In a recent judgment of the Supreme Court of 16 April 2024, no. 21 Cdo 2392/2023-128, this court dealt with the issue of equal treatment of employees in a situation, where the employer did not pay an extraordinary bonus to a former employee because one of the conditions for the right to payment was the continuation of the employment relationship as of a certain date.

Circumstances of the case

The employee, who worked for the employer under an employment contract dated 3 August 2020, gave notice on 25 October 2021, and accordingly which her employment with the employer ended on 31 December 2021. In March of the following year, the employer published a notice on its internal network informing employees that, in view of the excellent economic results achieved by the business group, of which it was a part in the previous year, they would receive an exceptional one-off financial reward of EUR 1,000 (i.e. CZK 25 000).

Eligibility for payment of the remuneration was subject to the cumulative fulfilment of two requirements:

• the employee worked for at least 3 months in 2021 and
• was employed by the employer on 31 May 2022.

At that time, the former employee had already filed a lawsuit in court seeking to be paid an extraordinary bonus for the year 2021, during which she was still working for the employer. She argued that the bonus had the nature of a wage granted in connection with good work performance and therefore its amount should have been determined only on the basis of the criteria set out in Article 109(4) of the Labour Code. These criteria are the complexity, responsibility and laboriousness of the work, the difficulty of the working conditions, job performance and the work results achieved. In the view of the former employee, the employer’s condition of employment at a future date was contrary to those remuneration rules and, moreover, contrary to the rule contained in Article 109(1) of the Labour Code, according to which wages are paid for the work performed. The application of this condition meant that the former employee was not remunerated the same as her colleagues for comparable work in 2021. As a result, in the former employee’s view, the employer breached the obligation to ensure equal treatment of all employees and the obligation to provide employees with equal pay for equal work or work of equal value.

The employer defended itself by arguing that, although the decision to pay the exceptional bonus was motivated by the exceptional economic results of the previous year, the purpose of the bonus was primarily to motivate current employees to similarly good performance and commitment in the following period. Therefore, according to the employer, the bonus cannot be characterized as wage, but as a benefit provided in connection with employment pursuant to Section 224(2) of the Labour Code. The rules for determining wages therefore do not apply to this remuneration.

Opinion of the Supreme Court

The Supreme Court held that there was no reason why an employer could not decide to award a wage component in excess of the guaranteed wage, even if this possibility had not been agreed in advance in the contract, established by an internal regulation or determined by a wage assessment. Thus, according to the interpretation of the Supreme Court, it is the employer’s prerogative to grant employees an extraordinary one-off bonus based on the achieved economic result. The specific decision as to which employees will be awarded such remuneration is purely at the discretion of the employer. This consideration is, however, limited by the principle of equal treatment, which implies the prohibition of unjustified favouring or, on the contrary, disadvantaging of employees over comparable employees.

The Supreme Court therefore had to ask itself whether there had been a breach of the employer’s duty to ensure equal treatment of all employees in this case. At the time of the employer’s decision to award

the exceptional remuneration, there was no longer an employment relationship between the employer and the former employee and, therefore, no related mutual rights and obligations. The Supreme Court thus concluded that the former employee was not in the same or comparable position (situation) as the employees, whose employment relationship with the employer was still ongoing on the date of the decision and on 31 May 2022. The court also inferred the incomparability of the former employee’s position with that of the current employees from the fact that the exceptional remuneration was granted to the current employees as an incentive for the future, whereas for the former employee, whose employment relationship had already ended, this intention had no effect.

However, the Supreme Court pointed out simultaneously that if the employer also paid an extraordinary remuneration to one of the other former employees, who were in the same or comparable position (situation) as the former employee (the plaintiff), then there could already be an unjustified distinction between comparable subjects in comparable situations.

Conclusion

The Supreme Court decision summarized above may provide reassurance to a great extent and increased legal certainty for employers who choose to reward their employees for their contributions to the company’s exceptional economic performance. From a higher perspective, this interpretation sets out the limits of the application of the principle of equal treatment of employees, which is relatively broad to the benefit of employees, but not limitless. In conclusion, it should be noted that – although at first glance this decision may seem to open the door to denying the payment of extraordinary bonuses or (annual) bonuses to former employees – in our opinion such a clear conclusion cannot be drawn and will always depend on the specific circumstances of the case. If you are unsure about this, please do not hesitate to contact us – we will be happy to advise you.