Update Employment Law January 2023
Exclusion of bonus claims arising during the year of exit
Hamm Regional Labor Court, Judgment dated September 13, 2022 - 14 Sa 277/22
If a social compensation plan provides for a (pro rata) bonus "in accordance with the bonus regulations in force at the time" in the event of an employee leaving the company and the relevant corporate works council agreement stipulates that employees receive a bonus "if the company [...] provides for a bonus to be granted", then the employee leaving the company is not entitled to the bonus if, as a result of a decision within the group, no bonus is granted in the employer's company for the year in which the employee leaves the company either.
The parties dispute whether the employer must pay the plaintiff an annual bonus for the year he left the company.
The plaintiff, who had been employed in the employer's group-affiliated company since 1985, argued that he was entitled under his termination agreement in conjunction with the company's framework social plan and the corporate works council agreement to a bonus payment also in the year he left the company.
The plaintiff left the company at the end of December 31, 2020 on the basis of a termination agreement concluded in 2016. In this agreement, the parties stipulated that all mutual claims were settled upon conclusion of the termination agreement, with the exception of any claims of the plaintiff pursuant to § 12 of the framework social plan regarding the (pro rata) "annual bonus".
Depending on the date of exit, the framework social plan provides different calculation factors for the bonus "in accordance with the bonus regulations in force at the time". It also stipulates that with regard to the payment of bonuses in the subsidiaries, the corporate works council Agreement on the Bonus System from 2012 shall apply.
According to the preamble of the corporate works council Agreement an annual bonus is granted "if the company [...] provides a bonus to the employees".
In 2020, the employer was still paying pro-rated bonuses to employees who had left the company by May 31, 2020. By email, the CEO of the Group informed all employees in June 2020 that bonuses for 2020 were unlikely. In line with this announcement, the plaintiff did not receive a bonus when he left the company.
The Gelsenkirchen Labor Court dismissed the claim.
The Regional Labor Court also ruled in favor of the employer. The plaintiff's appeal was unsuccessful.
In the view of the LAG, a claim for payment arose neither from the framework social plan nor from the corporate works council agreement. A claim was also not justified in terms of equal treatment.
As a result of the wording "in accordance with the respectively valid bonus regulations", the framework social plan required an already existing bonus regulation for the respective calendar year. The reference to the corporate works council Agreement only leads to a bonus entitlement if a bonus is granted by the employer for the relevant calendar year in general.
Solely by specifying the requirements for "whether" the bonus is granted (dependence on the time of exit in the calendar year) as well as the amount of the bonus (enumeration of certain factors), an entitlement which is independent of the corporate works council agreement is not established.
According to the preamble of the corporate works council agreement, the parties made it clear that they only wanted to define the principles of the distribution of the bonus (How) by using the wording "if the company [...] provides for a bonus payment". The individual subsidiaries specifically did not want to commit themselves as employers to grant a bonus every year (Whether).
Furthermore, the payment of a pro rata bonus to the employees who left the company by May 31, 2020 also does not include the employer's decision to grant a bonus regardless of the company's economic development.
The employer was not obligated to expressly reserve the right to decide on an annual basis whether a bonus will be granted within the framework social plan or the corporate works council agreement. This can be concluded without doubt by interpreting the agreement.
The unequal treatment of employees who left the company before (bonus granted) or after May 31, 2020 (no bonus granted) is objectively justified. The payments made up to May 31, 2020 were based on the assumption that a new bonus payment would be made, as in previous years. This assumption, which was in fact incorrect, was already communicated to the employees by e-mail in June 2020 and implemented consistently by not granting bonus payments to the employees leaving later in 2020.
The judgment is not yet final. The plaintiff has filed an appeal against the ruling with the Federal Labor Court (10 AZR 337/12).
The decision shows that a provision included in the framework social plan which deals with the evaluation factors of a possible bonus does not implicate an entitlement to such a bonus.
The ruling also confirms that a framework social plan which refers to a corporate works council agreement, which in itself refers (back) to the regulations of the respective group companies, (still) satisfies transparency requirements with the result that employees can determine in a sufficiently foreseeable manner whether they are entitled to a bonus.
In order to avoid being exposed to claims for bonuses, employers should however ensure clear and manageable regulations in agreements with the works council. The will of the parties and the purpose intended by them must be clearly expressed (BAG 18.03.2020 - 5 AZR 36/19, BAG 21.01.2020 - 3 AZR 565/18). The more clearly and transparently the conditions and factors for a possible bonus award are distinguished from the employer's decision to make a binding commitment to pay bonuses, the more likely it is that a court will deny a claim of the employee with respect to the payment of a bonus. The ruling shows that it is advisable to clearly separate the regulations on the principles for awarding bonuses, which are subject to co-determination, from the employer's decision as to whether a bonus pot will be available at all.