In a judgment of 2 December 2014, the Brussels Labour Court of Appeal ruled on a case brought by an employee against a Belgian company which had unilaterally decided to suspend the payment of its contributions to the group insurance (pension) plan for economic reasons. The appellate court held that the employer's contributions to the group insurance plan constitute an essential term of the employment relationship given the increasing importance of extra-legal pensions. Pursuant to the Employment Contracts Act of 3 July 1978, the employer may not unilaterally modify an essential term of the employment relationship.
In September 2003, a Belgian company informed its employees of its decision to suspend the payment of its contributions to the group insurance (pension) plan for a period running from 1 September 2003 until 31 December 2004. The employer believed it was entitled to implement this decision as the group insurance rules provided that it had the right to unilaterally modify, suspend or stop the payment of contributions if economic or social circumstances justified such a measure, in particular if the legislation imposed new objectives or contributions on the employer. The employer based its decision to suspend the payment of its contributions on economic grounds, specifically market pressure and statutory wage indexation.
An employee who had benefitted from the group insurance (pension) plan since the start of his employment contested the employer's decision and as a consequence his (future) salary reduction. The employee did not, however, claim constructive dismissal due to unilateral modification by the employer of an essential term of the employment relationship (i.e. his salary package). A few months later, the employee resigned and claimed compensation equal to the lost contributions to the pension plan.
The Brussels Labour Court of Appeal first recalled the general principle laid down in the legislation on extra-legal pension schemes that the employer has sole authority to introduce, modify or discontinue an extra-legal pension. This principle was reflected in the Belgian company's group insurance rules. However, the court noted that, when asserting this right, the employer must take into account the broader legal framework which provides that (i) agreements must be performed in good faith and (ii) an employer may not unilaterally modify an essential term of the employment contract (such as wages, working time, place of work, etc.). Pursuant to Article 25 of the Employment Contracts Act, a contractual provision which allows the employer to unilaterally modify essential contractual terms shall be deemed null and void.
The court found that the employer's contributions to the group insurance plan constitute remuneration in exchange for services rendered by the employees. Given the increasing importance of extra-legal pensions in ensuring social security coverage once employees reach the statutory age of retirement, the employer's contributions to the group insurance plan should indeed be considered an essential term of the employment relationship which cannot be unilaterally modified by the employer. The clause in the group insurance rules allowing the employer to unilaterally suspend payment of its contributions was therefore found to be invalid.
The court also noted that the modification clause, as part of the group insurance rules, concluded between the employer and the insurance company, had not been accepted by the employees. Furthermore, it ruled the clause could in any case not be applied as wage indexation, to which the employer referred in order to justify the suspension of its contributions, cannot be considered a 'new contribution' for the employer, as indexation had been applicable since the start of the employment relationship.
Finally, the court found that even if the employee had not claimed constructive dismissal due to suspension of the employer's pension contributions, this does not mean that the employee agreed with the modification. The employee is not deprived of his right to request specific performance of the initial employment contract. Correct performance of the initial employment contract (including the payment of group insurance contributions) should not be claimed immediately, but may be claimed as long the limitation period is still running (i.e. up to one year following termination of the employment contract).
As the claim was lodged in time, the Brussels Labour Court of Appeal found it to be substantiated and ordered the Belgian company to pay compensation equal to the lost contributions.
Please note that the above principles are generally upheld by the Belgian labour courts. Consequently, an employer should continue to proceed with caution if it intends to modify an essential term of the employment relationship. In order to avoid discussions with (current and former) employees, it is strongly recommended to obtain the prior written consent of the individual employees to a proposed modification
Brussels Labour Court of Appeal, 2 December 2014, AR 2013/AB/759