The case concerned seven employees in Shell’s downstream operations department, which among other things operated Shell’s petrol stations. In 2014, this part of the business was spun off into a separate company and later transferred through a business transfer to the company ST1. After the business transfer, several of the employees were made redundant and offered severance packages.
There had previously been a long-standing practice in Shell for employees over the age of 57 to be offered so-called early retirement if they retired voluntarily in the event of downsizing. The severance packages offered from ST1 did not include any such early retirement option. The employees claimed that the employer had undertaken to continue an early retirement scheme from the age of 57 and protested the content of the severance agreements, but nevertheless chose to sign the agreements for fear of being dismissed without a severance package. The question before the courts was whether the severance agreements had to be revised pursuant to Section 36 of the Contracts Act, because the employees in question had originally had a legal claim to be offered early retirement.
The Court of Appeal answered this question in the affirmative and ruled that the severance packages offered had to be revised pursuant to Section 36 of the Contracts Act, because it was “contrary to good business practice” to apply them. However, the Supreme Court came to the opposite conclusion.
In its assessment, the Supreme Court referred to the fact that in the event of a business transfer, the new company undertakes to continue “[t]he former employer’s rights and obligations arising from the employment contract or employment relationship at the time the transfer takes place”, cf. section 16-2 first paragraph of the Working Environment Act.
The Supreme Court then pointed out that Shell’s previous practice of offering its employees early retirement in the event of downsizing did not follow from labour agreements, collective agreements or law, but only from internal policies. The employer therefore had to be able to unilaterally make changes and restrictions to the schemes pursuant to the right of management. The employees argued that the employer had given a binding promise that the practice of offering early retirement would continue for a transitional period of two years. They therefore believed that the employer had bound its management right. The Supreme Court stated:
“This case concerns unilaterally determined pension benefits of great financial value. In principle, there will be a certain presumption that the employer has not waived the right to change the schemes (…) In order to deviate from this principle, there must be evidence of a certain weight that indicates that the employees have rights that prevent change (…)”
In the assessment of the evidence, it was emphasised that decisive weight had to be given to written and contemporary evidence. The transfer of business had been professionally handled, with the participation of the employees themselves, as well as union representatives from various trade organisations. After an assessment of the timely communication between the parties, the Supreme Court found that there was insufficient evidence that the employer had bound its management rights through a promise to continue the practice from Shell.
The employees therefore had no legal claim to be offered early retirement, and the final agreements could therefore not be revised pursuant to Section 36 of the Contracts Act.
Although the employees lost the case before the Supreme Court, none of the parties were ordered to pay legal costs. This was based on the fact that there was a difference in the balance of power between the parties and that the employer could to some extent be blamed for not having clarified the situation better in connection with the business transfer.
The judgement from the Supreme Court provides relevant guidance for the assessment of whether the employer has bound its management rights. It shows that in professional processes there is a certain presumption that the employer has waived the right to change arrangements for unilaterally determined pension benefits of great economic value.
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