(Non-)discriminatory conditions for awarding year-end performance bonuses

Article 126 of the Employment Relationship Act (“ZDR-1”) stipulates that salary consists of basic salary, part of the salary for job performance and additional payments. An integral part of the salary is also the business performance bonus, but only where provision is made for it in a collective agreement, employer by-law or an employment contract. Business performance bonus assessment criteria are not stipulated by law, but are usually regulated in collective agreements and/or employer by-laws. 

Since 2019, the Advocate has issued several decisions finding that the rules for awarding business performance bonuses, which apply equally to all an employer’s employees and which, according to predetermined criteria, link the Christmas bonus amount (also) to workplace attendance as one of the criteria, have a negative impact on: those who were absent through illness; suffer from chronic disease(s); pregnant women; parents, etc., thereby putting those rules in contravention of the ban on indirect discrimination stipulated in the Protection Against Discrimination Act (“ZVarD”). The Administrative Court of the Republic of Slovenia upheld one of the Advocate’s decisions, namely in case I U 29/2020-21 dated 11 November 2020. The Advocate submitted that all employees should be entitled to receive the same business performance bonus, despite any (justified) absence(s) from work, irrespective of the reasons: sick leave; parental leave; or even unpaid leave (i.e. absence beyond the employee’s control). The Advocate also submitted that the business performance bonus is a reward for all employees, provided the company has been successful, and not a reward linked to an individual employee’s contribution to the company’s performance. According to the Advocate, any restriction on the business performance bonus using criteria linked to an employee’s individual contribution to the company’s performance would in fact mean the payment of a job performance bonus, not a business performance bonus. The Advocate is of the opinion that the indicator of an employee’s success is not only his presence at work. As stems from the Advocate’s findings, in some cases where it was established that improper criteria had been applied in granting business performance bonuses, decisions have also been issued by the Labour Inspectorate. 

Critics of the Advocate’s decisions highlight that the Advocate does not take into account the nature of the business performance bonuses. That he fails to take into account that salary and its individual elements are paid for work performed and an employee does not work when (otherwise justified) absent, during which he does not receive a salary for this time, rather compensation. If an employee is not entitled to basic salary, part of the salary for job performance and additional payments while absent, he cannot be entitled to the business performance bonus as an element of salary. Critics point out that many activity-based collective agreements stipulate attendance at work as a condition for payment of business performance bonuses, and such arrangements have been in place since at least the adoption of the General Economic Collective Agreement in 1990. In their opinion this confirms that employees, as well as trade unions deemed work attendance as an appropriate criterion for evaluating an employee’s contribution to the employer’s business success. While the Advocate argues however that drawing a distinction between employees is indirect discrimination, they believe that abolition of the attendance criterion would be unfair to those employees who performed relatively more work in a given year because they were absent less and thus contributed more to the employer’s good business results. Furthermore, changing this general rule could lead to employers being less inclined to reward employees for business performance, which will be reflected in future amendments to collective agreements. Last but not least, not all employees would be content with that arrangement, especially those with excellent attendance records (which is also due to personal circumstances beyond their control), as their relatively greater contribution to the employer’s success would not be factored in to the reward decision. It is also worth noting that these employees would be discriminated against as they would work more hours for the same salary as those absent most often. 

Apart from the decision rendered by the Administrative Court of the Republic of Slovenia, there is no case law in relation to the above. According to the data from the Common Position of employer’s organisations dated 7 September 2021, issued by the Employer’s Association of Slovenia, a petition to allow an appeal on a point of law was allegedly filed against one of the Advocate’s decisions. This means we can expect an appropriate judicial review of the matter. If Slovenia’s Supreme Court upholds the decisions of the Advocate in a specific case, employers will need to be mindful of this when setting (new) business performance bonus award criteria. For many employers this will mean tweaking the existing reward system.

With the Supreme Court ruling on this issue not expected before year’s end employers run the risk of violating the ban on indirect discrimination if business performance bonuses are paid. Consequently, there could be a wave of lawsuits by individual employees. This risk exists regardless of whether the unions or shop stewards agree to maintain the attendance criterion. The Advocate’s previous decisions on this issue merely unearthed violations in specific cases, whereas the law provides for the option of initiating misdemeanour proceedings and fines of up to EUR 20,000. 

Author: Eva Jean, Associate