 %

Probability of keeping the job p.a.: 86 %

duration of employment (months) 240

volume of employment: 100 %

Reduction for unemployment pay I: 59.80 %

Reduction for unemployment pay II (€): 800

Claim for damages: € 233,960.48



Material Compensation: – Legal costs:

• Under German law there is no compensation for legal costs in the first instance in Labour Courts

• this is a violation of the EU directives and the UN convention• This German regulation is likely to be overturned

– Special financial damages:• This means material losses like

– Reduced productivity– Loss of abilities

• These damages are to be expected in cases of intensive and degrading bullying (so-called mobbing and straining)

• The losses can be permanent or for a long time. • Therefore: financial losses may be higher than the lost wages• The damage can be defined by an expertise in a way similar to bullying

(„mobbing“)– See „La valutazione peritale del danno da Mobbing“, Verlag Giuffrè, Mailand, 2002 by Prof. Dr. Ege,

Bologna, acknowledged in judgements of Italian Labour Courts: Agrigent (01.02.2005), La Spezia (04.07.2005), Sondrio (31.03.2006), Sondrio (22.07.2006), Bergamo (08.08.2006), Bergamo (14.06.2007)



Example:– Tony is 45 years of age and works as a mid level manager (salary:

€ 60,000). – He has been bullied by his superiors and colleagues for 5 years

because of his religion. He is the only roman catholic in the company.

– Finally he collapses and his doctor advises him to leave the company.

– He suffers from depression, he feels insecure and avoids meeting people. His doctor expects these handicaps to be permanent.

– He loses the ability to lead work groups and is working efficiency is permanently down to 50 percent.

– After four years he finds a new job, but his annual salary is down to € 36,000.



- Estimated loss of earnings (Kattenstein Formula): around € 240,000

- But:

- this sum equals only around four year‘s wages. The permanent loss of abilities is not taken into account.

- The employee „sells“ his abilities and efficiency in his job. If these „goods“ are damaged he loses economic value. This means: no salary or lower salary.

- This material loss has to be compensated in full.

- These special financial damages can be estimated by an expertise similar to damages caused by bullying („mobbing“ and „straining“)

Metodo Ege 2002, „La valutazione peritale del danno da Mobbing“, Milan, 2002



Compensation for immaterial damages



• Compensation for immaterial damages – Important: The compensation needs to have a real

deterrent effect on the employer• Aims are

– dissuading the perpetrator from further discriminations» Special prevention

– dissuading other employers from discriminating against their employees

» General prevention

– Problem:

What sum is really a deterrent?



• “dissuasive”: – deterring from action

• What does “to deter” mean? – Synonyms are: warn, frighten, intimidate– For example: “Deterrence theory”:

• Deterrence is a strategy by which countries threaten an

immense retaliation if attacked. Mutually Assured Destruction

(MAD) is a form of this strategy.



• Examples for how the EU interprets deterrence:– Big companies have been fined the following “deterrent” amounts:

• € 462 M, Hofmann-La Roche, 2001www.spiegel.de/wirtschaft/0,1518,292146,00.html

• € 497 M, Microsoft, 2004www.sueddeutsche.de/wirtschaft/774/341617/text/

• € 280 M, Microsoft, 2006www.spiegel.de/wirtschaft/0,1518,426368,00.html

• € 899 M, Microsoft, 2008www.taz.de/1/zukunft/wirtschaft/artikel/1/900-millionen-euro-strafe-fuer-

microsoft/?src=SZ&cHash=073fab7d36• € 85.8 M, Knauf, 2008

www.eu-info.de/eugh/knauf/

So:Real deterrence requires „painful“ compensation



• Another problem: – Without high compensations – why should a victim care to make a claim?– In Germany there have been just a few hundred cases up to now– Let us consider the position of the victim:

• It is a new law with unclear interpretations • They have to face years of legal battles (for example three instances and 5

years)• They have to prove things only they themselves have seen and heard• In many cases they will be denounced as liars, as being paranoid, as being

greedy– Some of my clients have to take calming medication before reading letters

from their former employers and their lawyers• They lose their jobs: for example because things will get rather unpleasant in the

work place• And they have a hard time finding a new job because their references are

damaged

• And if they win, they are awarded just a token € 2,000

Why make the effort?



• How to calculate the compensation:– First step: looking at the victim

• Criteria:– Severity of incidents– Psychological and medical consequences

• Large increase of compensation due to degrading treatment like bullying („mobbing“ and „straining“)

• Estimation of financial consequences by expertisesee Prof Harald Ege, „La valutazione peritale del danno da Mobbing“, Mailand, 2002

– Second step: looking at the perpetrator (deterrence)• Which sum is necessary to guarantee real deterrence?

– The higher sum has to be awarded as compensation



- Determining the deterrent compensation: comparing income and compensation- Example:

• The perpetrator has a business volume of € 10 bn• The victim claims a compensation of € 1,000,000• The higher the compensation compared to the business volume

the higher the deterrance • In this case: the compensation is 0.1 percent of the business

volume• Compared to the income of an average employee in Germany

this means:– „business volume“: € 30,000 per year– 0.1 percent: € 3

Can this sum be a deterrent?



- Deterrent compensation:- 1-2 percent of the annual business volume: deterrent but could lead

to extremely high sums- Suggestion:

- For each discrimination one year‘s wages should be awarded or at least one year‘s average income (in Germany: € 30,000)

- Minimum necessary for effective protection of low income earners

- Several German members of Parliament suggested this sum in 2006

- ECJ decided in 1997:

– Three month‘s wages are insufficient as „deterrent compensation“ (Draempaehl v. Urania Immobilienservice OHG 22. April 1997, C-180/95, Re. 26)

- Question: - is such a level of compensation really a deterrent, especially when

applied to big enterprises?



- Examples from Germany:- Tradition of very low compensations for immaterial damages- In the past the German courts awarded sums around 1.5 months

wages for discrimination- This is insufficient. Now the courts are slowly increasing the

amounts.- Development

- Several courts awarded 6 months wages e.g. Higher Labour Court Hamm, 26.02.2009, reference number 17 Sa 923/08; Labour Court Neumünster 09.12.2009, reference number 3 Ca 1055 b /2009

- bullying: 12 months wages: Labour Court Cottbus 08.07.2009, reference number 7 Ca 1960/08



- Own cases:

– € 500,000: gender and age discrimination, offer of the employer for a settlement, 2009

– € 200,000: age discrimination, settlement, 2008

– € 100,000: age discrimination, settlement, 2009

– € 50,000: gender discrimination, settlement, 2009

– € 50,000: discrimination of disabled people, settlement, 2008

– € 33,000: discrimination on grounds of belief, settlement, 2008

– € 30,000: because of bullying, judgement, 2009

– € 23,000: gender discrimination (14.5 month‘s wages), settlement, 2009

- 6 month‘s wages: gender discrimination, Labour Court Neumünster, reference number 3 Ca 1055 b/09, 2009



- Further Remedies and Sanctions:- Non commercial compensations:

- the wrongdoer can be required to do something or to refrain from doing something

- A very effective measure would be blacklisting discriminating companies and barring them from applying for public sector tenders and subsidies

- In the USA such a blacklist exists: - Office of Federal Contract Compliance Programs (OFCCP),

http://www.dol.gov/ofccp/index.htm» US Department of Labor



- Question- Why should we spend tax money on discriminating

companies by awarding them public tenders or subsidies?

- At least the government should keep up the idea of a society free from discrimination.

- This would be hypocritical:- On the one hand passing legislation against discrimination

whilst on the other hand doing business with discriminating companies.



Some case studies from Germany



- Mrs E.

- German citizen of Turkish decent

- Worked as an insurance employee selling in a district and earned bonuses for each insurance sold

- Was demoted because she was pregnant:

• she was pregnant with her second child in December 2006

• She told her boss that she wanted to return to work as soon as possible

• But her job was handed over to a male colleague

• When she insisted on returning to work after birth, the employer assigned her to a far less lucrative district which, on average, produces just 13 percent of the turnover of her previous area of responsibility

• The man given Mrs E‘s previous district, was provided with an office, an assistant and a higher salary than she had been receiving - all things she had been requesting for years – so Mrs E told



- Claim: discrimination because of gender (maternity) - € 450,000 loss of income- € 50,000 compensation for immaterial damages

- Judgement, Labour Court Wiesbaden (1. Instance), 18.12.2008:

- Two gender discriminations: - the employer reassigned Mrs E two times to a far worse

district- Material damages

- restitution in kind - she could work in her former district



- Immaterial damages• „Deterrent“ compensation of € 11,000

• Around 0.0001 percent of the business volume

• Comparing this with the salary of an average employee in Germany:

– „business volume“: € 30,000

– 0.0001 percent as compensation: 3 Cents

– For comparison: costs in Germany for a parking ticket are up to € 30 (0.1 percent of „business volume“ per year)

– Appeal is lodged– € 11,000 compensation was the wrong signal:

- Lawyer of the employer told the press: this amount is bearableSüddeutsche Zeitung, 19.12.2008, „Billige Diskriminierung“ (cheap discrimination)

- This verdict demonstrates to companies that violating human dignity can be done cheaply and it demonstrates to victims that fighting is useless



- Mrs L.- Client worked in nursing home as a senior nurse- A new manager started to bully her

- He revoked most of her competencies, although she had proven outstanding efficiency

- He ignored her, when she told him of health risks for the patients- He wrongly accused her of abstraction of documents - He offended her with anti female statements- And finally he terminated her contract- She is still in medical treatment



- Judgement, 2009- € 30,000 immaterial damages- And further compensations for any future damages - The company AND the manager are personally liable for

all these damages- The decision stresses the need for general prevention- The company employs around 40 people and the case

happened in a poorer region of Germany (eastern part) – therefore the sum was seen as deterring



Bullying martyrdom of a citizen of Forst, 12.07.2009Lausitzer Rundschau



- Mrs M- Gender discrimination (maternity)

- She worked as a physical therapist - She had a fixed-term work contract for one year- At the end of the year she was pregnant- Because of that the employer offered her no permanent

contract. Instead he hired another physical therapist- And her superior said that quite openly to her husband



- Gender discrimination (maternity)- Claim:

- Gender discrimination- Compensation

- Permanent contract

- immaterial damages

- loss of wages

- Judgement, Labour Court Neumünster, reference number 3 Ca 1055 b/09, 2009

- Permanent contract- Immaterial damages: 6 month‘s wages based on full time

employment - although she worked only half days- All wages



- Mrs Weingärtner- Sedika Weingärtner, aged 45, German citizen of Afghan decent- She came to Germany in 1991 as a single mother with three

children after fleeing from Afghanistan, where she had worked in the capital city, Kabul, as a television journalist.

- Worked from 2002 to 2009 as a manager in the area of global procurement

– Bullying for several years, for example: • Far greater workload than her colleagues

• Tucked alone inside a tiny office and nobody talked to her.

• Refusal to give her a laptop computer, like the other employees had. Instead, she was given an old computer.

• she suffered verbal abuse by her bosses, who called her names such as “dirt”, “sloppy” and “Arab”.

- Lower salary than her male German born co-workers



- Mrs Weingärtner- Claims:

- € 1.3 million as compensation for material and immaterial damages

- Disclosure of differences in salary and bonuses between Mrs Weingärtner and her male co-workers and pertinent compensation

- Judgement expected in summer 2010



Conclusion- Discrimination

- is highly immoral – a direct attack on human dignity- and it is higly inefficient as well

- Low awards are useless and encourage discrimination- At the same time such awards discourage victims

- Only full compensation of all material damages and truly deterrent compensations will end discrimination

- REAL deterrence needs „painful“ compensation

Only high compensation guarantees end of discrimination

remedies and sanctions – era seminar 15 march 2010

Documents

labour law

antidiscriminination

bonnprofessor of business

german society

fh nordhessen

euprof dr alenfelder

unlawful discrimination

sanctions era seminar