The European Court of Justice (ECJ) has held that a resignation following a unilateral substantial change in working conditions (namely reducing an employee’s salary by 25%) was a ‘redundancy’ under the European Collective Redundancies Directive (the Directive).

Background

The Directive requires employers to consult with em- ployees regarding collective redundancies, which are defined as “dismissals effected by the employer for one or more reasons not related to the individual workers concerned”.

In this Spanish case, the employer dismissed various employees for economic and production reasons. Dur- ing the same period, an employee also resigned in response to the company’s unilateral reduction of her salary by 25%. It was argued that this meant that the threshold for collective consultation had been reached and therefore the employer should have collectively consulted with all the dismissed employees.

What does this mean?

The ECJ held that the definition of redundancy in the Directive is wide enough to include resignations where an employer has unilaterally made significant chang- es to essential elements of an employee’s contract for reasons not related to them as an individual and which cause them substantial detriment.

The resignation in this case should therefore have been taken into account when considering whether the nec- essary threshold for collective consultation had been satisfied.

What should employers do?

It has been clear for a long time that the definition of redundancy for the purposes of collective consultation has a much wider meaning than redundancy for the purposes of statutory redundancy.

Employers should be aware that changing employees’ terms through termination and re-engagement on new terms can lead to a requirement to carry out collective consultation. This case has confirmed that the wide definition of redundancy also encompasses resigna- tions where the employer has unilaterally made signifi- cant and detrimental changes to essential elements of an employee’s contract.

Case reference: Pujante Rivera v Gestora Clubs Dir SL and another