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29.04.2009

Rapid Rise in the Incidence of Labor-Related Legal Disputes in Europe

The progressively worsening economic situation has triggered a rapid rise in the incidence of legal disputes between corporate enterprises and their employees. This trend was brought to the attention of the ARAG Group by the results of an analysis of requests for legal services from its policyholders in the most important European legal insurance markets. The volume of requests for legal insurance services has risen significantly, especially in Germany and the Netherlands. The corresponding figures have increased at a particularly rapid pace in Germany.

The economic crisis has now reached the German labor market. In contrast to previous recessions, the number of labor disputes has not increased gradually but rather by leaps and bounds this time. In the first quarter of 2009, ARAG Allgemeine Rechtschutz-Versicherungs AG processed nearly 17% more policyholder requests for services in labor-related matters than during the same period last year, with the most significant increase recorded in the month of March. The company has observed a marked shift in the nature of issues concerning the users of the telephone legal advisory service. “While the majority of the inquiries received last year related to incorrect or unfavorable performance evaluations and termination agreements, the focus has shifted this year to such matters as short-time work and lay-offs,” explains Klaus Heiermann, Senior Vice President Corporate Communications ARAG Group.

A comparable trend has been observed in other European countries as well. ARAG noted an increase in labor-related disputes amounting to roughly 60% in the Netherlands in the first quarter of 2009 compared to the previous year. The demand for telephone advisory services in that country also rose by about 60 percent. “The dramatic increase in the Netherlands is attributable to the financial and economic crisis, on the one hand, and to changes in labor law that took effect in January of this year, on the other. That has caused considerable unrest among employees in the Netherlands,” notes Klaus Heiermann.

In Spain, the country served by the largest international ARAG subsidiary, the number of policyholders who accessed the ARAG hotline in Barcelona seeking legal advice in labor-related matters rose by 15% during the first quarter as compared to the same period in 2008. “The trend in Spain – where everyday legal problems have given way to issues of existential significance - is symptomatic of the entire European market. And Spain has been particularly hard-hit by the recession,” as Klaus Heiermann points out. Roughly four million people in Spain were unemployed in the first quarter of 2009. This equates to an unemployment rate of 17 percent – the highest in all 27 EU Member States.

Labor law has also become a topic of increasing concern to ARAG policyholders in Italy and Greece. The trend in the demand for legal insurance services throughout Europe is an indication of the extent to which the economic crisis has impacted on Europe as a whole. It also clearly shows that people are now asserting their rights as employees more directly and actively than ever before. Disputes over jobs are carried out with greater intensity and more frequently waged in the courts than in the past.