Unilateral Change of Employment Contract Resulting from Covid 19 Pandemic

The desire to secure the company’s financial situation during the Covid 19 pandemic was of such overriding importance for an employer that he could waive the pay increases under the applicable CLA by relying on the unilateral amendment clause in the employment contract.
The turnover of a company which commercialised coffee and tea to offices, petrol stations and the on-trade industry largely depended on the number of cups consumed at office locations, in the on-trade industry and on the road. During the Covid 19 pandemic, the turnover sharply decreased, with serious liquidity problems for the company.
In the employment contracts with the company's employees, the CLA for the Technical Wholesale Trade had been declared applicable. The employment contracts also included a unilateral amendment clause.
In April 2020, with the consent of the Works Council, the company postponed the increase of the wages -in the CLA foreseen for April 1, 2020- to January 1, 2021.
When, in November 2020, the company asked the Works Council’s consent to cancel all CLA wage increases for as long as the Covid crisis would continue, the company and its Works Council reached an agreement. Under this agreement, all CLA wage increases would lapse, and be replaced by
- a one-off wage increase of 1.5%, once the turnover would have returned to 90% of the 2019 turnover and
- resumption of the CLA wage increases, six months afterwards, provided that the turnover would continue to be at least at the 90% of 2019 turnover.
When the company's situation recovered after the Covid 19 pandemic, the company submitted the proposal to the Works Council in June 2022 to increase the wages by 5% (instead of 1.5%) as of June 1, 2022, and to resume the CLA wage increases as of July 1, 2022. In return, the employees would have to agree with this arrangement in writing and to waive any claims on wage increases in the period up to 1 July 2022. Employees who agreed would receive a bonus of EUR 250. For employees who disagreed, the agreements as previously made with the Works Council would continue to apply.
Two employees who disagreed with this new agreement lodged a claim with the Sub-district Court to declare that the implemented unilateral change to the terms of employment was unlawful. When the Sub-district Court rejected this claim, they lodged an appeal to the Court of Appeal.
This Court states first and foremost that, according to the law, the employer's authority to unilaterally change the employment conditions requires such a weighty interest of the employer that it will change the interest of the employees according to standards of reasonableness and fairness if they would comply with these new employment conditions.
How much weight should be attached to the employer’s interest partly depends on the extent to which the interest of the employees is affected by the unilateral change of the terms of employment. On the basis of the data, provided by the employer, the Court of Appeal found it proven that there had been a negative operating result in 2020 and that the turnover in 2020 and 2021 had been considerably lower than in 2019. According to the Court of Appeal, this represented a significant financial set-back.
The fact that the employer, nevertheless, made certain investments did not preclude this, according to the Court of Appeal, because the employees had insufficiently contested the employer's assertion that these investments were necessary for the continuity of the company. The employees had also insufficiently challenged that a reorganization, in which a total of twelve jobs in two departments was made redundant, was prompted by organizational reasons and not by the Covid crisis.
According to the Court, the employer had also taken sufficient alternative action, such as renegotiating with suppliers, not extending temporary contracts, postponing investments, asking management for a wage sacrifice and applying for a NOW-subsidy ).
Regarding the NOW-subsidy, the Court also considered that this subsidy only covered part of the wage costs, whereas other costs just continued. Since the employer is part of an international group in which other group entities managed to remain profitable, there was also a chance that the advance on the NOW-subsidy would have to be repaid.
According to the Court, the employer's offer to refrain from claiming previous wage increases in exchange for a 5% wage increase was perfectly reasonable. The employer did not have to reverse previous measures, since they had been the measures that had enabled the employer to survive.
The Court of Appeal held the opinion that the desire to secure the financial position during the Covid 19 pandemic had been of such weighty importance for the employer that the interests of the employees had to give way according to standards of reasonableness and fairness.
The Court of Appeal also took into account that, even though the employees' financial position had been affected, the one and only intention had been not to implement a wage increase, so as to keep the financial consequences relatively contained. The Covid 19 pandemic had not been a normal business risk either, but an exceptional circumstance beyond the employer's control and one which had a very unpredictable course.
For the Court also the consent of the Works Council (after a careful process in which the Works Council had obtained advice from an expert) attributed to this judgment.
The claims of the employees were therefore rejected.

1) NOW stands for: Emergency Measure to Overcome Temporary Staffing Difficulties

The legal requirements for an appeal to a unilateral amendment clause are high and that is the reason why an appeal is seldom honoured by the Court. The judgment of the Court of Appeal indicates how the necessary balance of interests is carried out and what elements can play a role in it.