Bonus after Pregnancy?
Court of Appeal of Arnhem, 27 April 2010, LJN:
BM2034
Bonus and Forbidden Discrimination
Section 7:646 of the Dutch Civil Code ("BW") provides that an
employer may not discriminate between men and women in the
employment conditions. Discrimination between men and women is
understood as both direct and indirect discrimination. Direct
discrimination is understood to be (among other things)
discrimination on account of pregnancy, confinement and motherhood.
There is no justification for direct discrimination on grounds of
gender, except in the case of any of the statutory exceptions
listed in Section 7:646, subsections 2 through 4, of the BW. Some
bonus plans provide that an employee will not receive a full bonus
but only a pro rata bonus if the employee has not been working the
full year. Such inactivity may occur in the case of pregnancy and
maternity leave or pregnancy-related illness. The question arises
whether this provision in a bonus scheme constitutes forbidden
discrimination. On 27 April 2010 the Court of Appeal of Arnhem
examined this question.
The Facts in the
Judgment
The facts are as follows. An employer has a bonus plan for its
employees. An employee lays claim to the bonus arranged in it as of
1 April 2004. The bonus plan contains a performance bonus scheme
that is intended to be a variable supplement to the fixed salary.
The performance bonus is based on three components: (1) the net
profit target; (2) the turnover target; and (3) the individual
target of the relevant employee. The relative weight of these three
components is determined annually by the employer. The bonus plan
is always determined for one calendar year, on the express
condition that no rights can be derived from it for the future. It
is further provided that if an employee has been inactive for a
long time (i.e. for longer than one month) within one year, as a
result of illness or otherwise, the bonus will be paid pro rata.
The employee concerned has been absent in the years 2004, 2006 and
2007 due to pregnancy-related illness and due to pregnancy and
maternity leave. The employer did not pay out a bonus over these
periods, and the employee claimed payment of her bonus afterwards,
because in her opinion the non-payment of the bonus constituted
forbidden discrimination because of gender.
The Court of
Appeal
In this matter the Equal Treatment Commission and the
Subdistrict Court of Utrecht previously judged that there was
forbidden discrimination because of gender. However, the Court of
Appeal arrived at the conclusion that there was none. Firstly, the
Court of Appeal discussed the period of pregnancy and maternity
leave, and held that, although the bonus was fixed over a period of
one year, it was not "remuneration fixed per unit of time", because
the amount of the bonus is not determined on grounds of time but on
grounds of a weighing of the three components. It was "remuneration
fixed other than by reference to a unit of time". This entails that
an employee must be paid the average remuneration which she could
have earned during that period if she had not been so prevented
(Section 7:628 (3) of the BW). The bonus can be regarded as
remuneration within the meaning of Section 7:628 (3) of the BW,
according to the Court of Appeal. Because the employer was not
obliged to pay wages during the period of pregnancy and maternity
leave, he also did not have to pay a bonus to the employee during
this period. Secondly, the Court of Appeal discussed the
pregnancy-related illness, and held that it is allowed to cut back
on the salary of an employee who is absent due to a
pregnancy-related illness, as long as she is treated equally to a
male employee who is absent due to illness. As the cause of the
illness plays no part in the bonus scheme at issue, there was no
unequal treatment.
Tips:
- The judgment of the Court of Appeal shows once again that
the rulings of the Equal Treatment Commission on forbidden
discrimination on grounds of gender are not binding before the
Court.
- The law provides no absolute protection against a fall in
income of an employee as a result of her pregnancy and
confinement. If the employer wishes to prevent the employee's
fall in income, he may make commitments to that effect in a
contract.
- During the period of pregnancy and maternity leave the
employee is not entitled to wages, but to benefits under the
Work and Care Act, connected to the maximum daily wage. In view
of this the employer is under certain circumstances allowed to
cut back the employee's bonus over this period.
- During pregnancy-related illness the employee is entitled
to wages. However, if the employer does not wish to pay out a
bonus to the employee over this period, it is recommended to
include a neutral ground in the bonus plan as to when no bonus
is paid out, because this demonstrates that a pregnant employee
is treated equally to her male colleagues if they are absent
from work. It remains however important that also in practice
the pregnant employee is treated equally to her male colleagues
if they are absent from work.