Variable remuneration: two recent decisions of the Supreme Court to keep in mind

1. Variable remuneration and computation of the indemnity in lieu of notice

To calculate an indemnity in lieu of notice, not only the remuneration to which the employee is entitled when the employment contract is terminated is taken into account but also the benefits that were granted according to the employment agreement. The Law of 3 July 1978 on employment contracts, explicitly provides that where remuneration or benefits are entirely or partly variable, one should take into account to calculate the variable part, the average over the previous 12 months, or the part of those 12 months during which the employee was in service.

In its judgement of 6 May 2019, the Court of Cassation explained that this rule does not have as a consequence that any variable remuneration or benefit paid during the 12 months prior to the dismissal forms part of the remuneration and benefits at the time of dismissal.

According to the Court, when a bonus had been paid in the year prior to dismissal and the individual employment agreement stated that granting the bonus in a certain year did not entitle the employee to a bonus in any consecutive year, the judge may consider, according to specific circumstances (in the case at hand,  the fact that no one in the same category of staff received a bonus due to the company’s negative economic results), that the employee was not entitled to a bonus at the time of the dismissal, even if the employer had not yet informed the employee that he would not be granted a bonus for that year.

Therefore, the Court concluded that even if the variable remuneration was paid over the previous 12 months, it should not be taken into account for the computation of the indemnity in lieu of notice, given the absence of a right to a variable remuneration at the time of dismissal.

2. Variable remuneration paid by a third party are subject to social security contributions

Based on the general definition of the employment contract, remuneration is the counterpart for the work performed.

The Law of 12 April 1965 on the protection of the workers’ remuneration applies a much broader “remuneration” definition, being all salary in cash or benefits in kind to which the employee is entitled by virtue of his employment chargeable to the employer.

According to the Supreme Court in its decision of 20 May 2019, these two definitions are not exclusive.

The remuneration granted to employees as the counterpart for the work performed in the framework of their employment contract qualifies as remuneration subject to social security contributions.

Hence, according to the Court, premiums paid to employees by a third-party (in the case at hand, a distributor), who is not their employer, are subject to social security contributions, if it is received as a result of the work performed in the execution of their contract. It is therefore not necessary for the Court to examine whether the employees cannot assert a right to these premiums to their employer or, in other words, if these premiums are chargeable to the employer or not.

This decision confirms the last position of the National Security Office in its last administrative instructions (version 2019/2).

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Pierre Van Achter

pierre.vanachter@simontbraun.eu
+32 (0)2 533 17 41

 

Has the ECJ just killed the Belgian judicial restructuring procedure by transfer under judicial supervision?

The Belgian judicial restructuring procedure by transfer under judicial supervision (“PRJ 3 / WCO 3”) regulates the transfer of all or part of the debtor’s undertaking under the supervision of a judicial trustee.

One of the main added-values of this Belgian procedure is the “right of option”, which allows the transferee to choose which transferor’s employees it wishes to keep on after the transfer, provided that this choice is dictated by economic, technical or organisational reasons entailing changes in the workforce (article XX.86 §3 of the Economic Code; former article 61 § 3 of the Business Continuity Act).

On 14 August 2017, the Antwerp Labour Court of Appeal referred a preliminary question to the ECJ on the compatibility of the Belgian provision with articles 3 and 4 of Directive 2001/23 relating to the safeguarding of employees’ rights in the event of transfer of (parts of) undertakings (also called “TUPE Regulation”). This question has been raised in proceedings launched by an employee (Mrs Christa Plessers), who has been dismissed further to the transfer of her employer’s company under judicial supervision and is asking for her reinstatement in the transferee’s company.

Condemnation of the Belgian procedure by the ECJ

In order to answer this question, the ECJ had to determine whether:

  • the “right of option” granted to the transferee falls under the exception laid down in article 5 §1 of Directive 2001/23, which requires that the transferor (1) is subject to a bankruptcy proceeding or any analogous insolvency proceeding that has been instituted in view of the liquidation of the transferor’s assets, and (2) is under the supervision of a competent public authority;

and if not,

  • whether articles 3 and 4 of Directive 2001/23 preclude the Belgian “right of option”.

The ECJ decided on 16 May 2019 that the choice granted to the transferee by the Belgian law does not meet the cumulative conditions laid down in Article 5(1) of Directive 2001/23 and that, consequently, transfers carried out in such circumstances must comply with articles 3 and 4 of Directive 2001/23.

The ECJ emphasised that “dismissals which occur in the context of the transfer of an undertaking must be justified by economic, technical or organisational reasons relating to employment which do not intrinsically relate to that transfer”.

Yet, article XX.86§3 of the Economic Code does not impose upon the transferee to justify its choice with regard to the transferor’s employees who are made redundant.

As a result, according to the Court, the application of current article XX.86§3 of the Economic Code could seriously threaten the principal objective of Directive 2001/23, i.e. to protect employees against unjustified dismissals in the event of a transfer of undertaking.

Therefore, the ECJ decided that Directive 2001/23 has to be interpreted as prohibiting the transferee to choose the employees it wishes to keep on after the transfer.

What is the impact of this decision under Belgian law?

Given the ruling of the ECJ, it becomes complicated for the Belgian courts to interpret article 86 §3 of the Economic Code consistently with Directive 2001/23.

However, and as the ECJ pointed out itself, in accordance with EU law, the Belgian courts will not have to discard their own national provisions. As a result, as long as article 86 §3 of the Belgian Economic Code is not amended, it seems that the sole possibility for employees who have been dismissed in the framework of a transfer under judicial supervision will be to sue the Belgian State to claim compensation because (i) it did not correctly implement Directive 2001/23, or (ii) the national courts did not correctly interpret article 86 §3. However, in that second case, the dismissed employees will also have to prove that they suffered damages due to this wrongful behaviour. In other words, they will have to prove that they were not dismissed for economic, technical or organisational reasons, which might be a difficult task.

Conclusion: is it the end of the PRJ3/WCO 3?

By considering that current article 86§3 of the Belgian economic Code does not comply with Directive 2001/23, the ECJ might have sounded the death knell of the PRJ3/WCO3.

As mentioned before, the main advantage of such a proceeding is precisely to allow the transferee not to keep all the transferor’s employees but only the chosen ones. In addition, under this proceeding, the transferee can also modify the working conditions of the transferred employees. Even if this second principle of the Belgian legislation was not referred to the ECJ, one can expect a similar ruling, which would make the PRJ3/WCO3 completely useless.

In any case, the Belgian legislator will have no choice but to modify the Title V of the Economic Code to make it consistent with Directive 2001/23. This modification might be included in the coming (and more significant) reform of the Belgian insolvency law to implement the Directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures, whose final text has just been approved (15 May 2019) by the Parliament and the Council.

To be continued with our next government…

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Fanny Laune & Pierre Van Achter

20170615

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Feasible and manageable work – Summary overview of the new Belgian law

The law on feasible and manageable work of 5 March 2017, also known as the Peeters law, was published in the Belgian State Gazette on 15 March 2017. It contains a whole series of measures which modernize and innovate our labour law.

Below is a schematic overview of these provisions.

Measure

In short

Entry into force

Implementation

Annualization of the small flexibility

The reference period for the calculation of the working time is now automatically set at one year (one calendar year or any other period of 12 consecutive months). The derogation from normal working hours of max. 5 hours per week and 2 hours per day remains unchanged.

A shorter reference period may be maintained if a collective bargaining agreement (“CBA”) or the working rules provide so before 31/1/2017.

1/2/2017

The introduction procedure remains the same, with the exception of an additional simplification in case of introduction of the small flexibility via CBA. In this case, the provisions can be automatically added to the work regulations without having to follow the modification procedure.

100 voluntary overtime hours

100 voluntary overtime hours may be worked per year with payment of a supplement but without compensatory rest.

Possibility at industrial level to increase the quota up to 360 hours.

 1/2/2017

Via an individual written agreement with the worker, valid for 6 months (renewable).

Increase of the internal limit of hours within which the worker may work overtime without compensatory rest

The internal limit now rises to 143 hours regardless of the reference period.

Possibility of increasing this limit at the industrial level.

1/2/2017

 Applies automatically.

 “Floating Schedule”

A “floating schedule” can be set up for full-time or part-time workers (with a fixed schedule), i.e. a schedule in which the worker can determine the start and the end of his working day and his breaks, provided that he/she respects fixed ranges and certain moving ranges.

Limits:

• Daily: 9 hours

• Weekly: 45 hours

 1/2/2017

Implemented by CBA or the working regulations.

Existing floating schedules included in a CBA or the working regulations before 30/6/2017 are maintained and may deviate from the regulations.

The employer is obliged to set up a time tracking system and to add an appendix to the working regulations containing all the rules applicable to the floating schedules.

Night work in e-commerce

Introduction of a legal exemption to the prohibition of night work for the performance of all logistical and support services related to e-commerce.

1/2/2017

The specific procedure for the introduction of a working regime with night work (between 24 and 5 hours) must be followed.

Simplification of part-time work

      Abolition of the obligation to have all part-time working schedules in the working regulations:

  • fixed hours: mention in the employment contract
  • variable schedules: mention of a general framework in the work regulations is sufficient

      Variable schedules must no longer be displayed physically;

      Preservation can be done in both paper and electronic formats;

      Possibility of replacing the “derogations register” with a time tracking system;

      the credit for overtime hours is raised (42 hours instead of 39 hours).

1/10/2017

Adaptation of the work regulations within 6 months of the entry into force.

Occasional

Telework

Possibility for the worker to ask his employer to telework on an occasional basis for personal reasons or for force majeure reasons, as long as his function and/or his activity allows it.

The worker must file his request in advance and within a reasonable time.

1/2/2017

By means of an agreement between the employer and the worker relating to equipment, technical support, accessibility and possible handling of costs.

The framework within which occasional telework may be requested may also be regulated by a company-wide CBA or in the work regulations.

Career saving account  

The career saving account allows the worker to save time in order to later transform it into a leave during his career.

The time that can be saved is:

       voluntary overtime hours;

       the conventional holidays;

       the hours worked in addition to the average weekly working time and which may be transferred at the end of the reference period in a floating schedule;

       overtime for which the worker has the option to take compensatory rest or not.

1/8/2017, unless the National Labour Council (“NLC”) concludes a CBA

The NLC has 6 months from 1/2/2017 to elaborate the outline of this measure. A Royal Decree may extend this period by 6 months.

The law provides for an introduction via a CBA concluded at the industry level or, in the absence of such a CBA, via a CBA concluded at the enterprise level.

Donation of conventional leave

Scheme that allows the workers to offer (on a voluntary, anonymous and disinterested basis) conventional holidays to a colleague whose child is seriously ill and has taken all of his holidays.

Statutory holidays cannot be donated.

1/2/2017

The law provides for an introduction via a CBA concluded at the industry level or, in the absence of such a CBA, via a CBA concluded at the enterprise level or, in the absence of a trade union delegation, via the working regulations.

Interim employment contract

for an indefinite duration

The framework-contract between the interim agency and the temporary worker in which assignments with one or more users are foreseen can also be concluded for an indefinite period.  

1/2/2017

This scheme can only be applied if a CBA is concluded within the Joint Committee of Interim Work.

New interprofessional training objective

The current interprofessional training target of 1.9% of the global wages is converted into an average of 5 training days per FTE per year as part of a growth path.

1/2/2017

The objective must be implemented at industry or enterprise level.

A supplementary scheme is foreseen if the training days are not allocated by means of a CBA or an individual training account: as of 1/1/2017 at company level, a right to 2 training days on average per FTE per year.

For more information or specific support, please contact Pierre Van Achter at +32 (0)2 533 17 36 or via email: pierre.vanachter@simontbraun.eu

 

Serious cause and proportionality principle

According to Article 35 of the Law of 3 July 1978 on employment contracts, each party can terminate the employment agreement without notice period or termination indemnity for serious cause. A serious cause is defined as the serious breach which renders the continuation of the professional relationship immediately and definitely impossible.

In a order rendered on 12 January 2015, the labour court of appeal of Liège had decided that the serious breach alleged to the worker, namely diverting advantages that were intended for the clients of her employer to her own benefit (i.e., bonus points for a value of € 55.00), was not reasonable, according to the proportionality principle, in comparison with the sanction of losing her job without notice or compensation.

In its appreciation, the labour court of appeal of Liège had added a condition to the law by pursuing a proportionality test between the serious breach committed by the worker and the consequences of the corresponding sanction.

In its decision of 6 June 2016, the Supreme Court challenged this position. According to the Supreme Court, by linking the assessment of whether it was possible for the employer and the worker to pursue their professional collaboration despite the occurrence of a serious breach (which is the legal criterion of the serious breach) to the criterion of the proportionality between this breach and the loss of employment, the labour court of appeal of Liège violated Article 35 of the Law of 3 July 1978.

From what supersedes follows that when assessing the existence of a serious cause, one should solely take into account the impact of the shortcoming on the relationship of trust that should exist between parties to the employment relationship and the impossibility or not to definitively continue the collaboration. The possible disproportion between the breach alleged to the worker and the consequences of the sanction of being dismissed for serious cause should not be taken into account by the judge.

For more information, please contact Pierre Van Achter at +32 (0)2 533 17 36 or pierre.vanachter@simontbraun.eu