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Published On: Tue, May 19th, 2020

Collective lowering of salaries is not that simple

Government Building Closed - 20200224 JH

By Hilbert Haar

PHILIPSBURG – The kingdom’s demand that the government lowers the salaries of civil servants by 12.5 percent (as a condition for providing liquidity support) promises to result in a heated debate. The unions have objected and submitted a rather unrealistic counter-proposal. The kingdom expects to get an answer to its demands by Wednesday. But the literature on the subject of one-sided changes in labor conditions suggests that lowering these salaries without approval from all civil servants (or their unions) is a mission impossible.

Nuna Zekić, an associate professor at the department of labor law and social policy of Tilburg Law School, published an extensive exposé on the subject in 2017 with the following conclusion: “The current legal framework for changing labor conditions is unfit for assessing the collective lowering of salaries; therefore, salary has to be excluded from one-sided changes.”

Zekić notes that in the past, two large Dutch companies have attempted to lower the salaries of their employees: department store V&D and home care service provider TSN. Both companies went bankrupt and the court did not allow them to lower the salaries.

Employers who want to lower the salaries of all their employees have four possible grounds to support such a measure: the one-sided change-clause, good employeeship, limitation of validity, and reasonableness (redelijkheid en billijkheid), and unforeseen circumstances.

Since the Supreme Court’s 1998 Taxi Hofman-arrest employers increasingly call on good employeeship when they want to lower all salaries: they argue that it is the duty of employees to agree to changes proposed by their employer. But when labor contracts do not contain a one-sided change-clause, employees are not obliged to accept this: the employer will need their consent to proceed.

When such salary-disputes end up in court, judges will have to consider whether the proposal from the employer is reasonable and whether it is reasonable to expect that employees will accept it.

Zedić says that the so-called 611-review (based on an article in the civil code) is unfit for collective changes because it puts the interest of all employees in one basket. The Supreme Court has ruled that the courts have to consider all circumstances of the case. In practice, this means that the circumstances of each individual employee have to be part of the decision making process.

Nevertheless, Zekić wrote in her exposé, decisions can go against the interest of employees, also when it is about their salaries. Furthermore, employees may feel obliged to accept a lower salary. Thus, the legal protection of employees against salary-lowering initiatives is questionable at best, and employers are tempted to at least attempt to impose them as one-sided measures “because it is never explicitly prohibited.”

Zekić pleads for the exclusion of the salary-component from one-sided changes in labor conditions. Collective changes in salaries “are only possible after every individual employee has agreed or when their union has agreed on their behalf.”

For large companies – and the government is one of the largest employers in St. Maarten – collective consultation is the only realistic option, Zekić points out.

The professor also puts up the question what good legal protection will do if the end result is that people are losing their job. Job guarantees are legally weak: there are no guarantees. But employees who accept a lower salary, only to see their employer go belly up, will suffer financial consequences when it comes to unemployment benefits, pension entitlements, and vacation allowances.

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Related articles:
Cost-cutting counter-proposal unions vague
Brutal package of conditions leaves government little choice
Opinion piece: “An unthinkable scenario
Motion asks for modest paycuts but Parliament approves budget without it
Ministers and MPs agree to salary reduction




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