The European Court of Justice recently delivered two judgments on the status of a unilateral amendment of pay conditions by an employer to the disadvantage of an employee which, if rejected by the employee, entails the termination of the contract of employment. In two judgments dated 21 September 2017, the Court of Justice confirmed that such unilateral amendment may be classed as "redundancy" under Directive 98/59/EC on collective redundancies. Accordingly, a consultation procedure must take place prior to the redundancy, if the conditions for that procedure are met (threshold of redundancies).
Facts
The two cases leading to the judgments are based on similar facts. In the first case (C-429/16 – Ciupa and Others), a Polish hospital, suffering substantial financial losses, temporarily reduced the level of remuneration of its entire workforce by 15%. 20% of the employees accepted the cut. The other employees were given a notice of amendment of working and pay conditions, which – under Polish law – leads to the employment agreement being terminated (with a dismissal period to be respected by the employer) if the employee rejects the unilateral amendments proposed by the employer.
In the second case (C-149/16 – Socha and Others), a specialist Polish hospital, also facing financial difficulties, unilaterally amended the method of calculating a grant awarded to employees with at least 20 years of seniority. The new method would only take into account periods of work completed at the hospital. Several employees rejected the amendment and were given a notice of amendment of working and pay conditions.
The Polish jurisdictions submitted two questions to the Court of Justice for a preliminary ruling:
- Does unilateral amendment of pay conditions to the disadvantage of the employee qualify as redundancy under the Directive on Collective Redundancies when the amendment entails termination of the employment contract in the event of the employee's refusal to accept the amendment?
- Is the employer then obliged to consult the employees' representatives, as provided for in the Directive on Collective Redundancies?
The ruling by the Court of Justice
The Court of Justice first considered whether the amendments made by the Polish employer in casu can be regarded as redundancy under the Directive on Collective Redundancies. According to the Court of Justice, unilateral amendment of pay conditions by the employer to the disadvantage of the employee, entailing significant changes to essential elements of his employment agreement for reasons not related to the individual employee, falls within the concept of redundancy.
In this case, the Court states that amendment of the method of calculating a length of service award is not significant, and that the reduction of the level of remuneration of the entire workforce by 15% does not seem to be significant because of its temporary nature, it being understood, however, that it is up to the national court to decide whether or not an amendment is significant.
However, the Court of Justice noted that – under Directive 98/59 – termination of the employment agreement, following the employee's refusal to accept the changes proposed in a notice of amendment, constitutes termination of the employment contract on the employer's initiative for reasons not related to the individual workers concerned. This redundancy must be taken into account for the calculation of the total number of redundancies. Thus, the directive applies.
The Court of Justice then specified the point in time as from when an employer is required to hold the consultations, given that the amendment of working conditions will only lead to redundancy if it is rejected by the employee. In the cases at hand, the hospitals could reasonably expect that a number of employees would not accept the amendment of their working conditions, and hence that their contracts would be terminated as a result. Hence, there should have been consultation when the employer was considering amending the working conditions. Consultations are required to deal at least with possibilities of avoiding termination of employment contracts or reducing the number of contracts to be terminated, and measures to mitigate the consequences of termination. The employer must also provide the employees (or their representatives) with the necessary information in this context.
Impact in a Belgian context?
Even though no equivalent of a notice of amendment of working and pay conditions exists under Belgian law, these judgments of the Court of Justice are nevertheless relevant in Belgium. The unilateral amendment in a substantial manner of an essential element of an employment agreement by the employer may be considered as implicit dismissal, which leads to immediate termination of the employment agreement (dismissal by the employer), if the employee so demands.
Henceforth, an employer envisaging unilateral amendment of an essential element of the working conditions of all or part of its employees in a substantial manner will have to inform and consult its employees in advance, in line with the legislation on collective redundancies.