War in Ukraine: possible implications for you as an employer

The violence of war in Ukraine has far-reaching and often terrible human consequences. However, depending on how the situation in Ukraine will eventually develop, there is a real chance that it will also have consequences for the rest of the world. Consequences that we cannot leave unsaid from our field. For example, the sanctions imposed on Russia also affect the Dutch economy. Sharp price increases and drop in demand can lead to companies not being able to carry out their full operations and therefore not being able to put all their staff to work. This, in turn, may cause companies to fall into financial distress. In this situation, is it possible, for example, to adjust certain terms and conditions of employment? In this blog, we discuss some labor law issues that (may) arise as a result of the war in Ukraine.

Changing conditions of employment

For example, in response to rising fuel prices, some employers will wonder if they can move to change terms and conditions of employment. Fuel prices are skyrocketing and can cause the employer to face a huge expense. Consider the arrangements made in a lease arrangement. However, as a condition of employment, a leased car is part of an employee's financial remuneration. Therefore, this condition cannot simply be taken away from an employee. Nevertheless, it is advisable for employers to consider the options.

Unilateral modification of a condition of employment

Unilateral modification of a condition of employment takes place without the employee's consent. This is possible, but subject to strict conditions. Unilateral modification of the condition of employment can be done in two ways.

1. Through a unilateral modification clause in the employment contract; or
2. By making a reasonable proposal as an employer that the employee cannot reasonably refuse (HR Stoof/Mammoet).

In both cases, a balancing of interests must take place. The employer must have such a compelling interest that the employee's interest must give way.[1] The bar for this is very high.

In the example with the car lease arrangement, possible changes are:

1. designating certain (cheaper) gas stations where the employee must now fill up;
2. being prohibited from using the leased car for private use; or
3. switching from leased cars to a bicycle plan, for example.

The aforementioned changes go from somewhat to quite far-reaching. As a result, the balancing of interests will result more quickly in favor of the employee. The employer will have to prove that he has such a large (often financial) interest that the interest of the employee must give way. The (poor) financial status of the company may play a role in this, as well as the duration of an intended change. A temporary change of an employment condition, for example, is less drastic for the employee.

Change of terms and conditions of employment by mutual agreement

Terms of employment, such as those mentioned above, can always be changed by mutual agreement. Consideration can also be given to (temporarily) working more from home, to minimize commuting (and thus travel costs).

Changing terms of employment by mutual agreement can be easier because the employer does not have to comply with onerous requirements. In addition, it can often be done quickly because the employee has already given his approval. In addition, an employee will be more resistant when a change in his employment conditions is "imposed" unilaterally. The downside is that the employer must reach agreements with each employee individually. 

Travel reimbursement

The untaxed travel allowance is currently €0.19 per kilometer. Increased fuel prices are causing an imbalance between costs and reimbursement for business travel. Calls for an increase in the untaxed travel allowance are therefore intensifying. In 2024, the untaxed allowance will be increased to €0.23 per kilometer, but this does not take into account current price increases. For the time being, therefore, there is no option here for the employer to provide the employee with untaxed compensation at this point.

Financial problems

The war increases costs and decreases revenues. The company targeting the Russian and/or Ukrainian market has a good chance of losing so much revenue that financial problems lurk. This also applies, for example, to companies that have to adjust transportation routes, which increases costs and may reduce sales. All this may result in less work being available for employees.

Payroll continuation

Employers have an obligation to continue paying employees' wages when the employee fails to perform all or part of his or her work. This is different only when the reason that the work is not performed is attributable to the employee. Circumstances attributable to employees are, for example, caring for family and imprisonment. Foreseeable events may additionally be attributed to the person who could and should have foreseen the event. Exceptional risks, such as war or emergency, were not always for the employer's account in the past. After all, these risks are not foreseeable. Therefore, it cannot be said in advance with certainty whether wages must continue to be paid.

Dismissal on business economic grounds  

When, due to developments, a company finds itself in the situation where the amount of work is significantly reduced or its financial situation becomes worse, the only option may be to dismiss your staff. In that case, dismissal must be requested from the UWV. The UWV assesses whether there is an economic necessity for dismissal, resulting in a structural loss of jobs. 

Conclusion

If as an employer you foresee that the war in Ukraine will have severe financial consequences for you, it is important to intervene in time. There are several ways to do this, starting with consulting with employees about possible cost savings. This can be done, for example, by cutting back on working conditions. This is not an easy task, but doing nothing may not be an option either.

Do you have additional questions as a result of the above? Or are you noticing the consequences of the war in Ukraine in other areas and do you have (employment law) questions? Please feel free to contact us and we will be happy to help you.

[1] This is a simplified representation of the actual test. In the first test, the employer's interest in changing the employment condition must be so great that the employee's interest, which would be harmed by the change, must give way according to the standards of reasonableness and fairness. In the second case, the test is whether refusing a proposal causes the employee to act in violation of good employment practice. This is the case if refusing a reasonable proposal from the employer in response to related changed circumstances at work is unacceptable by the standards of reasonableness and fairness.