O'Leary bullish in face of costs hike threat from EU court ruling
Ryanair has insisted that a ruling by the European Court of Justice (ECJ) yesterday does not change the status quo of its thousands of crew members who work for the carrier under Irish contracts, and won't hit its cost base.
The ECJ ruled in a case related to six Belgium-based Ryanair workers that a jurisdiction clause that sought to prevent Ryanair employees from bringing proceedings before courts outside Ireland was not enforceable against those employees.
It effectively means that Ryanair crew can now have disputes regarding employment contracts held in the country where they habitually carry out their work, such as a Ryanair base, rather than in Ireland, the country under which the contracts are drafted.
Shares in the carrier slumped more than 4pc in Dublin at one point yesterday, with HSBC analyst Andrew Lobbenberg arguing the ECJ ruling could see Ryanair's employment costs rise by between 10pc and 15pc.
But Ryanair CEO Michael O'Leary denied its costs would increase as a result of the ECJ decision.
Mr Lobbenberg cut his rating from 'buy' to 'reduce' on the airline's shares, and said the ECJ determination is the "end of the line" for Ryanair regarding on-going efforts to defend its right to have employment disputes heard only in Ireland.
"We expect Ryanair to face higher social costs such as national insurance, holiday pay and sick pay," Mr Lobbenberg told investors.
"The use of zero-hour contracts may not be accepted in markets such as Germany and Belgium."
He said that he expects the carrier to develop "innovative" plans in an effort to mitigate the effect of the ECJ ruling.
"However, management will face unprecedented industrial relations challenges, which will weigh on investor confidence," he added.
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The case had been referred to the ECJ by the Mons Higher Labour Court in Belgium.
In a dispute, six employees of Crewlink, which provides staff to Ryanair, and of Ryanair itself, argued that the firms had to comply with and apply the provisions of Belgian law and that the Belgian courts had jurisdiction to adjudicate on their claims. The six employees brought proceedings before the Belgian courts in 2011.
All the six crew members' employment contracts were drafted in English, subject to Irish law and included a jurisdiction clause providing that the Irish courts had jurisdiction.
In those contracts, it was stipulated that the work of the employees concerned, as cabin crew, was regarded as being carried out in Ireland given that their duties were performed onboard aircraft registered in that Member State, the ECJ noted.
Those contracts nevertheless designated Charleroi airport (Belgium) as the employees' 'home base'. Those employees started and ended their working day at that airport, and they were contractually obliged to reside within an hour of their 'home base'.
The ECJ said yesterday that an employee's 'home base' amounts to a "significant indicator" to determine the location from where an employee habitually carries out their work.
"This ECJ decision does not change the status quo of Irish contracts of employment for Ryanair crew based across Europe," Ryanair insisted.
"Ryanair will continue to employ its crew on Irish contracts of employment, and this decision only updates the criteria for assessing the jurisdiction of national courts to hear legal cases locally and does not alter the law applicable to the contract."
It added that Irish employment legislation offers significant benefits to its staff.