Dismissed on the Day Their Bonuses Were Due

As part of its restructuring into four divisions, British bank HSBC dismissed several bankers on the very day their performance bonuses were supposed to be paid. It stated that, as a result, these bonuses would not be paid. But would such a refusal be legal under Belgian law?

In case of dismissal, in addition to the compensation in lieu of notice and any indemnity due for lack of justification, the issue of bonus payment for the period prior to termination often arises especially if the employer terminates the contract just a few days before the employee acquires the right to the bonus. Employers will frequently invoke a so-called "continued employment clause", which states that the bonus is only paid if the employee is still employed (or not serving notice) on the normal payment date (often in March). The validity of such a clause is crucial in the event of dismissal, both for determining the basis of calculation for the notice compensation and for assessing whether rights under the bonus plan exist or whether the loss of those rights should be compensated.

The first point to check is compliance with the Belgian legislation on language use in employment relationships, which could render the clause null and void (for example, if the clause is in English for an employee working in Wallonia).

Next, if the clause is deemed "purely potestative" under Article 1174 of the Civil Code meaning its fulfillment depends solely on the will of the person making the promise, or that person makes the condition impossible to fulfill through their own fault it cannot be enforced. However, case law and legal doctrine generally consider that (i) dismissal is not purely potestative as it at least partially stems from economic justifications, and (ii) is not, in principle, considered a fault.

Furthermore, Article 6 of the Employment Contracts Act stipulates that a clause contrary to the provisions of said law is null and void if it aims to restrict the employee’s rights or increase their obligations. But invoking this article is not straightforward and will mainly depend on the wording of the bonus plan.

One could also refer to Article 3 of the Law of 12 April 1965 on wage protection to argue for a prorated bonus. In the absence of a clause declaring the bonus indivisible or if it cannot be established that employee retention was the primary purpose of the bonus it can be argued that the bonus is earned progressively, as it corresponds to the services rendered.

In any case, there is no one-size-fits-all answer to the validity of continued employment clauses, and in practice, judges often uphold them. However, in the case of these bankers dismissed on the very day bonuses were to be paid there is a significant risk that a Belgian judge would consider the dismissal abusive or wrongful, unless a very solid justification is provided for such timing.