In this issue:
- Can an employer be exempted from payment of a mobility allowance provided by a collective bargaining agreement approved at the sectoral level if there is a similar benefit in place within the company?
- Bonus plans: a promise is a promise
- Benefits granted by third parties are remuneration!
Can an employer be exempted from payment of a mobility allowance provided by a collective bargaining agreement approved at the sectoral level if there is a similar benefit in place within the company?
In its judgment of 25 July 2017 (general docket No 2016/AB/8, available here, the Brussels Employment Appeal Tribunal had to rule on this matter.
Within joint committee No 111, a mobility allowance was provided by a collective bargaining agreement for the employees that commuted to the (first) construction site and back from the (last) construction site, regardless of the means of transportation and regardless if the latter was provided by the employer or not.
That collective bargaining agreement also stated that in companies that already provided some type of travel allowance, the provisions of the sectoral collective bargaining agreement could be integrated in the scheme existing at the company level through a company collective bargaining agreement.
Following an inspection, the Social Inspection Services found out that a company falling within the scope of joint committee No 111 did not pay that mobility allowance to its technicians working at the construction site. The company acknowledged the facts, but argued that it had implemented a more advantageous allowance for its employees within the company, as they had been provided a commercial company car and a fuel card which they used to commute to their construction sites.
Nevertheless, the FPS decided to issue an administrative fine to the company for the violation consisting of non-payment of the mobility allowance.
The company subsequently decided to bring an action before the Employment Tribunal and ultimately before the Employment Appeal Tribunal, since the company had been overruled by the first judge.
Although the collective bargaining agreement applicable within joint committee No. 111 provided the option to “replace” payment of the mobility allowance with “a more advantageous type of allowance” at the company level, it also expressly stated that this more advantageous type of allowance should be provided by a collective bargaining agreement, which was not the case in the matter at hand.
As a consequence, the Employment Appeal Tribunal ruled that, lacking any company collective bargaining agreement, the scheme provided at the company level cannot replace the mobility allowance provided by the sectoral collective bargaining agreement, regardless if the scheme applicable at the company level is more advantageous than the scheme provided at the sectoral level.
As a consequence, although the collective bargaining agreement approved at the sectoral level expressly states that the allowance can be integrated in the existing scheme at the company level through a company collective bargaining agreement, the employer will only be exempted from its obligation to pay a mobility allowance if the benefits provided at the company level are provided by a company collective bargaining agreement, even if the benefits provided at the company level are more advantageous.
Bonus plans: a promise is a promise
The employment contract of many employees states that the targets for the target bonuses the employees may be eligible for, shall be set annually. In a judgment of 31 March 2017 (docket number 2015/AB/673, available here, the Brussels Employment Appeal Tribunal ruled on what the consequences would be if no bonus targets were set, contrary to what was provided in the employment contract.
The employment contract of the party concerned contained a clause that was clear:
“The employee is also entitled to an annual variable indemnity of 10% of the gross annual salary (= monthly salary * 13,92). This indemnity will be paid in the first half of the year following the performance year. The performance year is the year in which those targets have been met. The targets are set annually”.
However, in practice, the company had not set any targets, nor paid any bonuses for 3 years. Following an (unlawful) dismissal for misconduct the employee claimed, among other things, bonus arrears for the 3 years in question.
The Employment Appeal Tribunal first and foremost found that no bonus targets had been communicated to the party concerned. The Employment Appeal Tribunal then applied article 1178 of the Civil Code which states that a condition is considered met if the debtor himself prevented it from being met. According to the Employment Appeal Tribunal, this was the case since the employer had made sure the employee could not meet the bonus targets by definition, although he was contractually required to set these targets.
Although the employment contract only stated a maximum bonus amount, the Employment Appeal Tribunal granted this maximum amount as bonus arrears. It is clear, however, that if the company would have set bonus targets, it is unsure whether the employee would have met them 100%. Hence, in a situation like this, the Employment Appeal Tribunal generally rules that the damage suffered by the employee only consists of the loss of the opportunity to earn a bonus, which brings them to the question of how to evaluate this opportunity.
As such, it is important to abide by the contractual provisions with regard to the fact that annual bonus targets will be set. If the company is not able to prove that it did set bonus targets in time, the employee is likely to be able to claim the maximum bonus amount which could have been due under the employment contract.
Since there were no targets at all in this case, the question of to what extent the employer can change targets from one year to another, was not relevant in this judgment.
In case of violation by the employer of the contractual requirement to set bonus targets in time, the employee can claim arrears of the maximum bonus amount which could have been due if the targets had been met 100%.
Benefits granted by third parties are remuneration!
On 10 October 2016, the Court of Cassation issued a judgment relating to benefits granted to employees by a legal entity that is not the employer.
This situation is more common than it seems. Such a scheme is generally applied in groups of companies in which subsidiaries offer their products and/or services at an attractive price (or even for free) to the employees of another subsidiary.
In the case at hand, the court faced a matter with employees who could subscribe to magazines from a sister company of the employer for free or at a reduced price. The cost of these subscriptions was not re-invoiced to the employer and, as such, it was not considered as a financial burden for the employer. However, it is important to highlight that it was explicitly stipulated in the employment contracts of new employees that they were entitled to this benefit. As a consequence, the Belgian social security authority decided that these subscriptions are subject to social contributions, which was challenged by the employer.
In practice, article 2 of the Act of 12 April 1965 states that wages, gratuities or services and benefits which are assessable in cash must be considered to be remuneration with regard to social contributions if (i) the employee is entitled to them, (ii) they are at the employer's expense, (iii) they are provided by the employment contract. Thus, if the benefit is not “at the employer's expense”, they may be considered not to be subject to social contributions.
However, there has been controversy until now about the meaning of “at the employer's expense”. Some considered that it needed to be interpreted strictly and that a benefit is only “at the employer's expense” if the employer bears the financial cost of it, whereas others, such as the Belgian social security authority, defended a broad interpretation in which a benefit is “at the employer's expense” if (i) it is borne financially by the employer or (ii) if the employer is the legal debtor, i.e. he has undertaken to provide this benefit.
The Brussels Employment Tribunal followed the employer's reasoning and decided that the benefit did not constitute remuneration. In appeal, the Employment Appeal Tribunal decided, however, that even if these subscriptions were not financed (directly or indirectly) by the employer, they nevertheless constitute a benefit which is “at the employer's expense” because he is obliged, under the employment contract, to grant these subscriptions. The Court of cassation was of the same opinion.
With this decision, the Court of Cassation put an end to the controversy. According to them, if the employer is obliged to grant this benefit, it could be subject to social contributions. The only requirement for this benefit to qualify as remuneration is that the employee is entitled to it under his employment contract, regardless of the fact that it is actually a third party who is bearing the financial cost of this benefit.
The controversy has, thus, ended. Even if the employer does not support the financial cost of a benefit granted to his employees himself, he can be required to pay social contributions on this benefit if the employee can claim it based on his employment contract.