Q: May a decrease in the capital group’s turnover be a reason for not paying out a bonus to an employee of the subsidiary?
A: It is worth noting that a decrease in turnover as a reason for not paying out a bonus to an employee works differently depending on whether we are talking about a subsidiary or a whole capital group.
A decrease in the whole capital group’s turnover should not be a reason for not paying out a statutory bonus to an employee of the subsidiary company for two reasons:
- The Corporate Policy’s provision concerning not paying the statutory bonus to an employee (in a subsidiary) may prove ineffective, and on the employee’s side there will be a claim to the employer for payment of due remuneration (statutory bonus is included in the employee’s remuneration). Mostly the capital group consists of companies operating in different markets or even different industries. Thus, a decrease in turnover due to the difficult economic situation in one market does not always cause a negative situation of another entity in the group. Moreover, the parent companies often simulate declines in turnover by making artificial transfers between subsidiaries.
- Moreover, such a provision within the Corporate Policy may even result in the liability of a shareholder of the parent company. In extreme cases, the court uses a solution called the piercing of the corporate veil, which consists in checking whether the owner of the company by abusing its legal entity (e.g. simulating an increase or decrease in turnover through transfers between subsidiaries) does not seek to circumvent the law and his obligations towards employees. If such a violation is found, the actual owner may be held liable in connection with the violation of employee rights.
If you are interested in the issue of establishing bonus regulations for an independent company, we invite you to read the article: Can an employer avoid paying a bonus for 2019 in the face of a coronavirus crisis?
Author: Oliwia Kruczyńska, Junior Associate at Kolecka & Partners Law Firm LLP
