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20.06.19 Just before summer: some recent case law regarding dismissals

Employment
June 20

Just before the start of summer, we inform you via this e-zine about some recent case law regarding dismissals.

1.     Constitutional Court (June 6, 2019 (93/2019)) confirms: individual agreements on notice periods prior to 2014 must be applied to calculate notice period

In a judgment of June 6, 2019, the Constitutional Court confirmed that valid individual agreements on notice periods prior to 2014 must be applied to calculate the notice period. The Court confirmed with this judgment its former case law (CC October 18, 2018 (140/2018)).

As you know, the notice period for employees having entered into service before January 1, 2014 must be calculated in two steps.

For the period up to December 31, 2013 the statutory, regulatory or conventional rules that applied on December 31, 2013 must be taken into account. The law provides for an exception to this rule for the so-called higher employees (annual remuneration > EUR 32,254 EUR on December 31, 2013) by stating that the notice period must be determined based on fixed notice periods, without referring to possible individual agreements on notice periods.

For the period as from 2014, the notice period is calculated according to fixed notice periods.

Case law has been very diverse when answering the question of whether or not individual agreements on notice periods should be taken into account to calculate the notice period, and if this is the case, to what step(s) of the calculation they should apply.

The Constitutional Court clarified this issue in 2018 by stating that individual agreements on notice periods for higher employees must be taken into account when calculating the first step of the notice period. The Court confirms its point of view in this new judgment.

To do

If you consider dismissing a higher employee who was already in service prior to 2014, please verify whether an individual agreement on notice periods exists. If so, you must apply this individual agreement for the calculation of the first part of the notice period.

2.     Bonus in calculation of severance indemnity?

Not only the remuneration to which the employee was entitled when the employment contract was terminated, but also the benefits that were granted according to the employment agreement, are taken into account to calculate a severance indemnity. Remuneration includes not only the employee’s base monthly salary, but also, for example any variable wage, such as a bonus the employee was entitled to at time of dismissal.

The law provides explicitly that where remuneration or benefits are wholly or partly variable, one should take into account for the variable part, the average over the previous 12 months, or, the part of those 12 months during which the employee was in service.

The Court of Cassation explained in its judgement of May 6, 2019 that this rule defines a way to calculate the variable remuneration at the time of dismissal. On the other hand, it does not have as consequence that any variable remuneration or benefit paid during the 12 months prior to the dismissal forms part of the remuneration at the time of dismissal.

In the same judgment the Court had to consider the question of whether a bonus should have been taken into account for the calculation of the severance indemnity, in the specific case that:

  • a bonus had been paid in the year prior to dismissal,  
  • 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; and
  • at the time of dismissal the employer had not yet informed the employee that he would not be granted a bonus for that year.

The Court concluded that the facts are important. In this particular case, the Court ruled that the employee was not entitled to a bonus, taking into account:

  • the clause in the individual agreement stating that the bonus in a certain year did not entitle the employee to a bonus in any consecutive year,
  • the company’s negative economic results for the year of dismissal,
  • the fact that no one in the category of staff that was entitled to a bonus, received a bonus, even after the employee’s dismissal.

The fact that the employer had not yet informed the employee of on the fact that he would not be granted a bonus for that year is according to the Court not relevant.

To do

Review the wording of your bonus plan and insert enough safeguards to ensure flexibility in your decision on whether or not to grant a bonus for a certain year.  

  Employment, Pensions & Benefits