Recent decision of the Supreme Court: No more balance of interests when assessing whether a unilateral modification of an essential element of the employment contract is acceptable or not

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Date:
08 Oct 2021

Balancing the interests of the employer and employee is not relevant when assessing whether or not a unilateral modification of an essential element of the employment contract, such as the position, the salary, the working arrangements or the place of work, is permissible. The only thing that matters is whether the essential element in question has been changed to such an extent that it can no longer be said that the original employment contract is being executed. This is what the Supreme Court ruled in a recent judgment of 6 September 2021.

If an essential element of the employment contract (depending on the situation this can – generally speaking – be the position, the salary, the working arrangements or the place of work) is changed unilaterally by the employer, the employee can claim that he was implicitly dismissed by the employer (which entitles the employee to the 'usual' termination indemnities), unless the modification of the essential element can be considered as insignificant. The question is how the 'importance' of this modification should be assessed.

In a recent judgment of 6 September 2021, the Supreme Court ruled that no balance of interests should be made when assessing whether the modification of an essential element of the employment contract constitutes a significant change.

The Court clarifies that it is only necessary to examine whether the essential element in question has been changed to such an extent that it cannot be assumed that the original employment contract will still be executed after this modification. The Supreme Court ruled that the parties' interest in the modification or maintenance is not relevant. Therefore, it is the extent to which the essential element has been changed that must be considered in order to determine whether the unilateral modification is significant or not, without taking into account the interests of the employer or the employee. A balance of interests is – according to the Supreme Court – not at stake.

The question arises which impact this one judgment of the Supreme Court will have on the case law in which - in the case of a unilateral modification of an essential element of the employment contract in the framework of a restructuring or financially difficult times - the economic interests of the employer can be weighed against the personal interests of the employee.

Action point

It is possible that, as a result of the judgment of the Supreme Court, the labour courts will, in certain cases, be more inclined to find a unilateral modification of an essential element of the employment contract. Employers should therefore pay extra attention to the question whether the intended unilateral modification is important or not.