Why a pandemic is not a license for unilaterally changing an employment agreement

Publication

31 July 2020

Due to the pandemic and, inter alia, the lockdown as a result thereof, many restaurants on Curacao (temporarily) closed their doors as of Mid-March 2020, making it problematic for many employers to continue the payment of the (full) wages of their employees. Like many others have considered, an employer on Curacao therefore wanted to unilaterally reduce the wages of an employee. Is an employer entitled to do such, considering the trying circumstances we are currently dealing with? The Court of First Instance Curacao has recently rendered a judgment in this respect, which we will further elaborate on in this article.

The employer in question operates a restaurant on Curacao that has been closed since the lockdown Mid-March 2020. Because the company had absolutely no revenue, the employer had proposed to its employees either to convert the employment agreements into a zero-hours agreement (and thus to temporarily discontinue payment of wages in full) or to terminate the employment agreements (by initiating a ‘dismissal procedure’ at the Labor Department of Curacao (SOAW)). The employee in question did not agree with either of the proposals of the employer and requested (inter alia) continuation of the payment of his wages, since he had not been receiving such since the lockdown.

The Court rules, first and foremost, that parties are bound by the (employment) terms and conditions laid down in the employment agreement. Meaning, a unilateral amendment of said employment terms and conditions is in principle not possible. However, the question whether an employer can nevertheless unilaterally amend employment terms and conditions must be assessed on the basis of a standard that was developed in case law, the so-called ‘threefold reasonableness test’. Briefly put this boils down to the following: (i) there must be altered circumstances on the part of the employer which may in reasonableness give rise to the proposed amendment, (ii) the proposal itself should be reasonable and (iii) accepting that proposal could be reasonably required of the employee, taking into consideration the consequences of the proposed change for him / her, amongst other things.

Although it became apparent that the employer in question, due to the business closure, was dealing with a deteriorated financial position, the Court ruled that the proposal of the employer cannot be qualified as a reasonable proposal. According to the Court, though in times of crisis like these it can be expected of employees to agree to a temporary amendment of their (primary) employment terms and conditions (e.g. a temporary reduction in working hours and pay), discontinuing payment of the wages in full of an employee with immediate effect is, in the given circumstances of this case, deemed to be unreasonable. Thus, the employer in question has been ordered to pay out the wages of the concerning employee with retroactive effect.

This ruling again confirms that it is important for employers to realize that the unilateral amendment of employment terms and conditions is not naturally possible, certainly not when it regards primary employment terms and conditions, like wages. However, it is not impossible to amend (primary) employment terms and conditions unilaterally. If the amendment can pass the so-called ‘threefold reasonableness test’, then an employer can in principle implement this amendment without the consent of the employee. In this respect it is important that a company shows good employment practices and makes reasonable proposals to its employees, while also taking into consideration the individual interests of the employees. Doing such proposals in writing and giving the employee reasonable time to consider, would in that respect be a first step in the right direction.   

If you would like to receive more information about this topic then contact Daniella Engelhardt or send an email to engelhardt@ekvandoorne.com.