According to the European Court of Justice, employees leaving a company after the employer has introduced significant changes to the employees’ detriment may qualify as “redundancy” for the purposes of the Collective Redundancies Directive.

A few days ago, the European Court of Justice interpreted in a new Directive the obligation of companies to inform and consult with their employees in cases of upcoming collective redundancies.

The Court has broadened the scope of the Collective Redundancies Directive (Directive 98/59/EO) in an effort to increase employee protection. The Court has ruled that in certain cases the unilateral termination of a labour contract by the employee should be interpreted as falling under the definition of redundancy.

As a result, unilateral terminations by employees would be taken into account when evaluating whether a series of lay-offs constitutes a collective redundancy. The termination of the employment relationship by an employee, however, has to be provoked by significant negative changes to the essential elements of the employment contract. Some examples of such unilateral changes to the employee’s detriment are any cuts to benefits or any drastic deterioration of working conditions.

The Court’s judgment may have a significant impact in Bulgaria. The Bulgarian Labour Code entitles an employee to unilaterally terminate their labour contract when the employer has made changes to it to the detriment of the employee. Examples of this include when a change of the employer leads to a material deterioration of the working conditions, or if the employer unilaterally and without legal grounds changes the place of work or the job of an employee, etc. If an employee leaves a company following negative changes caused by the employer, the rules for collective redundancy may apply (if the quantitative requirements are present as well).

According to Bulgarian law, employers have to assess in advance whether any planned redundancies will qualify as collective. This stems from the employer obligation to inform and conduct consultations with trade unions and employee representatives and to notify the Employment Agency. The Court’s judgment, however, may now hinder this initial assessment, as it can be difficult for companies to predict how many employees may potentially leave because of planned reorganisations or changes to working conditions.

Companies will now have to analyse even more closely how their personnel may be affected by a potential restructuring, outsourcing of activities, sale of a going concern, etc., if this will lead to the automatic transfer of employment or will significantly affect working conditions. Non-fulfilment of the employer’s obligation in cases of collective redundancy may result in pecuniary sanctions against the company.