Altering the Terms of Employment
It may become necessary to alter the content or terms of employment during the duration of the employment relationship.The terms of employment may be altered with a contract, by reason of the employer’s supervisory right or the dismissal procedure. Substantial alterations in terms of employment at companies employing at least 30 (20 from 1 January 2008 when the law reform comes into force) employees must comply with the cooperation procedure. This means that the employer is under an obligation to negotiate the proposed alterations with the employees (or their representatives).
The terms of employment may be altered substantially as long as the employee consents and collective bargaining agreements and labour legislation are complied with. Labour legislation includes numerous provisions which, if altered to becoming less advantageous to the employee, are invalid.
The employer has, by reason of his supervisory right, the authority to alter conditions relating to e.g. the employee’s working hours, location of work and salary. The employee is obliged to abide by the employer’s decision. The employer may otherwise be entitled to terminate the employment contract.
The employer is, however, not allowed by reason of the supervisory right to unilaterally alter all terms of employment. The employer is also prohibited from exercising his supervisory rights in order to alter terms expressly agreed upon in the employment contract. If, for instance, the employment contract sets out specific working hours, the employer may not unilaterally alter this.Such alterations must be agreed with the employee or they must be altered through the dismissal procedure. . If a condition of the employment contract is set out in broad terms, the employer may make unilateral alterations to it as long as this is within the scope of the condition. A condition is broad if e.g. it has been agreed that the employee will work five hours a day but the specific hours of work have not been set out. In these circumstances the employer may alter the time of work.
Terms of employment may become binding through practice. If e.g. the employee has received a bonus on top of his salary over several years, this may become a binding term of the employment relationship although it is not set out in the employment contract itself.
The employer must provide the employee with a written notification of the alteration of employment terms as soon as possible, and at latest by the end of the following salary payment period unless the alteration is attributable to a change in legislation or in collective bargaining agreements.
The terms of the employment contract may also be altered through the dismissal procedure. The dismissal procedure becomes relevant in situations where the change is necessary but cannot be agreed between the parties and the employment contract restricts the employer’s supervisory right. Then a notification of the alteration is given to the employer by using the notice period. The old employment contract terminates after the notice period and a new employment contract is offered instead. The right to use the dismissal procedure is limited to situations where the employer has grounds provided by the Employment Contracts Act to terminate the employment relationship (usually economical or productional grounds or ground relating to the re-organizing of the business). In case lawit has been considered that a company was not permitted to decrease the salaries of its employees merely on the basis that the company had a need to cut its costs. It was also prohibited from decreasing the salaries by using the dismissal procedure applying economical and productional grounds. The decrease of the salaries would only have been possible if it was necessary together with other measures for safeguarding the operational preconditions of the company, i.e. in order to avoid bankruptcy.
As a fixed term employment contract may not be terminated, it is thus not possible to use the dismissal procedure to alter a fixed term employment contract.
In a transfer of business the employer’s rights and obligations are transferred unaltered to the new owner of the business. Consequently, the right to alter the terms of employment remains the same. For further information, see Terminating the Employment Relationship in Business Transfers [Termination of an Employment Relationship during Transfer of Business].