YOU ARE probably aware that the decision of the supreme court on the constitutionality of the law by which the salaries in the public sector were adjusted downwards during the economic crisis that had arisen in 2011, was issued last Friday. The court’s decision, in its capacity as a court of appeal, reversed the previous decision of the administrative court, issued in 2019.
The issue at stake was the correct interpretation of Article 23 of the Constitution, which provides that “every person has the right to acquire, own, possess, enjoy or dispose of any movable or immovable property and has the right to demand the respect of such a right. No deprivation or restriction or limitation of any such right shall be made except as provided in Article 23 of the Constitution.
Restrictions or limitations that are absolutely necessary in the interests of public safety or public health or public morals or for town and country planning purposes or the development and use of property for the benefit of the public may be imposed, by law, on the exercise of such right. Just compensation shall be promptly paid for any such restriction or limitation, which materially decreases the economic value of such property, to be determined, in case of disagreement, by a court of law”.
The decision of the supreme court takes “for granted that salaries constitute a form of property right”, on the basis that this premise forms “common ground” between the litigants. On this basis, the supreme court has accepted that “the property right” that is linked to salaries has “a nucleus”, which cannot be touched under any circumstances, and “a shell”, which can be modified (reduced), provided this is done with full respect to the principles of “proportionality, proportional equality and on the basis of a rational reconciliation of conflicting, legitimate interests”, “having regard to the fact that the aim [of the measures taken] was the securing of the viability of the pension plans”. The supreme court indirectly introduced a further condition for the legal lowering of salaries, namely that such adjustments “should not endanger the decent standard of living for the affected citizens”.
The conclusion of the supreme court that the effected reduction of salaries and pensions was not in conflict with any of the provisions of the Constitution is unquestionably valid and correct. However, in my humble opinion and with full respect to the supreme court, the reasoning supporting the decision could have been more fully substantiated.
In my opinion, what constitutes a property right and, by extension, what constitutes a right qualifying for the protection afforded under Article 23 of the Constitution, is the earned segment of the salary or pension, i.e. the salary or pension that can be rightly claimed as a receivable, irrespective of whether it is payable at present or in the future.
From this perspective, there is a clear distinction between “salaries” and “pensions”.
The entitlement to a pension becomes earned when two basic conditions are satisfied: (a) the completion of the prescribed minimum period of service and (b) the payment of the prescribed pension fund contributions. From the very moment that these conditions are satisfied, the property right becomes earned, irrespective of the timing of the liquidation (payment) of this right, which may be effected in a lump sum or in instalments over a period of years.
It follows that, once this right is earned, it is unfeasible to modify it, given that such an adjustment will have, by definition, a retroactive effect, i.e. the adjustment will relate to the period of employment in the course of which this right had arisen. As far as pensions are concerned, I believe that their modification is permissible only in relation to possible changes in the current value of the property right as a result of external factors (e.g. as a result of a loss that has arisen from the mismanagement of the pension fund or reserve), in exactly the same fashion that the compensation payable in the event of the expropriation of a piece of land is based on the current (and not on the historic) value of the expropriated asset.
In contrast, in the case of salaries the property right accrues at the time the related services are rendered. Then, and only then, the property right becomes earned. Clearly, in the case of the resignation of a civil servant, the resigning employee does not have any right over the future salaries that he/she would have earned, had they not resigned their position. It follows that the unearned right does not constitute property of the employee and, therefore, it can be adjusted, in a manner, no doubt, that is consistent with the principles of fair management. It is understood that the earned right (e.g. the unpaid salary earned in the course of a given month) constitutes property of the employee and any retroactive adjustment of such earned salary would be unconstitutional. Clearly, this does not apply to unearned (future) salaries, otherwise a civil servant who has resigned would have been entitled to compensation for all the future salaries he/she would not collect as a result of their resignations.
The position that was initially taken by the proponents of the view that the future salaries of public servants may not be adjusted downwards, even in the case where the employer – the state – is threatened with bankruptcy, embodies an inherent contradiction. What sort of protection would civil servants have, if the result of the protection given would result in them becoming unemployed, as a result of their employer being declared bankrupt? The risk of bankruptcy was visible in 1974 as a result of the Turkish invasion, in 2011 as a result of the economic crisis and in 2020 as a result of the coronavirus.
The concept of an earned property right is a concept that is clearly and explicitly defined in accounting and it forms the basis of quantifying the value of the property owned. To the extent that a right has not been earned, the property right is non-existent and the protection of a non-existent right is unachievable. Of course, it is possible that the learned judges of the court used the term “nucleus” to refer to the earned segment of the salary right.
Christos Panayiotides is a regular columnist for the Cyprus Mail, Sunday Mail and Alithia