Ryanair shares slide 4.4% as ECJ rules against airline

Court rules airline cannot force employment disputes into Irish courts.

Shares in Ryanair fell more than 4 per cent after it lost a case before the European court of Justice (ECJ) Thursday - writes irishtimes.com.

The court ruled that the airline was wrong to insist in its contracts with crew that Irish law applied regardless of where crew were based.

The case involved Ryanair crew based at Charleroi Airport in Belgium .

The decision to allow them access to Belgian courts in the event of contract disputes is likely to increase costs for the airline.

Ryanair is now likely to be forced to rewrite contracts with all staff employed outside Ireland .

HSBC downgraded the airline on the basis that the ECJ ruling was “the end of the line” in a long-running legal process. It expects profit after tax to rise just 6 per cent in the 2019 financial year and 12 per cent in 2020 and it has cut it share price forecast to €16 from €19.50 previously.

“ We expect Ryanair to face higher social costs, such as national insurance, holiday pay and sick pay,” said HSBC analyst Andrew Lobbenberg . “The use of zero hours contracts may not be accepted in markets such as Germany and Belgium.”

He said the court ruling may increase the airline’s labour costs by between 10 and 15 per cent.

“We expect the company to come out with some innovative and no doubt assertive plans to mitigate the effects of this ruling,” said Mr Lobbenberg. “However management will face unprecedented industrial relations challenges, which will weigh on investor confidence.”

Ryanair’s employment contracts stipulated in a jurisdiction clause that cabin crew work was regarded as being carried out in Ireland. The contracts nevertheless designated Charleroi Airport in Belgium as the employees home base.

Six employees brought proceedings before the Belgian courts in 2011 after which the Belgian Labour Court went to the ECJ to establish whether it had jurisdiction.

In its judgment, the ECJ pointed out that most importantly, in disputes relating to employment contracts, the European rules concerning jurisdiction are aimed at protecting the weaker party. Those rules therefore enable an employee to sue their employer before the courts they regard as being closest to their interests.

As a result of that, the court found that clauses seeking to prevent employees from bringing proceedings before courts that do happen to have jurisdiction were not enforceable.

Responding to the ruling, the International Transport Workers Federation and the European Transport Workers Federation said it was a major defeat for Ryanair on workers rights. Steve Cotton , the ITF general secretary, said: “[The ruling] upholds the fundamental principle of protecting mobile workers in aviation by ensuring that they can hold their employer to account in the country from which they genuinely discharge their duties - not in a nation which they may never have visited and whose courts are foreign and based hundreds of miles from home and place of work”.

Ryanair, meanwhile, welcomed the decision saying it won’t “in any way alter our Irish contracts of employment”.

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