Adjusting employment conditions may be necessary for an employer under certain circumstances. For example in the event the company is experiencing financial difficulties. Also, after taking over employees of another company, the acquiring company may need to align employment conditions of the new employees with company standards. Such adjustments could include cutting a bonus scheme, abolishing a lease scheme or changing leave schemes. What options does the employer have to change the employment conditions of employees?
Employee’s consent required
The basic principle is that the employee’s consent is required to change employment conditions. In general, the employee will not simply agree to less favourable employment conditions. However, if the proposed changes are necessary to keep the company going and to reduce the risk of job losses, employees may agree to a modification of employment conditions more easily. It is therefore important that employees understand the need for the deterioration of employment conditions and that the employer is transparent about the financial health of the company. The timely involvement of employee participation, for example the Works Council or employee representative body, can also contribute to creating support among employees.
Adjusting employment conditions without the employee’s consent (unilateral change)
If the employee refuses to agree to the proposed changes, the employer may under certain circumstances change the employment conditions without the employee’s consent (unilateral change). When relying on a unilateral change, two situations may exist. Firstly, the situation in which a unilateral change clause has been agreed, for example in the employment agreement or collective labour agreement. Secondly, the situation in which no unilateral change clause has been agreed.
Unilateral change clause included in the employment contract
The unilateral change clause in the employment agreement or collective labour agreement gives the employer the right to unilaterally change the employment conditions, but only if the importance to the employer of doing so is so great as to outweigh, by the standards of reasonableness and fairness, the employee’s interests which are harmed by the changes. The fact that the continuity of the company is in danger may count, but in itself does not mean that the unilateral change is successful. Even if the majority of the employees agrees to the change, this does not necessarily mean that an appeal to the unilateral change clause with regard to employees who refuse to agree will be successful. A balance of interests must be considered for each individual employee.
No unilateral change clause
In the event that no unilateral change clause is included in the employment agreement or collective labour agreement, the employer may under strict circumstances still change the employment conditions unilaterally. However, in general the balance test will be stricter when no unilateral change clause is agreed.
See also our page on the review of employment contracts.