Preliminary Change to Bonus Policy Not Subject to Consent
It will have to be assessed in each individual case whether
there is indeed an intended change to the system. This is certainly
not always easy, especially because a change to the remuneration
system usually results in a change to the levels of remuneration.
In practice, this often gives rise to discussions between directors
and the Works Council.
On 30 June 2009 the Court of Appeal of The Hague ruled that the
increase of the target for obtaining a bonus, as implemented by the
director of KPN Retail B.V., cannot be regarded as a change to the
bonus system, and is therefore not subject to consent by the Works
Council (Court of Appeal of The Hague, 30 June 2009, JAR
2009/1999).
The Facts
The applicable Collective Bargaining Agreement
("CAO") contains a bonus plan ("Payplan").
Under this Payplan employees who have reached their targets receive
a bonus. The elaboration of the Payplan mentions as a condition
that the employees have to reach at least 75 % of the turnover
target, but that this target may be adjusted at corporate level.
KPN Retail has used this option. The director informed the Works
Council in a letter that the target for some retail chains and for
one specific corporate activity would be increased from 75% to
85%.
In the opinion of the Works Council, this board decision was
subject to consent, because it implied a change to the remuneration
system. The director disputed this argument and called the decision
a change to a primary term of employment, which is not subject to
Section 27 of the Works Councils Act ("WOR").
The Works Council then brought preliminary relief proceedings
before the Subdistrict Court in The Hague (Subdistrict Court of
Appeal of The Hague, 1 December 2008, JAR 2009/6). The Works
Council claimed that the director be ordered to cease and reverse
the decision. The Subdistrict Court rejected the Works
Council's claim, whereupon the Works Council appealed to the
Court of Appeal of The Hague.
Court of Appeal of The Hague
It is not in dispute between the parties that the Payplan is part
of the primary terms of employment, as a result whereof it is in
principle beyond the powers of the Works Council. It is not in
dispute either that it was left to the director to set the target
in the CAO. However, the parties differ on the question of whether
the increase of the target results in a (possible) change to the
group of persons who are or may be eligible for a specific
scheme/remuneration.
The Court of Appeal considered it important that it was agreed
in the CAO that the targets as such must be regarded as achievable
by the employees, while it has not become manifest that after the
increase the targets are not achievable anymore. According to the
Court of Appeal, the director has given sufficient reasons for the
intention behind the increase of the target, which was to steer the
employees' efforts in the desired direction. Moreover, the
Court of Appeal held that it has not been proven that the director
wished to change the internal order of positions and remunerations
by increasing the target.
The mere possibility that the increase of the target would
result in individual employees not being eligible for a bonus does
not automatically imply, in the words of the Court of Appeal, that
access to the bonus scheme will change for a certain group of
employees, or that the internal order of remunerations within the
enterprise will change. Against this background, the Court of
Appeal ruled that there had been no change to a remuneration system
within the meaning of Section 27 (1) of the WOR, and therefore the
decision of the director to adjust the target was not subject to
consent. As a consequence, the decision taken by the director was a
legally valid decision and does not have to be
reversed.
Tips
- Pursuant to Section 27 of the WOR, a change to a
remuneration system is subject to the consent of the Works
Council. The remuneration itself is a primary term of
employment, which is not within the powers of the Works
Council.
- It is relevant in this connection whether the
implementation of the decision will change the group of persons
that is or may be eligible for a certain scheme or
remuneration, and whether the change will bring about a shift
in the internal order of positions and remunerations.
- In 2006, the Court of Appeal of Den Bosch reached a
different conclusion (Court of Appeal of Den Bosch, 23 May
2006, JAR 2007/33) when it answered affirmatively to the
question of whether the decision to change the calculation
system of a bonus scheme was subject to consent. The Court of
Appeal of Den Bosch distinguished between the criteria for
being eligible for a bonus (which are subject to consent) and
the claim to the bonus as a result thereof (which is a primary
term of employment, and therefore not subject to consent).
- Neither case law nor literature offers a unanimous answer
to the question of when a decision to change a bonus system (or
part thereof) is subject to consent. For this reason it may be
worthwhile considering making express arrangements between the
director and the Works Council about this issue, in order to
prevent later discussions.