In this issue:
- Decision of the Supreme Court in Belgium: premiums paid by a third party to employees are subject to social security contributions!
- To what extent do contractual seniority clauses laid down since 1 January 2014 impact the calculation of the notice period in case of dismissal?
Decision of the Supreme Court in Belgium: premiums paid by a third party to employees are subject to social security contributions!
In its decision of 20 May 2019, the Supreme Court ("Cour de Cassation", "Hof van Cassatie") in Belgium confirmed the judgment of the Brussels Labor Court of 7 March 2018. The decision provides that a premium, paid by a third party to employees that are not in its service, must be considered as remuneration due by the employer subject to social security contributions within the meaning of the Act of 12 April 1965, insofar that this premium is awarded in return for the work performed in the service of the employer.
In the case at hand, a French company producing beauty products paid premiums to the employees of the perfume stores selling its products, according to the sales made by the employees.
The National Social Security Office believed that these premiums should be considered as remuneration, taking into account the fact that the beauty products are sold in the framework of an employment contract concluded with the employer.
The Brussels Labor Court ruled that these premiums must indeed be considered as taxable remuneration, based on the following:
- The premiums paid by the third party are only paid as compensation for the work performed in the framework of the employment contract between the employer and the employees;
- Neither the fact that the employees are not entitled to claim the premiums from the employer, nor the fact that the employer has not undertaken to pay these premiums affect the classification of the premiums as remuneration;
- It is not necessary to assess whether or not the employer bears the costs of what has actually been awarded in return for the work performed.
The Belgian National Social Security Office has already amended its administrative instructions to expand the definition of "at the expense of the employer" in accordance with the decision of the Supreme Court.
It will thus be important for employers in Belgium to assess whether or not premiums are paid by a third party to their employees in the framework of the work performed by the latter. If this would be the case, the premiums will in principle be subject to Belgian social security contributions.
To what extent do contractual seniority clauses laid down since 1 January 2014 impact the calculation of the notice period in case of dismissal?
A seniority clause had been included in an employment contract signed on 1 February 2015 (hence, after the entry into force of the Unified Employment Status Act). This clause stated as follows: "for the application of reciprocal rights at the end of the contract, seniority is calculated as of 18 April 1989".
How shall the notice period be calculated in the event of dismissal? Shall the provisions of the transitional regime laid down by the Unified Employment Status Act be implemented or "only" the provisions applicable since 1 January 2014?
In its ruling dated 20 November 2018, the Liège Labour Court had to answer this question (General List 17/7619/A).
In the case at hand, the dismissed employee believed that the notice period needed to be calculated based on the transitional regime, by using the two-step calculation provided by this regime in which the first part of the notice period is calculated based on seniority (fictitiously) acquired on 31 December 2013 and the second part is calculated based on seniority acquired since 1 January 2014. According to the employee, a total notice period of 25 months and 10 weeks needed to be observed. The employer, on the other hand, believed that the notice period needed to be calculated based on the total (acquired and contractual) seniority, but only taking into account the rules applicable since 1 January 2014. Therefore, according to the employer, the notice period to be observed was 68 weeks.
In its ruling dated 20 November 2018, the Liege Labour Court started by confirming the validity of such a contractual seniority clause. It went on to emphasize the clarity of the clause agreed between the parties which did not require any interpretation. It then gave thought to the application of the rules in force in order to calculate the notice period.
With regard to the possibility, in the case at hand, of implementing the provisions of the transitional regime provided by the Unified Employment Status Act, according to the Labour Court "the transitional provisions only apply to contracts that are ongoing on 01.01.2014, the termination of which is subsequent to this date". Since the employment contract in question had been signed after 1 January 2014, the conditions for implementing the transitional regime were not met.
Furthermore, according to the Court, the possibility to include a contractual seniority clause does not allow for derogations to the legal provisions applicable since 1 January 2014. Hence, the notice period needed to be calculated in accordance with the Act applying to a contract concluded after 1 January 2014 (in this case, a 68-week period).
Therefore, according to the Liège Labour Court, if the contractual seniority clause was agreed after the entry into force of the Unified Employment Status Act, the notice period that applies in case of dismissal should only be calculated based on the provisions applicable since 1 January 2014.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.