Amendment to Employment Terms

DFDL, our member,  shared that the Ministry of Labor and Social Welfare (“MLSW”) issued Notification 1559/MLSW (“Notice”) on 1 June 2020, relating to applicable procedures to implement any changes to an employee’s conditions of employment.

The Notice confirms that any changes to an employee’s remuneration package or leave entitlements, which by their nature constitute amendments to that employee’s employment terms, require the employee’s consent. The Notice also provides that should the employer be impacted by the COVID-19 pandemic, it is entitled to adjust the employment terms of its personnel (whether individually or collectively) only after having consulted and negotiated with the employee(s) and reached a compromise. The relevant procedures are set out in Article 12 of the Decree on Labor Conflict Resolution (No: 76/GO, 28 February 2018) (“Labor Conflict Decree”). Should the employer and employee(s) fail to reach a compromise, they must follow the collective bargaining procedures described in Articles 13 and 14 of the Labor Conflict Decree. Should collective bargaining fail, the employer or employee(s) may approach the Labour Conflict Resolution Committee to seek resolution of the dispute.

The employer must also follow the abovementioned compromise and collective bargaining procedures under Articles 12 to 14 of the Labor Conflict Decree should it seeks to implement temporary suspension provisions as envisaged under Article 111 of the Labor Law. This similarly applies to redundancies or downsizing of operations under Article 82 of the Labor Law. The procedures must be followed irrespective of whether such suspension or redundancy applies to only one or more employees.

While the Notice only applies to COVID-19 related business reasons for downsizing, redundancies or suspensions, it may be difficult for an employer implementing redundancies in the ordinary course of business per Article 82 of the Labor Law to delink such redundancies from the COVID-19 outbreak and the related economic downturn. This may leave employers vulnerable to claims for non-compliance with the directives in the Notice being brought against them.