Krajnc v. Slovenia

The applicant, Mr. Slavko Krajnc, was a professional truck driver in Celje, Slovenia. On September 29, 2003, Krajnc was deemed to have “category III work-related disability” as a result of his epilepsy, which rendered him unable to work as a truck driver. Accordingly, he had the right to be assigned to a different, more suitable working position, which was retroactively in effect from August 14, 2002. Krajnc was also registered as unemployed between March 1, 2003 and March 7, 2004. The Celje regional unit of the Pension and Disability Insurance Institute of Slovenia (“the regional ZPIZ”) found that, under section 22 of the new Pension and Disability Insurance Act (“the 1999 Act”), Krajnc was entitled to unemployment insurance for that period. Once the unemployment insurance expired, the regional ZPIZ granted Krajnc a waiting period allowance under section 123 of the previous Pension and Disability Insurance Act (“the 1992 Act”). The waiting period allowance was provided to workers with category II and III disability while they waited to be reassigned to more appropriate employment. The regional ZPIZ approved the waiting period allowance on February 21, 2005 which was retroactively in effect such that Krajnc would receive 390 euros per month from October 8, 2004.

Krajnc continued to receive the waiting period allowance until October 15, 2010. At that time, the regional ZPIZ reassessed his level of disability on the recommendation of his doctor after Krajnc suffered a shoulder injury. On February 2, 2011, the regional ZPIZ decided that Krajnc’s disability had worsened, and he once again had the right to be reassigned to another position that would better accommodate his ability to work. However, the regional ZPIZ’s reassessment of Krajnc’s disability changed the value of the benefits he received thereafter. On June 28, 2011, the regional ZPIZ decided that Krajnc was granted disability allowance under section 94(1)(1) and (3)(1) of the 1999 Act, effective retroactively from February 24, 2011. Thereafter, Krajnc received 192.91 euros per month for the disability allowance, effectively halving the 390 euros per month he had previously received for the waiting period allowance under section 123 of the 1992 Act. This was because, inter alia, the 1999 Act discontinued the 1992 Act’s waiting period allowance, while introducing new disability benefits in its place.

Krajnc appealed the reduction in his benefits on July 21, 2011 to the central Pension and Disability Insurance Institute of Slovenia (“the central ZPIZ”), arguing that the regional ZPIZ should have respected the principle of acquired rights when calculating his disability benefits. He argued that it was unjust for his benefits to be reduced while his disability had worsened considerably. The central ZPIZ dismissed Krajnc’s appeal.

In 2011, Krajnc then lodged a claim with the Celje Labour and Social Court challenging the central ZPIZ’s decision, which was also dismissed. The Court held that in cases where there is a fresh reassessment of a claimant’s disability, as was the case with Krajnc, the new 1999 Act was to be applied, even if the claimant had been receiving disability-related benefits under the 1992 Act prior to the reassessment. While Krajnc had retained his rights to the higher benefit payments under the 1992 Act, after the 2011 reassessment of his disability, his rights were determined anew. Thereafter, the 1992 Act provisions ceased to apply when he was granted new rights to workplace accommodation on February 2, 2011. The 1999 Act did not contain a waiting period allowance; instead, section 94 provided for the disability allowance which had been correctly granted to Krajnc.

In 2012, Krajnc appealed this decision to the Higher Labour and Social Court, and subsequently appealed that decision to the Supreme Court. At the Higher Labour and Social Court, he alleged that the reduction in benefits violated his right to social security, as he could not live off the 192.91 euros per month. At the Supreme Court, he made the same allegation and further alleged a violation of his constitutional right to property. Both courts dismissed Krajnc’s appeal for the reasons outlined by the Celje Labour and Social Court, holding that because Krajnc’s rights were determined anew when they were reassessed, there was no violation of his acquired rights or constitutional rights. In 2013, Krajnc launched a constitutional complaint to the Constitutional Court of Slovenia, which refused to accept his complaint for consideration.

Krajnc then appealed to the European Court of Human Rights, claiming that a reduction in the benefits in respect of his disability violated Article 1 in Protocol No. 1 of the European Convention of Human Rights. Article 1 provides that “every natural or legal person is entitled to the peaceful enjoyment of his possessions” and that “no one shall be deprived of his possession except in the public interest…”. Krajnc argued that his benefits being reduced was arbitrary and disproportionate and had resulted in him being unable to sustain himself. 

The Court held that Article 1 of Protocol No. 1 to the Convention applied to the case and that the replacement of the waiting period allowance with a much lower disability allowance amounted to an interference with Krajnc’s right to property. The Court cited prior case law for the proposition that an interference with a right protected by Article 1 will only be be compatible with Article 1 if the interference is (1) lawful, (2) serves a legitimate public or general interest, and (3) is reasonably proportionate to the aim of the legislation.

The Court held that the reduction in Krajnc's disability benefits fulfilled the initial two requirements. First, the provisions in the 1999 Act operated together to make the interference lawful. Second, the inference served a legitimate public interest by encouraging adults with disabilities with some capacity to work to find employment. However, the Court found that the interference failed to satisfy the proportionality requirement, as the reduction in payments posed an excessive burden on the individuals subject to it.  The Court relied on two distinct reasons for holding that the effect of the law was to pose an excessive burden on Krajnc.

First, the reduction in Krajnc’s payments did not occur because he failed to meet the eligibility criteria but rather because the law had changed. Sections 397 and 446 in the 1999 Act provide that potential claimants had a right to the disability allowance beginning on January 1, 2003. As such, the changes in the structure of benefit payments applied to those who, after January 1, 2003, either became newly disabled or whose preexisting disability worsened, such as Krajnc. The discontinuance of the waiting period allowance and granting a reduced amount as part of the disability allowance were not related to Krajnc’s contributions; instead, they occurred in response to societal changes.  Nonetheless, the 1999 Act allowed for those who had rights under the 1992 Act, such as Krajnc, to continue to enjoy them even after the 1999 Act came into effect. As a result, the Court held that Krajnc had a legitimate expectation that he would continue to receive a waiting period allowance, given that he still fulfilled the eligibility conditions of remaining unemployed and not being at the age of retirement.

The Court held that Krajnc was only subject to differential treatment in the form of reduced benefit payments  after he was reassessed by the regional ZPIZ due to his worsening disability, which he could not have predicted. As such, the 1999 Act differentially treated two groups of unemployed disabled workers – those whose disabilities remained unchanged after January 1, 2003 and those, like Krajnc, whose disabilities deteriorated after that date. The change in the law was arbitrary in that it resulted in the latter group losing half of the value of the monthly payments despite the fact that their disabilities had become more severe.

Secondly, the Court considered the nature of the benefit and the effect that the reduction had on Krajnc’s situation. He was unemployed and had difficulty finding employment that would align with his capacity and ability to work. The benefits were meant to address precisely this vulnerability. Additionally, the court considered that Krajnc had been reliant on the waiting period allowance for more than 6 years. The savings he had managed to build up over this time played no role in his eligibility for disability benefits and were prima facie insufficient to provide for his long-term subsistence. The regional ZPIZ also had reduced the benefits without giving Krajnc any transitional tools to mitigate the impact and allow him to adapt to the new amount.

Due to these considerations, the Court held that Krajnc as well as others whose disabilities had worsened after January 1, 2003 and were unable to find employment, disproportionally bore the burden of the government’s decision to change the disability benefits structure. The disproportionate effects on already vulnerable individuals were not balanced with the lawful and legitimate public interest the law aimed to serve.

The Court therefore held that the reduced payment Krajnc had received as a result of the 1999 Act’s change to the law had infringed his right to derive benefits from the social scheme, which violated his Article 1 rights. Krajnc received, in damages, the sum corresponding to the difference between the benefits he would have received under the 1992 Act and the benefits he received under the 1999 Act for the 27 months where he was subjected to the latter, amounting to an award of 5,395 euros. The Court also awarded Krajnc for non-pecuniary damage he suffered in the form of shame and the feeling that he was treated unequally by the state. Accordingly, Krajnc was awarded 10,000 euros in total to cover all heads of damages.

“However, if a Contracting State has legislation in force providing for the payment as of right of a welfare benefit – whether conditional or not on the prior payment of contributions – that legislation must be regarded as generating a proprietary interest falling within the ambit of Article 1 of Protocol No. 1 for persons satisfying its requirements (see Béláné Nagy, cited above, § 82). Where the amount of a benefit is reduced or discontinued, this may constitute interference with possessions which requires to be justified (ibid., § 84)” (Para 40).

“An essential condition for an interference with a right protected by Article 1 of Protocol No. 1 to be deemed compatible with that provision is that it should be lawful and serve a legitimate public (or general) interest (see Béláné Nagy, cited above, §§ 112 and 113). In addition, Article 1 of Protocol No. 1 requires that any interference be reasonably proportionate to the aim sought to be realised. The requisite fair balance will not be struck where the person concerned bears an individual and excessive burden (ibid., § 115). In considering whether that is the case, the Court must have regard to the particular context of social security schemes, which are an expression of a society’s solidarity with its vulnerable members” (Para 41).

“The Court further reiterates that the deprivation of the entirety of a pension is likely to breach the provisions of Article 1 of Protocol No. 1 and that, conversely, reasonable reductions to a pension or related benefits are unlikely to do so. However, the fair balance test cannot be based solely on the amount or percentage of the reduction suffered, in the abstract. In a number of cases the Court has endeavoured to assess all the relevant elements against the specific background, attaching importance to such factors as the discriminatory nature of the loss of entitlement, the absence of transitional measures, the arbitrariness of the condition, as well as the applicant’s good faith (see Béláné Nagy, cited above, § 117, with references therein). An important consideration in this context is whether the applicant’s right to derive benefits from the social-insurance scheme in question has been infringed in a manner resulting in the impairment of the essence of his or her rights” (Para 42).

“It was only when his disability was found to have deteriorated − a fact which he could have hardly predicted and prepared for − that he became affected by the new legislation. In the Court’s view, this differential treatment of two groups of unemployed disabled workers – those whose disabilities remained unchanged and those whose disabilities had deteriorated after 1 January 2003 – which resulted in the applicant being suddenly divested of half of his disability benefit while being at the same time further limited in working opportunities, carries great weight in the assessment of the proportionality issue under Article 1 of Protocol No. 1.” (Para 48)