Can you change an employment contract unilaterally?

Publication date: 15 December 2020
One of the arrangements you can include in an employment contract is that as an employer you have the right to unilaterally change the terms and conditions of employment. In the absence of such a clause, you cannot, in principle, change the employment contract without the employee’s agreement. And even if you have agreed on a unilateral change clause, this is not a licence to arbitrarily change arrangements made.

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Working from home, less turnover, a hard lockdown, these are all current issues due to Covid-19. As a result, employers may need to amend employment contracts with their employees. Think, for example, of a travel allowance, a homeworking expense allowance or a bonus scheme, but also the obligation to take holidays, such as during the coming Christmas period, or a (temporary) reduction in salary. How can you arrange this?

Unilateral changes clause

One of the arrangements you can make in an employment contract is that as an employer you have the right to unilaterally change terms and conditions of employment. Without such a clause, you may not, in principle, change the employment contract without the employee’s consent.

In practice, it is also possible to unilaterally change the terms of employment without a unilateral changes clause, but in that case it is much more difficult. And even if you have agreed on a unilateral changes clause, this is not a licence to arbitrarily change arrangements made. An important question in this context is whether the coronavirus crisis can be regarded as a substantial interest of the employer to unilaterally change an employment contract. There has been a lot of jurisprudence on this subject. And if a works council has been set up in your company, it is important to check whether it has to be involved in the decision-making.

When can you unilaterally change terms of employment?

An employer can only successfully invoke a unilateral changes clause if the following four conditions are met:

1. The unilateral changes clause has been agreed in writing

The unilateral changes clause cannot be agreed orally. The clause must therefore be in writing, either in the employment contract or in a collective agreement or any other document that is part of the employment contract, such as a staff manual or a lease arrangement. In addition, the employee must have agreed to the clause.

<2. The change concerns terms and conditions of employment that are included in the contract

The clause does not provide the employer with the opportunity to add new terms and conditions of employment, only to change existing arrangements. Although it is not ruled out that primary terms and conditions of employment (salary) can be changed unilaterally, in practice this will concern mainly terms and conditions of employment such as a leave scheme or travel expenses.

3. The employer must have a substantial interest in the change

A substantial interest of the employer can be a commercial or organisational interest. This could involve, for instance reduction of the operational costs or restructuring. The current coronavirus crisis can be a compelling reason to implement a (fundamental) change in the employment contract, such as the obligation to take holidays.

4. The interest of the employer outweighs the interest of the employee

When the employer has taken the abovementioned three hurdles, finally, there will be a balancing of interests. The interest of the employer in the change must be such that the interest of the employee in maintaining the existing situation must give way.

Changing terms and conditions of employment without unilateral change clause

If no unilateral changes clause has been included in the employment contract or collective agreement, the employer has to rely for changes on the employee’s approval. However, in some cases the employer can unilaterally change the agreement. In accordance with the law, an employee has to behave as a good employee. Therefore, he can only reject a reasonable proposal from his employer if he cannot reasonably be expected to agree to the change.

The main difference is that in case of a unilateral changes clause, the employee will have to demonstrate that the employer has wrongly invoked it. If there is no such clause, the burden of proof shall lie with the employer. He will have to prove that the proposal is reasonable and that the employee cannot simply reject it. In addition, the employer must indicate the changed conditions on the basis of which he, as a good employer, wishes to change the employment contract.

Changing terms and conditions of employment and the works council

If, for example, a change is made to the homeworking scheme or the holiday scheme, you must ask the works council’s permission. When doing so, remember that the cooperation of the works council does not mean that you do no longer have to ask your employees’ approval. In general, it is assumed that the employer does have a substantial interest if the works council has approved the change. Without this approval, it will be difficult for the employer to demonstrate a substantial interest in the change.

Our advice

  • Include a unilateral changes clause in an employment contract.
  • Consult with the works council on changes to the terms and conditions of employment.
  • Ask for legal advice if you want to change an employment contract unilaterally.

More information

Would you like us to draft a unilateral changes clause? Or do you want us to assess your standard employment contracts? Please contact us:

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