Reasonable, justified and modest ... Acquired rights versus the right to amend benefit schemes
By Frédéric Dopagne, Saskia Lemeire and Bert Theeuwes
In a decision of 3 July 2019 (Judgment No. 4195) , the Administrative Tribunal of the International Labor Organization (ILO Administrative Tribunal) decided on the question whether the European Patent Organization (EPO) breached the complainants’ acquired rights by: (a) requiring employees to pay a sickness insurance contribution in respect of gainfully employed spouses who had previously been insured free of charge; (b) requiring spouses who have other insurance, to use the Office’s insurance only as a complementary scheme; and (c) abolishing the right of former (divorced) spouses to obtain cover under the Office’s sickness insurance scheme upon the death of the permanent employee.
In accordance with earlier case law, the ILO Administrative Tribunal held that “the amendment of a rule to an official’s detriment and without his consent amounts to breach of an acquired right when the structure of the contract of appointment is disturbed or there is impairment of any fundamental term of appointment in consideration of which the official accepted appointment” (see Judgment 832) and stated that this “poses a three-part test for determining whether the altered term is fundamental and essential”.
The Tribunal applies a 3-step test:
“What is the nature of the altered term? “It may be in the contract or in the Staff Regulations or Staff Rules or in a decision, and whereas the contract or a decision may give rise to acquired rights the regulations and rules do not necessarily do so.”
What is the reason for the change? “It is material that the terms of appointment may often have to be adapted to circumstances, and there will ordinarily be no acquired right when a rule or a clause depends on variables such as the cost-of-living index or the value of the currency. Nor can the finances of the body that applies the terms of appointment be discounted.”
What is the consequence of allowing or disallowing an acquired right and the effect it will have on staff pay and benefits, and how do those who plead an acquired right fare as against others?”
In its decision, the ILO Administrative Tribunal finds that: “The Organisation is entitled to adjust the contribution rate if there are compelling reasons (including budgetary reasons), within reasonable limits. The Tribunal is satisfied in this case that the increased contribution rate resulting from the additional contribution for spouses is reasonable, justified and modest.”
It can be noted that the ILO Administrative Tribunal does not seem to assess nor offer guidelines to determine what is reasonable, justified and modest.
It is therefore unclear how the Tribunal reached this decision and the question could arise whether this decision was properly motivated.